Resurrecting a settlement that was reached back in January 2007 and a subsequent breach of contract suit, Mississippi Attorney General Jim Hood has officially ended the state's battle with State Farm and Nationwide over claims stemming from Hurricane Katrina.

The original agreement called for State Farm to reevaluate coastal claims related to Hurricane Katrina in exchange for a release from a civil lawsuit Hood filed shortly after Katrina struck. It also would have ended a criminal investigation of State Farm's claim-handling practices. But U.S. District Judge L.T. Senter, Jr. rejected the class-action settlement on grounds that it failed to protect policyholders' rights.

This resulted in Mississippi Insurance Commissioner George Dale establishing another compromise with State Farm to reassess coastal claims, one that required the company to pay at least 50 percent of Coverage-A limits to slab or pier-only claims, with a total minimum payout of at least $50 million. Nationwide, though not named in the suit, opted to reevaluate claims on its own.

Since then, both State Farm and Nationwide have paid an additional $74 million and $40 million, respectively. Because Hood's initial agreement, which was rejected, called for State Farm to pay at least $50 million in claims, he abandoned plans to further pursue the breach of contract suit.

Hood expressed satisfaction with the results, but peppered his comments with thinly veiled jabs at State Farm.

“Under the terms of our original settlement, which required supervision of the federal district court, a lot more money would have been paid out because the panel of arbiters would have been chosen evenly by the plaintiffs and State Farm,” said Hood. “Under the Mississippi Insurance Department reevaluation program, there were no arbiters. When we entered into the original agreement, our Office estimated that the arbiters would make State Farm pay between the minimum of $50 million and $400 million. Nevertheless, the additional $74 million paid by State Farm pursuant to the Mississippi Department of Insurance reevaluation program apparently meets the minimum payments required under our original state court settlement agreement.”

According to a release from Hood's office, the settlement agreement includes additional benefits for the remaining slab/pier-only policyholders, who were eligible to request that their claims be reevaluated but have not done so as of yet. State Farm has agreed to send those 148 policyholders new notices that will convey instructions about how to participate in the reevaluation process. The basic requirement is for each policyholder to submit a reevaluation form by Aug. 29, 2008. In accordance with the Attorney General's original agreement with State Farm, these offers are guaranteed to total no less than 50 percent of Coverage-A limits, subject to policy limits and prior payments.

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