Judge L. T. Senter, Jr. of the US District Court for the Southern District of Mississippi on Friday rejected for the time being a proposed settlement reached between the State Farm insurance company and Mississippi Attorney General Jim Hood on behalf of hundreds of Mississippi policy holders whose claims were denied after Hurricane Katrina. Senter said the parties had not provided enough information to allow the court to conclude that the "proposed settlement establishes a procedure that is fair, just, balanced, or reasonable." Senter was particularly concerned with the wellbeing of "other litigants... who are not members of the proposed class... and their views on the fairness of the proposed settlement," which would bind a "large number of policyholders into the process of binding arbitration" without their assent to the proposal.

The proposed settlement, if ultimately approved, would award $80 million to the 640 named homeowners who filed the lawsuit and would also provide an additional $50 million for approximately 35,000 other homeowners in Mississippi who did not sue State Farm after their claims were denied. The $50 million figure, however, is just a minimum and depending on the number of applicants, could easily reach hundreds of millions. The settlement would also end Hood's investigation into allegations of fraudulent claim denials by State Farm, including allegations that the company pressured its engineers to doctor their reports. Hood has also brought actions against other insurance companies, including Allstate and Nationwide.