In this July 9, 2007, entry—the second of two parts posted on his blog, InsuranceTransparencyProject.com—Dean Starkman discusses a Mississippi lawsuit that sheds unflattering light on how insurers responded after Hurricane Katrina.
In our last installment, State Farm, headed by cat manager Alexis "Lecky" King, had hired Forensic Analysis & Engineering Corp. to inspect an estimated 10,000 post-Katrina homes for a "proportionate share" of $2,500 each; Forensic's principal, Robert Kochan, had ramped up by, among other things, hiring two outside engineers, Brian Ford and Emanuel Manon, to perform inspections.
Both submit several reports attributing some damage to wind, causing King to hit the roof and fire Forensic. Kochan rushes to Biloxi to meet with King, fires Ford and Manon, and begins installing a new system to avoid repeating the mistake of angering King. Forensic engineer Randy Down objects, but soon is found participating in the new system.
The full complaint and exhibits are on the Scruggs Katrina Group site.
The new system is at first ad-hoc and involves retrieving and destroying Ford and Manon reports, substituting "swap outs" that blame water; or, if a report had been distributed up through State Farm processing system (and retrievable, one supposes, in discovery) to mark those as "draft," removing the conclusions and allowing State Farm to write in its own. Photos implicating wind are to be removed.
On Oct. 28, two months after Katrina and after the Kochan-Lecky King meeting, State Farm executive Mark Wilcox sends Kochan a sample report, which includes, among other things, the false conclusion that storm surge preceded the wind. No one believes that.
As Kochan wrote to a subordinate:
"Consider submitting the work we have done ... with a copy of the report marked DRAFT and Manny's conclusions REMOVED. Just mark that section INCOMPLETED. We don't need to give them any ammunition that is not necessary and we can still bill for the investigation."
The substitute reports are written by two Forensic engineers, William Forbes and John Kelly.
On Oct. 28, two months after Katrina and after the Kochan-Lecky King meeting, State Farm executive Mark Wilcox sends Kochan a sample report, which includes, among other things, the false conclusion that storm surge preceded the wind. No one believes that. The sample report's false conclusions are attributed to Weather Data Inc., a private contractor to State Farm. The sample report includes a conclusion that the property was destroyed by surge. No wind damage was included in the sample.
In a January 2006 email, Forensic's Kelly, commenting on a government site, admits he knows wind preceded water, even though Forensic reports are going out saying the opposite:
The thing I found interesting was the lead time of the wind ahead of the water, because this is what we experienced. I can not say what speeds the winds were, but they definitely were ahead of the water by our observation.
By everyone's observation. That's not even a debatable point, except among these "engineers." By November, a month after the Kochan/King meeting, Adam Sammis, the administrative assistant working in the specially equipped Forensic RV on the coast, is emailing Nellie Williams, Forensic's director of operations, working from her home in Nevada, that reports have been altered.
Case 56 has been changed...
Case 74 has been changed.
Case 23 has been changed...
Case 27 has been changed significantly....
In one case, the Simpson family's, Lecky King emailed Kochan at Forensic and asks why wind was listed a primary case. Kochan then emails engineer Down, saying "I suggest that the client (State Farm) be advised that we will amend the report." Engineer Kelly then emails Williams in Reno, copying Down, with the following warning:
I think this may be one of those jobs that one must be careful in handling. If the report has gone to some kind of distribution within SF, it may be better to write a letter of clarification addressing the question vs. amending the report. If the report has not been distributed and we can retrieve the original as a swap out we could re-do the report.
This is what the paper trail looks like of "wind" conclusion changing to "water." It's King to Kochan to Down to Kelly to Williams.
Soon, according to the exhibits in the Scruggs complaint, the task for Forensic becomes finding a pretext for subbing out the original reports that attributed wind with new reports that blamed water. Engineer Kelly writes to engineer Down how he will do just that on a report on the Pepperman family home:
I spoke with David Haddock of SF to tell him that we would like to submit a revised report on this job based on additional information that we now have that we did not have at the time the report was written. This included the Weather Data Inc. report supplied to us by State Farm. Since the report he is now holding has not been outside of SF, he is mailing that original back to me and the new report will replace it.