Insurers that adopted a tough stance on Hurricane Katrina claims involving storm surge face bigger losses and possibly punitive damages in the wake of a federal court ruling last week, according to a rating firm's analysis.

"Companies that took a harder line by not paying for damages when flood was a factor, or had inconsistent handling of claims by adjustors, are looking at larger losses and potential punitive damages," said Fitch Ratings in Chicago.

The firm's assessment followed the decisions by U.S. District Court Judge L.T. Senter Jr. in Gulfport, Miss., against State Farm in a case brought by homeowners Norman and Genevieve Broussard of Biloxi, Miss.

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