In court papers, Mr. Tejedor had asked for more than $5 million in a case that once again revolved around the issue of storm-surge damage.

State Farm has contended that claims for homes damaged by storm surge are not compensable under policy language that excludes flood damage.

According to Jack L. Denton, the Biloxi, Miss. attorney representing Mr. Tejedor, his client's coastal home was ripped off its slab.

According to the complaint--filed Nov. 7, 2005, in state court, before the case was moved to the federal tribunal--State Farm denied the Tejedor family's claim on Oct. 6, 2005, stating in part that "investigation showed that your property was damaged as a result of storm surge, wave wash and flood. Unfortunately that damage to your property is not covered under the policy..."

Mr. Tejedor's complaint charged that State Farm acted in bad faith and contrary to law, and that their agent, Philip Harvey, misrepresented the coverage in their policy. In addition to $5 million for bad-faith actions, it sought $50,000 for mental and emotional distress.

The suit alleges that Mr. Harvey "failed to disclose that the hurricane deductible did not imply hurricane coverage, nor State Farm's present undisclosed intention to refuse to pay for a covered wind loss or for storm surge, even though that term is not listed in the so-called flood exclusion."

Had the Tejedor case gone to trial, the insurer would have been facing the same judge who ruled Jan. 11 that a Biloxi, Miss., couple with a claim from Hurricane Katrina was entitled to punitive damages.

In that case--brought by Norman and Genevieve Broussard of Biloxi--Judge Senter first ordered the insurer to pay the couple their full policy value of $233,292, and then found that State Farm's conduct exposed it to punitive damages, which the jury set at $2.5 million.

State Farm had argued that the Broussard claim was excluded by policy language excluding flood damage because their house was swept off its foundations by storm surge from Hurricane Katrina.

The Broussards contended the damage occurred from covered wind damage, which hit the house before storm surge water from the Gulf of Mexico was blown in from the coast.

State Farm said after the verdict that it believed its expert witnesses had shown "that damage to the Broussard home was overwhelmingly caused by water and not wind."

Judge Senter found that the insurer's evidence was insufficient to make its case for flood damage, and that it had not presented an acceptable reason for denying the claim.

The ongoing global settlement negotiation has State Farm talking with Mississippi Attorney General Jim Hood and plaintiffs' attorney Richard Scruggs.

Mr. Hood has a suit against insurers pending in state court, arguing that they should cover homeowners against storm surge because their policy language is ambiguous.

He predicted in 2005 that insurers would do better reaching a global settlement with homeowners because they would "get hammered" trying individual cases before Mississippi juries.

The settlement that occurred Friday was forecast two weeks ago by Randy Maniloff, a Philadelphia attorney who represents insurers. Mr. Maniloff said then that if the Tejedor case details were similar to Broussard, he believed State Farm attorneys would likely settle--"unless there is something different that gives them the comfort level they won't get the same result" as the last case.