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Federal appeals court vacates punitive damages award in Katrina insurance case

[JURIST] The US Court of Appeals for the Fifth Circuit [official website] on Monday reversed and vacated [PDF opinion] a jury award of $2.5 million in punitive damages awarded to a Mississippi couple who lost their home in Hurricane Katrina [JURIST news archive] and later sued State Farm Insurance for rejecting their homeowner insurance claim. The presiding district judge, US District Judge L. T. Senter, had already remitted the jury award to $1 million [JURIST report], finding the award excessive at twelve times the amount of economic damages awarded, but the Fifth Circuit found that punitive damages were unwarranted.

The Fifth Circuit rejected the district court's decision to allow the jury to consider the plaintiff's claim that State Farm denied the insurance claim on a bad faith basis:

Although the Broussards have pointed to some facts which suggest that wind destroyed their home prior to the arrival of the tidal surge, State Farm had an arguable basis for denying their claim based on the observations of its adjuster regarding the position of the debris line and the condition of trees on and surrounding the property.
The appeals court proceeded to reject several other theories advanced by the plaintiffs in support of their punitive damages claim. The court also reversed the district court's grant of Judgment as a Matter of Law in favor of the plaintiffs and remanded the case for a jury to consider whether the the home was destroyed by wind, a covered peril under the insurance policy at issue, or by water, a peril that is not covered by the standard homeowner's insurance policy. AP has more. The US District Court for the Southern District of Mississippi has a collection of Hurricane Katrina insurance orders and opinions.

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