Insurance Co. Settles With Mississippi Couple Over Katrina Damage

October 1, 2007

A federal trial over Hurricane Katrina damage ended abruptly with a settlement between the insurance company and the Mississippi couple whose property damage, a jury decided, had been caused by the storm’s wind and should have been covered by the couple’s policy.

Terms of the settlement between USAA Casualty Insurance Co. and Kevin and Sherrye Webster were not disclosed. But an attorney for the couple, Charles Merkel, called the outcome “very satisfying to everybody.”

USAA spokesman David Snowden confirmed the settlement but declined comment.

Last week, the eight-member jury concluded that all of the damage to the couple’s beachfront house in Bay St. Louis, Miss., was caused by Katrina’s wind, wind-blown debris or wind-driven rain – perils that are covered by the San Antonio-based insurer’s policies.

The jury wasn’t asked to specify how much money USAA owes the Websters for the damage.

USAA had argued that nearly all of the damage to the two-story home was caused by Katrina’s flood waters and wasn’t covered by the Websters’ policy, but the jury disagreed.

“I think it’s a big victory for all the homeowners on the Gulf Coast,” said attorney John Cocke, who also represents the Websters.

USAA and other insurers say their homeowner policies cover damage from a hurricane’s wind but not its rising water, including surge. The Websters didn’t have a separate flood insurance policy.

USAA blamed most of the damage to the couple’s house on Katrina’s storm surge, but the couple argues that wind caused the house to collapse before surge reached it.

The Websters’ policy had limits of $811,000 for the house, $81,000 for a barn on their property, $162,200 for living expenses and $760,480 for the home’s contents. USAA paid them $10,944 for wind damage to the house and $42,929 for the barn.

Cocke said Friday’s verdict means USAA will owe the Websters at least $800,000.

The Websters also are seeking unspecified punitive damages for the company’s alleged bad faith, plus attorney’s fees and expenses. Jurors won’t be asked to consider punitive damages until later in the trial.

The couple is among thousands of Mississippi and Louisiana property owners who have sued their insurers after Katrina wiped out large swaths of the Gulf Coast in August 2005.

Several federal trials for Katrina insurance cases already have been held in Gulfport, Miss., yielding mixed results for policyholders.

In August 2006, U.S. District Judge L.T. Senter Jr. sided with Nationwide Mutual Insurance Co. and ruled that the company wasn’t obligated to pay a Pascagoula couple for damage from Katrina’s rising water. A federal appeals court in New Orleans later upheld that ruling.

In January, however, a jury awarded $2.5 million in punitive damages to a Biloxi couple who sued State Farm Fire and Casualty Co. for denying their claim. Senter later reduced the award to $1 million, though he said State Farm had acted in a “grossly negligent way.”

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