State Farm has reached a settlement on a Mississippi Hurricane Katrina claim which was the centerpiece of litigation over how the company made its determination of wind versus flood damage.

The suit charging bad faith against the Bloomington, Ill.-based insurer was dropped by the Biloxi, Miss., couple recently. State Farm told NU Online News Service that the dropped charges made up "the centerpiece of allegations of State Farm wrongdoing promoted by" attorney Richard "Dickie" Scruggs (See "Allegations of State Farm Katrina Misconduct Withdrawn," NU Online News Service, Sept. 11). He is now serving a prison sentence on bribery charges.

State Farm said the settlement reached over insured damages to the home of Thomas and Pamela McIntosh was for $250,000, "which is less than 25 percent of the amount the McIntoshes alleged as damages in their breach of contract suit."

According to State Farm, Mr. Scruggs, the McIntoshes' former attorney, "made up allegations in this lawsuit to launch a public relations plan to lure politicians, the media and others into publicly attacking State Farm. This was a tactic that diverted precious time and resources away from resolving Katrina claims."

Mr. Scruggs, who pleaded guilty in June to conspiring to bribe a judge, was the attorney who filed class actions on behalf of hundreds of State Farm policyholders in connection with Hurricane Katrina damages.

Fraser Engerman, State Farm spokesman, said there are still around 1,000 active lawsuits pending against the company stemming from Hurricane Katrina. They include both individual cases and larger class actions.

He said the company is "working very hard to settle those cases. We prefer that we wrap these up without going through the lengthy cost of litigation and trial."

Speaking to the significance of the withdrawal of charges in the McIntosh case and the subsequent settlement of the claim, Mr. Engerman said it was a "very significant case because Scruggs used this case as a centerpiece of his campaign designed for State Farm to pay him money."

As Gulf Coast residents now prepare to recover from the effects of Hurricane Ike, Mr. Engerman said State Farm has not considered if it will be exposed to litigation similar to the aftermath of Hurricane Katrina. "Our first priority right now is making sure our policyholders recover. We're doing everything we can to help them. So that's our focus."

Mr. Engerman declined to discuss State Farm's expected losses from Hurricane Ike, noting the company generally does not issue loss predictions.

Special Reports /

State Farm Settles Katrina Claim With Miss. Couple

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