On October 17, 2007, a federal court judge sitting in the Eastern District of Louisiana dismissed a Katrina-related whistleblower lawsuit (United States of America, ex rel. Branch Consultants, Inc. v. Allstate Insurance Company, et al., Case No. 06-4091 (E.D.La. filed August 2, 2006)). The lawsuit claimed that a number of insurers misrepresented claims to the National Flood Insurance Program, blaming flood water for Katrina-related damage sustained by its insureds rather than wind, a covered peril, so as to limit their exposure.
The lawsuit was dismissed on the basis that the allegations asserted in another, previously-filed lawsuit in a different federal jurisdiction -- United States of America, ex rel. Rigsby v. State Farm Ins. Co., Case No. 1:06-cv-433 (S.D. Miss, filed April 26, 2006) -- were essentially the same as those in the Branch lawsuit. The Branch lawsuit was brought under the False Claims Act, and under the terms of the False Claims Act, it cannot go forward if another lawsuit on the same subject has previously been filed.
In the Rigsby action, damages are being sought on behalf of the United States, arising out of allegedly false claims presented for payment under the National Flood Insurance Program by various insurance company defendants and engineering firms. The judge in the Branch action determined that the allegations in the Rigsby action were legally sufficient to put the government on notice of the fraud as alleged in the Branch complaint. The Branch action was dismissed on the basis that the Rigsby plaintiffs were the first to file suit on the subject.
We will continue to provide updates on this and other Katrina-related issues on InsureReinsure.com.