Miss. Regulator Announces State Farm Slab Claim Reexam

Mississippi's insurance regulator announced today that State Farm had agreed to his request that they reexamine all claims involving policyholders in the state whose homes were smashed off their foundation slabs by Hurricane Katrina.

A State Farm spokesman indicated the arrangement with Insurance Commissioner George Dale was separate from a proposed class-action settlement for 36,000 property owners in three Mississippi Counties that is being considered by a federal judge in Gulfport, Miss.

Richard "Dickie" Scruggs--the lead plaintiff attorney for the group involved with the class-action--assailed the commissioner's announcement saying it "merely requires State Farm to do what the law has always required them to do. It is clearly an election year illusion by State Farm to help its favorite commissioner."

Mr. Dale said the insurer agreed to identify and review all "slab" claims, identify the amount paid and/or offered to date, and detail the additional action State Farm is willing to take for each "slab" claim and report in writing back to his office within 30 days.

The company was formally notified of his call for reexamination of slab claims in a letter sent to them today.

"While the great majority of State Farm's customers appear to be satisfied with the way their claim was handled, we continue to hear complaints from consumers where all that's left of their claim is a foundation or 'slab,'" announced Mr. Dale.

The commissioner said the consumers he was concerned with insist they sustained wind damage prior to water surge. State Farm policies exclude flooding, but U.S. District Court Judge L.T. Senter Jr. has ruled that any portion of damage that can be attributed to wind must be paid.

Mr. Dale wrote the carrier that the slab owners complained "State Farm failed to properly apportion the loss and still paid zero."

He reminded them that on Sept. 7, 2005, his department had issued Bulletin 2005-6, notifying insurers that where the insurance company believes the damage was caused by water, the company must be able to prove to the department that the damage was caused by water and not by wind.

State Farm, according to Mr. Dale, in addition to being the target of single-action and class-actions on the wind/water issue, has been the subject of "hundreds of complaints to the MID offices that the company is not adhering to this bulletin."

The complaints, he said, had sparked an ongoing MID State Farm market conduct exam regarding its handling of Katrina claims in the six coastal Mississippi counties, which the commissioner said will take several more months to complete.

"In the meantime, many consumers' claims remain unsettled, and that is unacceptable. That is why I believe it is in the best interest of all parties that State Farm reopen these 'slab' claims and have them reviewed by a new team in accordance to all MID's earlier bulletins," he said.

The commissioner added he hoped his action "will bring about closure. Rest assured that the MID will continue, as it has since Katrina made landfall, to work directly with consumers and companies to verify that all claims were properly adjusted according to the policies, bulletins and regulations issued by this office," he promised.

Phil Supple, a State Farm spokesman, said the company received Mr. Dale's letter and "continues to work with Commissioner Dale to address insurance issues arising out of Hurricane Katrina. We intend to give the commissioner the information he has requested on this small group of claims. Many of these types of claims have already been resolved through the department's successful mediation program."

He said the company was glad to see that the commissioner's letter "acknowledges that the greatest majority of State Farm customers appear to be satisfied. State Farm has provided more that $1.1 billon to Mississippi property owners for the state's rebuilding efforts."

Mr. Supple said a proposed class-action settlement is still before Judge Senter, which proposes to give slab owners 50 percent of policy value, or to arbitrate a request for a higher amount. He noted that not all of the claims that could be resolved by the settlement before Judge Senter involved slab cases.

He could not immediately supply an estimate of the number of slab cases involving the company.

Mr. Scruggs said the terms in the proposed class-action settlement "have far more bite than [Mr.] Dale's milk toast 'deal.' State Farm and [Mr.] Dale know this. If Judge Senter approves our tough-terms settlement agreement, all unresolved State Farm cases would be reopened and reviewed with an arbitration guarantee. [Mr.] Dale's announcement is limited to a relatively few waterfront homes, and lacks the guarantee of unavoidable and binding arbitration, if State Farm offers nothing new."