Request Withdrawn for Judge to Approve Miss. State Farm Settlement

Some of the lawyers who helped negotiate a proposed settlement with State Farm Insurance Cos. over Hurricane Katrina damage claims withdrew their request Monday for a federal judge to approve the multimillion dollar deal.

At a hearing less than two weeks ago, a team of lawyers led by attorney Richard “Dickie” Scruggs joined Bloomington, Ill.-based State Farm in urging U.S. District Judge L.T. Senter Jr. to approve the proposed settlement.

On Monday, however, Scruggs’ legal team said in court papers that they are withdrawing their request for Senter to sign off on the deal, citing a legal “stalemate.” The proposed settlement calls for State Farm to pay at least $50 million to thousands of policyholders who haven’t sued the insurer.

In court papers, Scruggs said the decision is 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.”

“Given this stalemate, counsel must now direct even more focus on the hundreds of individual cases against State Farm and other insurer defendants,” Scruggs wrote.

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

“Clearly the Scruggs Katrina Group did this on its own. We are still hopeful for a resolution that will help in the efforts to rebuild southern Mississippi,” he said.

Scruggs, reached by telephone Monday evening, declined to elaborate on his court filing.

Scruggs and State Farm presented the deal to Senter in January. 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.”

In his motion, Scruggs said the proposed settlement is “not only legally viable, but in the best interests of the families on the (Gulf) Coast, particularly in the absence of any other sustainable alternatives being urged upon the court.”

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.

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, who also helped negotiate a multibillion dollar settlement with tobacco companies in the mid-1990s.

Also on Monday, a jury trial for a Biloxi homeowner’s lawsuit against State Farm opened in Gulfport. Senter is presiding over the case, which is the third Katrina insurance suit against State Farm to be tried in federal court. The second trial ended last week with a settlement before jurors could decide the case.