Judge refuses to stop questioning of State Farm employees

Published 3:35 pm Thursday, October 5, 2006

A federal judge on Wednesday refused to block employees of State Farm Fire and Casualty Co. from being questioned under oath by lawyers in civil cases while they are targets of a criminal probe of the company’s handling of Hurricane Katrina claims.

State Farm had disclosed Tuesday that at least two of its employees are under investigation by Mississippi Attorney General Jim Hood, whose office is probing allegations that insurance companies fraudulently denied Katrina claims.

U.S. Magistrate Judge Robert Walker ruled last week that four employees of the Bloomington, Ill.-based insurer — Alexis “Lecky” King, Lisa Wachter, Mark Drain and David Randel — can be questioned under oath by lawyers who sued State Farm on behalf of hundreds of policyholders.

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State Farm had asked Walker to reconsider his decision, citing its recent confirmation that King and Wachter are targets of Hood’s investigation. Walker refused, however.

The company claims its employees risk incriminating themselves if they testify in civil cases before the criminal probes are completed.

“State Farm’s interest in having a fair opportunity to defend itself in this civil proceeding would also be jeopardized if the depositions of these four individuals are permitted to go forward,” the company’s attorneys wrote in court papers.

Hood confirmed earlier this year that his office is investigating whether insurance companies have fraudulently denied claims after Katrina. U.S. Attorney Dunn Lampton has neither confirmed nor denied that his office is probing similar allegations.

State Farm says a federal grand jury is expected to issue a subpoena for Drain to testify before the panel. However, it’s unclear whether Drain is a target of either the state or federal investigation, the company says.

King was a co-coordinator of State Farm’s catastrophe team on Mississippi’s Gulf Coast after Katrina, while Wachter was a trainer responsible for overseeing State Farm adjusters, according to attorney Richard “Dickie” Scruggs, whose firm is suing State Farm and other major insurers.

Scruggs’ legal team wants to take depositions from the four State Farm employees this month. King was scheduled to be deposed on Thursday. On Wednesday, however, State Farm asked Walker to delay those depositions for at least 10 days.