Whistleblowers Say State Farm Shredded Documents to Avoid Paying Katrina

[sabra]

http://blogs.abcnews.com/theblotter/2006/08/state_farm_insi.html

Exclusive: Whistleblowers Say State Farm Shredded Documents to Avoid Paying Katrina Victims, Allegations of Massive Fraud

State Farm Insurance supervisors systematically demanded that Hurricane Katrina damage reports be buried or replaced or changed so that the company would not have to pay policyholders' claims in Mississippi, two State Farm insiders tell ABC News.

Kerri and Cori Rigsby, independent adjusters who had worked for State Farm exclusively for eight years, say they have turned over thousands of internal company documents and their own detailed statement to the FBI and Mississippi state investigators.

In an exclusive interview with ABC news, to be broadcast on 20/20 -- Watch 20/20 tonight at 10 --and World News, the Rigsby sisters say they saw "widespread" fraud at the State Farm offices in Biloxi and Gulfport, Miss.

"Katrina was devastating, but so was State Farm," says Cori Rigsby.

At one point, they say State Farm brought in a special shredding truck they believe was used to destroy key documents. State Farm says shredding is standard to protect policyholders' privacy.

[soothsayer]

1. They need to go to jail for that fraud.

[LynneSin]

15. They need to be forced to live in a house....

....flooded up to the roof with sewage water while the tempture hovers around 110 degrees and they have no access to food or water.

[Pithlet]

22. My thought was house arrest.

Only the house is one of the gutted shells they refused to cover through fraud.

[barb162]

50. They need to have their licenses lifted and never work in the

insurance industry again. Jail for a long time. They need to lose personal assets and be fined. The company needs a fine it will NEVER forget. ETC.

[unpossibles]

2. holy crap, does human indecency and greed know no boundary?

shame on these people. I am not one to suggest things like this normally, but whoever is responsible should have his house dismantled by Katrina victims and be forced to pay them out of his own pocket, and live in the street. I have NO sympathy.

[Sherman A1]

33. Agreed

And very well said. Then they could get a hammer, nails and some materials and spend time rebuilding houses on the Gulf Coast of the folks that they screwed..... That should take them a few years.

[unpossibles]

38. even better

especially should resonate with the "eye for an eye" crowd.

[Sherman A1]

61. Restitution or Retribution?

It's in the eye of the beholder, I suppose...

[ThomCat]

3. The insurance industry is based on a fraudulent premise.

They promise to pay out, but they only profit if they don't pay out. So when their obligations and their profits conflict, what the hell does anyone think they're going to do?

Of course an Insurance giant is going to do anything they can to screw people. A lot of people would be fired if they didn't.

It's time to regulate the insurance industry and put a lot of people in jail.
x(

[w4rma]

6. The insurance buisness is a gamble. They bet that nothing bad will

happen to too many people too quickly. It works just like gambling works. They need to take in slightly more than they pay out.

There are a couple of problems, though. Their profits don't really go back into some account to help the buisness stay afloat in case of future disasters like Katrina. Instead those profits go to the shareholders who jump ship whenever there is a disaster like Katrina.

Imho, if they can't pay then oh well. They should go bankrupt paying what they can and another buisness will replace them. The employees will just go work for the new buisnesses that will need new employees to take care of the accounts that the now bankrupt buisness that didn't save for times like this.

The last people that should be hurt by the insurance companies are the customers.

[HiFructosePronSyrup]

11. That's a good way of putting it.

They used to shoot people for not paying their gambling debts.

[badgerpup]

17. Gambling debts used to considered 'debts of honor'...

In fact, gambling debts were held sancrosact to the point that they got paid before such silly things as bills from the butcher, baker, tailor, etc...

I'll take "Useless trivia in my brain" for $400, Alex...

[krispos42]

28. They operate financial services with the profits

I mean, they sit on a certain amount of financial reserves, so they operate mutual funds and offer banking services. This brings in more money, which they hold and use to pay off disasters and such. They are banking, literally, on the fact that hundreds of millions of dollars in retirement and investment funds won't be yanked out suddenly by customers, and they use that money when a big crunch hits.

The steady income from the insurance business lets them offer loans, and the pool of money from the investments hedge off major disaster claims. Since the pool of money from retirement and investment accounts largely comes from affluent people (many, presumebly, white and Republican), and most of the insured were probably poor (and presumebly, black and Democrat), it is easy to see which one you toss to the wolves when the chips are down.

And thanks to the new bankruptcy bill, all the people who have lost their houses can't cancel out the morgages, which means that the insurance companies can then go after the disaster victims legally. The victims, of course, have had their major financial asset, their home, destroyed, and the land is now worth much less, all the while they don't have a job. So now a judgement can be impressed upon the victims and their wages garnished for years.

