Hurricane Katrina Settlement Actions Reported

A Mississippi official said the state is negotiating disputed Hurricane Katrina home damage claims with “almost all insurers in the state,” concurrent with a report that State Farm is near a mass settlement of Katrina homeowners' law suits.

Lee Harrell, Mississippi deputy insurance commissioner, also said that mediation activity by his department had resulted in the settlement of 5,000 disputes between homeowners with Katrina claims and carriers.

Mr. Harrell said that the majority of claims from the August 2005 storm still in dispute were south of Interstate 10, “where the water surge stopped.”

Insurers have argued that where storm water surge hit homes, all claims were barred by flood exclusion language in policies–regardless of damage caused by wind.

Mr. Harrell's department, he said, began negotiating with carriers in the state over homeowners' claims “the day after the storm.”

Phil Supple, a spokesman for Bloomfield-Ill.-based State Farm, said by e-mail that his company had about 84,000 claims in Mississippi and had paid out $1.1 billion on them. He said the company has about 800 Katrina lawsuits pending.

In what could be an industry precedent, State Farm is preparing to settle 639 of those actions for $80 million, The New York Times reported.

Mr. Supple said that at this point, “we [State Farm] have no settlement. We continue to talk and to search for ways to bring these events to a resolution.”

He mentioned that the company was working to resolve the cases–consistent with a call by U.S. District Court Judge L.T. Senter Jr. in Gulfport, Miss.–for attorneys on all sides to conclude the Katrina wind versus water cases in a just speedy and inexpensive manner.

Judge Senter last August–in a case brought against Nationwide by Gulf Coast homeowners Paul and Julie Leonard–ruled that while water damage was excluded, the insurer had to pay for the damage resulting from wind.

Randy Maniloff, an attorney with the White and Williams law firm in Philadelphia, who has written an analysis of the Senter decision, said the judge's ruling–which could form the basis for the State Farm and other insurers' settlements–will mean thousands of cases would have to be reopened and studied to distinguish between wind and water damage. “They have a lot of work ahead here,” he said.

Mississippi Attorney General Jim Hood has sued insurers, contending their policy language dealing with wind and water is unenforceable because it is ambiguous. An agreement on his part to drop the action is reported to be part of any mass State Farm settlement.

Mr. Hood's office said his statement on the matter is: “I am working day and night attempting to get our coastal residents a fair shake in the insurance litigation. It would not help our negotiations to disclose any details at this time.”

Meanwhile, in Gulfport today Judge Senter and an eight-person jury heard opening arguments in a case brought against State Farm Fire & Casualty Company by Norman and Genevieve Broussard of Biloxi, Miss.

The insurer had denied their claim, arguing the house was torn from its slab by a flood, while the homeowners argue it was ripped loose by wind.