Mississippi State Attorney General Jim Hood announced on Tuesday that a global settlement with State Farm has been reached on compensation to Mississippi policyholders whose houses were damaged by surging waters driven by Hurricane Katrina. Hood said that as part of the agreement, his grand jury investigation of the company’s claims-handling practices would end. That grand jury investigation reportedly could have led to criminal charges against State Farm for its handling of claims for damage from Hurricane Katrina.

Hood said there is no cap on the agreement and the company has agreed to pay a minimum of $50 million to homeowners who opted into a class-action settlement that would be filed with U.S. District Court Judge L.T. Senter Jr. in Gulfport, Mississippi.

The agreement involves more than 1,000 policyholders whose homes were hit by wind-driven storm-surge waters, which the company had argued was not covered because of policy language excluding flood claims. Hood had filed suit to void the policy language, saying it was ambiguous.

State Farm spokesman Phil Supple said the proposed agreement would involve millions of dollars, but the company felt it should not give out many details until the settlement was examined and approved by U.S. District Court Judge L.T. Senter Jr.

The settlement comes just after the company settled with Richard Tejedor of Long Beach, Mississippi, eight days after jurors awarded $2.5 million in punitive damages to another policyholder, a couple who sued the insurer for denying their claim.

New State Farm Katrina Settlement Could Hit $500 Million (National Underwriter 1/24/07)
 
Insurer State Farm Agrees to Multimillion Dollar Settlement (Insurance NewsNet 1/24/07)

Miss. AG Statement on State Farm Settlement (1/24/07)
 
Grand Jury Looking at Katrina Insurer (New York Times 1/18/07)

January 26, 2007