Feb. 15, 2007 — -- State Farm, Mississippi's largest home insurer, says that starting Friday it won't write new policies in the state, in part because of increased litigation after the damage caused to Mississippi homes by Hurricane Katrina.
Some are calling the move heartless, while others are calling it just plain greedy.
Mississippi Attorney General Jim Hood says that State Farm's tactics have hurt thousands in his state.
"What they have done is they have [dragged] this out for 15 months," Hood said on "Good Morning America."
Those thousands include people like Phil and Toni Shafer.
Last year, the Shafers showed ABC News where their newly renovated home used to be before Hurricane Katrina.
On Wednesday, after a year and a half, they finally got a check from State Farm.
"They're basically saying. … 'You guys eat this loss,'" Phil Shafer said.
The couple had to sue, move out of the state, and start over before getting their money.
A year and a half after Hurricane Katrina, 35,000 Mississippi households remain at odds with State Farm, and now the company says it won't issue any new homeowner policies in Mississippi.
Bob Hunter of the Consumer Federation of America said he believed State Farm's action was a warning to other Gulf Coast states.
"I would say it's a warning shot," Hunter said. "The insurance company here, State Farm, is basically saying, 'If you make us pay what we owe, we're gonna … take it out on your citizens.'"
State Farm thought it had a comprehensive deal to settle outstanding Katrina claims centered on the company's refusal to cover water damage.
A judge put that on hold, and the company also lost a million-dollar lawsuit.
"The real challenge in Mississippi is the uncertainty being created by all the judicial matters," Mike Fernandez, a State Farm vice president, said last week.
But Hood disagrees with that assessment.
"They [State Farm] created the problem," he said. "If they would have paid what they owed in the first place, there never would have been a lawsuit filed."
He believes the real problem is not the worst hurricane season ever, he says it's State Farm's greed.
State Farm says that less than 2 percent of all its Katrina-related claims remain unsettled.
But Hood has vowed to put pressure on the company until it pays the claims he believes it owes.
He says that most of the water damage came from the wind-driven storm surge, and that the company did not specifically exclude "storm surge" storm in its policies.