Judge cuts State Farm punitive award by $1.5 million

February 2, 2007, Daniel Hays, National Underwriter©

A federal judge who ruled that a jury could impose punitive damages on State Farm for its mishandling of a Hurricane Katrina claim, has decided that the $2.5 million award should be reduced to $1 million.

U.S. District Court Judge L.T. Senter Jr. in Gulfport, Miss., said that even though the company’s conduct was “reprehensible,” a lesser award was more appropriate.

State Farm said it would appeal the case in any event.

At issue was a claim brought by Norman Broussard and Genevieve Broussard, whose Biloxi, Miss., home was torn off its foundation slab.

The company, according to the judge, fought the claim on the basis of policy language excluding flood damage, and ignored the probability “that some damage occurred from a cause other than flood.”

Judge Senter, after hearing evidence at trial, had awarded the couple $211,222 in contractual/compensatory damages before sending the case to the jury to set punitive damages.

He said that in his opinion, the damages the panel assessed were almost 12-times the amount of compensatory damages, and a more appropriate assessment was a sum between four- and five-times the compensatory damages.

“The judge's order will not change our intention to appeal the ruling and the jury's punitive damage award,” State Farm said in a statement. “There remain critical legal issues that need to be addressed in the Broussard trial. Those include the location of the trial, which party should have the burden of proof, and the fact that the

jury was not permitted to deliberate the facts of the case.”

Judge Senter, in his latest ruling, said the company had “attempted impermissibly to place the burden of proof on the plaintiffs to establish that their losses were caused by wind…”

A few days after the Broussard verdict, State Farm announced it had reached a proposed class-action settlement to reimburse homeowners in three Mississippi counties with pending or potential claims.

However, Judge Senter has rejected the proposed language as unfair, sending the negotiators back to the drawing board, with representatives for both sides expressing confidence a deal satisfactory to the judge will be worked out.