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State Farm finally agrees to pay Katrina victims

State Farm agrees to pay up for Katrina in Mississippi Updated 1/23/2007 11:54 PM ET E-mail | Save | Print | Reprints & Permissions | Subscribe to stories like this By Kathy Chu, USA TODAY State Farm has agreed to pay thousands of Mississippi homeowners hit by Hurricane Katrina likely hundreds of millions of dollars in a landmark settlement that's expected to reverberate across the storm-ravaged Gulf Coast. The company agreed to a deal under which it will reopen thousands of homeowners' claims and is likely to pay as much as $500 million, Mississippi Attorney General Jim Hood announced Tuesday. There's no cap on the payout. The insurer will have to pay at least $50 million under the deal negotiated with the Scruggs law firm, which represents the majority of Mississippi homeowners who sued State Farm. In a related development, State Farm will settle more than 600 individual Mississippi homeowners' Katrina claims for roughly $80 million, according to a person with direct knowledge of the negotiations who didn't want to be named because the settlement is confidential. The settlement applies only to Mississippi homeowners — not to the thousands in Louisiana who are suing State Farm and other insurers, arguing that wind and rain ravaged their homes. Homeowners' policies cover wind and rain damage, but not flood damage, which is covered by federal flood insurance. Homeowners could begin receiving insurance checks within a few weeks, after the class-action settlement is approved, as expected, by U.S. District Court Judge L.T. Senter Jr. As part of the agreement with State Farm in Mississippi, Hood agreed to drop a criminal probe against the insurer related to its claims-handling process. Phil Supple, a spokesman for State Farm, the USA's largest home insurer, said its goal has always been to "reach a just, speedy and efficient resolution to these matters." A settlement "is in the best interest of our policyholders," Supple added. About 35,000 Mississippi homeowners are eligible to have their claims reopened. For about 1,000 Mississippi residents whose homes were reduced to slabs by Katrina, State Farm will offer at least 50% of the homeowner's insurance on the property structure. The average house in Mississippi costs about $200,000, Hood estimates. Thousands more will receive lower amounts. Homeowners who don't want to settle with State Farm can still sue the insurer. But the deal "gives a new opportunity for thousands of people to recover their insured losses through a quick process," says Zach Scruggs, an attorney who, with his father, Richard Scruggs, negotiated with State Farm. State Farm is fighting hundreds of other Katrina-related lawsuits along the Gulf Coast, including in Louisiana. Attorneys in those cases said they hoped the Mississippi development would cause State Farm and other insurers to settle quickly. "State Farm knows where to find me," says Madro Bandaries, who represents dozens of Louisiana homeowners disputing State Farm's payouts after Katrina. "They cannot, in my estimation, go to Mississippi and do one thing and then not go to Louisiana."

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