State Farm: Restraining Order Continued Against Miss. AG

A federal judge has extended a restraining order that prevents Mississippi Attorney General Jim Hood from continuing a criminal investigation into State Farm Insurance Cos.’ handling of Hurricane Katrina claims, a company spokesman said.

U.S. District Court Judge Michael T. Parker made the decision on the temporary restraining order on Wednesday, though it was not announced in open court, State Farm spokesman Jonathan Freed said.

The insurer sued the outspoken attorney general in September to stop Hood from reopening a criminal case or continuing grand jury hearings over allegations the company fraudulently handled policyholders’ claims after the August 2005 storm.

Hood was expected to testify Wednesday but attorneys on both sides spent much of the day meeting behind closed doors.

State Farm is “trying to find out about the grand jury proceedings and we just reached the status quo,” Hood said after the hearing. He would not explain the comment.

Hood’s attorneys would not say what happened in the private meetings or when – or even if – Hood might testify in the case.

“There is no hearing scheduled now and I have no way of knowing if there ever will be,” said J. Lawson Hester, one of Hood’s lawyers.

The hearing came just one day after Hood was re-elected to a second term as attorney general in a decisive victory over a lesser known opponent.

The hearing was continued, but no new date was set, Freed said.

“In the meantime the judge has continued the temporary restraining order indefinitely,” Freed said. “What that means is that Hood cannot proceed with his investigation at this time.”

Hood announced in January that he was closing his criminal investigation after reaching a settlement with the company in a mass litigation. However, when State Farm began getting grand jury subpoenas in recent months, the company asked the courts for a temporary restraining order that prevents the criminal investigation from continuing.

Hood has accused the company in the past of failing to honor the settlement agreement that would have, in part, required the Bloomington, Ill.-based insurer to pay out at least $50 million to members of the class.

Freed said State Farm offered mediation to 30,000 policyholders under the agreement and has paid $55 million to the thousands who accepted. Another $21 million has been offered.

“And we’re still going,” Freed said.

State Farm claims Hood is violating the terms of the settlement by investigating the company’s alleged “fraudulent conduct, not only toward their own policy holders, but also against the National Flood Insurance Program as well,” according to court records.

State Farm also accuses Hood of trying to “coerce” the company into settling other lawsuits with the Scruggs Katrina Group, which is headed by prominent attorney Richard “Dickie” Scruggs and is suing insurance companies on behalf of hundreds of homeowners.

A Scruggs Katrina Group attorney wrote a letter to State Farm, saying that if “State Farm or any of its employees are indicted, the value of our cases skyrocket,” State Farm claims in a motion filed in September. The Scruggs Katrina Group is not involved in the latest hearing.

Zach Scruggs denied Hood tried to bully State Farm into settling the group’s lawsuits, saying State Farm’s lawsuit against Hood was an election year ploy.

“Absolutely not,” he said. “We settled our cases with State Farm months before there was any negotiation deal with Jim Hood or State Farm. There was no coercion at all.”