According to a report in todayÃ¢â‚¬â„¢s New York Times, State Farm Fire & Casualty Co. is close to reaching a huge settlement of hundreds of lawsuits related to Hurricane KatrinaÃ¢â‚¬â„¢s destruction of the Mississippi Gulf Coast.
The Times said that the $80 million settlement is expected to address 639 lawsuits. In addition, there is also a provision in the settlement that calls for the review of previously settled claims made by policyholders who did not file suit. The companyÃ¢â‚¬â„¢s expenditure may grow into hundreds of millions of dollars once these previously handled claims are reopened.
Ã¢â‚¬Å“State Farm, under the tentative accord, would provide an average of about $125,000 to homeowners who filed lawsuits, although the payments would range from as little as about $2,000 to about $2 million,Ã¢â‚¬Â the paper noted. Ã¢â‚¬Å“The treatment of those cases would serve as a guide for increasing payments to any of the 35,000 homeowners who request a review of their claim, according to lawyers privy to the details.Ã¢â‚¬Â
The proposed settlement only applies to cases in Mississippi and does not include suits filed in Louisiana or Alabama. In all likelihood, however, this settlement will be a model for State Farm cases in the other Katrina-damaged states and may wind up being the model that is followed by Allstate and other affected insurance carriers as well.
The settlement is awaiting the approval of Mississippi Attorney General Jim Hood, who had filed a civil action against the company after the hurricane because they had refused to cover flood damages and other effects of the storm surge. It is quite probable that Hood will be forced to drop that suit and any other criminal investigation as part of the settlement. Once Hood signs off on the settlement, it will go before a federal judge for final approval.