Insurer then settles next case without going to trial; U.S. Rep. Taylor calls for Congressional probe of industry claims practices
In a Hurricane Katrina claims decision watched closely by the insurance industry, a federal judge in Mississippi ruled that State Farm failed to properly settle a claim involving both wind and water damage from Hurricane Katrina.
In a directed verdict, U.S. District Court Judge L.T. Senter in Broussard v. State Farm ruled that the homeowners needed to only prove a direct physical loss, while the burden was on State Farm to prove what damage was caused by water versus wind or a combination of the two, a burden he ruled the insurer failed to meet.
Senter ordered State Farm to pay $223,000 in actual damages for the home and belongings of Biloxi couple Norman and Genevieve Broussard, before turning the case back to the jury to decide on the punitive damages. The jury came back with $2.5 million in damages against the insurer for its handling of the Broussard’s claim.
After State Farm refused to pay for any damage to their demolished home, the Broussards sued to obtain full insured value of their home plus $5 million in punitive damages. They maintained that winds from Katrina destroyed their house.
State Farm, however, denied any payment, arguing that all the damage was caused by storm surge waters and therefore excluded from coverage.
“We did not expect this decision,” said Kim Brunner, general counsel for State Farm. “Testimony of expert witnesses showed that damage to the Broussard home was overwhelmingly caused by water and not wind.”
However, Senter pointed to testimony of one of State Farm’s witnesses who “testified that it was more probable than not that the Broussards’ dwelling sustained at least some wind damage to its roof.”
State Farm also expressed disappointment with the jury’s finding the company is liable for punitive damages in the amount of $2.5 million. The company will likely appeal.
However, eight days later, State Farm settled a similar case with another Mississippi policyholder whose lawsuit was scheduled to be tried next week in federal court. State Farm settled with Richard Tejedor of Long Beach for undisclosed terms.
State Farm attorneys had asked for the Tejedor trial to be postponed, but Senter refused.
State Farm attorneys argued in court papers that a “barrage of publicity” about the Broussard’s multimillion dollar verdict may have tainted the jury for Tejedor’s case.
State Farm also is the defendant in the next four Katrina cases set for trial in Gulfport. The first is scheduled to start March 12.
State Farm has said it has closed 98 percent of the claims it received arising from the storm and has paid out over $1.1 billion in claims in Mississippi.
The Broussard ruling has stirred a call for a Congressional probe. “This ruling is just the latest example of insurance companies engaging in a systematic effort to avoid paying Katrina victims for destruction caused by wind damage,” claimed Rep. Bennie Thompson, D-Miss., chairman of the House Homeland Security Committee.
“Working with other committees of jurisdiction, I will be investigating the assertions that insurance companies are wrongfully passing the costs of Katrina onto an already-burdened federal flood insurance program,” he said.
The Associated Press contributed to this report.
Topics Claims Mississippi Homeowners
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