Racketeering Alleged in Katrina Suit
By MICHAEL KUNZELMAN Associated Press Writer

NEW ORLEANS — State Farm Fire & Casualty Co. engaged in a “pattern of
racketeering” by manipulating engineering reports on Hurricane Katrina
damage so the company could deny policyholder claims, lawyers for a
group of Mississippi homeowners allege in a lawsuit filed Wednesday.

The federal suit against State Farm represents a new legal strategy for
attorney Richard “Dickie” Scruggs, who has played a prominent role in
challenging the insurance industry for its handling of Katrina claims.

Hundreds of homeowners in Mississippi and Louisiana have sued their
insurers for denying their claims after the Aug. 29, 2005, storm. The
suits typically accuse insurers of bad faith and breach of contract for
refusing to pay for damage from Katrina’s storm surge.

Wednesday’s lawsuit on behalf of Mississippi Gulf Coast homeowners is
the first in which Scruggs and his legal team accused an insurer of
violating the civil Racketeer Influenced Corrupt Organization Act,
commonly known as RICO.

Scruggs, who helped negotiate a multibillion dollar settlement with
tobacco companies in the mid-1990s, said he had filed similar civil
RICO suits against tobacco companies. They are tougher cases to build,
but can carry stiffer penalties, he added.

“The facts call out for this kind of remedy,” he said. “It puts their
license to do business at risk if they lose (the case), for one thing.”

Phil Supple, a spokesman for the Bloomington, Ill.-based State Farm,
said the lawsuit is nothing more than Scruggs’ “PR machine working
overtime.”

“This is a regurgitation of everything he has said for two years,”
Supple said. “We couldn’t find anything new here.”

Scruggs’ 103-page lawsuit claims State Farm engaged in racketeering by
procuring “scientifically dishonest” inspection reports and conducting
“sham re-inspections” of homes so that damage could be falsely
attributed to Katrina’s flood water.

State Farm and other insurers say their homeowner policies cover damage
from wind but not rising water, including storm surge.

The RICO Act is typically associated with criminal prosecutions of
organized crime figures. Randy Maniloff, a Philadelphia-based attorney
who has closely followed the wave of litigation spawned by Katrina,
said the civil RICO Act is rarely invoked in lawsuits over insurance
coverage.

“Nothing surprises me at this point,” Maniloff said of the frequent
legal twists in post-Katrina insurance cases. “Every day is something
new.”

Also named as defendants in Scruggs’ suit are Forensic Analysis &
Engineering Corp. of Raleigh, N.C., and E.A. Renfroe Co. Inc. of
Hoover, Ala. Forensic’s engineers inspected homes for State Farm, while
Renfroe helped the company adjust claims.

Scruggs accuses State Farm of pressuring its engineers to alter reports
on storm-damaged homes so that water, not wind, could be blamed for
damage.

Scruggs filed the lawsuit a day after State Farm asked a federal judge
to disqualify the Scruggs Katrina Group from representing a Biloxi
couple who sued the company for denying their claim.

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From American Constitution Society Blog:

June 8, 2007 11:00 AM Posted By News Questions & comments 19
Leading Conservative Activist Seeks Punitive Damages
Judge Robert Bork, one of the fathers of the modern judicial conservative movement whose nomination to the Supreme Court was rejected by the Senate, is seeking $1,000,000 in compensatory damages, plus punitive damages, after he slipped and fell at the Yale Club of New York City. Judge Bork was scheduled to give a speech at the club, but he fell when mounting the dais, and injured his head and left leg. He alleges that the Yale Club is liable for the $1m plus punitive damages because they “wantonly, willfully, and recklessly” failed to provide staging which he could climb safely.

Judge Bork has been a leading advocate of restricting plaintiffs’ ability to recover through tort law. In a 2002 article published in the Harvard Journal of Law & Public Policy–the official journal of the Federalist Society–Bork argued that frivolous claims and excessive punitive damage awards have caused the Constitution to evolve into a document which would allow Congress to enact tort reforms that would have been unconstitutional at the framing:

State tort law today is different in kind from the state tort law known to the generation of the Framers. The present tort system poses dangers to interstate commerce not unlike those faced under the Articles of Confederation. Even if Congress would not, in 1789, have had the power to displace state tort law, the nature of the problem has changed so dramatically as to bring the problem within the scope of the power granted to Congress. Accordingly, proposals, such as placing limits or caps on punitive damages, or eliminating joint or strict liability, which may once have been clearly understood as beyond Congress’s power, may now be constitutionally appropriate.
Ted Frank, another leading proponent of tort reform, questions the merits of Judge Bork’s claims:

I sympathize with Judge Bork’s serious injuries, but it’s beyond me what his lawyers are thinking in asking for punitive damages. And if any danger is open and obvious such that there is an assumption of the risk, surely the absence of stairs to reach a lectern on a dais is—especially if the dais is of the “unreasonable” height that the complaint alleges it to be.
ACSBlog wishes Judge Bork a swift recovery from his injuries.