In what turned out to be a month of positive legal verdicts for State Farm, a group of law firms that had formed to prosecute the insurer and its third-party administrator E.A. Renfroe in a large number of Katrina-related cases were all disqualified for engaging in unethical behavior. In addition, two star witnesses for prosecutors have been disqualified from testifying or using any material they gathered.
Previously known as the Scruggs Katrina Group (SKG), the litigation group pursuing State Farm was forced to realign itself recently after lead attorney Richard Scruggs and his law firm withdrew as counsel for allegedly bribing a judge in a separate, unrelated case. The remaining law firms of Barrett Law Office, Nutt & McAlister, and Lovelace Law Firm reorganized to form the Katrina Litigation Group (KLG). It was this group that was to represent a large number of policyholders who were suing State Farm over claim-handling procedures following Hurricane Katrina.
That was until Mississippi U.S. District Court Senior Judge L.T. Senter, Jr.'s ruling in early April. It again involved ethical misconduct charges against Scruggs, this time for paying two key witnesses — sisters and independent adjusters Cori and Kerri Rigsby — more than $150,000 for secretly gathering thousands of pages of evidence to use against State Farm and E.A Renfroe. They argued that there was an inherent conflict of interest with the payments since the sisters were likely to be called as material witnesses in many of the hurricane damage cases that Scruggs' group was handling.
In what might be the most devastating blow to those who filed lawsuits against State Farm and E.A. Renfroe, Judge Senter also barred the Rigsby sisters from testifying as witnesses in any actions pending against the two companies. That ruling includes any documents the sisters supplied to SKG or KLG, unless it is shown that the documents were obtained through ordinary methods of discovery, something that is unlikely to occur.
Days after the ruling was issued, State Farm filed several motions asking for the dismissal of the False Claims Act suit brought by Cori and Kerri Rigsby, which alleged that State Farm manipulated policyholder claims to shift responsibility from its homeowners' policies to the National Flood Insurance Program. Given that the Rigsbys cannot testify or present evidence they gathered, the good news is likely to continue for State Farm and E.A. Renfroe.
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