State Farm defends criticism over handling of Katrina claims

Anita Lee, Sun Herald© (Biloxi, MS) via The Herald© (Monterey, CA)

BILOXI, Miss. - The "cacophony" is drowning out what State Farm Fire & Casualty Co. sees as a just, speedy and inexpensive way to resolve Hurricane Katrina claims.

"You kind of step back from it and look over the last month or so and you see, at least I see, examples that sort of strike me as convenient amnesia or schizophrenia, whether we're looking at the political environment, whether we're looking at the legal environment or whether we're looking at the editorial environment," said Michael A. Fernandez, vice president of corporate communications and external relations at State Farm headquarters in Bloomington, Ill.

"Potentially, I see it as destabilizing, to the point that it causes a lot of concern around, what are the business certainties and uncertainties as we go forward? We see all the noise, and we see all the clutter and cacophony of voices and we're kind of saying, `OK, where do we go from here?'"

Fernandez was joined in a meeting Friday with the Biloxi Sun Herald by State Farm agency field executive J.D. Sparks and legislative affairs attorney Steven C. Simkins. They are making the media rounds in advance of a Feb. 28 hearing U.S. District Court Judge L.T. Senter Jr. will hold on the proposed settlement.

State Farm representatives have been taken aback by criticism that accompanied what they consider a compromise with policyholders: An offer to review 35,000 Coast Katrina claims and pay a minimum of 50 percent on structure and contents to policyholders whose homes the hurricane swept away. Settlement details consume 41 pages, plus 10 exhibits.

To date, State Farm says, it has paid an average of $25,030 for structural damage to 794 policyholders left with slabs or pilings. State Farm had been unwilling to release the figure before Friday.

Where wind damage covered by State Farm and water damage covered by federal flood insurance could not be separated, the company denied claims, infuriating policyholders on the waterfront from state line to state line.

As Fernandez pointed out, Senter asked attorneys on both sides of the insurance debate to look for a just, speedy and inexpensive way to resolve 1,000 Katrina insurance cases clogging the federal court, filed by policyholders against the big three insurers - State Farm, Allstate and Nationwide - and other insurance companies.

But Senter has found much to question in the State Farm settlement agreement. His concerns, outlined in a six-page order, will be reviewed at the hearing. The settlement State Farm negotiated with the Scruggs Katrina Group of attorneys is not the only solution being batted about, but it is the one the company is willing to accept.

Fernandez said state officials in Alabama and Louisiana have asked if they, like Mississippi, should start beating up on the company to get results. He failed to mention any specific remedies State Farm might be considering to avoid future post-catastrophe problems, although the issues raised in Mississippi mirror those in a 1999 tornado case from Oklahoma, in which a jury found the company recklessly disregarded policyholders' rights.

He was asked if the company bore any responsibility for what has happened.

"I'm not here to say we're perfect," Fernandez responded. "I'm not here to say there weren't mistakes made."