State Farm Fire and Casualty's proposed class-action settlement for Mississippi coastal residents with Hurricane Katrina claims would mean a payoff for 36,000 property owners, the company said in court papers last week.

The insurer submitted the information in advance of today's settlement hearing by U.S. District Court Judge L.T. Senter, Jr., in Gulfport, Miss.

At the same time, State Attorney General Jim Hood submitted a motion asking the judge to compel the company to submit a settlement agreement acceptable to the court.

Judge Senter on Jan. 26 -- in a ruling that questioned a multitude of points in the agreement -- rejected the initial proposal, saying he could not call it "fair, just balanced or reasonable."

State Farm, in its memorandum in support of the proposal, said it believes the settlement "creates a process that is fair, while still being flexible."

As initially framed, it would provide a minimum of $50 million to homeowners and would pay 50 percent of policy value, no questions asked, to homeowners who were initially paid nothing even though their houses were reduced to a bare foundation slab. Those who wished more could go through an arbitration process.

The company rejected large numbers of claims, arguing that the destruction or damage was all due to non-covered flooding. Judge Senter, in a key ruling, found that the insurer must do an evaluation to determine what percentage of any damage may have been created by wind, which is a covered cause of damage.

Judge Senter, in rejecting the settlement, had asked what could be expected when the company reevaluated claims with no additional evidence submitted.

For such people, State Farm said it "anticipates that, even in the absence of new evidence submitted by the claimant, most class members will receive some additional payment under the class-action settlement."

State Farm said it does not agree that its handling of Katrina claims was incorrect, but said the agreement provides that the company must consider all engineering reports -- copies of which will be provided to the arbitrator -- "and that various pre-storm, storm and post-storm conditions will be considered."

In other papers, the company asked the judge to remove himself from a number of Katrina claim cases involving federal court personnel. The judge already recused himself of one such case back in September.

This article originally appeared in The National Underwriter P&C. For the complete article, please click here.

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