Cyrus Dugger

State Farm Begins Settling Katrina Lawsuits - Scales Tip Towards Settlements

Sometimes… it takes a lawsuit.

State Farm Settles One Hurricane Katrina Suit By JOSEPH B. TREASTER Published: January 20, 2007

On the eve of trial, State Farm agreed yesterday to pay an estimated $1 million to settle a lawsuit by a Mississippi Gulf Coast resident whose house was destroyed by Hurricane Katrina. The settlement came a week after a jury ordered the insurer to pay $2.5 million in punitive damage to a homeowner with a similar case.

State Farm and lawyers for the homeowner confirmed the settlement. They would not say how much State Farm paid, but trial lawyers not involved in the case said simple mathematics and logic suggested that the insurer agreed to pay about $1 million.

By settling the lawsuit, the lawyers said, State Farm eliminated the risk of another huge punitive award and more of the bad publicity that has been shadowing it and other insurers that have refused to pay for widespread flood damage caused by Hurricane Katrina in August 2005.

The benefit to the homeowner, Dr. Richard Tejedor, a respiratory specialist from Long Beach, Miss., the lawyers said, was that he would receive the money soon, rather than waiting through the long appeal process expected for the family that won the court decision last week.

The settlement also eliminated the slim possibility that the same federal judge and another jury of Mississippi coast residents would be less sympathetic to Dr. Tejedor than the other family, which was awarded the full $223,000 for which they had insured their home plus $2.5 million in punitive damages.

The trial on the Tejedor case had been scheduled to begin Monday.

State Farm settled with Dr. Tejedor as it was in the midst of negotiations to settle hundreds of other Hurricane Katrina lawsuits and reopen up to 35,000 damage claims that had previously been closed.

In an eventual settlement, State Farm is expected to pay at least $130 million. Other insurers are then expected to settle similar lawsuits and reopen tens of thousands of damage claims that lawyers for homeowners say were underpaid. That could mean that hundreds of millions of dollars more would pour into the Mississippi coast and jump-start a long-delayed recovery from the ravages of Hurricane Katrina. (link)

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