The federal judge overseeing the Katrina claims cases in Mississippi reduced a recent $2.5 million jury award of punitive damages against State Farm to $1 million. U.S. District Judge L.T. Senter ruled a punitive damage award that is four to five times the compensatory damages of $211,212 in the case was more appropriate than the figure 12 times that amount decided by the jury..

The case involved State Farm’s handling of wind and water claims at the home of the Broussard family. State Farm denied the family's claim. But Judge Senter ruled that State Farm failed to meet its burden of proving that all damage to the Broussard’s house was caused by water and therefore excluded from coverage. He ordered the insurer to pay the $212,000 policy limits. He then handed the case to the jury, which returned with the $2.5 million in punitive damages. But Senter has now decided that is too high.

Days after the $2.5 million was awarded, State Farm settled another Katrina case in Mississippi out of court. Then about a week ago the giant insurer agreed to pay a minimum of $50 million to settle a class action involving more than 35,000 policyholders who did not sue the company and also agreed to pay $80 million to settle 640 lawsuits. The class action settlement has been delayed by Senter, who has demanded more information before signing off on it.

Judge Reduces State Farm’s Punitive Damages (Insurance Journal 1/31/07)

February 13, 2007