The Moral of the Story
According to the Chicago Tribune, Mississippi will soon settle with State Farm insurance regarding Katrina damages. Mississippi AG Jim Hood, with some assistance from Dickie Scruggs, has a civil suit against State Farm about the fine points of the fine print in the insurance contracts Mississippians held.
Hood has also filed criminal charges alleging fraud by State Farm. What are the odds that State Farm’s decision to settle the civil case was influenced by the threat of criminal punishment?
Just as importantly, as the article notes, “The Mississippi settlement would not involve any cases filed by State Farm policyholders in Louisiana or Alabama.” We have one guess what lesson the AGs in Louisiana and Alabama will draw from the Mississippi maneuver.
The political dynamic will certainly make these AGs popular in the short term, but in the long run, we doubt that most businesses will want to do business in states that toss out contractual rule of law and leverage criminal threats in order to extract civil fees.