Tt's not really a shareholder issue because once a company sells shares of stock they don't get any money from the shares increasing in value. The company does have the responsibility to keep the stock value from collapsing, of course, otherwise the shareholders will can the executives.

[Tansy_Gold]

32. But if the company retains SOME of the stock, doesn't

the increased value of the shares help the company's net worth? Isn't that part of what brought Enron down? They included stock in themselves as part of their net worth and . . . .?

I could be wrong. I'm one of those people who has just enough osmotic knowledge about this stuff to be dangerous, to herself and to society in general.

[krispos42]

35. Hmmm... didn't think of that, but probably true

They must have bought them back later on. Of course, they could only get the money by selling the stock, lowering the market price somewhat. MIght make for a nice reserve fund, though.

Don't know much about Enron. Like you, I'm not an expert! lol

[Spangle]

47. And that encourages people to

do exactly what?

I don't know.. But if I was stuck in that situation, I think I would just stop attempting to work. Become a bum and have no job.

[MUSTANG_2004]

59. Not so much gambling as statistically spreading risk

Actuarial science (determining the risk) is a serious science, not gambling at all.

[DURHAM D]

8. Aren't insurance companies regulated by the State ?

Isn't that part of the state's rights argument. Don't the majority of southerns want the states to regulate everything - not the federal government. Shouldn't this type of behavior/result be expected? Isn't this what the red staters asked for?

The insurance industry is the giant puppet master over all aspects of our lives and no one sees it and no one talks about it. They control policy and drive so many issues but they are not perceived. Ex. The insurance industry was the force behind the defeat of the Equal Rights Amendment - the only business that had something to lose.

[barb162]

52. Each state regulates the insurers operating in its state.

However, usually there are ex-insurer company employees in those jobs and the laws don't get enforced and investigation is often lousy

[barb162]

51. It is regulated but often by ex insurance company employees

Very similar to the FDA

[babylonsister]

4. Recommend to edumicate State Farm subscribers. nt

[Orrex]

5. Like a good neighbor, State Farm is there

A good neighbor who shreds potential incriminating or inconvenient documents, of course.

[ThomCat]

7. Expect to see a lot more of those hokie comercials in the near

future. They're going to be spending a lot more on PR than they will on paying those claims.
x(

[Orrex]

14. Well, that'll earn Barry Manilow a little extra $$, at least

Ah, royalties.

[MrPrax]

9. Somehow I think State Farm

will avoid the same tongue lashing as this 'criminal' for destroying evidence:

Evidence-destroying defendant severely sanctioned in P2P file-sharing case

In the case of Arista Records v. Tschirhart, the U.S. District Court for the Western District of Texas has shown little mercy on a defendant accused by record companies of illegal file-sharing.

Knowing that a court order was in place requiring her to turn over her hard drive to be copied, the defendant allegedly used "wiping" software in an attempt to destroy all evidence of her illegal P2P file sharing. In response, the plaintiff record companies moved, pursuant to Fed. R. Civ. P. 37(b), for the most severe form of sanctions against the defendant – entry of default against her. The court granted the plaintiffs' motion, and provided them with 30 days to submit a proposed order spelling out their damages.

...

Given that the record companies' expert opined that the defendant had downloaded over 200 sound recordings during 2005, those requested damages will probably be substantial. Statutory damages under the Copyright Act can go as high as $150,000 per work infringed, in the most egregious cases.

...

Not only was the sanction intended to dissuade the plaintiff from destroying evidence in the future, it was intended to make an example out of her. Merely awarding the plaintiffs their attorney's fees or giving the jury an adverse inference instruction at trial would not have been enough to remedy the situation. Given the defendant's "blatant contempt" for the court and a "fundamental disregard for the judicial process," only default would be an adequate punishment and deterrent to others considering similar conduct.

Internet News

Infringing copyrights on a couple of hundred songs is way way more serious than destroying insurance policies of thousands of people AND with the added bonus that the plaintiff don't have to provide any proof whatsoever...sweet

:eyes:

[ThomCat]

13. Of course you're right. The law only punishes people,

not corporations.
x(

[flyarm]

10. i am really mad about this..i lost my home in the Northridge earthquake

in 1994..and i had State Farm..and i got more than all my neighbors did with all different insurance companies..i honestly got the best settlement than anyone on my street or any of my friends..

i have since given high praise for State Farm...

no more!!

but i will say when you lose everything..it all depends on your adjuster..i had a great adjuster..

