A $5.25-million settlement has been reached with the Chubb Group of Insurance Cos. and a subsidiary in a dispute over drought insurance sold to Minnesota farmers last spring, it was announced. Minnesota Commerce Commissioner Michael Hatch said about 770 Minnesota farmers may be eligible for payments under the agreement with the New Jersey-based Chubb and its subsidiary, Federal Insurance Co. The settlement was granted preliminary approval by Steele County District Judge Frederick Hough, who also certified a class-action lawsuit against Chubb and Federal filed on behalf of Minnesota farmers who were denied drought insurance coverage. The dispute arose when Chubb sold more drought insurance than it could cover and denied coverage to most of about 8,000 Midwestern farmers who bought the policies. Hatch said the settlement applied only to Minnesota.