Mississippi Attorney General Jim Hood announced he has reached a settlement in his protracted battle with State Farm over payments to coastal homeowners whose houses were destroyed by Hurricane Katrina in 2005.

The attorney general said in a statement that he had reached an agreement to conclude his breach of contract suit against the insurer after concluding the company was acting properly by settling claims with oversight from the state insurance department.

His suit followed the collapse in 2007 of a proposed federal court agreement between State Farm and Mississippi homeowners participating in a class action. That arrangement fell apart when plaintiff lawyers said they were pulling out.

After the settlement disintegrated, State Farm made a new arrangement with the Mississippi State Insurance Department to help them settle contested coastal claims.

Mr. Hood reacted by filing a bad faith lawsuit on behalf of 30,000 policyholders, arguing the insurer should have kept to the terms of the proposed settlement, which he was involved in.

Fraser Engerman, a State Farm spokesperson, reacted by saying the company finds it “perplexing the attorney general is taking credit for a program that he opposed from the beginning, and in fact was the basis of the lawsuit which he filed against us and has now settled with State Farm.”

“This is reassuring to our policyholders, that we did the right thing and our resolution process with the Mississippi Insurance Department has worked well. Nonetheless, we're pleased the attorney general understands State Farm has met its obligations under the agreement we made with him in January of 2007,” which was never concluded.

As a result of the latest settlement, Mr. Hood said State Farm will send out new notices to 148 policyholders who were left with only a bare foundation slab due to the storm's destruction.

The 148 policyholders involved, it was explained, have not yet sued, settled or already participated in an agreed upon process for reevaluation of damage claims.

According to Mr. Hood, the original Hinds County Chancery Court settlement required that State Farm establish an administrative procedure to be approved by the Federal Court for the Southern District of Mississippi to reevaluate claims of its coastal policyholders in Hancock, Harrison and Jackson counties.

His statement said that settlement also required the insurer to make new offers to its policyholders for no less than 50 percent of Coverage A limits to slab or pier only claims, subject to policy limits and prior payments.

Mr. Hood said his office reviewed a sampling of the settlements reached under the insurance department program, and it appeared that State Farm has complied with the federal settlement proposal by making the minimum 50 percent offers.

He said under the terms of the original proposed settlement, which required supervision of the federal court, “a lot more money would have been paid out, because the panel of arbiters would have been chosen evenly by the plaintiffs and State Farm.”

Under the Mississippi Insurance Department reevaluation program, he said, “there were no arbiters.”

When his office entered into the original proposed federal agreement, it was estimated that the arbiters would make State Farm pay between the minimum of $50 million and $400 million, he said.

“Nevertheless, the additional $74 million paid by State Farm pursuant to the Mississippi Department of Insurance reevaluation program apparently meets the minimum payments required under our original state court settlement agreement,” he said.

State Farm said it paid over $80 million in Hurricane Katrina claims.

When Mr. Hood began his now settled lawsuit, he was slammed by the U.S. Chamber of Commerce, which said “the bottom line is not whether the people of Mississippi will get fair compensation on their losses; it is whether or not the state attorney general can subvert a fair process in order to give trial lawyers a cut–ultimately at the expense of Mississippi homeowners.”

Mr. Hood, the Chamber said, had deputized three outside plaintiffs' trial lawyers for the suit, and their combined total campaign contributions with their law firms to Mr. Hood's last campaign was nearly $70,000.

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Hood Ends His Suit With State Farm

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