NEW ORLEANS (AP) — Attorneys for homeowners suing State Farm Insurance after Hurricane Katrina have long accused the insurer of pressuring engineers to alter reports on storm-damaged homes so that policyholders’ claims could be denied.
Now, some of these lawyers assert that they have evidence to prove their accusation — internal e-mails from an engineering firm that helped State Farm adjust claims after the Aug. 29, 2005, hurricane destroyed thousands of homes on the Mississippi Gulf Coast.
State Farm denies pressuring engineers to change their conclusions, but the e-mails, obtained Tuesday by the Associated Press, indicate the company was threatening to dismiss Raleigh, N.C.-based Forensic Analysis & Engineering less than two months after Katrina.
State Farm and other insurers say their homeowner policies cover damage from wind but not rising water, including wind-driven storm surge.
Zach Scruggs, who is part of a legal team that sued State Farm on behalf of hundreds of homeowners, said Forensic turned over the e-mails as part of the pretrial discovery process for one of the lawsuits.
The e-mails “confirm everything that we have always suspected,” Mr. Scruggs said. “What it says is pretty shocking. This outlines the whole scheme of theirs.”
The e-mails exchanged between Forensic President and CEO Robert Kochan and Randy Down, the firm’s vice president of engineering services, outline complaints against their firm’s work from Alexis King, a State Farm manager in Mississippi.
Mr. Kochan, in an e-mail dated Oct. 17, 2005, said the firm will continue working with State Farm, but talks about needing to “redo the wording” of a report after a discussion with Ms. King “such that the conclusions are better supported.”
The e-mail also said Ms. King didn’t want local engineers to inspect properties because they were “too emotionally involved” and were “working very hard to find justifications to call it wind damage when the facts only show water induced damage.” She was also apparently upset that a report was based upon eyewitness accounts, the e-mail said.
In a reply dated Oct. 18, 2005, Mr. Down questioned the insurer’s motivations and questioned if there was an ethical problem with State Farm telling the firm what to put in reports. He also suggested that on another occasion, State Farm asked the firm to remove information from a report because “they would then have to settle.”
“I really question the ethics of someone who wants to fire us simply because our conclusions don’t match hers,” Mr. Down wrote in an e-mail dated Oct. 18, 2005.
“But what about the obvious fact that SF would love to see every report come through as water damage so that they can make the minimum settlement,” he wrote.
Mississippi Attorney General Jim Hood, in Washington after testifying yesterday before the Senate Commerce Committee, said he knew about the e-mails for months as part of his criminal grand jury investigation. He said civil attorneys obtained the e-mails as part of discovery proceedings.
“It is a document that clearly shows State Farm used engineers and coerced engineers to write a report like they wanted,” Mr. Hood said.
The e-mails are “the first paper evidence we’ve got where you can see engineers expressing concern about being pressured to change reports,” said Chip Merlin, a Tampa, Fla.-based attorney who has sued State Farm on behalf of dozens of homeowners.
“Whoever Randy Down is deserves a gold star on his forehead for being one of the most ethical individuals,” Mr. Merlin added.
Mr. Kochan said in an interview, however, that plaintiffs’ attorneys are taking the e-mails out of context. Ms. King “just felt like we weren’t doing a technically accurate job,” but she wasn’t pressuring Forensic to change conclusions so that claims could be denied, Mr. Kochan said.
Mr. Down, who has since left Forensic and started his own engineering company, said in an interview Tuesday that he was relying on “secondhand” information about State Farm’s complaints and wasn’t directly involved in Forensic’s work on Katrina claims. He said the threat to fire the firm came “out of the blue.”
“The question was why,” Mr. Down added. “The initial internal discussion I heard is that they didn’t like our reports.”
State Farm spokesman Phil Supple rejected the notion that the company pressured engineers to alter their conclusions on storm damage so that claims could be denied.
“Our employees are committed to conducting themselves in an ethical and appropriate manner,” he said. “Any suggestions to the contrary are simply wrong.”
Mr. Hood said the percentages of damage because of wind or water were in initial damage reports but that State Farm purportedly went back to the engineers and said “no percentages” because that information could be used in civil cases.
He said another issue, especially for federal officials and senators on the committee, was that since there were no percentages in the reports, the government’s flood insurance program would be required to pay 100 percent on claims.
“If it had been put in reports, then the federal government would have been entitled to some money back from” the insurance companies, he said.
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