Allstate Subject of Qui Tam Whistleblower Lawsuit

New Orleans, LAWhen Allstate Insurance filed a statement of claim with the National Flood Insurance Program, it is alleged that Allstate inflated the amount of flood loss suffered by three Allstate clients. In response, a qui tam whistleblower lawsuit has been filed on behalf of the federal government by an attorney serving as a relator in the suit who claims to have direct and independent knowledge of the allegations.

The lawsuit was filed more than three years ago by attorney John H. Denenea, Jr., but has been under seal until September 21, when an order from Judge Carl Barbier unsealed the case. The delay was in part to allow the federal government time to decide if it intended to intervene in the qui tam lawsuit.

With the unsealing of the lawsuit, which was originally filed in US District Court in New Orleans, Allstate has now been made aware of the allegations against them. To that end, the lawsuit claims that the insurer "knowingly fabricated" insurance documents to decrease its own claims payments and inflate flood losses at the expense of the federal government.

Allstate would not comment on the lawsuit.

Government whistleblowers have the capacity to claim percentages of damages and awards obtained through litigation against defendants who are found to have defrauded the federal government. Damages and awards can be three times as much as they might be otherwise when the case involves a fraud against the government.

According to Property & Casualty National Underwriter on 9/29/10, Denenea, serving as the qui tam government whistleblower, is seeking a trial and is asking for between 25 and 30 percent of any damages awarded if he brings the trial alone. Were the government to pick up the case, the attorney would seek between 15 and 25 percent of any proceeds derived from the lawsuit under provisions of the federal whistleblower act.

Denenea is reported to have turned over to the federal government all the documents he had in his possession related to the alleged fraud prior to filing the lawsuit three years ago. So far, the government has not taken the bait. Judge Barbier ordered the case unsealed, as the government "is not intervening at this time."

Federal whistleblowers are known to have uncovered numerous instances of fraud against the government over the years. In exchange for their diligence and willingness to blow the whistle against a defendant—often a former employer—whistleblowers enjoy a healthy payday in the end.