Judge rebuffs State Farm

Insurer had wanted AG's role reduced

April 12, 2006

GULFPORT - Attorney General Jim Hood remains active in an investigation of insurance fraud in South Mississippi, despite State Farm Fire and Casualty Co.'s attempt to have his role restricted.

State Farm attorneys tried to show in Circuit Court on Tuesday that Hood had leaked information about the secret investigation and should not be allowed to review company records a grand jury subpoenaed. Circuit Judge Stephen B. Simpson denied the request, finding no direct evidence to support the claim.

State Farm attorney Robert Galloway said the company is concerned Hood will use information from the criminal probe in a civil lawsuit. Hood has sued State Farm and other major insurers over their refusal to pay Hurricane Katrina claims that involved tidal surge.

Insurers say they are paying what is owed under their policies for wind damage, but the hurricane's tidal surge is excluded from coverage.

In the criminal probe, investigators for Hood and local District Attorney Cono Caranna are pursuing allegations that insurers are using altered engineering reports to minimize wind damage.

State Farm is concerned that Hood will share grand jury records with Richard "Dickie" Scruggs and other attorneys pursuing their own civil cases, Galloway said.

Scruggs, reached at his Moss Point office Tuesday afternoon, said Hood is not giving him information. Instead, he said, he is passing along records to investigators.

"There's not been a two-way street between the investigators and me," he said. "I wish there were. It's been a one-way street."

Scruggs said he has a high-level source at State Farm's corporate headquarters in Bloomington, Ill.

He said State Farm's own records, which the source provided, show "a long pattern and practice of unfair dealings with disaster-type claims." He also said the company is working to move records from the Coast to Texas and other places where they will be out of reach.

But Galloway told Simpson the company is fully cooperating with the grand jury investigation. He said six boxes filled with 18,000 pages are ready to turn over. State Farm estimates the company will produce a total of 35 boxes containing 100,000 pages.

The records were subpoenaed from State Farm's Biloxi catastrophe office and an unknown location in Gulfport.

Hood indicated during the hearing that a handwriting analyst and other experts will be called before the grand jury. Simpson decided those witnesses will have to sign paperwork acknowledging the proceedings are to be kept secret.

Hood told the judge Tuesday morning, "I'm going to be personally involved in this grand jury investigation because I want to make sure it's done right, that people are treated fairly."

Copyright © 2006 by Sunherald.com

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