JACKSON, Miss. - For failing to work around a federal judge's rejection of a proposed settlement, Mississippi Attorney General Jim Hood has decided to sue State Farm Fire and Casualty Co.
A report by The Associated Press claims Hood said Tuesday that he has nearly drafted a new complaint that alleges a breach of contract.
State Farm was one of five insurance companies Hood filed suit against alleging a lack of coverage following 2005's Hurricane Katrina. Just two weeks ago, another one of the proposed classes in the settlement was dismissed, effectively ending the saga of the proposed settlement between Hood and State Farm.
Trial lawyer Richard Scruggs, who helped negotiate the proposed settlement with State Farm, had already withdrawn his request for the Woullard class, led by Dennis and Imani Woullard, to be certified.
Hood made a last-ditch effort to force acceptance of the settlement, which U.S. District Judge L.T. Senter originally denied doing because of fairness problems he perceived in it. He denied Hood's motion.
The Guice class, about 900 homeowners whose homes were nearly or totally destroyed, last month was also turned down by Senter, whose final opinion on Woullard can be found here.
Hood's proposed settlement established a procedure to revisit claims from policyholders who had not sued but still could. State Farm's minimum offer would have been 50 percent of the structural value, and if the policyholder declined it, the case would go before an arbitrator. It was estimated the settlement, which would have affected about 35,000 policyholders, would be worth around $500 million.
Senter had problems with this procedure and denied the proposed settlement. In Hood's last motion, he blamed State Farm for the problems not being corrected.
"The state court settlement agreement requires State Farm to establish an orderly, fair, and prompt administrative procedure to reevaluate Hurricane Katrina claims in Harrison, Hancock and Jackson counties based upon criteria and guidelines approved by this Court, and enforceable by legal action in this Court," Hood wrote.
"As a result of State Farm's failure to establish an acceptable procedure for the reevaluation and settlement of claims which could be approved by this Court, State Farm is in breach of its settlement agreement with the Attorney General."
State Farm has set up a similar claims revisiting procedure with Insurance Commissioner George Dale, though Hood and Scruggs are irked at its lack of judicial oversight.
David Rossmiller, an insurance attorney and partner at Dunn Carney in Portland, Ore., who has been analyzing the Gulf Coast's insurance situation for LegalNewsline, said he can't see how Hood could win his breach of contract suit.
"This sounds an awful lot like a question on a Contract Law 101 final exam, with the correct answer being that you can't sue someone for breach when their performance of the agreement is prevented by a federal judge," Rossmiller said.
"Maybe in the course of drafting this complaint Hood will pull out those old law school finals and contemplate how to get around State Farm's impossibility defense.
"I wonder if by the time this thing gets drafted -- if it does -- Hood will get around to seeing Judge Senter's refusal to approve the class action and State Farm's lack of performance more as a failure of a condition precedent to Hood's own performance -- a justification for reinstituting the lawsuit he previously dropped. Maybe that's what he's driving at."