Biloxi, MS-Attorney General Jim Hood announced the settlement of the state's breach of contract suit against State Farm, which was filed after State Farm refused to comply with a January, 2007, Hinds County Chancery Court settlement. Due to the state's suit against several insurance companies, State Farm has paid an additional $74 million and Nationwide has paid an additional $40 million to Coast policyholders. As a result of the settlement, State Farm will send out new notices to the remaining 148 slab and/or pier only policyholders, who have not yet sued, settled or already participated in the reevaluation process.
The Hinds County Chancery Court settlement required that State Farm establish an administrative procedure to be approved by the Federal Court for the Southern District of Mississippi to reevaluate claims of its policyholders in Hancock, Harrison, and Jackson counties and make new offers to its policyholders for no less than 50% of Coverage A limits to slab or pier only claims, subject to policy limits and prior payments. The controversy leading to the breach of contract suit resulted when State Farm refused to comply with the requirements set forth by Federal District Court Judge Senter in order to obtain his approval of the class action settlement submitted to the Court by State Farm and the class plaintiffs.
State Farm instead set up the process with the Mississippi Department of Insurance to reevaluate these claims. After the Attorney General's Office reviewed a sampling of the settlements reached in this program, it appears that State Farm has complied with making the minimum 50% offers.
As a result of the Attorney General's original state court settlement with State Farm, the company has paid at least an additional $74 million to coast policy holders. In addition, Nationwide Insurance has paid out an additional $40 million to its policy holders.
Attorney General Hood stated, "Under the terms of the original settlement, which required supervision of the federal district court, a lot more money would have been paid out, because the panel of arbiters would have been chosen evenly by the plaintiffs and State Farm. Under the Mississippi Insurance Department reevaluation program, there were no arbiters. When we entered into the original agreement, our Office estimated that the arbiters would make State Farm pay between the minimum of $50 million and $400 million. Nevertheless, the additional $74 million paid by State Farm pursuant to the Mississippi Department of Insurance reevaluation program apparently meets the minimum payments required under our original state court settlement agreement."
This settlement agreement includes additional benefits for the remaining slab/pier only policyholders, who were eligible to have their claims reevaluated, but have not done so. State Farm has agreed to send these 148 policyholders new notices that will inform them how they can still participate in the reevaluation process, if the policyholder submits the enclosed reevaluation form postmarked by August 29, 2008. In accordance with the Attorney General's original agreement with State Farm, these offers are guaranteed to total no less than 50% of Coverage A limits, subject to policy limits and prior payments.
Eligible policyholders who complete their reevaluation forms by August 29, 2008, will receive an offer from State Farm. Those policyholders will have 21 days from the date the offer is mailed to accept the offer, or it will be deemed rejected by the policyholder. The policyholder will still have 30 days from the date of actual or deemed rejection to pursue legal action, if desired.
The Attorney General encourages any eligible policyholder who receives a letter from State Farm to consider all available options. All policyholders, even those not covered by this agreement, may desire to seek individual legal assistance to ensure that their rights are asserted in a timely manner.