State Farm, Mississippi Settle Katrina Lawsuit for $12M

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Mississippi has quietly settled its lawsuit against State Farm Fire and Casualty Co. for allegedly minimizing its Hurricane Katrina payments to policyholders, leaving the state to compensate homeowners.

The settlement says the $12 million payment represents “restitution for damage, which was or may have been caused by a violation of law or potential violation of law” on the part of State Farm, which has admitted no liability in its handling of claims from the 2005 storm, The Sun Herald reported.

Waves crash over Lake Pontchartrain as Hurricane Zeta makes landfall on October 28, 2020 in New Orleans, Louisiana. Photographer: Sandy Huffaker/Getty Images North America

State Farm paid the settlement in February 2021, but Attorney General Lynn Fitch never announced details of the agreement. The Sun Herald recently filed a public records request to secure a copy of the settlement, which does not appear in the voluminous electronic case file on the lawsuit.

Former Attorney General Jim Hood originally filed the suit in 2015. State Farm later lost a state Supreme Court appeal seeking to have the case dismissed.

In July, the company, a subsidiary of State Farm Insurance, also agreed to pay the federal government $100 million in restitution over its alleged mishandling of flood insurance claims following Katrina.

That settlement marked the end of legal proceedings that began more than 16 years ago when two whistleblowers sued the Illinois-based insurance company, which had the largest market share of Mississippi policies when the storm hit. State Farm also agreed to dismiss counterclaims it filed against the whistleblowers.

In the federal case, State Farm agreed to pay the federal government $100 million to avoid any further liability. A jury had already determined that State Farm defrauded the National Flood Insurance Program by charging it $250,000 for flood damage to a Biloxi policyholder’s home when wind caused the loss.

State Farm policies cover wind damage, while the NFIP covers damage from flooding.

The newspaper checked on the state case after finding out about the federal settlement. Before the federal settlement, State Farm faced having thousands of its Katrina claims investigated for additional fraud.