State Farm Fire & Casualty Co. Inc. agreed yesterday to settle hundreds of lawsuits by policyholders and reopen and pay thousands of other disputed claims, a landmark deal potentially worth hundreds of millions of dollars for Mississippi homeowners devastated by Hurricane Katrina.
The settlement calls for State Farm to pay about $80 million to more than 600 policyholders who sued the company for refusing to cover damage from the Aug. 29, 2005, storm. State Farm also agreed to pay at least $50 million - but possibly hundreds of millions more - to thousands of Mississippi policyholders whose claims were denied but who did not sue the company.
State Farm's agreement with Mississippi Attorney General Jim Hood and attorneys for the more than 600 policyholders resolves a civil lawsuit that Hood filed against the company for refusing to cover damage from Katrina's storm surge.
The accord also resolves Hood's criminal probe of allegations that the Bloomington, Ill., insurer fraudulently denied claims after the August 2005 storm.
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 claims in other states.
The deal was expected to be presented to U.S. District Judge L.T. Senter Jr. in Gulfport, Miss., yesterday afternoon. Senter must sign off on the settlement.
"The agreement greatly reduces the time, the risk and the expense of defending multiple claims in individual litigation," State Farm spokesman Phil Supple said.
State Farm, the state's largest home insurer, said it already had paid roughly $1.1 billion for about 84,000 property claims in the state. State Farm and other insurers paid for Katrina's wind damage, but Hood and hundreds of policyholders sued the companies over their refusal to pay for more than $2 billion in damage from the storm's wind-driven surge.
The settlement resolves the lawsuits that high-profile attorney Richard "Dickie" Scruggs filed on behalf of 639 policyholders, including U.S. Sen. Trent Lott (R., Miss.). Each of these policyholders will receive an average of about $125,000.
A "class-action" component of the deal requires the company to reopen and review claims filed by roughly 35,000 policyholders who live in Mississippi's three coastal counties, but did not file lawsuits against State Farm.
After reviewing those claims, the company will be required to make new offers. Any disputes will be heard by an arbitrator whose decision would be binding.