Appeals court rejects Miss. verdict in Katrina insurance case

The 5th U.S. Circuit Court of Appeals threw out a $1 million punitive damages verdict against State Farm Fire and Casualty Co. on Monday and sent the case back to federal court in Gulfport, Miss., for a jury to determine how much the company owes Biloxi policyholders Norman and Genevieve Broussard.

State Farm was not malicious or grossly negligent in adjusting the Broussards' claim, the court found, negating punitive damages that are awarded to deter bad behavior.

"We're happy with the appellate court's decision," said State Farm spokesman Phil Supple. "This ruling confirms our belief the jury should have been given an opportunity to evaluate the question of what damage was caused by wind and what damage was caused by water. It has also been our belief there was no basis for punitive damages, and the appellate court agreed."

The Broussards' attorney, Jack Denton, said the decision was also good for policy holders, however, because it found that under State Farm's all-perils policy, it is the insurance company's responsibility to prove that damage was caused by a flood, which would allow it to exclude that damage from coverage. State Farm had argued that, once it established flood damage to the dwelling, the policyholder had to show what portions were damaged by other forces, such as wind.

The Broussard case was one of the first tried after Katrina that hinged on insurance companies' refusal to compensate for damage caused by the hurricane's surge waters.

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