and i will say this honestly..we had a woman adjuster..and before she ever came to the house..my husband went off the deep end ( not hard to do when your whole house is destroyed..) but my husband had the stereotype b.s. down pat..he thought we would be screwed because we had a woman adjuster assigned to us..all the neighbors had men...

well our adjuster was wonderful..she was the best person and most compassionate..and she gave a damn about us as people...

all our neighbors with men adjusters..got screwed..

one way or another..


and my husband made amends after our settlement with our adjuster..he admitted to her..his thoughts prior to her ever coming to our house..

and she laughed and said alot of men think that way!

we were totally blessed with our adjuster..and state farm..honestly..

but this disaapoints me terribly..not for me , but for the people who are suffering daily in the gulf coast..

whoever did this must be prosecuted to the 10th degree..

there is nothing that can prepare a family for this kind of loss..
the only thing that can be worse is a death in the family..

but these kinds of losses are like a death in ones life..it is like your life and life long possessions never existed..you have no history..you pictures and everything connected to your life are gone..

like someone took an eraser to your life..

thank god these women came forward...bless them and protect them...

and all the people of the gulf coast..

fly

[KittyWampus]

19. Funny how whistleblowers are more often women.

[KoKo]

24. We've had good experience with them after Hurricane Fran...

Didn't have alot of damage but big trees down and minor deck damage. They were very good. We've used them for over 20 years with four different houses and our car insurance.

So sad to hear this. I wonder if it wasn't a case of an evil Independent Agentor Claims manager in that area who ordered this. I hope it's investigated to see if it was more widespread.

[barb162]

55. This happened in 2 offices, Bilozi and Gulfport. That tells me

it's not isolated

[LisaM]

26. Call your adjustor and tell her this story

IMO, if others at State Farm think their business integrity is being impugned, it will resonate throughout the company. We had a great family friend who worked at State Farm for years and she is as honest as the day is long and would never do anything like that.

[sakabatou]

12. Like a bad neighbor, State Farm doesn't care

[LynneSin]

16. Spike Lee's documentary talked in details about the shenigans of ...

...the Insurance company.

Seems that many of the people have Hurricane damage on their homeowners insurance policy but not flood insurance. So how did some of the insurance companies get out of paying for damages? Simple - they said that the damage was all flood related and NOT hurricane related.

All I could think was that if the Hurricane hadn't pass through New Orleans these people would have never been flooded

:grr:

[Lone_Star_Dem]

18. Don't be ridiculous

It's as if your saying that the flooding would never have happened with out the hurricane, and since they had hurricane coverage that should have included the damage caused by hurricane induced flooding.

Don't you see how silly your being? Do you understand how much that would have cost the insurance providers? Shame on you for even thinking such thoughts!

[LynneSin]

23. God forbid I want to help people

I'm just a damn liberal

:D

[flyarm]

43. you know they can only get away with this if the government lets them

clinton sat on top of insurance companies in the Northridge earthquake..the most expensive disaster to date in this country until Katrina..Clinton didn't let them get away with anything..and he had a great Fema man in James Lee Witt.

this i blame on bush and the republican congress!!

put the blame where it belongs..the mother fucker in this white house!

fly

[barb162]

56. Some people had a majority of wind damage, not flood damage

State Farm was changing or hiding engineering reports! I was watching the show on it this evening.

[MountainMamma]

20. State Farm writes all my insurance

and has for years. They make a mint off my premiums alone and I have never collected on a claim more than a broken windshield on my automobile. If this is the way they intend to operate, then why am I buying insurance from them? Can the insured put them out of business? I live in Florida for part of the year and insurance has become a very sore subject with we Floridians. We used to be told, "Just close up your house during hurricane season and don't worry because if ANYTHING HAPPENS TO YOUR HOUSE YOU HAVE INSURANCE". Now we know from our last few years experience, that they will not pay no matter what happens. It seems to me they are not upholding their end of the contract.

[Debau2005]

27. I switched from State Farm to

Liberty Mutual when I bought my house in June. Liberty Mutual saved me a ton on my premiums, with better coverage. I also got an alumni discount, because they have partnered with different colleges and universities. I used to be a State Farm fan until I sat down with pencil and paper and figured the differences! It is huge.

[flyarm]

44. its because of this administration!! and jeb!!..they are whores to

insurace companies..hell jeb let the insurace industry write their own damn laws in Fla!!

fuck the B*hes!!

fuck them to hell!

fly

[barb162]

54. You'r right. I have them too

[Tandalayo_Scheisskopf]

21. Life is often a conflict between...

The intellectual and the visceral.

Right now, my visceral side is telling me it just may be time for mobs. Lots and lots of very angry mobs.

