Gulfport, Miss. ? Gulf Coast policyholders and attorneys roundly applauded U.S. District Court Judge L.T. Senter Jr.’s decision to reject a proposed class-action settlement of State Farm Fire and Casualty Co.’s Katrina claims.

Senter issued an order Friday that said the proposal gave State Farm too many advantages and failed to protect the rights of policyholders.

Senter’s order said: “There is no evidence that State Farm will evaluate the class members’ claims in any way different from the way these claims have already been evaluated by State Farm in the past adjustment process.”

Still, attorneys who negotiated the proposed settlement for both sides said they believe they can address Senter’s concerns and find a workable agreement. The judge rejected the proposal without prejudice, which gives attorneys time to address his concerns.

“I think that we have answers for a lot of his questions,” said State Farm’s lead attorney, Sheila L. Birnbaum of New York. “I can easily explain that this is in the best interest of the policyholders and the people of Mississippi. I don’t want to see this settlement fall apart and there be no way to get money to these people.”

Richard “Dickie” Scruggs led negotiations for attorneys who wanted to represent policyholders through a class-action process laid out in the agreement.

His Scruggs Katrina Group said in a written statement: “We are studying the opinion issued by Judge Senter earlier this afternoon. It is our hope that the judge’s concerns can be quickly addressed. Our efforts and attentions will be placed on satisfying his questions and requirements. The prospect of multi-year, case-by-case litigation is in no one’s best interest.”

Many policyholders anxious to resolve their unpaid claims said they would rather wait than participate.

Judy Dutruch, who leads an organized group called the Slingshot Gang, heard late Friday afternoon about Senter’s ruling.

“That’s awesome,” Dutruch said. “I didn’t find one single person who thought it was fair. You can’t have two different settlements in one settlement. This is so great!”

Dutruch was referring to a settlement for Scruggs’ clients that will pay them 100 percent of their policy limits if Hurricane Katrina swept away their homes, leaving only slabs or pilings. This settlement was negotiated separately for 640 policyholders who had planned to sue the company, with about 300 of those entitled to recover policy limits. Scruggs said he expects to begin distributing payments next week.

The class-action proposal applied to other policyholders who have not filed lawsuits, and most specifically to 8,000 policyholders whose property was subject to storm surge. Those with slabs, estimated at about 800, would receive for structural damage a minimum of 35 percent of policy limits, with no guarantee of more. The percentages diminished from there.

Senter’s order covered a host of problems over eight pages, including no guaranteed minimum for other categories of damage. The way the agreement is structured, he said, some people with slabs who have recovered payments from flood policies would be entitled to no money under their State Farm policy for wind damage.

Attorneys applauded Senter’s courage, as he faces not only the State Farm cases but a docket crowded with 1,000 lawsuits against insurers. He is expecting reinforcements on the bench, but so far has carried the load along with Magistrate Judge Robert H. Walker, whose authority is more limited than a full judge’s.