By Michael Kunzelman
Associated Press
Wednesday, January 24, 2007

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

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 didn't sue the company.

State Farm's agreement with Mississippi Attorney General Jim Hood and policyholders' lawyers 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 accord also resolves Hood's criminal probe of allegations that the insurer fraudulently denied claims after the August 2005 storm.

"It's been like a death roll with an alligator for the last two months in these negotiations," Hood said.

"The agreement greatly reduces the time, the risk and the expense of defending multiple claims in individual litigation," said Phil Supple, a spokesman for State Farm.

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.

The deal was to have been presented to U.S. District Judge L.T. Senter Jr. in Gulfport, Miss., yesterday.

Supple said the company will review claims filed by policyholders in Mississippi's three coastal counties whose claims were denied but didn't sue the company. They can have their claims reevaluated or resolved by binding arbitration, he said.

State Farm, the state's largest home insurer, says it already has 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 comes less than two weeks after a federal jury in Gulfport awarded $2.5 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 in storm damage to the Biloxi home of Norman and Genevieve Broussard.

After Katrina, a legal team led by Richard "Dickie" Scruggs sued several major insurers on behalf of hundreds of Gulf Coast policyholders. Scruggs, a Gulf Coast native whose 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.

Besides State Farm, Hood sued Allstate, Mississippi Farm Bureau Insurance, USAA and Nationwide. 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.