tampabay.com

Homeowners prevail in State Farm suit

The insurer said it wasn't responsible for a Mississippi home's destruction in Hurricane Katrina. A judge and jury disagree.

By ASSOCIATED PRESS
Published January 12, 2007


GULFPORT, Miss. - A jury on Thursday awarded $2.5-million in punitive damages to a couple who sued State Farm Fire & Casualty Co. 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 that State Farm is liable for $223,292 in damage caused by Hurricane Katrina to the Broussards' home. Senter left it to a jury to decide whether to award punitive damages.

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 earlier rulings in other Katrina cases have 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 said that 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 their homeowners 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 couldn't 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.

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."

In his closing argument Thursday, one of the Broussards' attorneys, William Walker, said State Farm had breached the contract "in a bad way" by denying their claim. State Farm "acted like a chiseler," he said, adding, "The pocketbook is what they listen to."

State Farm attorney John Banahan urged jurors to "use your head and your heart" in deciding on punitive damages and to reject an attempt by the Broussards' attorney to demonize the company as an "evil empire."

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.

Flood ortornado?

Norman and Genevieve Broussard of Biloxi, Miss., filed a claim with State Farm after their home was destroyed. They blame a tornado spawned by Hurricane Katrina. State Farm denied the claim, saying the home was destroyed by storm surge, which their policy didn't cover.