June 13 2007 - Miss. attorney general sues State Farm

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Mississippi Attorney General Jim Hood sued State Farm Fire and Casualty Co. on Monday, claiming the company failed to honor an agreement for a mass settlement of claims over Hurricane Katrina damage.

In January, Hood agreed to drop State Farm from a lawsuit his office filed against several insurance companies for refusing to cover damage to homes from Katrina's storm surge.

Hood did that after State Farm settled with lawyers for homeowners on a $50 million payout to about 35,000 southern Mississippi policyholders who hadn't sued the company but could have their claims reopened.

But the pact fell apart after a federal judge refused to endorse it. Hood has said he didn't negotiate the terms of that settlement and shared the judge's concerns about the deal.

The state is seeking compensatory and punitive damages against the Bloomington, Ill.-based insurer for an alleged breach of contract. Hood's office filed the suit Monday in Hinds County circuit court.

"We filed this lawsuit in an effort to help the more than 30,000 Gulf Coast policyholders who have suffered for nearly two years because of State Farm's inaction," Hood said in a news release issued shortly before a news conference.

State Farm and lawyers for policyholders had presented the original agreement for a mass settlement to U.S. District Judge L.T. Senter Jr., who is presiding over hundreds of lawsuits that Mississippi homeowners filed against their insurers after the Aug. 29, 2005, storm.

Senter refused to sign off on the deal, however, saying he needed more information about how many policyholders would benefit from the mass settlement and how much money they would be guaranteed.

After that deal fell apart, State Farm made a similar agreement with Mississippi Insurance Commissioner George Dale. That pact also calls for the company to reopen and possibly pay tens of thousands of claims, but it isn't subject to judicial oversight.

A State Farm spokesman said Monday that the company's settlement with Dale is "moving forward."

But Hood said that process is not moving fast enough, resulting in a little more than 300 reevaluations so far.

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