A Mississippi judge drastically reduced the $38 million judgment against Trustmark Corp. over its force-placed insurance program.

The judge for the Second District Circuit Court of Jones County, Miss., which conducted the trial against the Jackson bank company, erased $33 million of the $38 million in punitive damages awarded to two plaintiffs by a jury in January.

The court left in place the $500,000 actual damages awarded to one plaintiff, a former car-loan customer, of which $125,000 was allotted to Trustmark and $375,000 to the insurance company used by the bank in the affair, according to Trustmark spokesman Gray Wiggers.

Attorneys for the plaintiffs were out of town on Monday and could not be reached for comment.

Charles K. Smith and his father-in-law, Jessie W. Holmes, filed suit against $4.7 billion-asset Trustmark in November, claiming that the bank had "force-placed" an insurance policy on their 1988 Toyota Sentra. With force-placed insurance, a lender on a car can require damage insurance on the auto. If the borrower fails to buy the insurance, the lender buys it for him and adds the premiums onto the loan.

In this case, Trustmark hired Mississippi insurance agency Ross & Yeager Inc. to place a policy on the car at a cost to Mr. Smith and Mr. Holmes of more than the Sentra was originally worth. When Trustmark submitted the $9,400 insurance bill to the borrowers after they had paid off the loan, according to court documents, they couldn't pay it and Trustmark repossessed the car. The borrowers claimed they were never notified of the force-placed insurance.

The Jones County jury awarded $19 million in punitive damages each to Mr. Holmes and Mr. Smith, in addition to $500,000 in actual damages to Mr. Holmes.

Trustmark asked the judge to set aside the verdict or have the damages reduced. On Friday, the judge eliminated the entire $19 million in punitive damages to Mr. Smith, and reduced the $19 million award to Mr. Holmes to $5 million.

In a statement, Trustmark chairman Frank Day said, "We are pleased" the court decided to reduce the awards.

"If Mr. Holmes accepts the reduced amount," Mr. Day added, "Trustmark has every right to appeal and will do so." If Mr. Holmes or Mr. Smith does not accept the judge's ruling, a new trial will take place.

Mr. Wiggers said Trustmark voluntarily stopped using force-placed insurance on its loans in February 1994.

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