Mississippi Attorney General’s Lawsuit Threatens to Disrupt Hurricane Katrina Settlement Process with Mississippi Insurance Department

Even as State Farm Proceeds with $50 million Effort
To Help Mississippi Policyholders Rebuild the Gulf Coast

Bloomington, Illinois,- “Sadly, it appears that Mississippi’s attorney general is more interested in making headlines in an election year than in making headway for the people of Mississippi,” said Mike Fernandez, State Farm vice president of public affairs, in referencing Mississippi attorney general Jim Hood’s announcement today that he is filing a civil suit alleging breach of his agreement with State Farm.

“You have to wonder,” said Fernandez, “what would motivate Attorney General Hood to disrupt an agreement that mirrors the one he was ‘happy to announce’ on Jan. 23 and asked other insurers to emulate as ‘a step to recovery’ two days later?”

The agreement with the attorney general was reached in January of this year in conjunction with the Woullard class action settlement agreement. Woullard was ultimately removed from a court’s consideration by the Scruggs Katrina Group. After the Scruggs action, State Farm cooperated with the Mississippi Insurance Department (MID) to extend the same settlement to Mississippi policyholders – only this time without a “set aside” of millions of dollars in compensation for trial lawyers. The MID settlement protects a policyholder’s legal rights by allowing for mediation, arbitration, or litigation.

Kim Brunner, State Farm Executive Vice President, General Counsel, and Secretary of State Farm Insurance Companies, noted that, “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.”

In a meeting last week the attorney general, flanked by private attorneys Danny E. Cupit and William H. Liston (now listed in the complaint as “Special Assistant Attorneys General”), threatened to take the action he announced today. In response, Brunner sent a letter to the Attorney General last Friday, June 8. In referencing any alternate proposal that might be proposed or accepted by the attorney general, Brunner noted in his letter that although it, “…may generate fees for lawyers, it would do little good for the people of Mississippi.”

Through the settlement overseen by the MID, State Farm already has mailed over 30,000 letters to policyholders in Jackson, Harrison, and Hancock counties. State Farm has received thousands of responses from these policyholders, is processing their claim re-evaluation requests, and already at this early stage has made offers totaling more than $10 million.

Brunner’s letter did offer a conciliatory tone: “We want to work with you. The terms of the MID program mirrors the reevaluation program that we had hoped to accomplish through the Woullard settlement. It is working, and we will be providing you with a status report in the days ahead. It is completely voluntary, and State Farm receives no release until a policyholder accepts the settlement offer. Policyholders who do not participate in the process or who reject an offer retain all of their legal rights.”

A separate letter also sent last Friday from attorney Sheila Birnbaum, representing State Farm, to Mary Jo Woods, an attorney with the Attorney General’s office, underscores the role the attorney general played in establishing the Woullard settlement: “Changes were made to the Woullard agreement specifically in response to comments received from the Attorney General or his representatives.”

The settlement process State Farm established with the Mississippi Insurance Department is actively underway with people responding and submitting claim forms to receive a portion of the $50 million committed to the process.

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.

Policyholders who do not participate in the process or who reject an offer retain all of their legal rights.