Katrina & Beyond

Insurer Disputes Claims of Altering Katrina Reports

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A number of lawsuits from Gulf Coast policy holders are pending against State Farm in Mississippi. The area's largest insurer of homes is defending itself against accusations the company altered storm-related reports to deny claims based on flood damage. Host Farai Chideya talks to State Farm spokesman Fraser Engerman.

FARAI CHIDEYA, host:

Now we're joined by Fraser Engerman, spokesman for State Farm Insurance Company based in Bloomington, Illinois. Welcome.

Mr. FRASER ENGERMAN (Spokesman, State Farm Insurance): Thank you, Farai.

CHIDEYA: So I know that you can't get into the specific intricacies of the pending cases. But let me ask you to respond to what you've heard from attorney Scruggs.

Mr. ENGERMAN: First of all, Farai, I think it's important to understand that we have settled over 98 percent of the claims that we received as a result of Hurricane Katrina. We received in the neighborhood of 295,000 property claims. We have settled over 98 percent. We have paid out roughly $3.5 billion to the folks in the Gulf Coast. So the allegation that we are not paying anything, that we have not settled is simply not true.

Last year's storms presented extraordinary challenges. We recognize that despite our best efforts a small of number of disputes will occur, and most of those disputes have involved flood issues. Some individuals have taken that disagreement to court. But I think again the bottom line is the overwhelming majority of our policyholders have been paid without any disagreement. And that seems to get lost sometimes in the discourse.

CHIDEYA: From what's being reported State Farm wanted the two women who used to work there, Cori and Kerri Rigsby, to stop talking about claims they handled for State Farm and pay damages for the records that they turned over to federal and state investigators. How did State Farm handle that situation?

Mr. ENGERMAN: I need to clarify something. These two individuals have never been employees of State Farm. Their employer, EA Renfroe, contracted with State Farm to provide independent adjustors to assist State Farm with evaluation of claims.

We are not a party to the litigation between these two individuals and their employer, so therefore I can't talk about the filing of that lawsuit. That said, State Farm has an expectation that our vendors and the people who work for them follow a code of conduct that protects the private information of our customers.

CHIDEYA: Has State Farm in any way ordered or changed engineering reports on property damage to minimize claims or deny claims?

Mr. ENGERMAN: There is no evidence to that case. Our first goal is always to help our policyholders settle their damage claims in a timely manner by paying what we owe based on the customer's insurance policy. Our employees are committed to conducting themselves in an ethical and appropriate manner. Any suggestions to the contrary are simply wrong. We don't accept anything less from our employees or the vendors with whom we do business with.

Occasionally, the evaluation of a claim may require the services of a qualified expert. And in those cases, we bring in an outside expert, an engineering firm, to help us evaluate damage. But ultimately on each claim, State Farm makes the final determination about how best to keep the promise that we make to our policyholders.

CHIDEYA: From what I understand, U.S. District Judge Robert Walker has turned down two motions from State Farm to stop proceedings until the government investigations are completed. Are you guys really caught in a crosshairs of civil and governmental litigation?

Mr. ENGERMAN: I'm not going to be able to discuss what's going on with regard to both the civil and the criminal. Our motion that we filed with Judge Walker I think speaks for itself, and we're currently evaluating our options based on Judge Walker's decision to stay the request for depositions.

CHIDEYA: But this means that some State Farm managers are going to have to testify in court, is that correct?

Mr. ENGERMAN: I don't know if that's been fully resolved yet. Again, we're reviewing our options legally.

CHIDEYA: How does State Farm, when it initially sets up policies, approach homeowners about what they need to be covered for and why?

Mr. ENGERMAN: When we have a contract, the policy states clearly what we cover and what we don't cover. Our agents are trained; they're professional. They're trained to always encourage our customers any time they have a question, don't understand something, that they contact their agent and discuss what's in their coverage.

I think it's important that people recognize that insurance doesn't cover everything, and ultimately customers, policyholders, need to understand what's in their policy and what's not covered. We have said all along since Katrina struck that we're always willing to look at credible evidence. If someone has new information about their claim, credible evidence about their claim that we may not have looked at, we're always willing to sit down with them and review their claim and take a look at that information.

CHIDEYA: You pointed out to me earlier that the two sisters didn't actually work for State Farm but for EA Renfroe, which contracts with State Farm but apparently does almost all of its business with State Farm. There's also an engineering company, Haag Engineering Company, that has handled assessing the damages of policyholders. From what we understand, State Farm conducted its own investigation of Haag, and Haag is a firm which has handled assessing the damages of policyholders. So was this firm unreliable?

Mr. ENGERMAN: We have been using Haag for a number of years prior to Katrina, and we continue to use Haag following Katrina on a number of claims. But again, we use engineering firms in less than one percent of all of the claims that we handled. As I said earlier, there are a small number of cases where we require help of an outside expert to help us evaluate the damage. Following the verdict by a jury in Oklahoma City with regard to a case that was brought against us involving Haag, we have since suspended any new business to Haag while we conduct an outside third-party investigation.

CHIDEYA: So does Haag still play a role in assessing Katrina damage, or was that already…

Mr. ENGERMAN: We are currently not assigning any new business to Haag.

CHIDEYA: But were they involved previous to your cutting off the business with them in assessing Katrina damage?

Mr. ENGERMAN: That's what I said, yes. We did…

CHIDEYA: So they were - okay. So they…

Mr. ENGERMAN: Haag is one of several engineering firms that we used in the Gulf Coast to help us evaluate damage; again, in a very small percentage of claims with regard to the total universe of claims that we received after Katrina.

CHIDEYA: Mr. Engerman, thank you very much.

Mr. ENGERMAN: You're very welcome.

CHIDEYA: Fraser Engerman is spokesman for State Farm Insurance, based in Bloomington, Illinois.

(Soundbite of music)

CHIDEYA: Coming up, three of Hollywood's top African-American power brokers talk about the challenges of avoiding stereotypes and increasing diversity. We'll discuss these topics and more on our special Roundtable next.

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