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State Farm Announces Settlement on Katrina Lawsuits
by: Keith Burton - GCN    Filed 1/23/07  GCN

In a major development that will help hundreds of families who suffered damages from Hurricane Katrina, but did not receive compensation for insurance claims from State Farm, the company announced, January 23,a settlement to hundreds of Katrina-related lawsuits.

Pascagoula attorney Dickie Scruggs has been the key local attorney in dealing with State Farm. In a statement posted on his website, Scruggs said:

"Today, we presented a settlement proposal to a Federal Court that could positively impact more than 35,000 families on the Mississippi Gulf Coast. This settlement has the promise to put hundreds of millions of dollars directly into the hands of State Farm policyholders to begin rebuilding their lives, homes and communities.

"No case in my thirty-year legal career has been more personal or tougher to resolve than the insurance litigation resulting from Hurricane Katrina. The proposal we presented is the product of an enormous effort by public officials and private lawyers. No other state has pulled this off after a large natural disaster and I am extremely proud to be a part of this settlement agreement." (Scruggs entire statement can be read by clicking here)

The settlement with State Farm is likely to put pressure on other insurance companies to settle lawsuits from Katrina claims.

According to a statement from State Farm, the company will participate in a court supervised  resolution process to reconsider and fully resolve claims from Hurricane Katrina in Harrison, Jackson and Hancock counties.  The process is part of an agreement reached through the settlement of a class action lawsuit against the insurer by families who believe their damage claims were not adequately resolved. The agreement will affect some 35,000 Mississippi families, if approved by the U.S. District Court in Mississippi overseeing hurricane litigation.

Many homeowners facing denials of claims after Katrina destroyed their homes posted signs expressing their outrage, such as this one (photo right) in front of a slab in Bay St. Louis.

The agreement is the result of lengthy negotiations between State Farm, the largest property insurer in the state, and the Scruggs Katrina group.

U.S. District Judge L.T. Senter, Jr., who is presiding over hurricane litigation, has been asked to give preliminary approval to the settlement plan.

The settlement also includes a dismissal of the investigation by Mississippi Attorney General Jim Hood into State Farm's practices stemming from how State Farm handled insurance claims following Katrina.

“This agreement can bring prompt and fair relief to residents of the three coastal counties who filed a claim with State Farm,” said attorney Richard Scruggs of the Scruggs Katrina Group.  “Thousands of families now have a second chance to have their claims reopened and receive money to rebuild,” added Don Barrett, an attorney also involved in the negotiations.  

The process applies to State Farm policyholders – including homeowners, renters and owners of business properties – in Hancock, Harrison, and Jackson counties, who experienced property damage as a result of Hurricane Katrina.  These policyholders will have an opportunity to have their cases reconsidered and receive speedy payment for losses under the court-supervised program.  If, after filing a settlement form and receiving an offer from State Farm under this resolution process, policyholders are not satisfied and reject the offer, they can request arbitration, which unlike mediation is binding and is not subject to appeal for both State Farm and the policyholder.  Homeowners will have the opportunity to decide if they wish to participate in this class settlement.

In a statement sent to GCN, Sen. Trent Lott, whose home was also destroyed by Katrina, Lott said, “This is a victory for the State of Mississippi and, more importantly, for the individual Mississippians who’ll finally be receiving a fair settlement to embark on rebuilding their homes and lives,” Senator Lott said.  “The insurance problem has perhaps been the major impediment to rebuilding Mississippi and making it whole again.  This decision removes a large part of that uncertainty, and it will greatly accelerate Mississippi’s recovery.”

Mississippi Insurance Commissioner George Dale also praised the settlement.

"A long ordeal appears near an end for many State Farm Gulf Coast policyholders." said Dale in a new release sent to GCN. "I am delighted to see that with this settlement, so many now can move forward in the rebuilding of their lives and homes without having to endure the lengthy process of expensive litigation.  The settlement mandates that State Farm comply with the bulletins I issued immediately after the storm. My office and I have worked tirelessly, offering our input in negotiations, to see an outcome that is in the best interest of Mississippi policyholders. Our concern, since Katrina struck, has been and will continue to be for those policyholders.
Dale added that, "This proposed settlement does not affect the current market conduct exam being conducted by this office and we will continue to work with other insurance companies encouraging them to settle as many claims as quickly as possible and to settle as many lawsuits as possible, so that other Gulf Coast policyholders can also begin to move forward in their recovery."

State Farm has been under great pressure to find a solution to the insurance crisis that has kept many homeowners from being able to restore their homes. Many were left after the hurricane with no money to rebuild when their coverage was denied.
“Our goal has always been to resolve these matters quickly, fairly and efficiently,” said Jeffrey W. Jackson, Vice President - Corporate General Counsel, State Farm Insurance.  “This settlement offers policyholders who resided in the areas most impacted by the unprecedented storm an opportunity to have their claims reviewed, share any additional information, and, if they choose, have their cases resolved through binding arbitration.” 

State Farm will initiate the resolution process by notifying all policyholders impacted by this agreement.   Policyholders will have 60 days to register for participation in the process, which is designed to have participants paid before the end of this calendar year.

Richard Scruggs and Don Barrett will serve as lead attorneys for the class action settlement.        

More Information:

Settlement Agreement (.pdf file)

About the Scruggs Katrina Group

The Scruggs Katrina Group is a legal team consisting of Mississippi attorneys from the following firms: Don Barrett and Marshall Smith of the Barrett Law Office; Johnny Jones, Steve Funderburg, and Stewart Lee of Jones, Funderburg, Peterson, Sessums, and Lee; Dewitt Lovelace of the Lovelace Law Firm; David Nutt, Meg McAllister, and Derek Wyatt of Nutt & McAllister, PLLC, and Richard Scruggs, Sid Backstrom, and Zach Scruggs of the Scruggs Law Firm. For more information go to www.scruggskatrinagroup.com

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