State Farm Close to Settling Katrina Suits
State Farm, the largest U.S. home insurer, said it is close to settling hundreds of lawsuits over its payments for homes wrecked by Hurricane Katrina along the Mississippi Gulf Coast.
A company spokesman confirmed Tuesday's New York Times report which cited lawyers briefed on the talks but would not provide additional comment.
The paper said the settlement of 639 lawsuits for $80 million could be the first step in resolving a legal battle between homeowners and their insurance companies that has threatened to drag on for years.
State Farm has agreed to review and possibly increase payments to as many as 35,000 additional homeowners, the NYT reported, adding that the homeowners received a few thousand dollars for homes that suffered major damage or were destroyed.
State Farm would provide an average of about $125,000 to homeowners who filed lawsuits, though payments could range from $2,000 to about $2 million, the newspaper reported.
Under the terms of the deal, State Farm would pay at least $50 million for claims that were previously closed, and some lawyers estimate the cost for the company could run into the hundreds of millions of dollars, the paper said.
A State Farm spokesman told the NYT that the insurer had been in settlement talks, but said a final agreement had not yet been reached.
A similar deal with other insurers could lead to an estimated 100,000 other closed claims being re-examined, the paper cited lawyers briefed on the talks as saying.
The talks do not apply to homeowners in New Orleans and the rest of Louisiana, the paper said.
A federal judge in late December sent back to Mississippi state court a lawsuit demanding that insurers pay flood damages to thousands of Hurricane Katrina victims, increasing the chances of a ruling against the companies.
The insurers, including Allstate , State Farm and Nationwide Mutual Insurance Co., claimed that flood damages were excluded from their policies and were covered under federal flood insurance.
Nationwide Mutual is the parent of Nationwide Financial Services .