A US federal jury in Louisiana Monday awarded $2.8 million in damages and penalties to an Allstate Insurance Co. policyholder in the second federal lawsuit to go to trial involving Louisiana homeowners affected by the Hurricane Katrina disaster. Homeowners Robert and Merryl Weiss sued Allstate for bad faith, alleging that the insurance carrier did not correctly adjust their claim and underpaid them for the structural damage to their home. Allstate contended that they properly paid the couple $29,483 for the damage to the home and $14,787 for living expenses, since most of the damage was caused by the hurricane's storm surge and thus did not fall under the Weiss' hurricane policy. After conflicting expert testimony about the height of the storm surge and the strength of the winds, the jury found that the damage was caused by wind and was covered under the policy. A $1.5 million penalty was assessed for Allstate's delayed payment of the claim. The Weiss' have already received $350,000 in federal flood insurance. The jury also rejected Allstate's assertion that the Weiss' had voided their policy by misrepresenting their claim after attempting to claim at least $34,000 in damages for a boathouse that allegedly was not located on the insured property during the hurricane.

In February, homeowners in the first federal insurance trial brought by Louisiana homeowners abruptly dropped their suit after Allstate alleged they misrepresented their claims. There are 350 lawsuits pending in Mississippi against insurance companies over the issue of whether insurance policies should cover water damage when the policies, as written, cover wind damage created by a hurricane, but not water damage by "wind-driven surge."