Settlement Reached in Miss. Homeowner’s Case Against State Farm

March 19, 2007

State Farm Fire and Casualty Co. avoided the court room and possibly days of litigation by settling out of court with a D’Iberville homeowner who sued the company after Hurricane Katrina reduced her house to a slab.

Terms of the settlement were not disclosed.

The agreement comes three days before the case between Melanie Bass and State Farm was to go to trial before U.S. District Judge L.T. Senter Jr. and one day after a similar settlement was agreed upon by a Biloxi homeowner and the insurer.

“She was pleased to get this behind her,” Jack Denton, attorney for Bass, told The Associated Press March 16 just hours after the agreement went final.

Denton said the lengthy courtroom drama would have been stressful for the elderly Bass.

Bass’ house sat on the north side of Biloxi’s Back Bay. The home was valued at $104,800 and the contents $78,600. Bass’ flood policy paid her $31,000 for the dwelling and $7,800 for contents. She was seeking $177,850 and $5 million in punitive damages.

“Some of the damage was caused by water but much of the damage was caused by wind,” said Denton, who noted that Bass’ homeowner’s insurance should have covered the wind damage. “There was nothing left of her home but a slab.”

State Farm has suspended the sale of homeowners and commercial policies in Mississippi. The company and other insurers say their policies cover damage from wind but not from water, including wind-driven storm surge. State Farm also says its policies exclude damage caused by a combination of wind and water, even if wind damaged a home before surge reached the structure.

“We are pleased we were able to dissolve this issue without litigation,” said Fraser Engerman, a spokesman for State Farm.

On March 15, a federal jury sided with Biloxi City Councilman Edward Gemmill, whose house was destroyed by the storm, and ordered State Farm to pay $66,234 for actual damages to Gemmill’s home. Gemmill was also seeking $5 million in punitive damages, but before the jury could deliberate on the punitive amount, State Farm reached a settlement with Gemmill.

When asked if the trend of settling out of court will continue for other homeowners, Engerman said, “Every case is taken separately and is different.”

Last week, the second federal trial for a Katrina insurance lawsuit against State Farm ended with a settlement between the company and the plaintiffs, Michael and Michelle Williams, before jurors could decide the case involving a rental home the couple owns in Ocean Springs.

The couple agreed to settle after U.S. District Judge Peter Beer ruled punitive damages weren’t warranted in the case.

Senter is also weighing a proposed settlement that calls for State Farm to pay at least $50 million to thousands of policyholders who haven’t sued the company. The deal, reached in January, calls for State Farm to reopen, review and possibly pay up to 36,000 claims.

On March 12, however, a team of lawyers who helped negotiate the proposed settlement withdrew their request for Senter to approve the agreement, citing a legal “stalemate” and Senter’s apparent reluctance to sign off on the deal.

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