A federal judge in Mississippi has scheduled a hearing later this month to clarify the terms of a proposed settlement that calls for State Farm Insurance Cos. to reopen, review and possibly pay thousands of disputed claims by policyholders after Hurricane Katrina.

U.S. District Judge L.T. Senter Jr. said he will meet on Feb. 28 with attorneys involved in the deal to discuss his concerns about the proposed settlement. “Any interested party” impacted by the agreement also can ask to speak at the hearing, Senter added.

“I would like nothing more than to approve a settlement procedure that is fair, balanced and reasonable,” Senter wrote Thursday in a five-page court order.

Senter also has scheduled a separate hearing on the same day to discuss certifying a class action suit for State Farm policyholders whose homes on Mississippi’s Gulf Coast were damaged or destroyed by the Aug. 29, 2005, storm.

Senter has previously refused to allow a class action against the Bloomington, Ill.-based insurer over Katrina damage, but the judge said Thursday that he will revisit the issue in light of his ruling last month in the first jury trial for a Katrina insurance case.

On Jan. 11, Senter took part of the case out of jurors’ hands and ruled that State Farm is liable for $223,292 in damage to the Biloxi home of Norman and Genevieve Broussard, who sued the company for denying their claim.

The jury awarded $2.5 million in punitive damages to the Broussards, but Senter recently reduced the award to $1 million.

State Farm and other insurers say their homeowner policies cover damage from wind but not from water, and that the policies exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm’s rising water.

Senter, however, ruled that State Farm couldn’t prove that Katrina’s storm surge was responsible for all of the damage to the Broussards’ home. The judge also said the testimony failed to establish how much damage was caused by wind and how much resulted from storm surge.

Senter said he will hear arguments Feb. 28 on whether his ruling in the Broussard case could open the door for a class action by other State Farm policyholders whose homes were demolished by Katrina.

State Farm has opposed efforts to certify a class action for policyholders after the hurricane. “Every claim has different elements and cannot be adequately reviewed en masse,” company spokesman Phil Supple said Thursday.

Richard “Dickie” Scruggs, who helped negotiate the proposed settlement with State Farm, said a new agreement that satisfies Senter’s concerns will be “extremely difficult without strong leadership from the court.”

Scruggs noted that Senter is soliciting feedback from as many as 180 lawyers involved in Katrina cases.

“He is basically handing out 180 veto chips,” he said. “I hope I’m wrong, but that’s the way I see it now.”

Ben Galloway, who represents about 75 State Farm policyholders and has joined other lawyers in seeking a class action, said Senter’s ruling in favor of the Broussards could apply to any State Farm policyholder whose home was reduced to a slab.

“Those issues are common to all slab cases and how they were adjusted by State Farm,” Galloway said.

In a landmark agreement last month, State Farm agreed to pay about $80 million to settle lawsuits filed by 640 policyholders. The company also agreed to pay at least an additional $50 million to up to 35,000 policyholders whose claims were denied but haven’t sued the company.

Senter refused to sign off on the latter, “class action” portion of the deal, saying he doesn’t have enough information about how many policyholders would benefit or how much money they are guaranteed.

In his order Thursday, Senter expressed concern that the class settlement doesn’t include many policyholders who have sued State Farm or already have resolved their claims through mediation. Senter said he has heard complaints from many policyholders who settled through mediation but feel their payments were not fairly calculated.