Update: Mississippi Couple in Settlement with State Farm over Katrina

September 16, 2008

State Farm Fire & Casualty Co. paid $250,000 to settle a lawsuit brought by a Biloxi, Miss. couple over damage to their home from Hurricane Katrina in 2005.

Terms of the settlement were not disclosed Sept. 15 in U.S. District Court documents or by the attorney for Thomas and Pamela McIntosh.

But Bloomington, Ill.-based State Farm said in a statement that the $250,000 paid to the McIntoshes was less than 25 percent of the what the couple had claimed as damages in their breach of contract lawsuit.

U.S. District Judge L.T. Senter Jr. agreed to dismiss the lawsuit after lawyers for the McIntoshes and State Farm filed documents showing the settlement had been reached.

“I’m personally happy for the McIntoshes that this matter is finally coming to a resolution,” the couple’s attorney, William “Chip” Merlin of Tampa, Fla., said Sept. 15 in a telephone interview.

He said the McIntosh settlement is particular to their case and has nothing to do with other pending State Farm lawsuits.

Last week, Senter dismissed the bad-faith portions, once considered a key piece of the lawsuit, after the couple requested he do so.

The lawsuit had been considered the centerpiece Katrina litigation for now-imprisoned attorney Richard “Dickie” Scruggs, once one of the most prominent — and feared — tort attorneys in the country.

In the motion to dismiss punitive damages granted by Senter, the Merlin Law Group said the McIntoshes were promptly and properly paid policy limits of $350,000 for flood damage and $36,228 for wind damage before an engineer inspected their property.

State Farm said in its Sept. 15 statement that Scruggs made up allegations in the lawsuit to launch a public relations plan to lure politicians, the media and others into publicly attacking the company. State Farm also said it was a tactic that diverted time and resources away from resolving Katrina claims.

“Dick once said he used every trick in the book, political, public opinion, and legal to force State Farm to pay him money. This case was his centerpiece,” said Jeff Jackson, State Farm senior vice president and general counsel.

The settlement of the McIntoshes’ case should put an end to allegations State Farm acted dishonorably in handling the couple’s claim, the company said.

The McIntosh case drew national attention because two sisters who worked for a State Farm-affiliated engineering company found separate engineering reports on the property, the first allegedly emphasizing wind damage covered by State Farm and the second blaming tidal surge covered by flood insurance.

Altered reports for other properties were subsequently discovered and turned over to federal and state investigators. The two sisters left their jobs and went to work for Scruggs.

The McIntoshes, who were unaware of the first report, had accepted their initial wind payment without question. After news of the altered reports broke, the McIntoshes hired Scruggs to file their lawsuit. But personal criminal charges forced him to bow out of Katrina litigation in December.

“The McIntoshes are private individuals with no intention of ever bringing a lawsuit and did not do so for months after the storm,” Merlin said. “They did so only after becoming aware of another engineering report that had never been brought to their attention and tended to show the money they had gotten could be greater.”

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