Hurricane Katrina left thousands of Gulf Coast homeowners battling their insurance companies. A police officer and his wife are the first to take their fight to court.

A federal judge on Monday began hearing a groundbreaking trial that could signal whether thousands of people whose homes were destroyed by Katrina can receive payouts for losses their insurance companies claim were caused by flooding.

Paul Leonard, a police lieutenant whose lawsuit against Nationwide Mutual Insurance Co. is the first post-Katrina insurance case to be tried. He testified Monday that his insurance agent assured him in 1999 that he didn’t need to purchase flood insurance because his Pascagoula home isn’t in a flood zone.

Then came Katrina.

Nationwide paid Leonard and his wife, Julie, around $1,600 for wind damage, but refused to cover the rest of the estimated $130,000 in damage. The insurer argued that while wind damage is covered by its homeowners’ policies, damage from flooding is excluded, including Katrina’s wind-driven storm surge.

The Leonards claim they were misled by their insurance agent.

“He never told me it didn’t cover everything from a hurricane,” Leonard said of his policy.

The trial, being heard without a jury by U.S. District Judge L. T. Senter Jr., is the first among hundreds of lawsuits that have been filed by Gulf Coast homeowners challenging insurance companies over the wind-verses-water issue.

Plaintiffs’ attorneys hope a ruling in the homeowners’ favor would pressure insurance companies to pay out hundreds of millions of dollars in settlements for homeowners whose claims have been rejected.

“This is a big case,” Zach Scruggs, one of the Leonards’ attorneys, said in his opening statement. “This case has the opportunity to right a wrong, to bring equity to an inequity, to bring justice to an injustice.”

Scruggs and his father, Richard “Dickie” Scruggs, represent about 3,000 policyholders on Mississippi’s Gulf Coast. Their law firm also has filed suits against other insurers, including Allstate Insurance Co., Metropolitan Life Insurance Co., State Farm Insurance Cos. and United Services Automobile Association.

Zach Scruggs said the $1,600 that Nationwide paid the Leonards was $500 less than the premiums the family paid to the insurer that year.

“Nationwide actually made money off the Leonards as a result of Hurricane Katrina,” he said.

Dan Attridge, an attorney for the Columbus, Ohio-based company, said evidence would show the company “has fully complied with its obligations.” He said the agent never told Leonard that flood damage was covered by his policy or that he did not need flood insurance.

Leonard, the first witness, said before Katrina, he had “always considered flood as coming from a river. Storm surge doesn’t happen unless there’s a hurricane.”

Under questioning by the insurance company’s attorney, Leonard said he did not need separate flood coverage because his agent “explained I had hurricane coverage.”

Asked if the agent had explained why he did not need flood insurance, Leonard responded: “No, sir. I always had a hurricane policy. Why would I need flood on top of hurricane (coverage)?”

The first floor of the Leonard home received 5 feet of water during the hurricane, forcing the family to live on the second floor during repairs. Leonard said he has spent $30,000 of his own money on repairs, clothing and other needs since Katrina.

Zach Scruggs said weather data shows Katrina’s 140 mph wind hit the Mississippi coast three hours before any storm surge flooding. He said Nationwide’s experts ignored that evidence and wrongly blamed water for the vast majority of the damage to the Leonards’ house.

Attridge said Nationwide has paid out $230 million for 21,000 claims in Mississippi since Katrina and an additional $220 million for its handling of 1,800 flood insurance claims under the National Flood Insurance Program.

Richard Scruggs said it was too early to discuss the case’s effect on other claims.

“A journey of a thousand miles begins with one step, and this is the first step,” he said. “It’s one case. If you win it, it’s a huge win. If you lose it, you spin it the best way you can.”

Nationwide spokesman Joe Case said the company looks “at each claim on a case-by-case basis.”

On the Net:

Insurance Information Institute: http://www.iii.org