State Farm Fire and Casualty avoided a potential multimillion dollar punitive damages award Thursday by settling out of court with a Biloxi homeowner who sued the insurer over Hurricane Katrina destruction.
About an hour before attorneys reached the settlement, a federal jury had sided with policyholder Edward Gemmill and ordered State Farm to pay $66,234 for actual damages to his home. But before the jury could consider punitive damages, both sides decided to settle the case for an undisclosed amount.
Gemmill, who walked out of court with his wife Lisa, said he wasn't tempted to gamble on a multimillion punitive damage award. He was seeking up to $5 million in punitive damages, but said he looked forward to moving on with his life.
"I wasn't looking for charity, I was looking for justice," he said.
The Aug. 29, 2005, storm destroyed Gemmill's home. The home was valued at $217,813 and the contents $107,080. A flood insurance policy paid him the maximum of $128,100, but State Farm had denied part of Gemmill's claim under his homeowner's policy, later giving him a check for $5,746 for wind damage.
Gemmill says his home was devastated by wind before any flooding, but State Farm concluded Katrina's storm surge demolished the residence.
State Farm and other insurers say their policies cover damage from wind but not from water, including wind-driven storm surge. State Farm also says its policies exclude damage caused by a combination of wind and water, even if wind damaged a home before surge reached the structure.
Gemmill's lawyers claim the Bloomington, Ill.-based insurer set up a procedure on the Mississippi Gulf Coast that calls for denying claims on any home Katrina destroyed.
In January, a jury in Gulfport awarded $2.5 million in punitive damages to policyholders Norman and Genevieve Broussard after U.S. District Judge L.T. Senter ruled the insurer was liable for $223,292 in damage to the couple's Biloxi home.
Senter later reduced the jury's award to $1 million. He said State Farm failed to prove Katrina's storm surge was responsible for all the damage to the Broussards' home.
Last week, the second federal trial for a Katrina insurance lawsuit against State Farm ended with a settlement between the company and the plaintiffs, Michael and Michelle Williams, before jurors could decide the case involving a rental home the couple owns in Ocean Springs.
The couple agreed to settle after U.S. District Judge Peter Beer ruled punitive damages weren't warranted in the case.
Senter also is weighing a proposed settlement that calls for State Farm to pay at least $50 million to thousands of policyholders who haven't sued the company. The deal, reached in January, calls for State Farm to reopen, review and possibly pay up to 36,000 claims.
On Monday, however, a team of lawyers who helped negotiate the proposed settlement withdrew their request for Senter to approve the agreement, citing a legal "stalemate" and Senter's apparent reluctance to sign off on the deal.