Blaming lawsuits filed against the company by angry homeowners, State Farm Insurance says it will no longer sell business or homeowner policies in Mississippi. The decision will have a huge impact in Mississippi as State Farm currently covers 30 percent of homeowners in the state.
State Farm Senior Vice President Bob Trippel said, "We came to this decision reluctantly. But it is no longer prudent for us to take on additional risk in a legal and business environment that is becoming more unpredictable."
State Farm had been hit by a wave of lawsuits from victims of Hurricane Katrina who claimed the company had wrongly denied or low-balled their claims. An exclusive report by ABC News detailed charges that State Farm Insurance supervisors demanded that Hurricane Katrina damage reports be buried or replaced or changed so that the company would not have to pay policyholders’ claims in Mississippi.
Today’s action by State Farm comes on the heels of a decision by a U.S. District Court judge to not fully sign off on a proposed settlement by State Farm. Judge L.T. Senter, Jr. had agreed to allow State Farm to pay an estimated $80 million to homeowners who had sued the company.
The judge, however, rejected another part of the settlement that called for State Farm to compensate homeowners whose claims were denied but didn’t file suit, leaving the company still vulnerable to potential civil and criminal litigation.
State Farm said its decision to discontinue coverage in Mississippi is not in response to any specific legal development.
But attorney Richard Scruggs, whose firm represents hundreds of Katrina homeowners, disagreed, "State Farm’s extreme reaction to Judge Senter and the business climate could surely hinder the Coast’s recovery." Scruggs added, "It’s time for everyone to take a deep breath and think through the consequences of their actions."