Hood To Sue State Farm Over Miss. Claims

A State Farm spokesperson said today that the insurer was "disappointed" to learn that Mississippi Attorney General Jim Hood plans to sue the firm over a failed class action settlement for policyholders with Hurricane Katrina damage claims.

The firm believes it lived up to its legal requirements, said Phil Supple speaking for State Farm.

He said he understood that Mr. Hood is finalizing a draft of a breach of contract suit, "claiming that we did not adhere to the terms of the agreement."

The proposed class settlement was tossed out in March by U.S. District Court Judge L.T. Senter Jr. in Jackson, Miss.

As originally announced in January, the agreement would have applied to homeowners in three coastal Mississippi counties and Mr. Hood estimated the insurer might have to pay up to $500 million to 1,000 homeowners.

Most of the disputed claims involved damage that the insurer initially rejected saying they were barred by policy language excluding damage from flooding or storm surge.

The settlement talks in addition to Mr. Hood had included a combine of attorneys, the Scruggs Katrina Group that represented hundreds of policyholders. The judge initially rejected the settlement saying it was not "fair, just, balanced or reasonable."

After the judge held a hearing on its provisions, the Scruggs Katrina Group said they could see he was not inclined to approve it and they dropped their effort.

Mr. Supple said the proposed agreement "makes clear that a claim reevaluation would be submitted to the federal court. That plan was submitted and we feel that fulfills our legal obligation to the proposed settlement.

"We are disappointed Mr. Hood would take this action."

He said the company was going ahead with an agreement it worked out with Mississippi Insurance Commissioner George Dale to reevaluate Hurricane Katrina claims, which he said "mirrors the settlement that was before Judge Senter."

Mr. Hood, when the proposed class action settlement was announced in January, dropped State Farm as defendant in a civil action and ended a grand jury probe of the insurer's claims handling.

He did not immediately respond to a call for comment, but he told the Associated Press that the insurer's agreement with Mr. Dale "doesn't have all the protections for the insureds that the judge's requirements would have." The attorney general also was quoted as saying, "The grand jury is still there and available."