GULFPORT, Miss. - The terms of a settlement rejected by a federal judge will be discussed during a Feb. 28 meeting with attorneys from both State Farm Insurance Co. and policyholders who allege State Farm is responsible for covering damages caused by Hurricane Katrina to their homes.
U.S. District Judge L.T. Senter expressed several concerns over the proposed settlement and hopes to iron them out during the meeting.
The suit was filed by Mississippi Attorney General Jim Hood, and the proposed settlement separated policyholders into two groups -- those who have already filed suit against State Farm, and those who haven't.
Senter's rejection of the settlement did not stop 640 of those who had already attached their names to the case from being given their money from State Farm. Checks have already been sent to several.
But the second group, estimated at 35,000 policyholders who will make claims, was more problematic to Senter. According to a report from The Associated Press, Senter said he has been in contact with 180 attorneys involved in Katrina cases.
Hood's office estimated the settlement would end up being worth about $500 million.
Senter wrote in an opinion that he has not received necessary information on the number of class members who claim State Farm unfairly denied coverage after Hurricane Katrina. Also, Senter says commonality among the potential class members has not been established, so he can not certify the policyholders as a class.
In addition to the procedural problems of which Senter complained, he said he is uneasy about the power State Farm has over claim-settling procedures. If a policyholder declines to accept the opening 50-percent-of-structural-value offer, the claim goes before an arbitrator.
"The proposed settlement agreement contemplates State Farm's participation in the selection of the Special Master, a choice that is exclusively within the prerogative of the Court," Senter wrote. "The proposed agreement also allows State Farm to train the arbitrators, control much of the administrative process and control the compensation of all those involved in the administration of claims.
"This arrangement has the potential of allowing State Farm to exert a substantial measure of control over the claims resolution process without oversight by an independent or neutral authority."
There was no cap on the amount of damages State Farm would pay under the proposed settlement.
On Jan. 11, Senter took the case of Norman and Genevieve Broussard out of a jury's hands by ruling himself that State Farm was liable for $223,292 in damage caused by the storm. Once he gave the jury a bad faith instruction, it awarded the couple $2.5 million in punitive damages, though that amount has since been reduced to $1 million.