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Settlement reached in Miss. homeowner’s case against State Farm

State Farm Fire and Casualty Co. avoided a potentially hefty punitive damages award Thursday by settling out of court with a Biloxi homeowner who sued the insurer over Hurricane Katrina destruction.

Terms of the settlement were not disclosed.

About an hour before attorneys reached the agreement, a federal jury sided with policyholder Edward Gemmill and ordered State Farm to pay $66,234 for actual damages to Gemmill’s home. But before the jury could consider punitive damages, both sides decided to settle the case.

Gemmill, who’s a Biloxi City Council member, said as he walked out of court with his wife, Lisa, that he wasn’t tempted to gamble on a multimillion punitive damage award. He was seeking up to $5 million in punitive damages, but said he looks forward to moving on with his life.

“I wasn’t looking for charity, I was looking for justice,” he said.

David Majors, a State Farm spokesman, said the company feels as if the “evidence and testimony in this case supported a different outcome,” but he noted that jurors decided that the majority of the damage to the home was caused by flood waters.

“We felt like it was good for all parties to settle and to close this for everyone without protracted litigation,” Majors said.

The Aug. 29, 2005, storm demolished Gemmill’s home, leaving only a slab. The home was valued at $217,813 and the contents $107,080. A flood insurance policy paid him the maximum of $128,100, but State Farm had denied part of Gemmill’s claim under his homeowner’s policy, later giving him a check for $5,746 for wind damage.

Shortly before the settlement, U.S. District Judge L.T. Senter Jr. had told attorneys for State Farm and Gemmill that the issue of punitive damages should rest with the jury.

Afterward, Senter said settlements are “always good” because they prevent courts from becoming clogged with lawsuits, and “it may be years before someone gets their money.”

Jack Denton, an attorney for Gemmill, said he hopes “that the jury verdict would put to rest any concerns juries down here can’t be fair and impartial.”

“Any time that we’re able to settle the case, we consider that a victory,” Denton said.

The jury’s damages award represented a portion of the actual amount sought by Gemmill for damage to his home and its contents after the flood insurance payment and the check from State Farm.

The jury was told it could award up to $83,967 for damage to the home and up to $107,080 for the contents. Gemmill had sought the full amount of his claim, plus $5 million in punitive damages.

“The moneys that were paid to Mr. Gemmill are the moneys that were owed to Mr. Gemmill based on the coverage he chose,” State Farm attorney John Banahan said in closing arguments on the actual damages issue.

William Walker, another of Gemmill’s attorneys, told jurors that there was “no question that State Farm breached its contract.”

Gemmill said his home was destroyed by wind before any flooding, but State Farm concluded Katrina’s storm surge demolished the residence.

State Farm has suspended the sale of homeowners and commercial policies in Mississippi. The company and other insurers say their policies cover damage from wind but not from water, including wind-driven storm surge. State Farm also says its policies exclude damage caused by a combination of wind and water, even if wind damaged a home before surge reached the structure.

Last week, the second federal trial for a Katrina insurance lawsuit against State Farm ended with a settlement between the company and the plaintiffs, Michael and Michelle Williams, before jurors could decide the case involving a rental home the couple owns in Ocean Springs.

The couple agreed to settle after U.S. District Judge Peter Beer ruled punitive damages weren’t warranted in the case.

Senter also is weighing a proposed settlement that calls for State Farm to pay at least $50 million to thousands of policyholders who haven’t sued the company. The deal, reached in January, calls for State Farm to reopen, review and possibly pay up to 36,000 claims.

On Monday, however, a team of lawyers who helped negotiate the proposed settlement withdrew their request for Senter to approve the agreement, citing a legal “stalemate” and Senter’s apparent reluctance to sign off on the deal.