Mississippi Attorney General Announces Suit Against State Farm®

Mississippi Attorney General Jim Hood filed a civil suit on Monday, June 11, 2007 against State Farm®, alleging a “bad faith” breach of the Settlement Agreement we reached with the attorney general in January. His actions are completely without merit. State Farm responded by issuing this press release.

The lawsuit alleges that we failed to uphold our Settlement Agreement with the attorney general that was reached in January and that led to the dismissal of the attorney general’s civil suit that was filed in September 2005.  This civil suit was filed against major insurance carriers saying that their policies are confusing and that they should be forced to pay for flood damage (a peril clearly excluded by most homeowners policies). 

The agreement with the attorney general was reached in conjunction with the settlement proposal developed in the Woullard class action. The attorney general was involved in the creation of the Woullard agreement and publicly promoted it in press releases (January 23 & January 25) shortly after it was announced. The Scruggs Katrina Group unexpectedly withdrew their motion for approval of the Woullard settlement which led to our agreement with the Mississippi Insurance Department.

The agreement with the Mississippi Insurance Department (MID) mirrors the Woullard proposal, including a $50 million minimum commitment to the process. Participation in the process is completely voluntary. If participants choose to reject the settlement offer, they retain all their legal rights.

The current re-evaluation process with oversight from the MID is doing exactly what it was intended to do. The settlement process is actively underway. State Farm has received thousands of responses from policyholders and is processing their claim re-evaluation requests. Already at this early stage, we have made offers totaling more than $10 million. Policyholders with questions about the reevaluation process may call 1-866-7KATRINA (1-866-752-8746).

Through our regular claim handling, State Farm has already paid more than $3.1 billion to settle all Hurricane Katrina claims, over $1.2 billion of that in Mississippi. In total, more than 99 percent of all State Farm Katrina claims have been settled. 

The attorney general’s most recent action threatens to disrupt this process which was intended to resolve matters in a fair and efficient manner and further the rebuilding efforts along the coast. 

State Farm met with the attorney general on June 6, 2007, prior to his filing the lawsuit. In that conversation and a letter that followed, we expressed our disappointment in his plans to file a lawsuit. We informed him that a lawsuit such as this would be harmful to the interest of State Farm policyholders, the State of Mississippi, and State Farm agents and employees who work and reside in Mississippi. Such litigation filed by the attorney general, could severely compromise the goals of getting additional compensation into the hands of State Farm policyholders.

We are voluntarily trying to resolve cases and make it possible for more Mississippi policyholders to rebuild.  We asked the attorney general to support these efforts, and help create additional positive benefits to the citizens of Mississippi. 

The attorney general’s action highlights the unpredictable business and legal environment in Mississippi that led to our February decision to suspend writing all new homeowners and commercial property business in the state.