Katrina Insurance Punishment Tops $2 Million

State Farm Insurance has been ordered to pay $2.5 million in punitive damages for denying a claim on a house destroyed by Hurricane Katrina.

The judge in the case ruled earlier that the company had failed to prove that damage to the house in question was caused by water and not wind. Wind damage is covered under a regular homeowners' insurance policy, but damage from water is not.

Now legal experts are wondering how the decision will affect settlement talks on other cases.

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