A Mississippi federal court judge in a hurricane Katrina-related damages trial recently refused to allow a jury to consider whether to award punitive damages against an insurer. Aiken v. USAA, No. 06-CV-741 (S.D. Miss. Jan. 28, 2008).

Plaintiffs had submitted a claim for Katrina-related damage to their home under their homeowner’s policy. The insurer had paid $178,204 under the policy, representing the portion of the damage the insurer found was caused by wind, but had denied the remainder of the claim on the ground that the damage was caused by storm surge, which was not a covered peril under the policy.

Plaintiffs then sued the insurer for breach of contract and bad faith, as well as bringing a claim for conspiracy against the engineering firm retained to evaluate the damage to plaintiffs’ home. The court had previously dismissed the claim against the engineering firm at the close of plaintiffs’ case at trial, ruling that plaintiffs failed to meet their legal burden.

At the close of trial, the court further ruled that the bad faith claim (and thus punitive damages) could not go to the jury, noting that the plaintiffs had presented no evidence in the case to indicate that the insurer had acted in bad faith in denying damage it maintained was caused by storm surge rather than wind. Tasked with considering only a claim for breach of contract, the jury determined that the insurer owed an additional $64,000, a small fraction of the $427,000 in additional damage that plaintiffs alleged was caused by wind rather than storm surge.

It has been reported that plaintiffs do not intend to file an appeal.

For a copy of the Aiken verdict, click here.

For a copy of the Aiken complaint, click here.

We will continue to monitor Katrina-related developments and provide updates at InsureReinsure.com.