In the Circuit Court of Hinds County Monday, Mississippi Attorney General Jim Hood filed a complaint against State Farm Fire and Casualty Co. alleging bad faith breach of contract related to the settlement agreement the two parties entered into on January 23.
“It’s unfortunate when you have to force a company to do the right thing,” Hood said at a press conference Monday. “It surprises me that a company this large enters into an agreement with a state this large and then just backs out of it.”
Hood attributed the travesty of Mississippi residents still living in FEMA trailers nearly two years after Hurricane Katrina to “State Farm not living up to their agreement.”
State Farm officials maintain that they are upholding their end of the deal struck in January and they accused Hood of stumping for votes in an election year.
“Sadly, it appears that Mississippi’s attorney general is more interested in making headlines in an election year than in making headway for the people of Mississippi,” said Mike Fernandez, State Farm vice president of public affairs. “You have to wonder what would motivate Attorney General Hood to disrupt an agreement that mirrors the one he was ‘happy to announce’ on Jan. 23 and asked other insurers to emulate as ‘a step to recovery’ two days later?”
During Monday’s teleconference, Hood was relentless in his disdain toward State Farm’s actions and did not hold back: “The only thing they understand is when they have to write a check,” he said, “They can put all the spin on it they want, but there are people on the coast living in FEMA trailers in 95 and 100 degree weather.”
Hood accused State Farm of reporting false statistics, saying the insurer asserted it had settled 99 percent of its Katrina claims. The Attorney General said if the insurer considered a residence damaged by water, it didn’t consider it a claim at all. He also accused the company of withholding claimants’ complete files.
“They agreed and the state court ordered them to give insureds their entire claims file. One adjuster would say to pay and another would say not to pay,” Hood said. “State Farm knew there were two reports and they were sitting on them. I think that’s awful.”
State Farm directly blames Hood for its decision to stop writing new policies in his jurisdiction.
Kim Brunner, State Farm executive vice president, general counsel, and secretary of State Farm Insurance Companies said, “The attorney general’s actions only further highlight the unpredictable legal and business environment that led to our February decision to suspend writing any new homeowners or commercial property business within the state of Mississippi.”
Filed on behalf of 30,000 Gulf Coast State Farm policyholders Hood said the breach of contract suit addresses noncompliance with the “terms we have with them in black and white.”
“The State Farm reevaluation procedure through the Department of Insurance has only resulted in a little more than 300 new offers,” Hood said in a follow-up press release. We have a state court order that they signed and then backed out on. If they will breach a clear agreement with a State, then this is further evidence that they have breached their own policy provisions with their insured on the Coast.”
Hood charges that State Farm has violated several specific terms of the settlement agreement including a failure to make “an offer of settlement to the policyholder based upon criteria and guidelines approved by the U.S. District Court for the Southern District of Mississippi.”
The complaint seeks compensatory and punitive damages from State Farm.
The settlement process State Farm established with the Mississippi Insurance Department is actively underway with people responding and submitting claim forms to receive a portion of the $50 million committed to the process, according to State Farm.
In its own press release, State Farm added that the agreement with the attorney general was reached in January in conjunction with the Woullard class action settlement agreement. Woullard was ultimately removed from a court’s consideration by the Scruggs Katrina Group. After the Scruggs action, State Farm cooperated with the Mississippi Insurance Department to extend the same settlement to Mississippi policyholders – only this time without a “set-aside” of millions of dollars in compensation for trial lawyers.
The MID settlement protects a policyholder’s legal rights by allowing for mediation, arbitration, or litigation, according to State Farm.
State Farm said it has mailed more than 30,000 letters to policyholders in Jackson, Harrison, and Hancock counties and that it has received “thousands of responses from these policyholders” and are processing their claim re-evaluation requests.
The company said it has made offers to date totaling more than $10 million.
Sources: Office of the Mississippi Attorney General
State Farm Fire and Casualty Company
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