California Punitives by Horvitz & Levy

  • Mississippi Judge Rejects Punitive Damages Claim in Closely Watched Hurricane Katrina Lawsuit Against USAA

    Last week a jury awarded $910,000 to a Mississippi couple suing USAA for wrongfully denying their claim for damage to their home caused by Hurricane Katrina. According to the SunHerald’s coverage of the case, USAA took the position that the damage was caused by water, which was not covered the the insured’s policy. The insureds claimed the damage was caused by wind, which was covered. Describing the impact of the case on other Katrina-related insurance disputes, the plaintiffs’ attorney announced, “It’s going to help plaintiffs everywhere.”

    The judge, however, has now dismissed the plaintiffs’ punitive damages claim, prompting the plaintiffs to file an emergency motion to hold the jury until the plaintiffs can seek appellate review.

    A blog called “Slabbed” has a nice collection of links to the media coverage on this case.

  • A billion in punitive damages?

    An interesting editorial in the Mississippi Democrat argues: “The Scruggs Katrina Group may have to pay a Jackson law firm punitive damages in the continuing saga in which high-powered lawyer Dickie Scruggs and others have pleaded guilty in connection with conspiring to bribe a judge.
    For years trial lawyers have argued that big rich companies should pay big settlements over and above any actual damages in order to ‘get their attention’ and ‘make them think twice’ before doing the same thing again. We trust that same argument will be made in this case. Scruggs was reported to have been paid a billion dollars in litigation proceeds. In view of the damage his actions have done to the perception of justice in our state, we think he should have to pay a large chunk of that wealth in punitive damages. The money, however, should not go to another trial lawyer. The money should be paid to the people of Mississippi – they were the ones damaged in this tragedy.”


  • Will the Scruggs Firm Face Punitive Damages for Bribery?

    The Daily Mississippian reports: ” Judge William Coleman ruled today that Scruggs Law Firm, along with other firms in the Scruggs Katrina Group (SKG), irreparably harmed the law firm Jones, Funderburg, Sessums, Peterson and Lee when members of the Scruggs firm tried to bribe presiding Judge Henry Lackey in the fee dispute case between the Jones firm and SKG. A trial is set for Nov. 12 in Oxford to decide how much the Jones firm is owed in attorney’s fees as well as possible punitive damages the bribe caused the Jones firm. . . . SKG signed a joint venture agreement outlining several different aspects of the partnership. The Jones firm felt they were owed 20 percent of $26.5 million. However, they received just more than $900,000 and in March 2007 sued the other SKG firms for more money. This is the suit in which Scruggs and others attempted to bribe Lackey. . . . Punitive damages could be awarded to the Jones firm, though they must prove how the bribe financially hurt them. ‘Any attorney for any client should be concerned about punitive damages,’ Mayo said. By March, Scruggs and four other co-conspirators pleaded guilty to the bribery attempt. So far no sentencing date has been set.”

  • Broussard v. State Farm: Fifth Circuit Reverses Punitive Damages in Dispute over Insurance Coverage for Damage Caused by Hurricane Katrina

    The Fifth Circuit tossed out the $1 million punitive damages award in Broussard v. State Farm, a lawsuit involving a home damaged by Hurricane Katrina. State Farm had taken the position that the damage to the plaintiffs’ home was not covered under their homeowners policy because the policy did not cover damage caused by flooding. The insureds argued that their home was damaged by wind before it was damaged by water, and that their policy expressly covered damage caused by a “windstorm.” They sued State Farm for breach of contract and bad faith.

    The district court granted judgment as a matter of law for the plaintiffs on liability and submitted the case to a jury to award damages. The jury awarded $2.5 million in punitive damages, which the district court reduced to $1 million. (The Fifth Circuit’s opinion does not appear to mention the amount of the compensatory damages award, which did not figure into the court’s analysis.)

    On appeal, the Fifth Circuit reversed the grant of judgment as a matter of law on the liability issues, finding there was sufficient evidence to create a triable issue of fact as to whether the plaintiffs’ property was destroyed by water as opposed to wind. That’s a simplified version of the court’s liability analysis, which is really beyond the scope of this blog. More relevant to our purposes, the court held that, regardless of the outcome of the retrial, State Farm could not be liable for punitive damages. The Fifth Circuit said the district court should have decided as a matter of law that State Farm had at least an arguable basis for denying the plaintiffs’ claim, and therefore could not be liable for punitive damages, which are available against insurers only when they deny a claim (1) without an arguable basis, and (2) with malice or gross negligence in disregard of the insured’s rights. The court’s analysis here is akin to California’s “genuine dispute doctrine,” recently adopted by the California Supreme Court in Wilson v. 21st Century, under which an insurer cannot be liable for tort damages if the insurer takes an objectively reasonable coverage position, even if the insurer’s coverage position later turns out to be wrong.

    For further discussion of the Broussard case, see here and here.