NEW YORK--Reacting to a report yesterday that State Farm is nearing a major Mississippi agreement over hurricane claims, Mississippi Insurance Commissioner George Dale said the justice system forces insurers into settlements for the wrong reasons.

Mr. Dale said a resolution has not been reached by State Farm, which is in settlement talks with attorneys contesting the insurer's denial of hundreds of homeowners' claims resulting from Hurricane Katrina.

"I think there's something wrong with our system when the parties involved say, 'We will settle because in the long run we will save money,' [rather than] speaking to the issue of what's right and what's wrong," he said.

Mr. Dale made his comments during the opening session of the Property-Casualty Insurance Joint Industry Forum held in New York yesterday afternoon.

While not specifically mentioning Bloomington, Ill.-based State Farm, Robert P. Hartwig, president of the New York-based Insurance Information Institute, who moderated the session, referred earlier in the day to "news emanating from [the] state of Mississippi," asking the commissioner what insurers need to do to resolve pending litigation.

Mr. Dale responded that many storm-related issues remain in litigation, and while he confirmed his department "has been involved in negotiations with some parties" relating to a large number of pending suits, he said that "at this point in time, they're not settled."

"I don't know who jumped the gun and wrote the article, or who put out the information." The negotiations, he said, "are not at the point of being a solution" to litigation issues.

The New York Times reported that State Farm is close to settling 639 lawsuits for $80 million. A spokesman for State Farm said the company has no settlement but continues to hold talks seeking a resolution of Katrina claim disputes.

At issue are coastal homes that were hit by storm surge waters, which insurers argue are not eligible for any damage payments because they are barred by flood exclusion language in policies. A federal judge has ruled that while flooding is not a valid claim, insurers must pay for any portion of the home damaged by wind.

Mr. Dale said that insurers have paid $11.2 billion in hurricane damage losses in Mississippi, adding, however, that his responsibility is not just to make sure every claim that is owed is paid, but also to make sure that there's a Gulf Coast insurance market "after all this is over."

"I'm finding that the second one of these responsibilities may be a little bit more difficult than the first," he said. He continued, "Unfortunately, some of our friends in the plaintiffs' bar and some well-meaning political officeholders are not familiar with that second issue."

Another panelist, Brian Sullivan, editor of Risk Information, agreed with Mr. Dale that settling the claims isn't enough. "You need to settle the issue. We need to know if wind-driven water is a covered event," he said. "The definition of that...needs to come out of this, or else there's no future certainty," he said.

During yesterday's meeting, insurance executives in attendance were polled on a variety of issues, including the question of whether insurers would prevail in wind-water suits, with 80 percent responding that they would.

According to the figures from the Mississippi Insurance Department, there have been 5,000 Hurricane Katrina claims disputes settled through mediation.

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