State Farm reaches settlement in Katrina case

NEW YORK, Jan 19 (Reuters) - State Farm Mutual Automobile Insurance Co. said on Friday it reached a settlement with a Mississippi homeowner in the latest case arising out of claims over Hurricane Katrina.
"We are pleased to be able to resolve this before it went to trial," said Fraser Engerman, a spokesman for State Farm, the largest U.S. home insurer.

The case was scheduled for trial on Monday in U.S. District Court before Judge L.T. Senter, who ruled in a similar suit against State Farm last week that a Biloxi, Mississippi, couple was entitled to collect the full value of the insurance on their home. In addition, a jury awarded them $2.5 million in punitive damages.

The terms of the latest settlement, with Richard Tejedor, were confidential, Engerman said. On Thursday, State Farm lost an appeal to delay the case.

State Farm and other insurers face hundreds of similar lawsuits from Gulf Coast residents who lost their homes when Hurricane Katrina ravaged the Gulf Coast on Aug. 31, 2005.

All told, the storm, which whipped up a 30-foot wall of water, caused more than $38 billion of insured damages, much of it in Mississippi.

State Farm disputed some of these claims, saying damages were caused by water rather than wind. Flood losses are generally covered by a federal program, while wind damages are usually covered by conventional property insurers such as State Farm.

But Judge Senter has ruled that in the absence of proof, insurers are liable to pay the claims. Tejedor's attorney, Jack Denton of Biloxi, Mississippi, would confirm only that the case had been resolved and that terms were confidential. Tejedor has already received $280,000 of payments through two flood insurance programs after his home was reduced to a slab, according to court documents.

In addition to civil cases, State Farm, which is Mississippi's largest home insurer, faces a state grand jury probe of its claims practices following the hurricane. The insurer has said it is "cooperating fully with the investigation" but would not comment further. © Reuters 2007. All Rights Reserved.