State Farm Insurance Cos. is suspending sales of any new commercial or homeowner policies in Mississippi starting Friday, citing in part a wave of litigation it has faced since Hurricane Katrina, a company official said Wednesday.

Mike Fernandez, vice president of public affairs for State Farm, said Mississippi's "current legal and political environment is simply untenable. We're just not in a position to accept any additional risk in this homeowners' market."

Fernandez said the decision does not affect existing policies but the company is still assessing how many of the current policies in Mississippi will be renewed this year.

Fernandez said the action was not a direct response to any specific development in the litigation. That litigation has included a recent federal jury's $2.5 million punitive damage award to a couple who sued State Farm for refusing to cover the 2005 hurricane's storm surge damage to their Biloxi home.

U.S. District Judge L.T. Senter Jr. later reduced the award to $1 million, even though Senter said State Farm acted in a "grossly negligent way" by denying the claim filed by policyholders Norman and Genevieve Broussard.

State Farm, the largest homeowners insurer in Mississippi with more than 30 percent of the market, has agreed to settle hundreds of lawsuits by policyholders and reopen and pay thousands of other disputed claims. The landmark deal is potentially worth hundreds of millions of dollars for Mississippi homeowners devastated by Katrina.

The company had written roughly 29,000 new homeowner policies in the Mississippi in 2006, while other companies were writing a smaller percentage of claims, Fernandez said.

The decision does not impact State Farm's financial services, banking products or automobile coverage in the state. And Fernandez said Mississippi is the only state where his company has suspended writing new policies.

"The political and regulatory and legal environment in the other two states (hit by Katrina) — Louisiana and Alabama — is not the situation in Mississippi," he said.

State Farm and other insurers say their homeowner policies cover damage from wind but not from water — and exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm's rising water. Hundreds of policyholders have challenged that claim, saying they are entitled to damages from storm surge.

"We don't want to write new policies under a contract that they are calling into question," Fernandez said.

The settlement reached last month calls for State Farm to pay about $80 million to more than 600 policyholders who sued the company for refusing to cover damage caused by Katrina on Aug. 29, 2005.

Senter later said he would not sign off on part of the agreement, a deal between State Farm and Mississippi Attorney General Jim Hood for at least $50 million in payments to policyholders whose claims were denied but didn't sue the company.

Senter said he doesn't have enough information to determine how many policyholders would benefit from the deal or how much each can be paid.

State Farm said earlier that it already has paid roughly $1.1 billion for about 84,000 property claims in Mississippi.