Insurer State Farm Agrees To Multimillion Settlement Of Katrina Lawsuits

State Farm Fire & Casualty Co. agreed to settle hundreds of lawsuits by policyholders and reopen thousands of other disputed claims, a deal potentially worth hundreds of millions of homeowners devastated by Hurricane Katrina, a company spokesman said.

State Farm spokesman Phil Supple said Tuesday the company will reopen and review claims for policyholders on Mississippi's Gulf Coast whose claims were denied but haven't sued the company.

That part of the settlement could be worth hundreds of millions of dollars for roughly 35,000 policyholders, a person with direct knowledge of the settlement said.

"The agreement greatly reduces the time, the risk and the expense of defending multiple claims in individual litigation," Supple said.

State Farm's agreement with Mississippi Attorney General Jim Hood and lawyers for more than 600 policyholders resolves a civil lawsuit that Hood filed against the company for refusing to cover damage from Katrina's storm surge nearly 17 months ago.

The money for the settlement will come from State Farm's assets, Supple said.

The accord also resolves Hood's criminal probe of allegations that the Bloomington, Illinois-based insurer fraudulently denied claims after the August 2005 storm.

"I hope that this settlement with State Farm will encourage other insurers to join the settlement, so that we can get a quick flow of capital into our coastal counties at this critical time," Hood said in a statement.

The settlement calls for State Farm to pay about $80 million (euro61.5 million) to 639 policyholders, including U.S. Sen. Trent Lott, whose claims were denied after Katrina, according to the person with knowledge of the settlement. These policyholders _ all represented by a legal team led by high-profile attorney Richard "Dickie" Scruggs _ will receive an average of about $125,000 (euro95,859).

Mississippi's mass settlement _ the first of its kind since Katrina spawned hundreds of lawsuits against State Farm and other major insurers _ does not involve any claims in other states.
U.S. District Judge L.T. Senter Jr. was presented Tuesday with the portion of the agreement that benefits the thousands of policyholders who did not sue State Farm. He hasn't been asked to sign off on the deal with Scruggs' clients.

Supple said State Farm will review claims filed by policyholders in Mississippi's three coastal counties whose claims were denied but did not sue the company. They can have their claims "reevaluated, and, if they choose, have their claims resolved by binding arbitration," he added.
The settlement comes less than two weeks after a federal jury in Gulfport awarded $2.5 million (euro1.9 million) in punitive damages to a couple who sued State Farm for denying their claim after Katrina. A judge took part of that case out of jurors' hands, ruling that State Farm is liable for $223,292 (euro171,236) in storm damage to the Biloxi home of Norman and Genevieve Broussard.

Scruggs, a Gulf Coast native whose own home in Pascagoula was destroyed by Katrina, rose to national prominence when he helped negotiate a multibillion dollar settlement with tobacco companies in the mid-1990s.

In addition, Hood has investigated allegations that State Farm and other insurers have fraudulently denied claims after Katrina. Last week, a grand jury in Pascagoula began hearing testimony on those allegations.

State Farm attorneys say a federal grand jury has been probing similar allegations.

Scruggs and other attorneys have accused State Farm of pressuring its engineers to alter reports and change their conclusions on whether Katrina's wind or water was responsible for damage to homes.

Source: Associated Press (www.ap.org)

From: Insurance News Net (www.insurancenewsnet.com)