JACKSON, Miss. - State Farm Insurance announced Wednesday that it will not write any new commercial or homeowner policies in Mississippi starting Friday, and state Attorney General Jim Hood said he was disappointed but not surprised with the decision.
The company, the largest homeowners insurer in the state, said that the Mississippi's unpredictable legal and political climates make practicing in the state too troublesome.
The Associated Press reports that State Farm vice president of public affairs Mike Gonzalez said Mississippi's "current legal and political environment is simply untenable. We're just not in a position to accept any additional risk in this homeowners' market."
State Farm is the main target in Hood's Hurricane Katrina-related class action lawsuit filed against it and four other insurers. Recently, Hood and State Farm reached a settlement that would provide an estimated $500 million to policyholders who claimed damages incurred during Katrina were covered by State Farm.
Hood said the business is only worried about profit.
"It's unfortunate that a company promotes itself to be a good neighbor and during the most catastrophic year in history, they increase their profits by $3.9 billion," Hood said. "The whole reason for insurance is to cover catastrophic incidents and they are not doing it.
"They're only worried about the bottom line."
Hood also accused State Farm from creating the environment from which it is now resigning.
"They created the problem," Hood said. "If they had paid what they owed in the first place, there never would have been a lawsuit filed."
Hood's lawsuit was filed two weeks after Hurricane Katrina hit Louisiana, Mississippi and Alabama. Some criticized Hood, saying he was suing first and asking questions later.
State Farm indicated that it would continue conducting normal business in Mississippi during settlement negotiations, Hood claimed.
Part of the settlement was rejected by U.S. District Judge L.T. Senter, who worried that State Farm had too much control of the arbitration process in which policyholders and State Farm would participate if the policyholder rejected State Farm's initial offering, an automatic 50 percent of the structure's value according to the policy.
The proposed settlement separated policyholders into two groups -- those who have already filed suit against State Farm, and those who haven't but will.
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. He did not feel it could be certified as a class because policyholders' homes were affected in different ways by the hurricane.
Reports concluded that the Scruggs Katrina Group, a group of plaintiffs attorneys led by nationally known Dickie Scruggs, stood to make up to $46 million from the settling of their Katrina cases.
Scruggs represents Sen. Trent Lott, who has filed suit against State Farm and has been clamoring in Congress for national insurance reform.
Senter will conduct a meeting Feb. 28 between the two sides to address his problems with the proposed settlement. Hood said he is planning on filing an action in federal court to make State Farm comply "with what the federal judge pointed out to make this settlement proper."
One case that wasn't settled was decided Jan. 11, when 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.
State Farm has said that it has paid approximately $1.1 billion for about 84,000 property claims in the state.
"The political and regulatory and legal environment in the two states -- Louisiana and Alabama -- is not the situation in Mississippi," Fernandez said in the AP report.