A federal judge in Mississippi has ruled that Attorney General Jim Hood cannot investigate State Farm's handling of hurricane claims after agreeing last year to drop his probe of the insurer.

Under the January 2007 agreement, State Farm agreed to reopen 30,000 hurricane claims from 2005 and pay out a minimum of $50 million to settle the claims. In return, Attorney General Hood agreed to drop his criminal probe of State Farm's handling of the claims.

U.S. District Judge David Bramlette in Natchez, Miss., ruled that State Farm's agreement with Mr. Hood, which settled a class-action lawsuit stemming from the claims dispute, is “valid, unambiguous and enforceable,” State Farm spokesman Fraser Engerman said today.

“We are pleased with the outcome,” he added.

A spokesman for Attorney General Hood was not available for comment.

Terms of the settlement are confidential.

After the settlement deal failed, according to Mr. Engerman, State Farm reached an agreement with then Insurance Commissioner George Dale “to implement the spirit of the agreement.”

As a result of the deal between State Farm and the plaintiffs, U.S. District Court Judge L.T. Senter Jr. dismissed the case, Woullard vs. State Farm, in April 2007.

The latest decision by Judge Bramlette says that even though the case was ultimately dismissed, the agreement reached to end the criminal probe of State Farm in return for agreeing to reopen the cases is still valid.

The judge's decision ended a massive class-action lawsuit by homeowners against State Farm that was supposedly settled in January 2007 through an agreement between State Farm and Attorney General Hood.

It came at a hearing requested by State Farm on a motion to dismiss the case that the insurer filed. The motion accused Attorney General Hood of using the threat of criminal charges to force settlements in civil lawsuits.

In a motion filed with the court on the eve of the hearing, Attorney General Hood said the State Farm allegation is based on “lies, speculation and innuendo.”

The class-action lawsuit pact was never signed because Judge Senter declined to approve it, citing concerns about the terms of the deal.

A little while later, Richard Scruggs, the plaintiff's lawyer who was the lead counsel in the case, dropped out. Mr. Scruggs is facing trial soon on federal charges.

Mr. Scruggs is accused by the government of conspiring with several associates to bribe a judge in an unrelated dispute over $26.5 million in fees from a mass settlement of Katrina claims.

He also faces contempt charges in Alabama for allegedly violating a federal judge's order by giving leaked Katrina assessment documents to Attorney General Hood rather than returning them to the company from which they were taken.

Mr. Scruggs has denied wrongdoing in either case.

The lawsuit that led to the agreement with Attorney General Hood was filed by Mr. Scruggs and other lawyers on behalf of 30,000 State Farm customers in three coastal counties in Mississippi hit hard by Hurricanes Rita and Katrina.

Mr. Engerman said that as of Jan. 23, State Farm has paid out more than $76 million to settle those claims and has offers on the table that would require the insurer to bring the total cost of the settlement so far to $88 million.

“The big difference between the original agreement and the agreement with the commissioner is that policyholders are getting the money directly,” Mr. Engerman said. Under the prior agreement, the policyholders would have to pay attorneys' fees, he explained.

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Judge Ends Hood State Farm Probe

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