On June 11, Mississippi Attorney General Jim Hood filed a civil action again State Farm Fire and Casualty Co. in the Circuit Court of Hinds County, Mississippi, alleging breach of contract, bad faith breach of contract, and breach of duty of good faith and fair dealing. The suit arises out of State Farm’s alleged failure to honor an agreement for a mass settlement of claims arising out of damage caused by Hurricane Katrina.
The suit highlights another chapter in the Katrina saga which, in this case, began in September 2005 when Hood filed suit against State Farm and other insurers, seeking to have their policies’ anti-concurrent causation clauses declared void and to enjoin enforcement of the policies’ exclusions. The anti-concurrent causation clauses provide that if a loss arises from a combination of covered and non-covered perils, the loss is not covered.
In January 2007, in an attempt at settlement, Hood and State Farm entered into a proposed agreement pursuant to which State Farm agreed to establish a procedure to reevaluate claims of approximately 35,000 Mississippi affected policyholders, and to pay them $50 million collectively. In return, Hood agreed to dismiss State Farm from the lawsuit filed against the insurers. However, a federal district court rejected the proposed settlement, concluding that the agreement did not establish a fair and reasonable procedure.
After the proposed settlement fell apart, State Farm and the Mississippi Insurance Commissioner reached an agreement with similar terms in which State Farm agreed to reopen its policyholders’ claims. Unlike the earlier proposed settlement, the agreement with the Commissioner was to be overseen by the Mississippi Insurance Department as opposed to the court. According to State Farm, it has contacted thousands of policyholders, is reevaluating policyholder requests, and has paid claims totaling more than $10 million.
In his June lawsuit, Hood alleges that State Farm intentionally violated its settlement agreement with him while benefiting from Hood’s January dismissal of State Farm. Hood is seeking compensatory damages of more than $50 million for the affected policyholders, extra-contractual damages, attorneys’ fees and expenses, and exemplary damages.
Notwithstanding State Farm’s agreement with the Commissioner and the remedial actions State Farm claims to have taken, Hood, unhappy with the breakdown of the settlement of his suit against State Farm, presses on. Will Hood prevail? Stay tuned.
Click here to read the recently-filed Complaint.
