"I was relieved the house was still standing," Paul tells CBS News correspondent Jim Acosta.
When their insurance company, Nationwide, offered to cover just 1 percent of their damages, the Leonards sued.
"You trust in faith that they are going to guide and direct you. They didn't," Julie says of the insurance company.
The outcome of their trial could set a precedent for the thousands of homeowners trying to make a case against the insurance industry with this argument: A storm surge is not a flood.
That's key because in most insurance policies, wind damage is covered, flooding is not.
"Most of them are taking the approach that if there's one drop of salt water in the home, even if the roof is gone, they won't pay," Richard Scruggs, the Leonards' attorney, says.
The Leonards claim their agent told them they didn't need flood insurance.
They argue the policy they had was too ambiguous — excluding "flood and overflow from a body of water … whether or not driven by wind."
But there's no mention of storm surge.
Contrast that with the policy Nationwide mailed to the Leonards a month after Katrina hit. It specifically excludes "storm surges."
Nationwide's chief spokesman, Joe Case, says the company was simply "updating" the Leonards' policy language.
"It is not something that we've made up or something that we have tried to fool people with," Case claims.
The insurance industry, which has already shelled out more than $5 billion to Katrina victims in Mississippi, warns that the current flood of storm suits could be catastrophic.
"Were these cases to be successful, what we would see is a dramatic deterioration in the availability and affordability of insurance coverage throughout the Gulf Coast," says Robert Hartwig, with the Insurance Information Institute.
But Mississippi's attorney general, Jim Hood, vehemently disagrees. "They are not gonna go bankrupt," Hood says. "This is a ruse. They made money last year."
Hood worries that once federal relief arrives for Katrina victims, the pressure will be off of the insurance companies. He's suing the industry on behalf of the state — an industry, he notes, that posted record profits last year.
"The insurance industry is getting good at dumping it off on the taxpayer," Hood says.
Meanwhile, the Leonards are slowly pulling themselves out of the hole Katrina created. "We are deep into our savings putting our house back together," Paul says.
It's a job the Leonards fear they won't finish without their insurance company.