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Miss. Attorney General to Sue State Farm

May 1, 2007 | AP

Mississippi Attorney General Jim Hood said Tuesday he plans to sue State Farm Fire and Casualty Co. because he believes the insurer failed to honor the terms of their agreement for a mass settlement of policyholder claims over Hurricane Katrina damage.

Hood, who agreed in January to drop State Farm from a civil suit his office filed less than a month after Katrina, said his office is in the "final stages" of drafting a new complaint that accuses State Farm of breach of contract.

"They can't just enter into an agreement and back out of it," Hood told The Associated Press during a telephone interview Tuesday.

State Farm spokesman Phil Supple said the company met its legal obligations in the proposed settlement and is disappointed that Hood plans to sue.

"We are at a loss to understand Mr. Hood's motives for his actions," Supple said.

Hood, however, said the Bloomington, Ill.-based insurer hasn't adhered to the terms of a deal that called for the attorney general to drop State Farm from the lawsuit he filed against several insurers for refusing to cover damage from Katrina's Aug. 29, 2005, storm surge.

State Farm agreed to pay at least $50 million to roughly 35,000 southern Mississippi policyholders who hadn't sued the company but could have their claims reopened. The deal fell apart after a federal judge refused to endorse it.

At the time, U.S. District Judge L.T. Senter Jr. said he needed more information about how many policyholders would benefit from the mass settlement and how much money they would be guaranteed.

Hood said his deal with State Farm isn't satisfied by the company's separate, more recent agreement with Mississippi Insurance Commissioner George Dale. State Farm's deal with Dale also calls for the company to pay at least $50 million to 35,000 policyholders whose claims would be reopened and possibly paid, but it isn't subject to judicial oversight.

"It doesn't have all the protections for the insureds that the judge's requirements would have," Hood said. "They're still going to have to put in some of the protections that (Senter) pointed out."

Hood said he isn't seeking to stop State Farm from consummating its deal with Dale.

"If they're actually giving money to their insureds, I'm happy to let them continue that," he said. "We're just trying to make them do what they said they would do. The program that they've got going on with Dale doesn't do that."

Last month, Hood had asked Senter to let him intervene in the settlement between State Farm and policyholders' attorneys so he could enforce his end of the agreement. Senter, however, said Hood's request was moot because the plaintiffs' lawyers had withdrawn their request for the judge's support.

Supple said State Farm is "disappointed Mr. Hood would take this action as we prepare to distribute millions of dollars to our policyholders, particularly since Mr. Hood repeatedly showed support for (January's proposed settlement) when it was submitted."

Hood said the suit will be filed in the "next couple of weeks," but he refused to say in which court.

Hood also agreed in January to end a criminal investigation of State Farm's claims handling practices after Katrina. A grand jury was hearing testimony when Hood and State Farm reached their agreement.

Hood wouldn't say if he is considering reviving his office's criminal investigation of State Farm, but he noted, "The grand jury is still there and available."