Litigation Moves Forward Against State Farm and Allstate for Tricking Mississippi Gulf Coast Residents

September 22, 2003

Mississippi homeowners who suffered property loss or damage as a result of Hurricane Georges and whose recovery under their homeowner insurance policies was reduced or eliminated have filed a motion today to have a class action lawsuit certified against State Farm Fire and Casualty Company and Allstate Insurance Company in Jackson Country. The lawsuit charges the insurance companies with causing unreasonable financial hardship on thousands of Mississippi Gulf Coast residents when it conspired to unfairly penalize homeowners by imposing a 2% deductible on their insurance policies.
“Thousands of Gulf Coast residents suffered unreasonable financial hardship following Hurricane Georges because their insurance companies “fugabooed” them by deviously reducing or eliminating the amount of reimbursement they can receive,” said Richard F. Scruggs, lead attorney for the affected Gulf coast residents. “It is clear that, based upon their actions, the insurance companies conspired among themselves and threatened the Mississippi Insurance Commissioner to deny homeowners in the three coastal counties of Jackson, Harrison and Hancock insurance unless an excessive deductible was levied.

“The effect of the discriminatory deductible was to unfairly penalize homeowners on the Mississippi Gulf Coast when hurricanes often inflict damage to non-coastal counties of a magnitude equal to or greater, and costlier, than damage to non-coastal communities. The reduction or elimination of reimbursement due to the deductible was significant. For example, if a policyholder suffered $5,000.00 in damages and the face value of the policy was $100,000.00, the insurance carrier would pay only $3,000.00. In effect, the defendant insurance companies were attempting to profit from the misfortunes of those whom they were obligated to protect.”

“It is important that all who have been victimized and suffered because of the defendants’ unscrupulous scheme receive the reimbursements that are their due and the improper deductible be removed from these homeowner insurance policies. With a particularly severe hurricane season upon us, the ability of Mississippians, as well as hurricane victims across the country, to have access to appropriate insurance protection and to not be discriminated against is essential,” Mr. Scruggs said.

The plaintiffs are seeking to assert claims on behalf of more than 13,000 residents in a class action proceeding, which would be the first class action in the state of Mississippi. While the Mississippi Supreme Court, has not adopted class action procedures, plaintiffs are filing a motion to certify a class because the identical issues of fact and law make a class action mechanism the most logical, prudent and fair manner to handle these cases. Proceeding as a class action promotes judicial economy, ruling consistency and is the only way to protect the rights of all policyholders that were wronged. Mississippi is the only state in the country that does not utilize the class action mechanism. Without a class action mechanism, the majority of the 13,000 residents who suffered as a result of the insurance companies’ deductible will have no realistic opportunity to have their claims heard.

The lawsuit was originally filed in Mississippi state court in 1998, moved to federal court and then returned to state court because the defendants failed to establish jurisdiction for trying the case regarding residents of three counties in Mississippi in a federal court. United States Fidelity and Guaranty Company had originally been a defendant in the lawsuit as well, but it agreed to voluntarily waive the deductible to its Mississippi policyholders. As a result, USF&G is no longer a defendant.

Attorneys representing the Mississippi homeowner plaintiffs are doing so on a pro bono basis and are not seeking any attorney’s fees.

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