DISCUSS SHARE DIGG FACEBOOK NEWSVINE -more- DEL.ICIO.US DE.LIRIO.US FARK FURL REDDIT TECHNORATI YAHOO MY WEB Diane Scruggs, wife of Richard, with a table base retrieved at the site of her former home. The couple had flood insurance, and they were paid the maximum $250,000 on the house plus $80,000 for furnishings.

PASCAGOULA, Miss. — Richard F. Scruggs, one of the country’s most successful trial lawyers, made his first fortune in a case that hit close to home. He sued asbestos makers on behalf of workers at the shipyard in his hometown, Pascagoula, who had developed lung diseases. He made his second fortune with lawsuits against the tobacco industry, coming up with a winning legal strategy in Mississippi that he then applied nationwide.

His white-washed house on Beach Boulevard, just 50 yards from the Gulf of Mexico, is gone. The house, with its columned entrance and sunny breakfast room, appeared in the movie “The Insider,” about a whistle-blower who helped Mr. Scruggs win a $248 billion settlement in the tobacco case. It was so badly mangled that it had to be bulldozed to the foundation slab.

The loss made him a partner in grief with tens of thousands of residents along the coast of Mississippi. Many turned to him in their battle for insurance money in a fight that has become a financial and public relations nightmare for the insurance industry.

Mr. Scruggs, 60, slim, often folksy and smooth as molasses in court, is using techniques that he honed in his earlier legal fights. He is arguing now, as he did before to such good effect, that he is fighting for the little guy who cannot stand up alone to big anonymous companies.

The insurance dispute centers on two main kinds of damage in a hurricane: wind and flooding. People along the Mississippi coast say they thought their policies covered any type of hurricane damage. The insurers, with the backing of the courts, have insisted that flooding is not included.

But in some cases insurers have also refused to pay when a house was wrecked by both wind and flooding — and there, a federal judge has ruled, they were wrong. Flood insurance is sold by the federal government. But fewer than 20 percent of the coastal residents in Mississippi bought it.

Insurers note that they have paid $41 billion for damage from Katrina, including $5.5 billion for homes in Mississippi. The insurers add that only 1 percent of their customers have taken them to court, but that amounts to more than 2,000 lawsuits in Mississippi and many more in New Orleans and elsewhere in Louisiana that are being dealt with separately.

For months after the hurricane hit on Aug. 29, 2005, the insurance dispute in Mississippi was stalled. But in mid-January a Biloxi couple won a $1 million verdict against State Farm, the largest home insurer in the nation and in Mississippi.

Less than two weeks later, Mr. Scruggs completed negotiations on settlements with State Farm worth at least $130 million, setting the pattern, many insurance experts said, for resolving hundreds of other cases and potentially providing hundreds of millions of dollars for rebuilding along the coast.

In what some of his critics sniff at as unlawyerly decorum, he missed no opportunity to bash the insurers in newspaper and television interviews and press releases. He embraced two whistle-blowers who walked away from their jobs as claims adjusters, taking with them thousands of State Farm documents. Then he turned over the information to the attorney general of Mississippi, who began a criminal investigation.

In his talks with State Farm, Mr. Scruggs regularly dropped the names of two of his clients — his brother-in-law, Senator Trent Lott, and his friend, Representative Gene Taylor, who both lost houses to Katrina and had their claims rejected by State Farm.

Both men have been leading efforts in Congress to eliminate the industry’s exemption from antitrust laws and to strip the insurers of some tax benefits. Also, at their behest, federal investigators have been looking into some of the practices regarding claims payments that Mr. Scruggs has been challenging.

[On Monday, Mr. Scruggs surprised State Farm by abruptly filing court papers to withdraw from the agreement he had engineered. But other lawyers said they thought Mr. Scruggs was merely maneuvering to force State Farm to agree to modifications requested by Federal Judge L. T. Senter Jr. to improve terms for policy holders before approving the deal.

Mr. Scruggs began his career often defending insurance companies at a prestigious law firm in Jackson after graduating from the University of Mississippi Law School in 1976.

Looking for more independence and more money, Mr. Scruggs said he persuaded his wife, Diane, to move back to Pascagoula, the hard-scrabble town where they both were raised. His first year on his own he tripled his income.

Mr. Scruggs and several partners received $50 million for their work on the asbestos cases. He used the asbestos money to bankroll the litigation against big tobacco and has been using the tobacco money to take on other industries, like health care and now home insurance.

Mr. Scruggs said his first objective in his latest legal battle was to help people get back on their feet. But he also wanted to tilt the balance of power in insurance more toward the customer.

In hopes of getting stricter regulation, he has quietly begun campaigning to replace George Dale as commissioner of insurance in Mississippi and he is pushing insurers to rewrite their policies in plain English.

Mr. Scruggs came to terms with State Farm in two phases. First, the insurer agreed to pay $80 million to 640 homeowners, many of whom had been originally denied any payment by the company. Then, State Farm agreed to reopen damage claims for up to 36,000 others. In that agreement, State Farm said it would pay at least $50 million.

Some lawyers, who are pursuing separate cases against the insurers and who oppose the larger settlement, have raised suspicions that Mr. Scruggs drove a harder bargain for his initial clients, the 640 homeowners, than for the others. And there have been complaints from rival lawyers about potential fees of more than $46 million for Mr. Scruggs and the pick-up team of two dozen lawyers in his Scruggs Katrina Group.

Mr. Scruggs, who has earned more than he says he could spend in 10 life times, said he got the best deal he could for all his clients and that the earnings of his group would rise as payouts to homeowners increase.

Mr. Scruggs said that his own insurer, USAA, had paid him several hundred thousand dollars but that his claim was still not fully resolved. He was one of the few homeowners along the coast who bought federal flood insurance, and he said he was paid the maximum $250,000 on the house and $80,000 for some of the furnishings.

As part of the settlements with State Farm, Jim Hood, the attorney general of Mississippi, agreed to end his criminal investigation of the company and drop it from a civil lawsuit that accuses most of the insurers in Mississippi of failing to live up to commitments in their policies.

State Farm further angered Mississippians by declaring that because of an uncertain legal climate in the state, it would stop providing new coverage on homes.

Mr. Scruggs said he was sure other companies would come in to pick up the slack. “If this is the way State Farm is going to treat their trusted customers, then don’t let the door hit them in the fanny,” he said.

The insurance companies may not like Mr. Scruggs. But if he wanted to run for office in Mississippi, now might be a good time. Outside the Beau Rivage Casino in Biloxi one morning, Michael Foster, a security worker, overheard a reporter on a cellphone arranging to meet Mr. Scruggs.

Less than a year before the hurricane, Mr. Scruggs bought a house in Oxford, Miss., the home of the University of Mississippi. He had already shifted his main office there. Since then, Mr. Scruggs, a former Navy pilot, has commuted to the coast in a corporate jet that he often flies himself. In Pascagoula, he stays in a boxy mobile home parked on the waterfront slab where Senator Lott’s home once stood.

He has sold his bare lot on Beach Boulevard, but he has not abandoned the coast. He is repairing storm damage to his late father-in-law’s home, and plans to make that his Pascagoula home. It is about 100 yards farther back from the water than the home he lost to Katrina.

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