Mississippi Jury’s Verdict in Katrina Case Favors Insurance Company

A federal judge refused to let Mississippi jurors consider punitive damages against an insurance company after they handed down a verdict Monday that favored the insurer in a dispute with policyholders over Hurricane Katrina damage.

At the end of a 10-day trial, an eight-member jury ordered San Antonio-based USAA Casualty Insurance Co. to pay an additional $64,000 to policyholders David and Marilyn Aiken for wind damage to their Pass Christian home and its contents during the Aug. 29, 2005, hurricane.

But that amount was only a fraction of the maximum $427,087 that jurors could have awarded to the Aikens for wind coverage under their USAA homeowner policy.

After the jury’s unanimous verdict, U.S. District Judge L.T. Senter Jr., ruled that jurors can’t consider punitive damages in the case because “there is no substantial evidence that USAA was acting in bad faith” when it denied most of the Aikens’ claim.

USAA attorneys grinned and shook hands after jurors delivered their verdict, while the Aikens and their lawyers consoled each other.

“We are pleased the jury ratified USAA’s claims handling in this case,” company spokesman David Snowden said.

Charles Boggs, a lawyer for the couple, said his clients were disappointed in the verdict and may file an appeal.

“In my opinion, the jury looked at the evidence and came to a different conclusion than Dr. Aiken and Mrs. Aiken did,” Boggs said.

David Aiken, an orthopedist, and his wife live in the New Orleans suburb of Metairie, La. They used the Pass Christian property as a vacation home and had planned to retire there.

“Now I won’t be able to rebuild,” David Aiken said as he left the courtroom.

The Aikens had accused USAA Casualty and a Houston engineering firm, Rimkus Consulting Group Inc., of conspiring to deny the couple’s damage claim.

Last week, however, Senter dismissed Rimkus as a defendant in the case during the middle of the trial. Senter ruled the Aikens failed to show that Rimkus acted with gross negligence or malice, which was their legal burden for seeking damages against the engineering firm.

USAA already has paid the couple $178,204 for wind damage under their homeowner policy, which had total coverage limits of $582,750 for the dwelling and its contents. The couple also had a separate, federally subsidized flood policy that paid them $278,000.

Hundreds of Gulf Coast homeowners have sued insurers for denying their claims after Katrina. The companies say their homeowner policies cover damage from a hurricane’s wind but not its rising water.

In their lawsuit, the Aikens say a Rimkus engineer initially concluded Katrina’s winds were strong enough to destroy the home – a “very favorable” finding for the homeowners. But the couple claims a Rimkus team leader later revised the engineer’s report to “mollify the language,” so their claim could be denied by USAA.

USAA, which blamed storm surge for destroying the Aikens’ home, said it already has paid the couple what they are owed. The company also denied conspiring with Rimkus to deny the couple’s claim.

“At USAA, we investigate every claim thoroughly,” Snowden said. “We are pleased that the court acknowledged our legitimate efforts to find the cause of the damage and that the court concluded we had a justifiable reason for our claims decision.”

The first federal trial in Mississippi against USAA over Katrina damage ended in September 2007 with a mid-trial settlement with policyholders Kevin and Sherrye Webster.

A jury had sided with the Websters and concluded wind, not flood water, destroyed their home in Bay St. Louis, Miss., but the settlement ended the trial before jurors could consider punitive damages.

Fewer than a dozen trials have been held in Mississippi for federal suits against insurers over Katrina damage. Several federal cases also have been tried in Louisiana, with equally mixed results for homeowners and insurers.

Topics Carriers Homeowners Mississippi