Even as the Mississippi attorney general negotiates a potential settlement with State Farm Fire & Casualty Co., an eight-person jury began hearing opening statements Tuesday in one of hundreds of insurance lawsuits filed by policyholders after Hurricane Katrina.
By seating the jury of four women and four men to hear the lawsuit brought against State Farm by Norman and Genevieve Broussard, U.S. District Judge L.T. Senter Jr. rejected the insurer’s bid to move the proceedings to Oxford, Miss., 300 miles from the Gulf Coast.
In court papers filed earlier, State Farm claimed it could not receive a fair trial in south Mississippi because the jury pool has been tainted by “media propaganda” about the insurance industry’s handling of claims after Katrina. Lawyers for the Broussards have argued that State Farm hasn’t met the legal burden for showing that the case must be moved.
A second eight-person panel also was selected Monday for a second Katrina-related lawsuit involving State Farm that is scheduled for trial here later this month.
Meanwhile, State Farm, Mississippi’s largest home insurer, is negotiating a multimillion dollar settlement in the state to resolve thousands of lawsuits and other disputed policyholder claims from Hurricane Katrina, people with direct knowledge of the negotiations told The Associated Press on Monday.
Lawyers for Bloomington, Ill.-based State Farm met with Mississippi Attorney General Jim Hood as recently as Friday to discuss a possible settlement, which would resolve a civil lawsuit Hood filed against the company for refusing to cover damage from Katrina’s storm surge almost 16 months ago.
A mass settlement would be the first of its kind to follow the wave of litigation spawned by Katrina.
Hood, through a spokeswoman, declined to be interviewed. But he issued a statement that said: “I am working day and night attempting to get our coastal residents a fair shake in the insurance litigation. It would not help our negotiations to disclose any details at this time.”
Hood last month announced that he was trying to negotiate a settlement with several insurance companies, but he didn’t specify which ones.
State Farm spokesman Phil Supple said that while no settlement has been reached with Hood, “we continue to talk and search for ways to bring these events to a resolution.”
State Farm says it already has paid roughly $1.1 billion for about 84,000 property claims in the state, not including flood insurance.
(Miss. Insurance Commissioner George Dale, speaking at an insurance industry forum in New York on Tuesday, confirmed that talks are in progress but said they “are not at a point of solution.” He said news reports had “jumped the gun.”
He told an audience at the Joint Property Casualty Innsurer Conference that he wants to make sure that lawyers do not “walk off with all the money,” leaving policyholders with little.”)
Many policyholders with damage, including those who had coverage from companies other than State Farm, contend that they received nothing or only small payoffs from their homeowner policies because insurers blamed their losses on storm surge, which is not covered, rather than on the hurricane’s winds.
Hundreds of Mississippi homeowners have sued their insurance companies for refusing to cover billions of dollars in damage from Katrina’s storm surge. The Broussards’ case is only the second to be tried since the August 2005 storm destroyed or severely damaged tens of thousands of homes.
The Broussards, whose Biloxi home was reduced to a slab by Katrina, claim a tornado destroyed their home before any flooding.
As jury selection began Monday, Senter dismissed six potential jurors who said they could not be impartial in the case.
“The object is to find eight fair and impartial jurors who will listen attentively to the evidence as it comes in,” Senter told the jury pool.
All but seven of the 74 remaining potential jurors acknowledged during questioning by State Farm attorneys that their homes had received at least some damage during Katrina. None said they had a claim denied by their insurer, but several acknowledged that they had complaints about the process used to adjust their claims.
State Farm attorney John Banahan of Pascagoula told the potential jurors that it was a daunting task to remain objective “because we’re all gone through something collectively here on the coast.”
Last year, Senter presided over the first trial of a Katrina insurance lawsuit, which Paul and Julie Leonard of Pascagoula filed against Nationwide Mutual Insurance Co. Senter’s decision in that case, which was heard without a jury, was seen as a victory for the insurance industry.
Senter ruled in August that Nationwide’s policies cover damage from a hurricane’s wind but not from its rising water, including storm surge. The judge also rejected the Leonards’ argument that Nationwide’s policies are ambiguous and therefore cannot be enforced because storm surge isn’t specifically excluded from coverage.
While a settlement deal with State Farm hasn’t been completed, people with knowledge of the talks said both sides were nearing an agreement that could be worth hundreds of millions of dollars to tens of thousands of State Farm policyholders in Mississippi. The Mississippi settlement would not involve any claims filed by State Farm policyholders in Louisiana or Alabama.
State Farm agreed “in principle” to pay an undisclosed amount of money to more than 600 policyholders, including Sen. Trent Lott, R-Miss., who sued State Farm after the storm, according to the people with knowledge of the negotiations. All the policyholders are represented by a legal team led by high-profile attorney Richard “Dickie” Scruggs.
An agreement also could benefit thousands of other Mississippi State Farm policyholders who haven’t sued State Farm.
A “class action resolution” component of the proposed deal calls for the company to review the claims filed by roughly 35,000 policyholders who live in Mississippi’s three coastal counties but didn’t file lawsuits against State Farm for refusing to cover storm damage.
After reviewing those claims, the company would be required to make new offers, and any disputes would be heard by an arbitrator whose decision would be binding.
State Farm would pay a minimum of $50 million to these policyholders after their claims are reviewed, but the company could end up paying hundreds of millions of dollars more than that because there wouldn’t be a cap on the amount, the people with knowledge of the talks said.
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