Posted on Tue, Apr. 8, 2008
NEW ORLEANS - A federal appeals court yesterday threw out a $1 million punitive damage award to a Mississippi couple who sued the nation's largest insurer over Hurricane Katrina damage.
The U.S. Court of Appeals for the Fifth Circuit in New Orleans also ordered a new trial for the lawsuit that Norman and Genevieve Broussard filed against State Farm Fire & Casualty Co. Inc. after the August 2005 hurricane.
A jury in Gulfport, Miss., awarded $2.5 million in punitive damages to the Broussards in January 2007. U.S. District Judge L.T. Senter Jr. later reduced the amount to $1 million.
But a three-judge panel from the Fifth Circuit court vacated the entire award, saying Senter should not have allowed jurors to consider punitive damages in the case.
The appeals court also ruled that Senter erred when he took part of the case out of jurors' hands and held State Farm liable for $223,292 in wind damage to the Broussards' Biloxi home.
The Fifth Circuit court said a "rational jury" could have sided with State Farm and concluded that Katrina's water destroyed the home. State Farm and other insurers say their homeowner policies cover damage from a hurricane's wind but not its water.
Senter concluded State Farm acted in a "grossly negligent way" by denying the Broussards' claim. The judge also said the company denied policyholders' Katrina claims based on a new "wind-water" protocol that is "at odds with other express terms of the insurance contract."
However, the Fifth Circuit court said State Farm had an "arguable basis" for denying the couple's claim based on observations made by one of the company's adjusters.
State Farm spokesman Phil Supple said the ruling confirmed the company's belief that Senter should have allowed jurors to distinguish between damage from wind and water to the Broussards' home.
