Citing uncertainty in Mississippi's legal and business environments, State Farm announced last week that it would halt writing new homeowners' and commercial property insurance in the state of Mississippi.

"We came to this decision reluctantly," said Bob Trippel, senior vice president for State Farm, in a letter sent to Mississippi's Commissioner of Insurance George Dale. "But it is no longer prudent for us to take on additional risk in a legal and business environment that is becoming more unpredictable. When there's more certainty, we will reassess the situation."

Trippel added that the company is concerned that provisions in its insurance policies are being reinterpreted after the fact to provide for coverages that were not contemplated when the policies were written. Criticisms about the company's claim-handling practices also were cited as a factor.

The announcement provoked an immediate reaction from Mississippi Attorney General Jim Hood, who has been a very public figure in the wind v. water litigation that has consumed State Farm. A month ago, litigation led by Hood resulted in a negative verdict for State Farm in the case Broussard v. State Farm. The Broussards not only received policy limits totaling $220,000, but they also received $2.5 million in punitive damages. Shortly after, State Farm settled more than 600 contested cases.

"[Last week's] announcement by State Farm is disappointing, but not surprising to me," said Hood. "One of the main reasons for reaching the settlement was to keep State Farm here, because they have 25 percent of the [homeowners'] insurance market on our Coast. It was our hope that this settlement would stabilize the insurance markets down there and we would be able to continue our rebuilding efforts."

Hood also said that he viewed State Farm's withdrawal as indicative of an insurance system gone awry, one that needs rebalancing from the government.

"I think the answer lies in Congress," said Hood, during his Feb. 14 press conference. "Hopefully the good that will come of this is that we'll have some true national insurance reform. If you're going to write policies in a state, you have to write them all over the state and allow the premiums to reflect that cost."

Hood also said that insurers are trying to create a tax-payer-funded program that would establish an insurer of "last resort" for homeowners unable to obtain coverage in the traditional market, a move he views as being potentially detrimental to state residents.

"[Insurers] dump it on the taxpayers," he said. "They got the Florida legislation to pass the wind pool policy, and they're trying the same thing over here. And guess who backs the wind pool if something goes wrong? The taxpayers. As I've described before, it's like a death roll with an alligator. Insurers refuse to admit that they've done wrong, and they don't want to pay for what they owe. In the end I think Mississippi courts will make them do the right thing."

Trippel said that less than two percent of State Farm's Katrina claims have not been settled. He also stated in the release that the company would continue to serve existing policyholders, and affirmed that its auto insurance division would not be affected.

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State Farm Suspends Miss. Policies; Provokes Hood Reaction

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