Insurance Law

Third update: State Farm v. Hood

By David Rossmiller

Holy Cow, do I wish I could have been in the courtroom to hear the exchange between State Farm attorney Jim Robie and AG Jim Hood, which I was hearing about for a couple hours tonight by rumor but finally have confirmed as true.  At first, I did not quite believe the reports I was receiving, because it suggested a colossal drubbing of Hood on the witness stand beyond what even I would have expected. 

You know, Hood went into this current round of litigation attempting to dissolve the State Farm injunction, in effect shouting the motto "Bring it on!" After spending Wednesday on the witness stand, it appears Hood has a new motto: "Stop bringing it on!"

Let's slow down here, and take this one step at a time.  I see this exchange is alluded to in the updated Associated Press story tonight, but not in the amount of detail I heard. In the AP story, Hood is finally talking a blue streak and saying his dispute with State Farm is settled.  State Farm says in the story that this is "premature," which I don't know at this moment what that means.  Maybe it means all the details of the "No More Pantsing of Hood" clause have yet to be worked out.  Let's think for a moment.  Why would Hood, who has treated the press this past two months as if it consisted of Medusa and the Gorgon sisters, and who locked down his office with a "no comment to the media or bloggers" policy earlier this year (it hurts that he did this shortly after I publicly invited him to call me for an interview to present his side of events), be trying to get out in front of something that State Farm says is premature to talk about?  Unless it is perhaps an effort to save face about something that would otherwise look like a reprise of the Killer Bunny scene from Monty Python and the Holy Grail: "Charge! . . .  Run Away, Run Away!"

I don't have verbatim quotes, but Robie asked Hood if he was at a dinner in Jackson right after Scruggs had tentatively settled 640 Katrina cases with State Farm, and if Tim Balducci and Steven Patterson told Hood that if he didn't help make the settlement happen Scruggs and Mike Moore would make sure Hood had opposition in the 2007 Democractic primary, and within a week Hood settled the criminal investigation with State Farm in late January.

The way I heard it is Hood turned red at the question, said he hadn't been to the restaurant in a long time, then said he hadn't been threatened, but instead said he had talked with Balducci and Patterson about leaving a firm they were with.  

Here's an excerpt from the AP story on the exchange:

During Wednesday's hearing, a State Farm attorney asked Hood if it was true that Scruggs threatened to support an opponent to run against Hood last year if he didn't end his criminal probe of State Farm as part of the January 2007 settlement.

Hood, who was re-elected to a second term in November 2007, denied that allegation.

"If you're asking me, 'Did somebody come to me and threaten me?' the answer is no," he said.

Now, you may remember that in the Lee Harrell deposition on October 31, Harrell testified that Scruggs threatened to support an opponent in the Democratic primary of Insurance Commissioner George Dale unless Dale supported Scruggs' proposal to set himself up as some sort of Katrina Czar over a $500 million slush fund that was to be squeezed out of State Farm.  So the kind of threat implied by Robie's question would not be unthinkable in Scruggsylvania.  

I do not yet have a transcript of Wednesday's proceedings, but I have every reason to believe that the Robie-Hood exchange happened pretty much like it is related above.  With Robie's high reputation, it doesn't seem to be part of the equation that he would step out on a limb without some evidence to support a question like that.   

In addition, see my first and second updates yesterday on the hearing, and you get a picture of Hood's world starting to look like one of those Salvador Dali paintings -- clocks turning into liquid and dripping off the wall, folks floating above the ground with no feet, barren landscape with no sign of life, everything getting real surreal on him in a big hurry, like he wants to yell "Waiter, check please!" but he knows it isn't going to do any good. 

Now, think about it from Hood's perspective, considering what he's been asked about and what he said.  He's laid a whole bunch off on Courtney Schloemer, and she's due up the next day, and gulp, what is she going to say? And Scruggs' deposition transcript, where presumably he took the Fifth, is going to be read, question after nauseating question and Scruggs taking the Fifth beaucoup, and State Farm is going to be arguing a negative evidentiary inference from the lack of a response.  Plus, as I understand it, Robie at the end of the day isn't done with Hood, and Hood's gotta be thinking, is this like a timeout in football when the field goal kicker comes on to the field? Is dude trying to "ice" me? What if he's saving some question that's even bigger than the Balducci question? What if he's got a secret question that is, like, Balducci squared? I mean, put yourself in Hood's shoes, you might feel like Mike Tyson is your opponent in the ring and you're all ears.   Hey! Someone turn off that dang heat, this courtroom is like a sauna!

Let's also think about something else here: State Farm sued Hood, and got an injunction, and at the beginning of the hearing, the judge extended it for another month at least, so what are the odds that this settlement, when officially announced, is going to involve State Farm walking away with anything less than a non-prosecution agreement?    

UPDATE: Here's an AP story from January 9, 2007, where Hood is talking about his negotiations with State Farm.  In this story, all that is discussed is a settlement of Hood's civil lawsuit against the insurer, the one about which he testified yesterday and said he showed a draft to Scuggs before filing it.  Not mentioned yet, however, is a settlement of the criminal investigation.  It is understandable that Hood would have been willing to dismiss the civil lawsuit, but to give up his criminal investigation was something he would not naturally have wanted to do, and to not only give up an investigation but to tie it to settlement of Scruggs' cases is pretty extraordinary.  The addition of the proposed class action, where 36,000 policyholders would get some money, would have been some incentive to add the criminal investigation to the pot, but also remember that Judge Senter had serious problems with the proposed procedures of claims resolution under this settlement, saying they were all in State Farm's hands -- in effect, he was questioning whether policyholders would have a fair tribunal to resolve disputes. Scruggs and the Scruggs Katrina Group, however, were going to get some $15 million or more in attorney fees out of the settlement of the class action. (Remember, the class action, which never made it past Senter, is different from the settlement of the 640 Scruggs Katrina cases against State Farm, that happened and didn't require judicial approval).

Full post as published by Insurance Coverage Law Blog on February 07, 2008 (boomark / email).