Miss. State Farm $50 million settlement falters

Some of the lawyers who helped negotiate a proposed settlement affecting some 36,000 claims with State Farm Insurance Cos. over Hurricane Katrina damage have withdrawn their request for a federal judge to approve the multimillion dollar deal.

The proposed settlement called for State Farm to pay at least $50 million to thousands of policyholders who haven’t sued the insurer.

Just weeks ago, a team of lawyers led by attorney Richard “Dickie” Scruggs joined State Farm in urging U.S. District Judge L.T. Senter Jr. to approve the proposed settlement. Last week, however, Scruggs’ legal team withdrew their request for Senter to sign off on the deal, citing a legal “stalemate.”

In court papers, Scruggs said the decision was based on Senter’s apparent “reluctance” to approve the settlement, as well as concerns about whether State Farm is “genuinely amenable further to address even its own interpretations of the court’s actions.”

State Farm spokesman Phil Supple said the company was surprised by the development.

Scruggs says in court papers that he may renew his request for Senter to sign off on a settlement, “once the court’s concerns are more fully understood.”

The proposed settlement calls for State Farm to reopen, review and possibly pay up to 36,000 claims by policyholders who challenge the company’s refusal to cover damage from Katrina’s storm surge. State Farm would be required to make a new offer to each policyholder. If they turn down the offer, each case would be settled through binding arbitration.

Following Scruggs’ withdrawal, Insurance Commissioner George Dale reported that he had convinced State Farm to reopen all of its 36,000 Katrina claims upon request.

State Farm also has separately agreed to pay about $80 million to settle with up to 640 policyholders who sued the company. All were represented by Scruggs.