Settlement in Katrina Lawsuit Over Damage to Miss. Rental Home

A federal trial ended abruptly Tuesday when State Farm Fire & Casualty Co. settled out of court with a couple who sued the company over Hurricane Katrina damages to a rental home they own.

U.S. District Judge Peter Beer told jurors before they got the case that a settlement had been reached after he ruled punitive damages weren’t warranted under Mississippi law.

“I based that entirely on what the law is, which I won’t bore you with the details of,” Beer told jurors. “That, in turn, allowed the attorneys to get together on the settlement of the claim itself.”

Beer also suggested there was a “misunderstanding” about how the claim of Michael and Michelle Williams was handled.

The couple sued State Farm for denying their claim on their Ocean Springs rental property, which Katrina knocked off its foundation.

State Farm blamed all the damage to the couple’s property on Katrina’s storm surge, but the couple claimed the Bloomington, Ill.-based insurer ignored evidence of wind damage to the house. State Farm and other insurers say their policies cover damage from wind but not rising water, including wind-driven surge.

The Williamses, who had a rental dwelling policy, were seeking the full amount of their $46,000 claim plus $50,000 in emotional damages and $5 million in punitive damages.

Michelle Williams, who walked out of court with her husband, declined to discuss the terms of the settlement.

“All I will say is that we won a moral victory today,” she said.

State Farm spokesman Phil Supple said the company is pleased the judge ruled that the facts did not warrant the consideration of punitive damages.

“We are always open to settling litigation and we’re glad we were able to come to an amicable settlement with the Williamses today,” Supple said.

The trial was to be the first of four trials scheduled for this month.

U.S. District Judge L.T. Senter Jr. presided over the first jury trial in January. He took part of the case out of jurors’ hands and ruled that State Farm is liable for $223,292 in damage to a Biloxi home owned by Norman and Genevieve Broussard.

Senter said State Farm failed to prove that Katrina’s storm surge was responsible for all the damage to the Broussards’ home. Jurors in that case awarded $2.5 million in punitive damages against State Farm, but Senter later reduced the award to $1 million.

Jack Denton, attorney for the Williamses, said after Tuesday’s settlement was announced that he “fully respects and accepts” the judge’s decision not to let jurors consider punitive damages.

Denton noted this case was different from the last jury trial because portions of the Williams house, while knocked off its slab, were still intact.

“There was something there for them to look at,” he said.

He also downplayed the notion that Tuesday’s settlement could influence other cases scheduled for trial this month.

“At this point, both sides think there are a lot of issues that need to be decided by a jury,” Denton said.

Hundreds of Gulf Coast policyholders have sued their insurers for refusing to cover damage from the Aug. 29, 2005, hurricane, but State Farm already has settled many of those cases.

State Farm agreed in January to pay $80 million to settle up to 640 lawsuits, including a case filed by U.S. Sen. Trent Lott, R-Miss., whose Pascagoula home was demolished by Katrina.

State Farm also agreed to pay at least $50 million to thousands of policyholders who haven’t sued the company. The proposed settlement calls for State Farm to reopen, review and possibly pay up to 36,000 disputed claims.

Senter has refused to endorse that agreement, but the judge heard testimony last week from lawyers who urged him to reconsider. Senter is expected to rule on their request later this month.

In a separate development Tuesday, Mississippi Insurance Commissioner George Dale said he is requiring State Farm to reopen all 800 to 1,200 cases where policyholders were left only with slabs after Katrina. He said the review would determine whether any additional action is needed.