State Farm accused of Katrina racketeering

State Farm Fire & Casualty Co. engaged in a "pattern of racketeering" by manipulating engineering reports on Hurricane Katrina damage so the company could deny policyholder claims, lawyers for a group of Mississippi homeowners allege in a lawsuit filed on June 20. The federal suit against State Farm represents a new legal strategy for attorney Richard "Dickie" Scruggs, who has played a prominent role in challenging the insurance industry for its handling of Katrina claims. Hundreds of homeowners in Mississippi and Louisiana have sued their insurers for denying their claims after the Aug. 29, 2005, storm. The suits typically accuse insurers of bad faith and breach of contract for refusing to pay for damage from Katrina's storm surge. Scruggs' 103-page lawsuit claims State Farm engaged in racketeering by procuring "scientifically dishonest" inspection reports and conducting "sham re-inspections" of homes so that damage could be falsely attributed to Katrina's flood water. State Farm and other insurers say their homeowner policies cover damage from wind but not rising water, including storm surge. Also named as defendants in Scruggs' suit are Forensic Analysis & Engineering Corp. of Raleigh, NC, and E.A. Renfroe Co. Inc. of Hoover, AL. Forensic's engineers inspected homes for State Farm, while Renfroe helped the company adjust claims. Scruggs accuses State Farm of pressuring its engineers to alter reports on storm-damaged homes so that water, not wind, could be blamed for damage.