Judge knocks down punitives tab in state farm Katrina case.

A federal judge who pre-empted jury deliberations in a Hurricane Katrina coverage case by declaring State Farm Fire and Casualty Co. liable for a Mississippi policyholder's home, now has determined that same jury erred when it ordered the company to pay $2.5 million in punitive damages.

U.S. District Judge L.T. Senter reduced the damages verdict to $1 million. In a directed verdict, Senter previously ordered the insurer to pay the full $223,292 cost of policyholders Norman and Genevieve Broussard's Biloxi, Miss., home, which had been destroyed by Katrina.

The judge took part of the deliberations out of the jury's hands after determining "no reasonable juror" could conclude the insurer acted properly when it denied the couple's claim. The jury was left to determine only whether punitive damages should be assessed, and at what amount they would be set.

While concurring with the jury that the company had acted "in such a grossly negligent way as to evince willful, wanton, or reckless disregard for the rights of the plaintiffs," Senter noted the policyholders had suffered only economic injuries, not physical injuries. At nearly 12 times the compensatory damages in the case, the $2.5 million judgment was thus somewhat excessive, with $1 million a "more appropriate" amount, Senter wrote.

While pleased to see the sum reduced, State Farm still intends to appeal both Senter's directed verdict, and the jury's award of punitive damages, to the 5th U.S. Circuit Court of Appeals, according to company spokesman Fraser Engerman.

"We believe there still are critical legal issues that need to be addressed, including the location of the trial, which party should have the burden of proof, and the fact that the jury was not allowed to deliberate the facts of the case" Engerman said.

On Feb. 14, State Farm announced that it will no longer write new property/casualty and commercial insurance policies in Mississippi.

Top Writers, Miss.,
2005-Homeowners
Multiperil

Group market shares (%) are
based on direct premiums written.

State Farm Group    30.3%

Southern Farm
Bureau Group        20.8

10.5 Allstate Insurance Group

7.2           Nationwide Group

5.4           Farmers Insurance Group

Source: Best's State/Line Reports