VERY angry mobs.

[earth mom]

25. Insurance companies are the DEVIL!

In fact, ALL CORPORATIONS ARE THE DEVIL! We're all learning that the hard way these days aren't we?! :grr:

[Megahurtz]

29. That's for sure! n/t

[newspeak]

31. California set up an earthquake fund

the people voted on it, and they also voted on continuing the fund after they reached a certain amount of money. The Katrina documentary showing the man whose father had paid over fifty years of insurance premiums and the insurance company stiffed him!!!!!! I still think that a co-operative approach by the people to administer their own insurance with a board of members would be in the best interest of the people--do it at state levels. These mega corporations only care about their bottom line, doesn't matter how many years you paid premiums for them to exist, and doesn't matter to them if they add to the misery and suffering of others.

[Zorra]

36. Yep. My health insurance company just screwed me royally.

I am now committed to bleeding them as dry as I possibly can while campaigning full bore for a nationalized health care system that will hopefully drive them out of business ASAP.

[Maine-ah]

30. I have both cars and my house with SF.

I've been with them for over ten years. Never had any problems, and my premiums are wicked low, they also have an office located locally which I really like.

[newspeak]

34. well, those low rates may be good until a catastrophic event happens

I believe Randi Rhodes was talking about some insurance companies not paying out on Wilma-she was one of them-the company talks in circles to keep from paying. Also, have an experience with State Farm, my in-laws have had SF for over forty years, brother who had a spotless record, gets DUI, no accident just DUI--they tell them that he has to move out or they're going to cancel their insurance. Forty years with them and they want to dictate the terms to the family. I'm not excusing the DUI, but a family with a spotless record, this is harsh.

[GoddessOfGuinness]

39. Our cars are insured by SF...

When I first needed their assistance, it was a major hassle...I had to go to the body shop they said to go to, they would have to accept their estimate, and so forth. Then my agent retired. It was the best thing that ever happened to me.

My current agent helped Mr GoG, after he had an accident involving a tractor trailer, get out of his junk insurance policy and into SF. He's presented us with sensible options to keep our premiums as low as we can. And when I hit a guy who ran a red light, they did the haggling with the guy's insurance company so I didn't have to, and I received a rental car during the time my car was in the shop.

There are many things I don't like about the insurance industry, including the fact that companies have been known to cheat people out of their money, or cancel policies once a payment has been made.

[barb162]

53. How were they on paying claims?

I have them too but haven't had any claims. I am thnking of dummping them over this.

[denverbill]

37. I'm going to go against the tide and say give them a chance.

I'm in the insurance industry with a tiny company, and I know we shred tons of documents. We are always using confidential consumer info like names, birth-dates, SS#'s, etc, so every time we print a page that has that info it is supposed to get shredded when we are done with it.

I've been insured with State Farm for years and never had any problem with them. They are a mutual insurance company, which means if they make a profit, the profit goes back to the policyholders, not to shareholders. State Farm doesn't even have shareholders, so they have no reason to do this.

IMO, either this is a misunderstanding by the whistleblowers, an unintentional shredding of something that was supposed to be kept, or this was the act of some mid-level manager trying to protect his bonus or something.

State Farm is not Halliburton or Walmart. Anyone that thinks they are needs to explain to me who at State Farm would benefit from doing something like this.

[barb162]

57. These two women were adjusters for 8 years with State Farm

They showed their documents to the FBI and they showed engineers who told the TV interviewer that they forged his signature and changed his report

[Kurovski]

40. Spike Lee let some of their customers speak freely

in his four part HBO film.

Or lord, but it wasn't pretty.

We should all drive the offenders out of business when and where we can.

If they can get away with this, they've gotten WAY TOO big. The government should step in but...what government? We've got a king.

[Chomskyite]

41. John Stossel's not gonna like this one

n/t

[Supersedeas]

42. "Like a good neighbor???"

[cosmicdot]

45. State Farm's CEO: member of Bush's Transition Advisory ...

Team Committee on Education ... former chair of the American Enterprise Institute

pulling back the curtain for a glimpse into State Farm's governance and mindset


Edward B. Rust Jr. is chairman of the board and chief executive officer of State Farm Mutual Automobile Insurance Company, Bloomington, Ill., and the other principal State Farm affiliates.

A native of Illinois, Rust joined State Farm in 1975 at the Dallas, Texas, regional office. He became president and chief executive officer in 1985 and was elected to the additional post of chairman of the board in 1987.

