U.S. Judge Kills State Farm Miss. Class Settlement

A proposed State Farm class-action settlement for Mississippi homeowners with Hurricane Katrina claims was rejected by a federal judge yesterday who said the cases involved were too different to be lumped together.

The decision by U.S. District Court Judge L.T. Senter Jr. in Gulfport, Miss., came 10 days after a key group of lawyers involved in developing the proposal withdrew their request to have it approved.

A week later it was announced that the insurer had worked out an arrangement with Mississippi Insurance Commissioner George Dale for an expedited re-examination of up to 35,000 homeowners' claims in three coastal counties with a minimum of $50 million in payments promised.

Judge Senter found that the proposed class action, which was limited to an estimated 1,000 homes that had been swept off their foundation slab, was "inconsistent with the requirements of due process."

Judge Senter wrote that "while each of the many 'slab cases' has in common the fact that the insured property was totally destroyed during Hurricane Katrina, the many other factual differences between the cases" does not permit a class settlement.

After having tried three slab cases, the judge said he had learned that hurricane force varied by location, closeness to the shore, type of building hit and its placement, and that State Farm had handled claims in a variety of ways.

State Farm in reaction issued a statement that the company is "pleased with Judge Senter's affirmation each claim is unique and no two property owners experienced the same type of loss. It is only right each claim be tried in court separately."

Judge Senter initially rejected the settlement in January saying a multitude of points in the agreement were unclear and he could not call it "fair, just, balanced or reasonable." He later held a hearing at which objections for the proposal were voiced in addition to statements of support by the lawyers who crafted it.

The Scruggs Katrina Group of attorneys, which pulled out from the settlement March 12, said they did so because the judge appeared reluctant to grant the motion to approve the settlement and they were unclear whether State Farm wanted to address it further.

As proposed, the settlement would have provided binding arbitration where homeowners disagreed with a State Farm offer on a claim. Scruggs Group noted that this was not part of the insurer's agreement with the Mississippi Insurance Department.