Homeowners in Katrina lawsuits get paid

A "class-action" portion of the deal also called for State Farm to pay at least $50 million to thousands of policyholders who haven't sued the company but can have their claims reopened, reviewed and possibly paid. However, a federal judge has refused to endorse this part of the settlement.

U.S. District Judge L.T. Senter Jr. said in a Jan. 26 ruling that he does not have enough information to determine how many policyholders would benefit from that part of the deal or how much each can be paid.

Senter also said he is concerned about a lack of any guaranteed payments to policyholders whose homes were not completely destroyed. And he noted that cases already in litigation would be excluded from a procedure for resolving disputes through binding arbitration.

"We're still trying to come up with a way to address the judge's concerns," Scruggs said. "I'm optimistic that we can better demonstrate the benefits of the class settlement to the judge, given the alternatives."

State Farm spokesman Phil Supple said the settlements with Scruggs' clients show that the company is "fulfilling our agreement" with the policyholders. That part of the settlement is separate, he added, from the class-action portion of the deal that Senter wouldn't endorse.

In the meantime, Senter is soliciting ideas from other lawyers with Katrina lawsuits. In a letter Friday to 180 attorneys, Senter said he is looking for a broader approach to a settlement.

"While the proposed class action is currently limited to State Farm policyholders," Senter wrote, "any procedure the court approves as an alternative to litigation would likely serve as a de facto model that would apply to similar claims against the other major insurers, Allstate and Nationwide."

Senter said he is open to establishing an "arbitration alternative" to the binding arbitration procedure outlined in the proposed settlement, but he added, "Unless such a procedure offers substantial benefits for both parties, it will not succeed."

The judge asked the attorneys to respond to his letter by Feb. 12.

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