On January 23, 2007, Attorney General Jim Hood announced that he had settled the State’s civil suit with State Farm. (the press release, curiously can no longer be found at the AGO website) In one press release, he announces that he’s forced State Farm to enter into a class action settlement with the Scruggs Katrina Group as well as discontinued the criminal charges against State Farm in return for settlement of the State’s civil suit.

The settlement agreement holds:

This administrative process will be carried out in a class action settlement [the SKG class action lawsuit] under the supervision of the Honorable Judge L. T. Senter in the United States District Court for the Southern District of Mississippi. The process will require State Farm to send out a notice of the class, an opt out form, and a table showing the percentage of policy coverage limits a policyholder may receive based upon the amount of damage to the structure. The notice will clearly provide that the policyholder will receive $200 for simply returning a registration form. The policyholder may opt out without the loss of any rights and pursue a remedy in court.

If the policyholder chooses to stay in the class, then State Farm will reevaluate the claim following the requirements set forth in our state court Settlement Agreement and make a new offer based upon the percentage of damage and the policy coverage limits. State Farm will not assert as a ground for the total denial of a claim that water contributed to the loss if wind damage occurred. State Farm will be required to show by a preponderance of the evidence that any damage denied was caused by an excluded peril. We believe that Judge Senter will enforce this standard based on his prior rulings.

Hood statement also read:

The criminal investigation of State Farm’s claims handling practices is now complete. “Although their activities warranted criminal investigation, our career prosecutors found that the matter would be better handled in civil court and in the United States Congress,” said Attorney General Hood.

In other words, since State Farm agreed to enter into the class action settlement with SKG, the criminal investigation was no longer needed.

Elsewhere it’s reported:

As part of the overall settlement, Mr. Hood, the Mississippi attorney general, agreed to drop a criminal investigation into State Farm’s handling of hurricane damage claims and to remove the company from a civil lawsuit accusing it and other insurers of treating policyholders unfairly.

But negotiations to get to that point were tenuous.

Several participants in the talks said State Farm wanted to reach agreement before a grand jury began hearing evidence on whether it ordered adjusters and independent engineers to file paperwork that would lead to underpayments to homeowners. As part of the agreement, State Farm was insisting that Jim Hood, the attorney general of Mississippi, drop a criminal investigation into the company’s handling of claims and call off the grand jury, which would decide whether there was probable cause to return an indictment.


But, according to several participants, Mr. Hood refused to sign off on the deal. That enabled the grand jury to be seated in Pascagoula. It also meant that another of State Farm’s conditions was not met: A requirement that Mr. Hood also drop a civil lawsuit against it and other insurers.

It, apparently, was during this time that, according to an FBI report, Scruggs paid Tim Balducci and Steve Patterson $500,000 to go have a sit down with Jim Hood to get him to drop the criminal charges and enter into the settlement of the State’s civil suit in return for State Farm agreeing to settle Scrugg’s class action lawsuit. In reference to the charges Jim Hood, states “I made my decision that there was insufficient evidence to uphold a conviction of State Farm on evidence we had at the time.” But his press release stated there was evidence, but that things would best be handled with Scrugg’s civil suit. Elsewhere it was reported “Hood has also been pursuing a criminal investigation of State Farm, which he said he would drop when the class-action settlement is finalized.”

But Judge Senter threw a monkey wrench into the whole works and balked on the proposed agreement that Hood and Scruggs designed “because it did not provide enough information for him to conclude that it was ‘fair, just, balanced and reasonable.'”

The combined State civil suit/criminal charges and SKG class action had also settled the 640 lawsuits for which Scruggs eventually intertwined himself into a bribery of another judge over attorney’s fees related to the settlement of those 640 suits. The settlement was two-fold. It settled the 640 lawsuits and secondly created a model to settle other claims within the class action that Scruggs was pursuing using demands that Jim Hood set forth in his state civil settlement.

Judge Senter seemed to be OK with the settlement of the 640 lawsuits but was concerned with the Hood/Scruggs settlement that would go forward and was concerned with the attorneys fees associated with the settlement.

In rejecting the agreement, Judge Senter raised concerns about a lack of detail on how much money policyholders might receive. He noted that State Farm had agreed to pay at least $50 million for reopened claims. But, he said, “there is no way I can ascertain how this sum compares to the total claims” of the approximately 35,000 homeowners, nor “how thinly this large sum may be spread.”

He said he was also troubled about the potential unfairness of an arbitration process intended by the negotiators to provide an appeals process for homeowners who requested that their claims be re-evaluated. He said that under the agreement, arbitration hearings were to be limited to two hours and that there was no apparent provision for legal representation for homeowners.

Judge Senter said the agreement also failed to provide information on what the lawyers had done to justify an agreed-upon payment of up to $20 million in relation to reopening the 35,000 damage claims. The lawyers are to receive another $26 million for settling the 640 lawsuits.

Scruggs then dropped the request for the second part of the class action settlement, but in March, 2007, George Dale, realizing things were falling apart, entered into the scene and negotiated a settlement with State Farm.

