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State Farm may reopen claims

Jan 9, 2007 |

Thousands of State Farm Fire & Casualty Co. policyholders on the Mississippi Coast could reopen their claims under a tentative settlement the company is working out with Attorney General Jim Hood and a private attorney, who also is close to settlement on about 640 lawsuits his group filed on behalf of homeowners the company insures.

"I am working day and night attempting to get our Coastal residents a fair shake in the insurance litigation," Hood said in a written statement Monday evening, after the Sun Herald broke news of the settlement. "It would not help our negotiations to disclose any details at this time."

Terms are undisclosed in the tentative settlement of the Scruggs cases.

State Farm would reserve a minimum of $50 million to reconsider Katrina claims filed by thousands of other South Mississippi homeowners, said a source close to the negotiations. The company would notify the policyholders in writing that they can have their claims reconsidered.

Policyholders who decided to participate would go to binding arbitration with State Farm if they were unable to agree on settlement amounts.

State Farm would consider claims within the parameters of its homeowners' policy, which the company maintains does not cover damage from tidal surge. However, thousands of policyholders in areas subject to tidal surge are still trying to collect for what they believe was wind damage to their properties.

The source said a settlement hinges on Hood's signature. Weeks after Katrina, Hood filed a lawsuit against State Farm and other major insurers for refusing to fully cover Katrina property damage. Hood also launched a criminal investigation at least one year ago over how State Farm and other insurers handled Katrina claims.

The source said Hood would have to agree to drop both the civil and criminal proceedings for State Farm to accept the settlement. No charges have yet resulted from the criminal probe.

Not everyone is happy about the settlement negotiations. A Biloxi attorney who has her own lawsuit pending against State Farm, said after hearing the news:

"I think it's really important for the public to understand what they're trying to do here. To link together dismissal of a criminal investigation with insurance claims that should have been paid months and months ago is extremely troubling. It just shows more and more the need to investigate what State Farm did, who was involved and what the details are.

"I won't be a party to (a settlement). I will not be bought off by State Farm."

Two State Farm policyholders who also are represented by another attorney, U.S. Sen. Trent Lott and U.S. Rep. Gene Taylor of Mississippi, have said they believe the company denied or minimized claims by blaming water rather than wind. Taylor thinks insurers charged the National Flood Insurance Program for damage they should have covered.

However, State Farm says it has investigated each claim on its merits and paid what is owed under its policies. The company has paid $1.1 billion on 84,000 claims filed statewide.

The company also has relied on language in its policy that purports to say wind damage is not covered when water contributes. U.S. District Judge L.T. Senter Jr. has ruled that that language is ambiguous and can't be enforced.

Senter has urged attorneys on both sides to find just and timely ways to resolve more than 1,000 Katrina cases pending in his court against insurance companies.

A spokesman for State Farm, Phil Supple, said: "At this point, we have no settlement. We continue to talk and to search for ways to bring these events to a resolution consistent with Judge Senter's call earlier this fall. We continue to pursue a just, prompt and efficient resolution."

In addition to the lawsuits, State Farm has more than 100 other lawsuits pending. Supple said State Farm would "absolutely" like to see the cases resolved.

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