Federal judge cuts punitive damage award in Katrina insurance case

[JURIST] A federal judge Wednesday reduced a $2.5 million punitive damage award to $1 million [order, PDF] in a Hurricane Katrina [JURIST news archive] insurance case, finding the award excessive at twelve times the amount of economic damages awarded. US District Judge L.T. Senter issued a direct verdict against State Farm [JURIST report; opinion text, PDF] in January holding the insurance company liable for the policy limits on a Mississippi home that was damaged during the storm, finding the insurance company had not met the burden of proof required by Mississippi law to challenge the policyholders' claim that their home was damaged by wind preceding the hurricane, not water from the storm surge. The jury returned with a $2.5 million punitive damage award for gross negligence in denying the claim. In reducing the award, Judge Senter wrote:

The philosophy or attitude or position adopted by the Defendant that lasted throughout the consideration of Plaintiffs' claim is reprehensible enough to warrant deterrence. What effect it may have remains to be seen, but substantial harm resulted from Defendant's conduct, which was neither isolated nor mere accident.

The amount of punitive damages assessed by the jury in the instant case is almost 12 times the amount of compensatory damages. Fortunately, Plaintiffs only suffered an economic injury.
The Insurance Journal has more.

In another Katrina case, Judge Senter last Friday rejected [JURIST report; opinion, PDF] a proposed settlement [JURIST report] reached between State Farm and Mississippi Attorney General Jim Hood on behalf of hundreds of Mississippi policy holders whose Katrina-related claims were denied. The US District Court for the Southern District of Mississippi has a collection of Hurricane Katrina insurance orders and opinions.

 

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