The MID’s exam, State Farm’s response, baseless allegations

In 2006, the Mississippi Insurance Department (MID) announced its examination of State Farm’s post-Katrina claims handling. As the largest property/casualty insurer on the Mississippi Gulf Coast, with the largest number of storm-related auto, home and business claims, we were not surprised when the MID announced the exam.

The Exam

The MID conducted a targeted exam involving only those claims in the lower six counties, focusing on the surge area.

The report clearly shows that examiners found no violations of state law or state regulations by State Farm. The MID order (attached to the report) says, “. . . the Department found that while the Company did make errors, it found no violations,” and that “. . . no specific violations of the Unfair Trade Practices statute were identified.”

The MID’s report finds that allegations made by others about “fraud and abuse” were baseless. The report says “While there may have been questionable decisions made by the Company, they did not appear to be a part of any scheme to systematically mistreat policyholders” and that the allegations “simply could not be substantiated.”

State Farm’s response

State Farm entered into an agreement to re-evaluate more than 35,000 claims, at policyholders’ request, in early 2007. As a result, we have made additional claims offers exceeding $90 million to about 6,000 policyholders. The MID’s report says, “. . . to address many of the comments above and various concerns of the MID, the Company agreed to re-evaluate hundreds of claims, at which point over $88 million was paid to policyholders by State Farm.”

We did this early on during the exam to address concerns raised, without waiting for the exam to conclude.

State Farm handled more than 400,000 claims from Katrina, over 50,000 of which were in Mississippi’s lower six counties. We settled the vast majority of those satisfactorily. We recently submitted documentation to the MID showing that only one of the files referenced in its report was not in the lower three counties, where all claimants had an opportunity to participate in the re-evaluation program.

State Farm agents and employees have worked tirelessly to help our Mississippi policyholders settle their damage claims quickly and fairly, and to help them recover from Katrina’s devastation. We evaluate each claim individually and we pay what we owe based on our contract with each policyholder.

State Farm has settled nearly all of the 650,000 claims from the 2005 storms – including Katrina, Dennis, Rita and Wilma. We have paid more than $5.7 billion overall to State Farm policyholders for their 2005 storm losses.

We paid more than $1.3 billion in homeowners claim payments to our Mississippi policyholders after Hurricane Katrina.

A small number of claims remain unresolved for various reasons – such as customers who have not yet accepted offers under the re-evaluation program, or those that are still involved in litigation. We settled the great majority of claims without dispute.

Where there were disagreements, State Farm worked to resolve them with policyholders through a re-evaluation agreement with the MID, through mediation, and through continued communications.

Baseless allegations

The MID’s report finds that others who made allegations about “fraud and abuse” were unable to prove those allegations.
Now-disbarred attorney Dickie Scruggs launched his campaign against State Farm just days following Katrina. He encouraged Mississippi Attorney General Jim Hood to file a lawsuit seeking to overturn the flood exclusion policy. And by October 2005, the Rigsbys began stealing State Farm documents, including copies of engineering reports.

Scruggs made up allegations and launched a public relations plan to lure politicians, the media and others into publicly attacking State Farm.

The McIntosh v State Farm case, which Scruggs held out as a key case in his allegations against State Farm, was recently settled and dismissed. In the dismissal, filed by the McIntosh’s current attorneys, they acknowledged State Farm handled their claim properly and admitted there was “no credible evidence” State Farm engaged in bad faith.

The Report cites numerous examples of instances where allegations by Scruggs and the Rigsbys were later withdrawn or proven false. For example, the report says:

“A review of these ‘irregularities,’ in and of themselves, revealed that while there may have been questionable decisions made by the Company, they did not appear to be a part of any scheme to systematically mistreat policyholders.”

“The veracity of the specific allegations of ‘widespread fraud and abuse’ deteriorated throughout the course of our investigation. Many of the specific allegations were investigated and simply could not be substantiated.”

“The examination team questioned many people, including those individuals specifically identified by the Rigsbys as key witnesses, but none could corroborate the allegations."