In the mean time, State Farm had announced it was not going to write any new policies due to the pressures of not knowing whether their written contract (policies) were going to be upheld or if arbitrary decisions would be made on what an insurance company has to pay for claims as a whole, instead of on an individual basis. Jim Hood announces:

“It is indeed childish for a company like State Farm to hurt its own dedicated insurance agents in an attempt to intimidate a federal judge, the Mississippi Legislature, and the citizens of the State of Mississippi. It is one thing to write no new policies in coastal areas, but to also punish its own agents throughout other parts of the state where there is no additional risk, shows the American public just how arrogant this company has become.”


“Tomorrow morning I will be announcing a course of action which I believe will put a stop to these type of antics,” said Attorney General

But, Jim Hood, apparently influenced to give up both the State’s civil suit as well criminal charges must have realized that Scruggs got what he needed out of the deal, the settlement of the 640 cases and the fees associated with that and Hood had egg on his face because his settlement was now in the dust and George Dale was going to get credit for helping the majority of policyholders.

On April 17, 2007, Judge Senter dismisses the SKG class action lawsuit because the original plaintiffs named in the suit, Woullard, settled their claim. Judge Senter noted “State Farm is presently engaged in an effort to resolve its policyholders’ claims under a program negotiated with the Mississippi Department of Insurance. This program follows, in part, the terms of the settlement agreement originally proposed…” in the Woullard action.

Before being dismissed, Hood had tried to personally intervene in the SKG class action because he must have realized he was duped by Scruggs somehow and that things were falling apart for his original settlement.

On May 2, 2007 ” Jim Hood says he is in the'”final stages’ of drafting a complaint against State Farm for breach of the settlement agreement that was shot down earlier this year by federal district court Judge Senter.” David Rossmiller sums up the events to this point:

Hood is up for re-election in Mississippi this year, and maybe this is just an effort at getting free campaign publicity. How else do you explain announcing a lawsuit that has not even been drafted yet, much less filed?

The settlement with Hood, to my understanding, was that as part of a massive class action settlement involving some 36,000 State Farm policyholders in Mississippi, Hood would drop both a prior civil suit against State Farm and cease a related grand jury investigation into claims practices. State Farm also was to pay Hood $5 million. Remember however, that the class action settlement, put together by the Scruggs Katrina Group and State Farm, didn’t make it past Judge Senter, who twice refused to certify a class action, saying it contravened the Federal Rules and involved an arbitration and settlement process that was procedurally unfair to policyholders. After the second try, the Scruggs Group backed off the proposed class action, and State Farm also moved on, making an agreement with Mississippi Insurance Commissioner George Dale to review the 36,000 claims anyway, but without class action status and the arbitration process.

I don’t know whether Hood got his $5 million or not, but this sounds an awful lot like a question on a Contract Law 101 final exam, with the correct answer being that you can’t sue someone for breach when their performance of the agreement is prevented by a federal judge. Maybe in the course of drafting this complaint Hood will pull out those old law school finals and contemplate how to get around State Farm’s impossibility defense. I wonder if by the time this thing gets drafted — if it does — Hood will get around to seeing Judge Senter’s refusal to approve the class action and State Farm’s lack of performance more as a failure of a condition precedent to Hood’s own performance — a justification for reinstituting the lawsuit he previously dropped. Maybe that’s what he’s driving at.

In June, Hood does file the breach of contract lawsuit and Rossmiller explains:

The lawsuit alleges that State Farm breached an agreement with Hood whereby he dismissed his prior lawsuit against State Farm over Katrina claims handling practices. This was part of a deal with the Scruggs Katrina Group in which State Farm was to seek certification of a class of some 36,000 policyholders, and settle the class action by setting up a new claims adjudication process that would reexamine the claims of people who had not sued State Farm. Hood gave his blessing to the agreement, but it went only as far as the bench of Judge L.T. Senter Jr., who said the proposed class action did not meet the requirements of the Federal Rules, and because he had concerns over fairness of the process State Farm was to create.

It was during the summer of 2007 that claims of Jim Hood helping Scruggs with his contempt proceedings by writing letters claiming Scruggs as a confidential informant, started brewing. During this time also, Hood opens another criminal investigation into State Farm and State Farms responds by filing suit against Hood to stop the investigation.

Leading us to Natchez where the State Farm suit against Hood was settled in confidence and under seal but not after Hood’s weird performance on the stand. Where Rossmiller even says that Hood “beclowned” himself. Further saying:

I was appalled at how proud Hood was that he negotiated language for State Farm’s proposed arbitration procedure that was to have been a part of the class action certification and settlement that never happened. On page 169, he said he subtly inserted the phrase “During the reevaluation and arbitration process, State Farm will not assert as a ground for the total denial of a claim that water contributed to policyholder’s loss if wind damage occurred.”

Transcript of the court appearance is here.

After Hood’s many media appearances where he seemed intent on further burying his reputation in the mud, he finally relinquishes while the whole Scruggs affair continues on a roll. So, it strikes many that Hood taking any credit for something he seemed to continually aggravate rather than help work out, would be perplexing.