State Farm Probe Continues? Mississippi Attorney General Says Criminal Probe of State Farm Has New Focus

State Farm gets itself in a lot of trouble.

Last week, we were talking about the hot water Allstate found itself in with the state of Florida. This week, we look to Mississippi where Attorney General Jim Hood has opened a new hurricane Katrina related criminal investigation of State Farm, which he says is different from the earlier “crimes against policyholders” investigation. Hood had agreed to end that earlier investigation as part of a January 2007 settlement in which State Farm paid the attorney general’s office $5 million in costs and reopened policy holder claims from Hurricane Katrina.

In response to an August subpoena for records from the grand jury investigation, State Farm filed a declaratory judgment action seeking to stop the investigation, and by September, had obtained a temporary restraining order. Now in mid-January, Hood has asked another federal judge to lift that order. That motion is still pending.

At issue is whether this is a continuation of the “crimes against policyholders” investigation or whether this is a validly new and different claim not covered by the agreement of January 2007. The focus of this new investigation has not been openly identified by the attorney general. There is speculation that it has to do with the handling of National Flood Insurance Program claims.

Homeowner policies cover wind and rain damage. Separate rising water/flood damage insurance is subsidized by the federal government, but sold through insurers. Some politicians and lawyers have accused insurance companies of fraudulently over-billing the federal government for flood damage claims.

Hood is asking the temporary restraining order banning him from investigating the criminal handling of Katrina claims by State Farm be dissolved. Yet attorney Edwin Snyder, a consultant for Hood, said, “The operative phrase is ‘Hurricane Katrina claims.” If it’s unrelated to that and it’s new, it’s available to investigate.”
I can’t believe I’m saying this but I think the Mississippi Attorney General is looking to take a second bite of the apple when he has already agreed to taking just the one bite. The earlier agreement appears to have resolved any outstanding Hurricane Katrina claims. But these stories underscore that the corporate culture of arrogance is not something that these insurance companies can selectively flash. The same executives that once tried to bully personal injury victims and their lawyers, often with great success, have moved up the food chain. Now, they make corporate policy decisions that no longer impact just individual claims but the entire company. Dealing with politicians requires a certain level of diplomacy and respect. Yet these insurance company executives have embedded in their DNA (at least their professional DNA, a distinction fairness requires) the paradigm of arrogance and obstruction. Why else do you think the state agencies and politicians are getting so riled up?

I’ll admit that I just made up this theory about ten minutes ago, but you have to admit – it makes some sense. Of course, you might also be wondering whether some of these politicians have some other agenda beyond justice in vilifying these insurance companies. But why interrupt a great tale of good versus evil with such nuance?

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