Short answer? If I’m on the losing side in that case, under the circumstances, I strongly recommend an appeal.
Remember, unlike the Leonard v. Nationwide case last year where federal judge L.T. Senter Jr. was the trier-of-fact and there was no jury, in the recent Broussard case the eight-person jury was the trier-of-fact. (I wrote about the Leonard case here and here, and other places too, if you want to use my site’s search feature to look). There is a lot of significance in this. In the Leonard case, Judge Senter made findings of fact, and on appeal to the Fifth Circuit Court of Appeals, these would be reviewed on the clear error standard, meaning an appeals court would not overturn them merely because it might have weighed the evidence differently, but would have to conclude that the findings were against the great weight of the evidence. An appeals court is reluctant to reverse a judge on his findings in a bench trial, because he was there and saw the witnesses, and the appellate judges didn’t.
A directed verdict is different: both State Farm and the Broussards moved for a directed verdict under Federal Rule of Civil Procedure 50. The standard for granting such a motion is that no reasonable juror could find for the party against whom the motion is directed. Senter denied State Farm’s motion and granted the Broussards’. But a directed verdict is reviewed by a far stricter standard. It is a legal question, not a finding of fact — the judge is actually precluded from weighing conflicting evidence or making credibility determinations because this is the jury’s prerogative — and legal questions are reviewed de novo, or in other words, completely anew with no deference owed to the trial court’s decision. The party who is appealing the motion is entitled to have the appeals court give it the benefit of the doubt in every inference, and if a reasonable mind could have found differently, the verdict must be reversed. See, for example, Wiltz v. Mobil Oil Exploration and Producing North America, Inc., 938 F.2d 47, 49 (5th Cir. 1991). In addition, there is an axiom in the Fifth Circuit: "directed verdicts have a high mortality rate in this Circuit." Cates v. Sears, Roebuck & Co., 928 F.2d 679, 685 (5th Cir. 1991).
I think there is an issue whether the directed verdict can stand. In Judge Senter’s opinion, he pointed to the testimony of State Farm’s expert, Dr. Kurtis Gurley, who is a professor at the University of Florida, that a 75 percent chance existed that between 0 and 35 percent of the Broussards’ roof was caused by wind, which unlike flood damage would be covered under the State Farm policy. Dr. Gurley also testified he couldn’t say with certainty if other parts of the house had been damaged by wind. However, merely because it is probable some part of the house sustained wind damage does not necessarily mean a jury can’t weigh the other probabilities and find that almost all the damage was caused by flooding. (It was difficult to tell because the home was completely destroyed by Hurricane Katrina).
I’m somewhat skeptical about Judge Senter’s reasoning about how no juror could have found for State Farm. It appears to me, from having read the documents on file in the official court docket in this case, that one could say the Broussards’ expert, James T. Slider, was merely engaging in conjecture and didn’t have a solid model to support his contention that a tornado destroyed the house before the waves got there. Apparently, he reached his conclusions by looking at pictures of the debris taken by the Broussards’ daughter months after the destruction. I’m not saying he’s wrong, because I don’t know, I’m just saying it seems possible to me you could weigh Slider’s evidence against Gurley’s and apportion damage as 20 percent wind, 80 percent flood, or 100 percent wind, or 100 percent flood. Remember, the judge is not supposed to weigh the conflicting evidence or determine which witness is more credible.
A key to Judge Senter’s ruling was a case he cited, Lunday v. Lititz Mutual Ins. Co., 276 So.2d 696 (Miss. 1973). This was a Hurricane Camille case in which a dispute over wind damage versus flood damage was allowed to go the jury, which found for the insurance company. It appears the insurance company won because it had already paid $2,500 in wind damage, and the plaintiff did not sustain his burden of showing wind damage above that amount. The house in that case, however, was still standing, unlike the Broussards’, which was reduced to a slab. The significance of the difference is this: in Broussard, Senter said he believes the pretrial stipulation that the house was destroyed shows that covered damage occurred, unless State Farm can prove specifically that all the damage was caused by a flood, since State Farm had paid nothing on the Broussard claim.
One is tempted to say the result might have been different, then, if State Farm had paid some amount, like the insurance company in Lunday. But since the Broussard house was destroyed, there could be no degree of certainty that, say, $50,000, or $80,000, or any other figure was the right amount. Under that reasoning, only a full payment of the $230,000 loss could get the insurer off the hook, even if it was possible that there was, say, a 90 percent chance all the damage was caused by surging waves.
One final note about the punitive damages. The jury decided this question, but because the purpose is to punish and deter, an award of punitive damages is not a finding of fact under Mississippi law, and is reviewed more like a legal issue. Last night I read a bunch of Mississippi law on punitive damage standards, which I won’t cite here. (This is a diversity case, so Mississippi law applies across the board to substantive legal questions). The standard of review is fairly deferential to an award of punitive damages: basically, the award should be overturned or reduced only if it shocks the conscience. On that standard, Mississippi law provides precedent for punitive damages against an insurer, which under state law has a continuing duty to pay claims even during litigation if it finds evidence of covered damage. Because Senter had ruled State Farm had no basis to withhold payment, the jury was merely following Mississippi law, although the amount might be reduced. However, if the directed verdict itself is reversed, I believe that the punitive damage award that followed it would also have to be vacated, and the whole case sent back for a new trial. It’s also possible the Fifth Circuit could decide to grant State Farm’s motion for a directed verdict, but I consider that unlikely.
UPDATE: I should make it more clear that the Lunday case featured a different kind of insurance policy than the Broussards’ all-risk homeowners policy — a fire policy with windstorm coverage added. So the burden was on the plaintiff in that case to prove covered damage, whereas when damage is otherwise covered in an all-risk policy, the insurer must prove the exclusion it relies upon to deny coverage.