Judge reduces Katrina settlement

Published 4:44 pm Thursday, February 1, 2007

A federal judge on Wednesday reduced by more than half a jury’s award of $2.5 million in punitive damages against State Farm Fire and Casualty Co. for denying a Mississippi couple’s claim after Hurricane Katrina.

U.S. District Judge L.T. Senter Jr. in Gulfport, Miss., reduced the award to $1 million even though the judge said State Farm acted in a “grossly negligent way” by denying the claim filed by policyholders Norman and Genevieve Broussard, whose Biloxi home was destroyed by the August 2005 storm.

Earlier this month, Senter presided over the first jury trial for the hundreds of lawsuits that Mississippi homeowners have filed against insurers for refusing to cover damage from Katrina’s storm surge.

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On Jan. 11, the judge took part of the case out of jurors’ hands and ruled that State Farm is liable for $223,292 in damage to the Broussards’ home. But he allowed jurors to decide whether to award punitive damages.

In his four-page ruling Wednesday, Senter said punitive damages are warranted but said an award of $1 million — between four and five times the amount of damage to the Broussards’ home — is “more appropriate” than $2.5 million.

“Clear and convincing evidence supports a finding that (State Farm) acted in such a grossly negligent way as to evince willful, wanton or reckless disregard for the rights of the plaintiffs,” he wrote.

Jack Denton, an attorney for the Broussards, said Senter’s rationale for reducing the award is “well-reasoned” and doesn’t dilute the message that jurors sent to State Farm.

“He is not letting them off the hook,” Denton said. “The judge is doing his job, which is looking at the applicable law and making sure everything fits within those guidelines.”

Phil Supple, a spokesman for the Bloomington, Ill.-based insurer, said the company still plans to appeal both Senter’s ruling and the jury’s award earlier this month.

“There remain critical legal issues that need to be addressed,” Supple said. “Those include the location of the trial, which party should have the burden of proof and the fact that the jury was not permitted to decide the case.”

Senter had rejected a bid by State Farm to move the Broussards’ trial to north Mississippi. The company had argued that it couldn’t get a fair trial in Gulfport, a coastal city hit hard by Katrina.

The Broussards’ case wasn’t part of a recent settlement between State Farm and more than 600 policyholders who sued the company over Katrina damage.

State Farm agreed to pay about $80 million to those policyholders and pay at least $50 million more to resolve thousands of other disputed claims filed by policyholders who didn’t sue the company.

The deal called for Mississippi Attorney General Jim Hood to drop State Farm from a civil lawsuit his office filed against several insurance companies after Katrina. Hood also ended a criminal probe of State Farm’s claims handling practices on the Mississippi’s Gulf Coast.

The Broussards claimed a tornado during the hurricane reduced their home to a slab, but State Farm blamed all the damage on Katrina’s storm surge.

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, said the company denied Katrina claims based on a new “wind/water” protocol that is “at odds with other express terms of the insurance contract.”

Denton said the Senter’s ruling Wednesday sends a signal to insurers that the judge won’t stand in the way of punitive damages in Katrina insurance cases.

“The philosophy or attitude or position adopted by (State Farm) that lasted throughout the consideration of plaintiffs’ claim is reprehensible enough to warrant deterrence,” Senter wrote. “What effect it may have remains to be seen, but substantial harm resulted from (its) conduct, which was neither isolated nor a mere accident.”