USAA Faces $15M Final Judgment in Katrina Bad-Faith Case After Mississippi High Court Refuses Rehearing

In one of the most protracted and closely watched insurance disputes arising from Hurricane Katrina, the Mississippi Supreme Court has refused to revisit its 2024 decision that upheld nearly $15 million in punitive damages and attorney fees against USAA. The ruling stems from the insurer’s handling of a homeowners claim filed by the Minor family after their historic Ocean Springs residence was destroyed in 2005.

This legal saga, which spanned nearly two decades, centered on a dispute over whether wind or storm surge caused the damage. USAA argued for storm surge, which wasn’t covered, while the plaintiffs presented evidence that wind did the most harm before water arrived. At trial, damning internal testimony and evidence of ignored structures and inadequate training among claims staff proved pivotal.

The Mississippi high court found USAA acted in bad faith and failed to update or review its claims practices even after an early jury loss. The judgment stands as a sharp rebuke to claims-handling procedures that neglect prompt investigation, proper documentation, and fair settlement. For claims professionals, this case is a vivid reminder of the regulatory and reputational risks of insufficient training, documentation lapses, and ignoring policyholder rights.

While USAA may still appeal to the U.S. Supreme Court, the decision sends a clear message: state courts are willing to impose massive penalties for systemic bad-faith behavior. Adjusters working in catastrophe-prone areas should take note of how wind vs. water causation, overlooked coverage areas, and field missteps can evolve into multimillion-dollar liabilities.