Judge: State Farm wrong in hurricane-damage case

GULFPORT, Miss. - A jury awarded $2.5 million in punitive damages to a Mississippi couple because State Farm Fire & Casualty Co. Inc. denied their Hurricane Katrina claim. The decision could benefit hundreds of other homeowners challenging insurers for refusing to cover billions of dollars in storm damage.

State Farm said it would likely appeal.

Earlier yesterday, U.S. District Judge L.T. Senter Jr. took part of the case out of jurors' hands before they awarded punitive damages to State Farm policyholders Norman and Genevieve Broussard of Biloxi.

Senter ruled yesterday morning that State Farm was liable for $223,292 in damage to the Broussards' home caused by Hurricane Katrina. He left the question of punitive damages up to the jury.

Senter's decision to make a directed verdict rather than let the jury decide the entire case appeared to surprise everyone in the courtroom.

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

The judge's decision and the jury's award also are likely to affect recent settlement talks involving State Farm, Mississippi Attorney General Jim Hood, and other plaintiffs' attorneys.

Earlier this week, people with direct knowledge of the settlement talks told the Associated Press that State Farm, Mississippi's largest home insurer, was considering paying hundreds of millions of dollars to settle more than 600 lawsuits and resolve thousands of other disputed claims.

The Broussards' case was not directly part of those negotiations, but Hood said yesterday that the verdicts only strengthened his position in the ongoing settlement talks.

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