ATTORNEY GENERAL SUES STATE FARM
State Farm Fire and Casualty Co. says it is working to resolve Hurricane Katrina claims, but Mississippi Attorney General Jim Hood maintains in a lawsuit filed Monday that the company has ignored its legal promise to follow a court-sanctioned process.
"Once they reached an agreement with the state, they had a duty to follow through," Hood said. "And this agreement is in black and white. It's crystal clear ...
"Now, if a company will treat a state like that, they'll certainly do it to policyholders."
State Farm says it can't follow an agreement that was never approved,
but the company is working to resolve lingering claims. "The intent
was to re-evaluate claims and pay where we could find some evidence of
wind damage," said company spokesman Phil Supple.
State Farm portrayed Hood's lawsuit, filed in Hinds County Circuit Court,
as a political ploy for re-election. Corporate attorney Kim Brunner said
in a written news release: "The attorney general's actions only
further highlight the unpredictable legal and business environment that
led to our February decision to suspend writing any new homeowners or
commercial property business within the state of Mississippi."
Hood is suing State Farm for breach of contract. He's asking
that $50 million be set aside to pay Coast policyholders for Katrina
damage and an unspecified amount for damages they suffered because State
Farm has breached its agreement. He also is seeking an unspecified amount
of punitive damages, designed to deter bad behavior.
Hood's rift with State Farm began after the two sides signed a settlement
agreement filed in Hinds County Chancery Court. As part of the
agreement, State Farm sought a proposed class action settlement with
policyholders in U.S. District Court that would have led to re-evaluation
of its Coast claims.
In exchange, Hood dismissed the company from a civil lawsuit he had filed against insurers shortly after Katrina, and he ended a criminal investigation of the company's claims-handling practices.
But U.S. District Judge L.T. Senter Jr. rejected the class action settlement,
saying it failed to protect policyholders' rights.
Mississippi Insurance Commissioner George Dale, who heads the state Insurance
Department, then stepped into the breach and worked out a separate compromise
with State Farm to re-evaluate Coast claims.
Hood said that agreement does not include the protections State Farm promised him. He sought the concessions because State Farm had previously denied claims for wind damage when water contributed. State Farm covers wind damage but its policies exclude tidal surge, covered by federal flood insurance.
Evidence also had surfaced that engineering reports prepared by State Farm contractors were altered to minimize or ignore wind damage.
Hood's agreement with State Farm required the company to show policyholders their claims files, on request, and turn over any multiple copies of engineering reports.
However, the company maintains it has followed Hood's requirements. Supple said engineering reports have been mailed to policyholders. Minimum payments for policyholders whose homes Katrina swept away also are patterned after the rejected federal agreement, as Hood required.
Those policyholders are offered combined coverages that total at least 50 percent of their structural policy limits, minus any flood or other insurance payments.
Legally, Senter has ruled, policyholders are entitled to recover insurance payments that total the actual value of their loss at the time of the hurricane. He has questioned the deduction of flood payments from what an insurer owes for wind.
"The State Farm re-evaluation procedure through the Department of Insurance has only resulted in a little more than 300 new offers," Hood said in a news release announcing his lawsuit. "That does not comply with the terms we have with them in black and white."
However, State Farm says letters about the re-evaluation have been mailed to more than 30,000 Coast policyholders and the company has offered payments of more than $10 million. State Farm has set aside $50 million for claims re-evaluation, the amount also agreed to in the rejected federal court settlement proposal.
Supple would not say exactly how much money the company has paid to policyholders through the re-evaluation, but said a report will soon go to Hood and Dale, as required.
Source:The Sun Herald
