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State Farm held liable for damages in Katrina case

January 12, 2007|From Reuters

A Biloxi, Miss., couple who sued State Farm Mutual Automobile Insurance Co. after Hurricane Katrina destroyed their home were awarded $2.7 million in damages in a Mississippi federal court Thursday.

The award could have major implications for other insurers that are being sued for damages in connection with the storm, which caused more than $38 billion of insured damage in August 2005.

A jury in the U.S. District Court in Gulfport, Miss., decided that State Farm, the largest home insurer in the state, was liable for $2.5 million in punitive damages in a suit brought by Norman and Genevieve Broussard. Bloomington, Ill.-based State Farm also will have to pay its policy limit of nearly $224,000.

State Farm and other insurers have argued that the 30-foot wall of water thrown up by Hurricane Katrina caused most of the billions of dollars in damage to homes, businesses and casinos along the Gulf Coast.

Flood damage is generally covered by federal, not private insurers.

But attorneys for the Mississippi residents whose homes were damaged or destroyed said the destruction was caused by "storm surge," or waters that were whipped up by the 135-mph winds, and therefore should be covered by private insurers, which are generally liable for wind damage.

A State Farm spokesman said his firm was "disappointed and surprised" by the verdict and that an appeal was likely.

"Expert testimony supported a different result," said Fraser Engerman, a spokesman for State Farm.

The Mississippi decision could have a major effect on other lawsuits filed by Mississippi attorney Richard Scruggs and state Atty. Gen. Jim Hood against insurers such as Northbrook, Ill.-based Allstate Corp., which also have hundreds of claims against them for damages.

"There will be added pressure on Allstate and all the other insurers to reach a settlement," said Donald Light, an insurance analyst with Celent, a Boston-based research and consulting firm.

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