Broussard v. State Farm Fire and Casualty Co.

In late August, 2005 after Hurricane Katrina ripped through Mississippi, Norman and Genevieve Broussard returned to their Brady Street home to find only a slab remained. Mr. and Mrs. Broussard reported the loss promptly to their homeowner’s carrier who denied their claim. Specifically, State Farm Fire and Casualty Co. claimed that water destroyed the Broussard house and water damage was not covered by the homeowner’s policy. With no other option, Mr. and Mrs. Broussard filed a breach of contract claim against State Farm seeking almost $224,000 for damage done to their home and personal belongings as well as $5 million in punitive damages for State Farm’s failure to compensate them under the policy’s terms.

The trial that all insurers had their eye on got underway on January 9, 2007 in Federal Court in Mississippi. The Broussard’s expert witness, a structural engineer, testified that based upon his analysis, his interviews with hurricane witnesses, and the data collected by the NOAA, that the wind gusts were strong enough and lasted long enough to destroy the couple’s home before the water arrived. State Farm’s expert witnesses testified that storm surge caused the destruction of the couple’s home and they based their opinions on the photographs of the 308 homes in the vicinity of the couple’s home. The defendant’s experts, however, conceded there was likely some damage caused by the wind before the surge arrived.

One of the key issues in the case was which party bore the burden of proving whether it was wind or water that destroyed the Broussard’s home. On January 11, 2007, U.S. District Judge L.T. Senter, Jr., answered that question loud and clear when he directed a verdict in favor of Mr. and Mrs. Broussard on the property damage claim in the amount of $223,292. Judge Senter told State Farm the couple only had to show they lost their home in Katrina. He further stated that if State Farm denied the claim based upon water exclusion in the policy it must prove how much damage was caused by the wind before the surge damage began. Judge Senter opined that because State Farm’s experts could not determine the amount of damage done by the wind before the surge arrived they were obligated to pay the entire claim.

The Broussard’s claim for $5 million dollars in punitive damages was sent to the jury. Judge Senter instructed the jury that in order to award punitive damages they must find clear convincing evidence that State Farm denied the claim out of gross negligence or malice. In response to that instruction the jury awarded the couple $2.5 million dollars sending a strong message to State Farm and all other insurers. If this decision stands on appeal it will force all insurance companies to review their policies and even perhaps change the way they do business.

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