State Farm and Mississippi's insurance regulator announced an agreement for handling Hurricane Katrina claims today, which the company said includes many provisions of a proposed class-action settlement that collapsed in federal court.

On March 12, a group of attorneys involved in the federal class-action proposal notified U.S. District Court Judge L.T. Senter Jr. in Gulfport, Miss., that they were withdrawing their request to have it approved.

Based in part on withdrawal of the class-action settlement, Mississippi Insurance Commissioner George Dale said he had arranged with the company to undertake a reexamination of claims, where policyholders requested it, which could eventually impact 35,000 homeowners.

The commissioner explained that his latest arrangement with the company was an expansion of his March 6 agreement with State Farm to reopen about 1,200 coastal claims.

That agreement applied only to homes that were swept off their foundation slab. It called for such claims to be reviewed by a new team of claim representatives.

Scruggs Katrina Group, the combination of attorneys that was part of the proposed federal court settlement, criticized the Commissioner's March 6 arrangement as a "milk toast (sic) deal" lacking the binding arbitration in their proposal.

A State Farm spokesperson, Fraser Engerman, said the newest arrangement with Mr. Dale does not include binding arbitration, but "upholds the spirit" of the federal court proposal, which "essentially was dead" when Scruggs Katrina Group pulled out.

He said the company pledged to pay a minimum of $50 million in claims, and would be contacting slab owners within 14 days in Hancock, Harrison, and Jackson counties. At issue are claims initially rejected as policy-excluded flood damage.

Mr. Engerman said the arrangement with Mr. Dale would include renters and commercial claims--including those that are or were in mediation. He said commercial claims were not in the proposed federal court settlement.

Mr. Dale said if a claim is already in litigation, the insured's attorney will need to ask that the claim be readjusted. As a starting point, he said State Farm will use the settlement numbers under the proposed class action.

State Farm offered to pay 50 percent of slab claims' policy value without question. The commissioner said his department believes that in a lot of cases there is a strong possibility the insured will be receiving more than what was offered in the class-action settlement.

When he learned that the proposed class-action settlement had stalled, Mr. Dale said his department "opened negotiations with State Farm immediately, working virtually around-the-clock to come to this agreement." He said "this plan presents a consumer-friendly way to resolve these disputes and quickly put substantial amounts of money into the hands of those waiting to rebuild their homes and lives on the coast."

He added that "combined with the recently passed wind pool legislation that was presented by my office, this is another big step toward a more stable insurance environment," said Commissioner Dale.

He said State Farm will review claims, make payment offers, and, if requested, rely upon his department's Hurricane Katrina Mediation Program to resolve differences on offer amounts. Representatives from the insurance department will monitor the claim review and payment offers.

Mr. Dale described the arrangement as a "no-lose proposal for coastal policyholders. It's a free process, and presents them with the opportunity to have their claim looked at again, by different eyes, under the supervision of the Mississippi Insurance Department."

He said State Farm indicated it hopes to have all claims re-adjusted within 60-to-150 days following notification from the policyholder, and will create a toll-free number to answer any questions.

In addition, the commissioner said he is continuing to have discussions with State Farm about reopening their Mississippi markets. The company said February it would stop accepting new homeowners business in the state.

Commissioner Dale said discussions with other companies on expediting their claim-handling practices as well, and further announcements to aid in stabilizing the state's insurance market could come in the following weeks.

Republican Gov. Haley Barbour issued a statement calling the announcement "great news. Commissioner Dale's action should allow hundreds if not thousands of Mississippi homeowners to receive insurance payments from State Farm after these claims are readjusted. Everyone's goal should be to get as much money as possible into the hands of as many people as possible so they can continue to rebuild. This agreement is another way to do that."

The Scruggs Katrina Group, in pulling out of the settlement, said it appeared the judge did not favor it, and that it was not clear that State Farm wanted to keep working on an agreement. State Farm said it was surprised by the attorneys' move.

Special Reports /

A New State Farm Deal In Miss.

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