A Mississippi official said the state is negotiating disputedHurricane Katrina home damage claims with “almost all insurers inthe state,” concurrent with a report that State Farm is near a masssettlement of Katrina homeowners' law suits.

Lee Harrell, Mississippi deputy insurance commissioner, alsosaid that mediation activity by his department had resulted in thesettlement of 5,000 disputes between homeowners with Katrina claimsand carriers.

Mr. Harrell said that the majority of claims from the August2005 storm still in dispute were south of Interstate 10, “where thewater surge stopped.”

Insurers have argued that where storm water surge hit homes, allclaims were barred by flood exclusion language inpolicies–regardless of damage caused by wind.

Mr. Harrell's department, he said, began negotiating withcarriers in the state over homeowners' claims “the day after thestorm.”

Phil Supple, a spokesman for Bloomfield-Ill.-based State Farm,said by e-mail that his company had about 84,000 claims inMississippi and had paid out $1.1 billion on them. He said thecompany has about 800 Katrina lawsuits pending.

In what could be an industry precedent, State Farm is preparingto settle 639 of those actions for $80 million, The New York Timesreported.

Mr. Supple said that at this point, “we [State Farm] have nosettlement. We continue to talk and to search for ways to bringthese events to a resolution.”

He mentioned that the company was working to resolve thecases–consistent with a call by U.S. District Court Judge L.T.Senter Jr. in Gulfport, Miss.–for attorneys on all sides toconclude the Katrina wind versus water cases in a just speedy andinexpensive manner.

Judge Senter last August–in a case brought against Nationwide byGulf Coast homeowners Paul and Julie Leonard–ruled that while waterdamage was excluded, the insurer had to pay for the damageresulting from wind.

Randy Maniloff, an attorney with the White and Williams law firmin Philadelphia, who has written an analysis of the Senterdecision, said the judge's ruling–which could form the basis forthe State Farm and other insurers' settlements–will mean thousandsof cases would have to be reopened and studied to distinguishbetween wind and water damage. “They have a lot of work aheadhere,” he said.

Mississippi Attorney General Jim Hood has sued insurers,contending their policy language dealing with wind and water isunenforceable because it is ambiguous. An agreement on his part todrop the action is reported to be part of any mass State Farmsettlement.

Mr. Hood's office said his statement on the matter is: “I amworking day and night attempting to get our coastal residents afair shake in the insurance litigation. It would not help ournegotiations to disclose any details at this time.”

Meanwhile, in Gulfport today Judge Senter and an eight-personjury heard opening arguments in a case brought against State FarmFire & Casualty Company by Norman and Genevieve Broussard ofBiloxi, Miss.

The insurer had denied their claim, arguing the house was tornfrom its slab by a flood, while the homeowners argue it was rippedloose by wind.