GULFPORT, Miss. – A historic agreement with State Farm Fire & Casualty Co. means up to $500 million in payments to Mississippi policyholders previously dissatisfied with their Hurricane Katrina insurance settlements.

Mississippi Attorney General Jim Hood said Tuesday that State Farm will pay 50 percent of policy limits to certain homeowners left with only slabs. State Farm previously had denied those claims, maintaining water led to the destruction and the company was unable to find any separate wind damage covered under its policies.

The two sides signed a settlement agreement filed Tuesday in Hinds County Chancery Court, which also brings an end to the lawsuit Hood filed shortly after Katrina to seek coverage for policyholders whose homes were subject to tidal surge.

“It’s not the best thing since sliced bread,” Hood said. “I wanted to get everybody 100 percent. This is a settlement option primarily for the 8,000 people hit by storm surge who don’t have lawyers.”

Hood said State Farm has about 800 slab claims on the coast and about 9,000 policyholders whose homes were hit by storm surge. The company, by its own count, had a total of more than 32,000 Coast Katrina claims filed as of February 2006.

He later summed up what he sees as the benefits of the settlement. “This is just an option. It will get some money on the ground quick. It will stabilize the insurance market and it will help in our economic development. We’ve got to rebuild our homes and the people’s lives.”

State Farm released a statement that read, in part, “We believe this is in the best interests of our policyholders and State Farm, and the effort to rebuild Mississippi.”

Under the settlement, State Farm has agreed to review the claims of any Coast policyholder who opts in. The settlement also gives policyholders the right to see their State Farm file. If a policyholder is dissatisfied with State Farm’s offer, they can go to binding court arbitration with the company.