The 5th Circuit threw out a $1 million punitive-damage award to a Mississippi couple who sued State Farm Fire and Casualty Insurance Co. for refusing to pay for the wind damage that destroyed their home before Hurricane Katrina. A three-judge panel ruled that jurors should not have been allowed to consider punitive damages in the case.

    Norman and Genevieve Broussard did not have flood insurance, but brought a claim under their State Farm homeowners' policy. The insurer denied their claim after a State Farm agent determined that their house had been "more damaged by flood than wind."

    The Broussards sued for breach of contract and bad faith, arguing that their home was destroyed by "tornadic" winds that swept through Mississippi before Katrina flooded the area.

    Jurors awarded the couple $2.5 million in punitive damages, which U.S. District Judge L.T. Senter Jr. reduced to $1 million.

    The federal appeals court remanded for a new trial, noting that "the question of whether the Broussards' property was first destroyed by wind or water remains an extremely close one," but added that State Farm's investigation of the claim does not merit punitive damages.