State Farm will not renew coverage for about 2,600 policyholders, mainly in Alabama's beach resort areas, the company said.

Karen Cutter, State Farm's Alabama vice president for agencies, said the 2004-2005 catastrophes have shown that “we must continue to manager our property-loss exposure along the coast for the sake of all of our policyholders.”

“This has been a difficult decision; one that was made with careful review and great consideration,” she said.

The Bloomington, Ill.-based insurer, which announced the nonrenewal action Friday, has the biggest market share on the Alabama coast and is the state's largest home insurer. Most of those affected by the nonrenewal notice own beach condominiums, state regulators said.

Ragan Ingram, assistant commissioner with the Alabama Insurance Department, said he met last week with company officials asking them to reconsider the decision.

“Understandably, we are extremely disappointed in State Farm's decision to nonrenew policies in the coastal areas of Alabama,” he told the NU Online News Service.

The announcement came after State Farm agreed to pay about $80 million to more than 600 Mississippi policyholders who sued over Katrina damage and proposed a class action settlement to pay at least $50 million more to resolve thousands of other potential Katrina claims in three coastal counties.

Separately, a jury awarded a Biloxi, Miss., couple whose home was destroyed by Katrina $2.5 million in punitive damages against State Farm–an amount reduced to $1 million by a federal judge.

State Farm's cutbacks in Alabama affect properties within about 1,000 feet of the shoreline of the Gulf of Mexico, Mobile Bay and its connected bays, said Mr. Ingram.

The policies not being renewed represent less than 1 percent of the company's policies statewide, said State Farm spokesman David Majors.

Special Reports /

State Farm Cuts Back In Alabama

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