- The Washington Times - Wednesday, February 14, 2007


State Farm Insurance Cos. said yesterday it will stop writing homeowner and commercial policies in Mississippi starting tomorrow, citing in part a wave of litigation it has faced since Hurricane Katrina.

Mike Fernandez, vice president of public affairs for State Farm, said Mississippi’s “current legal and political environment is simply untenable.”

“We’re just not in a position to accept any additional risk in this homeowners’ market,” he said.

Mr. Fernandez said the decision does not affect existing policies, but the company is still assessing how many of the current policies in Mississippi will be renewed this year.

He said the action was not a direct response to any specific development in the litigation. That litigation has included a recent federal jury’s $2.5 million punitive-damage award to a couple who sued State Farm for refusing to cover the 2005 hurricane’s storm-surge damage to their Biloxi home.

U.S. District Judge L.T. Senter Jr. later reduced the award to $1 million, even though he said State Farm acted in a “grossly negligent way” by denying the claim filed by policyholders Norman and Genevieve Broussard.

State Farm and other insurers say their homeowner policies cover damage from wind but not from water — and exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm’s rising water. Hundreds of policyholders have challenged that claim, saying they are entitled to damages from storm surge.

“We don’t want to write new policies under a contract that they are calling into question,” Mr. Fernandez said.

Bob Trippel, State Farm senior vice president, said the company would reassess the situation “when there’s more certainty” in the state’s business climate.

“I view this decision as the inevitable outcome of the increased uncertainty and cost associated with the litigation that has developed post-Katrina,” said Robert Hartwig, vice president and chief economist for the Insurance Information Institute in New York, an industry-funded group.

The state’s courts and some Mississippi officials have created a “virtually impossible working environment for insurers,” he said.

Mississippi Insurance Commissioner George Dale said State Farm’s decision comes when “it is becoming more vital than ever that policyholders in Mississippi have a viable and affordable insurance market.”

“State Farm’s decision is a stark reminder that the issues brought about by Hurricane Katrina affect not only the coast, but policyholders all across the state,” Mr. Dale said.

State Farm, the largest homeowners insurer in Mississippi with more than 30 percent of the market, has agreed to settle hundreds of lawsuits by policyholders and reopen and pay thousands of other disputed claims. The landmark deal is potentially worth hundreds of millions of dollars for Mississippi homeowners devastated by Katrina.

Mr. Fernandez said Mississippi is the only state where his company has stopped writing new policies.

“The political and regulatory and legal environment in the other two states [hit by Katrina] — Louisiana and Alabama — is not the situation in Mississippi,” he said.

The settlement reached last month calls for State Farm to pay about $80 million to more than 600 policyholders who sued the company for refusing to cover damage caused by Katrina on Aug. 29, 2005.

State Farm has said it has paid roughly $1.1 billion for about 84,000 property claims in Mississippi.

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