[StBernard] Judge rejects Katrina settlement

[Westley Annis]

Judge rejects Katrina settlement 
State Farm had agreed to pay Mississippi victims $50 million
The Associated Press
Updated: 6:05 p.m. CT Jan 26, 2007

NEW ORLEANS - A federal judge in Mississippi on Friday refused to endorse
part of a proposed settlement that calls for insurance payments to thousands
of Mississippi policyholders whose homes were destroyed or damaged by
Hurricane Katrina.

U.S. District Judge L.T. Senter Jr. would not sign off on a deal between
State Farm Fire & Casualty Co. and Mississippi Attorney General Jim Hood for
at least $50 million in payments to policyholders whose claims were denied
but didn't sue the company.

The Bloomington, Ill.-based insurer also had agreed 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. Senter hasn't been asked to sign off
on that part of the deal.

Senter said he doesn't have enough information to determine how many
policyholders would benefit from the deal or how much each can be paid.

"In the absence of substantially more information than I now have before me,
I am unable to say, even preliminarily, that the proposed settlement
establishes a procedure that is fair, just, balanced or reasonable," he
wrote.

Senter rejected the settlement "without prejudice," allowing lawyers to
present a new agreement that satisfies his concerns.

State Farm spokesman Phil Supple said the company looks forward to
"addressing Judge Senter's concerns," adding, "We believe, given the
opportunity, he will come to view the proposed settlement as fair, just,
balanced and reasonable."

Hood, in a written statement, said State Farm and plaintiffs' lawyers were
responsible for negotiating the terms of the "class action" portion of the
settlement. Hood added that he had "reservations" about that part of the
deal.

"Nevertheless, I knew that Judge Senter would make sure that the class was a
fair procedure for all," he added. "I am confident that Judge Senter will
make the plaintiffs and State Farm fix the problems he has raised in his
order."

Richard "Dickie" Scruggs, a lawyer for the 639 policyholders who have
settled their lawsuits with State Farm, said Senter's ruling shouldn't have
any affect on the company's settlements with his clients. Scruggs said he
expects to begin making payments to his clients next week.

"Case by case, litigation over many years is in nobody's best interest,"
Scruggs said. "It's our hope that we can quickly address the judge's
concerns."

In his eight-page ruling Friday, Senter said that although State Farm has
agreed to pay $50 million to policyholders who qualify for the class action
portion of the settlement, he can't determine "how thinly this large sum may
be spread among the class members."

Senter also expressed concern about a lack of any "guaranteed" payments to
policyholders whose homes weren't completely destroyed and said he is
"uncomfortable" with allowing many cases to be settled by binding
arbitration "when none of these individuals has ever agreed to participate
in that procedure."


Mississippi's mass settlement agreement didn't involve any claims in other
states.

Lawyers involved in the agreement presented the "class action" portion of
the deal to Senter on Tuesday afternoon.

That part of the agreement would require State Farm 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 would be required to make new
offers. Any disputes would be heard by an arbitrator whose decision would be
binding.

The accord came 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. Senter 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.

Senter is the only federal judge in Mississippi who has been presiding over
the hundreds of lawsuits that policyholders filed against State Farm and
other insurers.

In the first trial for a Katrina insurance case, Senter ruled in August that
Nationwide Mutual Insurance Co.'s homeowner policies cover damage from wind
but not storm surge. He also has ordered dozens of policyholders who sued
their insurers to participate in an experimental mediation program.

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