Judge Balks at State Farm Katrina Deal

NEW ORLEANS - Thousands of Mississippi policyholders whose homes were destroyed or damaged by Hurricane Katrina must wait a bit longer before reaping their share of a proposed settlement with State Farm Fire & Casualty Co., a judge ruled. 
 
U.S. District Judge L.T. Senter Jr. of Mississippi on Friday refused to endorse part of a proposal for the insurance company to pay at least $50 million to policyholders whose claims were denied but did not sue the company. 
 
The Bloomington, Ill.-based insurer also had agreed to pay about $80 million to more than 600 policyholders who sued the company for refusing to cover damage from the Aug. 29, 2005, storm. Senter has not been asked to sign off on that part of the deal. 
 
Senter said in his ruling that he does not have enough information to determine how many policyholders would benefit from the deal or how much each can be paid. 
 
"In the absence of substantially more information than I now have before me, I am unable to say, even preliminarily, that the proposed settlement establishes a procedure that is fair, just, balanced or reasonable," he wrote. 
 
Senter rejected the settlement "without prejudice," allowing lawyers to present a new agreement that satisfies his concerns. 
 
State Farm spokesman Phil Supple said the company will address the judge's concerns. "We believe, given the opportunity, he will come to view the proposed settlement as fair, just, balanced and reasonable," he said. 
 
State Attorney General Jim Hood had sued State Farm for refusing to cover storm damage, but now has agreed to drop the company from his lawsuit and end a criminal investigation of its claims practices. 
 
Hood, in a written statement, said State Farm and plaintiffs' lawyers were responsible for negotiating the terms of the "class action" portion of the settlement, but said he had "reservations" about that part of the deal. 
 
"Nevertheless, I knew that Judge Senter would make sure that the class was a fair procedure for all," he said. "I am confident that Judge Senter will make the plaintiffs and State Farm fix the problems he has raised in his order." 
 
Richard "Dickie" Scruggs, a lawyer for the 639 policyholders who have settled their lawsuits with State Farm, said he does not expect Senter's ruling to affect the settlements with his clients. Scruggs said he expects to begin making payments to his clients next week. 
 
"Case by case, litigation over many years is in nobody's best interest," Scruggs said. "It's our hope that we can quickly address the judge's concerns." 
 
In his eight-page ruling, Senter said that although State Farm has agreed to pay $50 million to policyholders who qualify for the class action portion of the settlement, he can't determine "how thinly this large sum may be spread among the class members." 
 
Senter also said he is concerned about a lack of any guaranteed payments to policyholders whose homes were not completely destroyed and said he is uncomfortable with allowing many cases to be settled by binding arbitration "when none of these individuals has ever agreed to participate in that procedure." 
 
Mississippi's mass settlement agreement did not involve any claims in other states. 
 
Lawyers involved in the agreement presented the "class action" portion of the deal to Senter on Tuesday afternoon. That part of the agreement would require State Farm to reopen and review claims filed by roughly 35,000 policyholders who live in Mississippi's three coastal counties but did not sue State Farm. 
 
After reviewing those claims, the company would be required to make new offers. Any disputes would be heard by an arbitrator whose decision would be binding. 
 
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