A graduate of Illinois Wesleyan University in Bloomington, Rust holds both juris doctor and master of business degrees from Southern Methodist University, Dallas, Texas. He serves on the boards of directors of Caterpillar, Inc., Peoria, Ill.; Helmerich and Payne, Inc., Tulsa, Okla.; and McGraw-Hill Companies, Inc., New York.

Nationally recognized as a leader of the business community's efforts to improve the quality of education in the United States, he currently serves on the No Child Left Behind Commission, a bi-partisan, independent group established to make recommendations to Congress and the Bush Administration on how the federal law can be improved. He is former co-chairman of the Business Coalition for Excellence in Education and served on President Bush's Transition Advisory Team committee on education. He is former chairman of the Business Higher Education Forum, former chairman of The Business Roundtable's Education Initiative, a director of Achieve, Inc., a director of the National Center for Educational Accountability, and served on the National (Glenn) Commission on Mathematics and Science Teaching for the 21st Century.

He is co-chair of The Business Roundtable, chairman emeritus of the Illinois Business Roundtable, and a member of The Business Council. He is former chairman of several other organizations, including the American Enterprise Institute, The Financial Services Roundtable, the Insurance Institute for Highway Safety and the National Alliance of Business. He serves on the Board of Trustees of The Conference Board and is a former member of the board of directors of the American Council of Life Insurance.

He is a trustee of Illinois Wesleyan University and former member of the advisory council of the Stanford University Graduate School of Business.

He is a former trustee of The American Institute for Property and Liability Underwriters and a former member of the board of overseers of The Institute for Civil Justice. Rust is a member of the Texas and Illinois bar associations.

http://www.statefarm.com/about/media/edrustjr.asp

Some of his political donation history
http://www.opensecrets.org/indivs/search.asp?NumOfThou=0&txtName=rust&txtState=IL&txtZip=&txtEmploy=&txtCand=&txt2004=Y&Order=N
http://www.opensecrets.org/indivs/search.asp?NumOfThou=0&txtName=rust&txtState=IL&txtZip=&txtEmploy=&txtCand=&txt2000=Y&txt1996=Y&Order=N

Other State Farm Directors (from 2004 Annual Report)

Gerald M. Czarnecki – Chairman and Chief Executive Officer,
Deltennium Corporation

Christopher C. DeMuth – President, American Enterprise Institute for
Public Policy Research

W. H. Knight Jr. – Dean, School of Law, University of Washington

Judith A. Muhlberg – Former Senior Vice President, Communications,
The Boeing Company

Susan M. Phillips – Dean, School of Business and Public Management,
George Washington University

Jerry I. Porras – Lane Professor of Organizational Behavior and Change,
Emeritus, Stanford University

Edward B. Rust Jr. – Chairman of the Board and Chief Executive Officer,
State Farm Mutual

James E. Rutrough – Vice Chairman and Chief Administrative Officer,
State Farm Mutual

Paul T. Stecko – Chairman of the Board and Chief Executive Officer,
Packaging Corporation of America

Pamela B. Strobel – Executive Vice President and Chief Administrative
Officer, Exelon Corporation

Vincent J. Trosino – Vice Chairman of the Board, President, and
Chief Operating Officer, State Farm Mutual

Charles R. Wright – Former Senior Executive Vice President and
Chief Agency and Marketing Officer, State Farm Mutual

John D. Zeglis – Former Chairman of the Board and Chief Executive
Officer, AT&T Wireless

http://www.statefarm.com/_pdf/2004annualreport.pdf

[Roland99]

46. White-collar criminals like this bastard deserve to rot in jail for life!

[Psephos]

48. If this is true, they need to be hung, and hung high. n/t

[graywarrior]

49. Notice the top 3 bad faith insurance companies

http://www.badfaithinsurance.org/

[NastyDiaper]

58. What exactly were they shredding that was secret?

Anything provided to them would essentially be a copy. The terms of their policy?
If the shredders were not there, would we be suing SF for not guarding dumpsters from identity predators?
This is a non-story imo.

"The sisters say they saw supervisors go to great lengths to pressure outside engineers to prepare reports concluding that damage was caused by water, not covered under State Farm policies, rather than by wind."

This would be a problem, ut I don't get the shredder angle.

[lynne]

60. Insurance companies and agencies routinely shred their paper -

- because it includes the following information on their policyholders: Name, address, date of birth, drivers license number, social security number, financial score data, "clue" claims data, occupation, employer. Info could also include (depending upon the type of policy you have with the agent) the year, make, model, ID# of your vehicles or detailed information about your home, your home security, what is in it, diagram of your interior, pictures, replacement cost data. Anyone looking to steal your property or your identity need only get into the trash can of your insurance agent.

What you need to be worried about is when your insurance agent DOES NOT shred his papers.