MS heavy hitters back insurance company over Coast policyholders in bad-faith Katrina case
The Mississippi Supreme Court should reverse its decision ordering United States Automobile Association to pay $15 million for acting in bad faith in adjusting the Hurricane Katrina claim of policyholders who owned a historic home on the waterfront in Ocean Springs, the insurance company argues.
Policyholders Paul and Sylvia Minor initially filed their lawsuit against USAA in August 2008, almost two years after the hurricane. Paul Minor, a former trial attorney with a nationally recognized practice, has since moved to Louisiana, where his wife Sylvia died of breast cancer in 2009. Her estate, represented by their two children, has carried on the case.
Both sides have appealed decisions made at the trial court level in Jackson County, making the lawsuit the longest-running among hundreds policyholders filed against their insurance companies after Katrina. The Category 3 hurricane devastated the Coast almost 20 years ago, packing damaging winds and a record storm surge.
USAA is asking the Supreme Court for a re-hearing of its recent split decision upholding a jury’s punitive damages verdict of $10 million in the estate’s favor, plus about $458,000 in extra damages that went to attorney’s fees. The high court added $4.5 million in attorney’s fees for the estate.
State Insurance Commissioner Mike Chaney, former Gov. Haley Barbour and a host of business and insurance interests have lined up in USAA’s corner. They filed friend of the court briefs that support the insurer’s position.
“Maintaining this nearly $15,000,000 combined award turns back the clock to an era that the Legislature ended two decades ago,” USAA argues in its motion for a rehearing, referring to the state Legislature’s decision to curb large jury awards through tort reform.
Lawyers for the Minor estate argue the awards should stand and chastised the insurance commissioner for filing a brief in support of USAA.
“Commissioner Chaney would have this court decide that the only way an insured homeowner, an insurance consumer he is sworn to protect, may recover punitive damages is if the homeowner can prove fraud or malice on the part of the insurance company in adjusting a claim,” the policyholder brief says. “Apparently, Commissioner Chaney finds it perfectly acceptable that USAA refused to pay the insureds’ boathouse and other claims for seven years while the claim was pending and then only on the eve of trial.”
Legal arguments focus on ‘safety’
USAA essentially argues the Supreme Court is misinterpreting state law as adopted by the Legislature. The law, USAA says, would allow for punitive damages only if the insurance company had acted with gross negligence that disregarded “the safety of others.”
The Minors never argued their safety was at risk, USAA contends, saying, “Any injuries were ‘purely economic.’ “
The court instead made its decision based on “gross and reckless disregard for the insured’s rights,” USAA says.
Chaney’s brief says that large punitive damage awards hinder his ability to maintain a competitive and affordable property insurance market in Mississippi, where rates are among the highest in the nation.
Former Gov. Barbour, an attorney, headlines another friend of the court brief. The Mississippi Chamber of Commerce, Gulf Coast Business Council, Mississippi Bankers Association and other influential groups signed onto the brief.
If it’s not reversed, the brief says, the punitive damages award could represent a return to Mississippi’s old reputation as a “judicial hellhole” where juries delivered large punitive damage verdicts referred to as “jackpot justice.”
David Baria, an attorney representing the Minor estate, said the friend of the court brief from Barbour that lists all the business groups in support is designed to “intimidate” the Supreme Court justices.
The estate argues in its brief that the definition of safety includes being safe from injury or loss. Financial loss, the estate argues, would be included.
When USAA initially adjusted the Minors’ claim, the company offered the couple $37,245.86 for structural losses. USAA offered the couple another $67,864.23 in contents coverage shortly before the trial. The Minors had paid for more than $2 million in coverage on their home, other structures and contents.
A Circuit Court jury in Jackson County found in 2013 that the Minors were owed more than $1.5 million. The judge had ruled before trial that the Minors were not entitled to punitive damages, a decision the Mississippi Court of Appeals reversed in 2017.
The Supreme Court’s most recent decision upheld a jury’s subsequent punitive-damages verdict and awarded the additional $4.5 million in attorney’s fees that the estate incurred during appeals.
