[StBernard] State Farm settles Katrina lawsuits

[Westley Annis]

State Farm settles Katrina lawsuits 
Homeowners to get average $125,000; thousands of cases to be reviewed 
The Associated Press
Updated: 7:43 p.m. CT Jan 23, 2007

State Farm Fire & Casualty Co. agreed Tuesday to settle hundreds of lawsuits
by policyholders and reopen and pay thousands of other disputed claims, a
landmark deal potentially worth hundreds of millions of dollars for
Mississippi homeowners devastated by Hurricane Katrina.

The settlement calls for State Farm to pay about $80 million to more than
600 policyholders who sued the company for refusing to cover damage from the
Aug. 29, 2005, storm. State Farm also agreed to pay at least $50 million -
but possibly hundreds of millions more - to thousands of Mississippi
policyholders whose claims were denied but didn't sue the company.

State Farm's agreement with Mississippi Attorney General Jim Hood and
lawyers for the more than 600 policyholders resolves a civil lawsuit that
Hood filed against the company for refusing to cover damage from Katrina's
storm surge.

The accord also resolves Hood's criminal probe of allegations that the
Bloomington, Ill.-based insurer fraudulently denied claims after the August
2005 storm.

"It's been like a death roll with an alligator for the last two months in
these negotiations," Hood said.

Mississippi's mass settlement - the first of its kind since Katrina spawned
hundreds of lawsuits against State Farm and other major insurers - does not
involve any claims in other states.

The deal was expected to be presented to U.S. District Judge L.T. Senter Jr.
in Gulfport Tuesday afternoon. Senter must sign off on the settlement.

"The agreement greatly reduces the time, the risk and the expense of
defending multiple claims in individual litigation," said State Farm
spokesman Phil Supple.

State Farm, the state's largest home insurer, says it already has paid
roughly $1.1 billion for about 84,000 property claims in the state. State
Farm and other insurers paid for Katrina's wind damage, but Hood and
hundreds of policyholders sued the companies over their refusal to pay for
more than $2 billion in damage from the storm's wind-driven surge.

The settlement resolves the lawsuits that high-profile attorney Richard
"Dickie" Scruggs filed on behalf of 639 policyholders, including Sen. Trent
Lott, R-Miss. Each of these policyholders will receive an average of about
$125,000.

A "class action" component of the deal requires the company to reopen and
review claims filed by roughly 35,000 policyholders who live in
Mississippi's three coastal counties but didn't file lawsuits against State
Farm.

After reviewing those claims, the company will be required to make new
offers. Any disputes will be heard by an arbitrator whose decision would be
binding.

Hood said State Farm must pay a minimum of $50 million to these
policyholders after their claims are reviewed. However, depending on how
many policyholders qualify, the company could end up paying hundreds of
millions of dollars more than that because there isn't a cap on the amount.

The settlement comes less than two weeks after a federal jury in Gulfport
awarded $2.5 million in punitive damages to a couple who sued State Farm for
denying their claim after Katrina. A judge took part of that case out of
jurors' hands, ruling that State Farm is liable for $223,292 in storm damage
to the Biloxi home of Norman and Genevieve Broussard.

The settlement with Hood and Scruggs' clients leaves about 200 other
lawsuits against State Farm pending in a federal court in Mississippi.

Scruggs, a Gulf Coast native whose own home in Pascagoula was destroyed by
Katrina, rose to national prominence when he helped negotiate a
multibillion-dollar settlement with tobacco companies in the mid-1990s.

After Katrina, his legal team sued several major insurers on behalf of
hundreds of Gulf Coast policyholders, including Lott, his brother-in-law,
whose Pascagoula home was demolished by the storm.

Scruggs' legal team also sued Nationwide Mutual Insurance Co., Allstate
Insurance Co., Metropolitan Property and Casualty Insurance Co. and United
Services Automobile Association. Besides State Farm, Hood sued Allstate,
Mississippi Farm Bureau Insurance Co., USAA and Nationwide.

In addition, Hood has investigated allegations that State Farm and other
insurers have fraudulently denied claims after Katrina. A grand jury in
Pascagoula began hearing testimony on those allegations, but Hood said the
settlement ends his investigation.


"Many of us have friends or who have had homes and businesses on the coast
that have been hammered," Hood said. "I just pray that this will work
quickly and efficiently to stabilize our insurance markets and to stabilize
the economic development down on the coast."

Scruggs and other attorneys have accused State Farm of pressuring its
engineers to alter reports and change their conclusions on whether Katrina's
wind or water was responsible for damage to homes.

But the civil cases against State Farm were weakened by a series of court
rulings that favored the insurance industry.

C 2007 The Associated Press. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed.
URL: http://www.msnbc.msn.com/id/16774511/


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