Cyrus Dugger

State Farm Folds and Settles Katrina Class Action in Mississippi – Appears to Avoid Criminal Prosecution

While it would have been nice if State Farm had simply honored its insurance contracts (thereby avoiding the initiated criminal investigation) and paid these claims when originally filed, at least the day of reckoning has come.

Sometimes, it simply takes a lawsuit to get justice.

While I’m a little bit concerned about the exact details of the binding arbitration process that the re-opened claims will go through (my assumption and hope is that plaintiffs’ counsel will have a say in selecting a truly neutral arbitrator), it’s still wonderful to see that the more than 35,000 policy holders will get what appears to be a thorough evaluation of their previously denied claims.

Tort “reformers” will tell you that this lawsuit will bankrupt the insurance industry, but it’s pretty hard to swallow that arguments when the home and auto insurance industry is making historically high profits.

Here's the report:

Report: Policyholders whose homes were destroyed to get $80M from State Farm Bradenton Herald, MICHAEL KUNZELMAN Associated Press State Farm Fire & Casualty Co. agreed Tuesday to settle hundreds of lawsuits by policyholders whose homes were devastated by Hurricane Katrina, a person with direct knowledge of the settlement told The Associated Press.

Terms of the deal were not immediately announced Tuesday. The insurer's agreement with Mississippi Attorney General Jim Hood and lawyers for several hundred policyholders was expected to resolve 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 Bloomington, Ill.-based insurer fraudulently denied claims after the August 2005 storm, the person with direct knowledge of the proceedings said. The person asked not to be named because the discussions have been closed to the public.

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 settlement calls for State Farm to pay about $80 million to 639 policyholders, including Sen. Trent Lott, R-Miss., whose claims were denied after Katrina, the person who knew details of the deal said. These policyholders - all represented by a legal team led by high-profile attorney Richard "Dickie" Scruggs - will receive an average of about $125,000.

The settlement also is expected to benefit thousands of other State Farm policyholders in Mississippi who haven't sued the company. 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 didn't file lawsuits against State Farm, the person with direct knowledge of the settlement said.
(link to full article)

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Posted at 4:35 PM, Jan 24, 2007 in
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