Miss. Jury Penalizes Insurer for Denying A Katrina Claim

GULFPORT, Miss., Jan. 11 -- A jury on Thursday awarded $2.5 million in punitive damages to a couple who sued State Farm Fire & Casualty for denying their claim after Hurricane Katrina, a decision that could benefit hundreds of other homeowners challenging insurers for refusing to cover billions of dollars in storm damage.

A federal judge only hours earlier had taken part of the case out of jurors' hands before they awarded punitive damages to State Farm policyholders Norman and Genevieve Broussard. U.S. District Judge L.T. Senter Jr. ruled Thursday morning that State Farm is liable for $223,292 in damage to the Broussards' home caused by Hurricane Katrina. Senter left it to a jury to decide whether to award punitive damages.

Senter's decision to make a directed verdict rather than let the jury decide the entire case appeared to surprise everyone in the courtroom. After he explained his ruling, Senter ordered a recess to give attorneys time "to get over the shock."

After the jury announced its award, the Broussards left the courthouse arm in arm. "It's a great day for south Mississippi," Norman Broussard said.

Some of Senter's rulings in other Katrina cases favored the insurance industry, but his decision Thursday calls into question the companies' refusal to cover billions of dollars in damage from Katrina's storm surge.

The Broussards sued State Farm for refusing to pay for any damage to their home, which Katrina reduced to a slab. The couple, who wanted State Farm to pay for the full insured value of their home plus $5 million in punitive damages, claimed that a tornado during the hurricane destroyed the dwelling. State Farm blamed all the damage on Katrina's storm surge.

State Farm and other insurers say that 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, ruled that State Farm could not prove that Katrina's storm surge was responsible for all of the damage to the Broussards' home. The judge also said the testimony failed to establish how much damage was caused by wind and how much was caused by the storm surge.

State Farm spokesman Phil Supple said after the jury's verdict that the company is likely to appeal the decision. "We are surprised and disappointed by both the judge's ruling on the coverage issues and the amount awarded by the jury for punitive damages," he said in a written statement. "We believe the expert testimony supported a different result."

Jack Denton, one of the couple's lawyers, said the Broussards are "very pleased" with the jury's verdict but declined to comment further. "Obviously we have other trials coming up and don't want to jeopardize those cases," he added.

Robert Hartwig, chief economist for the Insurance Information Institute in New York, said before the jury announced its decision that a punitive damage award would be "distressing" for insurers. "It adds even more cost and more uncertainty to the other problems that already exist in the Mississippi homeowners insurance market," he said.