State Farm v. Hood update: the day before the big hearing

Now, I have heard from all sides on this question, and one very interesting point of view — and these folks would not be in the category of really big fans of State Farm, quite the contrary — is that it was remarkably not smart to link a criminal investigation so directly to the fate of civil litigation. A couple conclusions derive from this point of view. First, what better way to say this whole thing was a wholly owned subsidiary of Scruggs, Inc. Second, even if it wasn’t, it was less than astute to give grounds for the appearance of a shakedown, especially as — again, in this view — that the whole massive settlement of 640 cases was a boon for State Farm, not a great deal for many if not most of the 640 homeowners, and a big payoff to Scruggs & Co. for results that, when you do the math and look at the individual cases, were not that impressive. This view would also hold that, whatever his motives, Hood didn’t necessarily want to drop the criminal investigation, but got pushed to do so by those who said it was a good idea to put dollars in the hands of Mississippi policyholders.

We should also recall that, at that time, it appeared it would be possible to some — not to me, but to some others — to get approved a massive proposed class action involving some 36,000 policyholders in Mississippi, and that this deal between State Farm and Scruggs, with Hood’s blessing, would pump more millions into the state. The class action, which was to have been settled as soon as it was approved, was rejected by Judge L.T. Senter Jr. on grounds of procedural unfairness and failure to comply with the Federal Rules for class actions. Hood, a few months later, filed his own lawsuit against State Farm for alleged breach of this class action agreement, even though the insurer did enter into an agreement with Insurance Commissioner George Dale that resembled the class action settlement in some ways, and even though if a federal judge rejects your class action settlement, that is a pretty good excuse for not doing it . I have always wondered if Hood believed that State Farm thought all along the class action was not likely to be approved — kind of like they hoodwinked him. It would be difficult for him to say this publicly, because to do so would be to admit State Farm was smarter. In addition to filing his own lawsuit, Hood also restarted his criminal investigation with a state grand jury in July 2007.

Insurance Coverage Blog
2/5/8