A federal judge in Mississippi on Friday refused to endorse part of a proposed settlement that calls for insurance payments to thousands of his state's policyholders whose homes were destroyed or damaged by Hurricane Katrina.
U.S. District Judge L.T. Senter Jr. would not sign off on a deal between State Farm Fire & Casualty Co. and Mississippi Attorney General Jim Hood for at least $50 million (euro38.76 million) in payments to policyholders whose claims were denied but did not sue the company.
The Bloomington, Illinois-based insurer already has agreed to pay about $80 million (euro62 million) to more than 600 policyholders who sued the company for refusing to cover damage from the Aug. 29, 2005, storm. Senter has not been asked to sign off on that part of the deal.
Senter said he does not have enough information to determine how many policyholders would benefit from the deal or how much each can be paid.
"In the absence of substantially more information than I now have before me, I am unable to say, even preliminarily, that the proposed settlement establishes a procedure that is fair, just, balanced or reasonable," he wrote.
Senter rejected the settlement "without prejudice," allowing lawyers to present a new agreement that satisfies his concerns.
A spokeswoman for Hood and a State Farm spokesman would not immediately comment.
In his eight-page ruling, Senter said that although State Farm has agreed to pay $50 million (euro38.76 million) to policyholders who qualify for the class action portion of the settlement, he cannot determine "how thinly this large sum may be spread among the class members."
Senter also expressed concern about a lack of any "guaranteed" payments to policyholders whose homes were not completely destroyed and said he is "uncomfortable" with allowing many cases to be settled by binding arbitration "when none of these individuals has ever agreed to participate in that procedure."
Senter said he would allow lawyers to present a new agreement that satisfies his concerns.
Mississippi's mass settlement agreement did not involve any claims in other states.
Lawyers involved in the agreement presented the "class action" portion of the deal to Senter on Tuesday afternoon.
That part of the agreement would require State Farm to reopen and review claims filed by roughly 35,000 policyholders who live in Mississippi's three coastal counties but did not file lawsuits against State Farm.
After reviewing those claims, the company would be required to make new offers. Any disputes would be heard by an arbitrator whose decision would be binding.
The accord came less than two weeks after a federal jury in Gulfport, Mississippi, awarded $2.5 million (euro1.94 million) in punitive damages to a couple who sued State Farm for denying their claim after Katrina. Senter took part of that case out of jurors' hands, ruling that State Farm is liable for $223,292 (euro173,081) in storm damage to the Biloxi, Mississippi, home of Norman and Genevieve Broussard.
Senter is the only federal judge in Mississippi who has been presiding over the hundreds of lawsuits that policyholders filed against State Farm and other insurers.
In the first trial for a Katrina insurance case, Senter ruled in August that Nationwide Mutual Insurance Co.'s homeowner policies cover damage from wind but not storm surge. He also has ordered dozens of policyholders who sued their insurers to participate in an experimental mediation program.