Title: Rampy v. State Farm Mutual Automobile Ins. Co.

State: mississippi

Issuer: Mississippi Supreme Court

Document:

278 So. 2d 428 (1973) Whitson RAMPY et al. v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY. No. 47127. Supreme Court of Mississippi. May 14, 1973. Rehearing Denied June 5, 1973. *430 Charles C. Finch, D. Briggs Smith, Jr., M. Collins Bailey, Richard T. Phillips, Batesville, for appellants. Wise, Carter, Child, Steen & Caraway, William M. Dalehite, Jr., Jackson, Murray L. Williams, Water Valley, for appellee. *429 RODGERS, Presiding Justice. This action originated as a suit in contract against the appellee, State Farm Mutual Automobile Insurance Company, to enforce the provisions of an uninsured motorist policy issued to the driver of an automobile in which appellants' decedent was killed. The trial was conducted before the Circuit Court of the Second Judicial District for Yalobusha County, Mississippi. At the conclusion of appellants' presentation of their case, the court granted State Farm's motion for a directed verdict based upon appellants' failure to give State Farm notice of a prior tort action prosecuted in Federal District Court in Tennessee against the uninsured tort-feasor. The accident in question occurred in Shelby County, Tennessee, on July 13, 1968. On that date, Doris Rampy, a resident of Water Valley, Mississippi, was a guest passenger in an automobile operated by Dianne Wooten, also of Water Valley. The Wooten vehicle was exiting from Interstate Highway 240 in Memphis, Tennessee, when an automobile operated by a Tennessee resident, William Alvin Diffee, collided with the rear of the Wooten automobile. A few hours after the accident, Miss Rampy died in a Memphis hospital of injuries sustained in the accident. On July 1, 1969, the heirs of Doris Rampy, appellants herein, filed a wrongful death action against William Alvin Diffee in United States District Court for the Western District of Tennessee, Western Division. As a result of this tort action, appellants were awarded a forty thousand dollar ($40,000.00) judgment against Diffee. In attempting to execute this judgment, it became apparent that Diffee carried no liability insurance and was otherwise impecunious. Subsequent to prosecution instituted by the State of Tennessee, Diffee pled guilty to a charge of involuntary manslaughter and was sentenced to eleven (11) months and twenty-nine (29) days in the Shelby County, Tennessee penal farm. Considering the admissions made in Diffee's deposition as well as the other testimony presented in the record, there is ample evidence to show that Diffee's negligence was the proximate cause of the automobile accident which caused Doris Rampy's death. On March 2, 1970, appellants filed this action in the Circuit Court of Yalobusha County, Mississippi, in an effort to recover under the terms of an uninsured motorist policy issued to Joe Dean Wooten, the owner of the vehicle in which Miss Rampy sustained her fatal injuries. At the conclusion of appellants' case, State Farm moved for a directed verdict, alleging that appellants had failed to give notice to State Farm of the institution of the Tennessee tort action, and that due to the expiration of the Tennessee one-year statute of limitations on tort actions, State Farm had lost its rights of subrogation. In granting appellee's motion for a directed verdict, the circuit judge stated: In their appeal to this Court, appellants argue that the lower court committed reversible error in granting appellee's motion for a directed verdict. Appellants also contend that the trial court erred in applying the Tennessee tort statute of limitations to a Mississippi contract action, and in holding that appellants' failure to serve a copy of the summons on the insurance company in the Tennessee case was a bar to the present contract action. The issues raised in this appeal with regard to the lower court's interpretation of the notice and subrogation provisions of the Uninsured Motor Vehicle Act [Mississippi Code 1942 Annotated Section 8285-51 et seq. (Supp. 1972)] are matters of first impression for this Court. After diligent consideration of the issues presented in this case, we are of the opinion that the trial court was in error in sustaining appellee's motion for a directed verdict. We, therefore, reverse the judgment of the trial court for the reasons hereafter shown. The two Code sections on which the appellee bases its grounds for a directed verdict are in the following language: and In order to more fully understand the reasoning adopted by this Court with regard to the interpretation of Mississippi's Uninsured Motor Vehicles Act, it is appropriate to recall the history and purposes of uninsured motorist coverage in general. Uninsured motorist coverage or "family protection insurance", as it is sometimes *432 called, came into existence in 1956 at the behest of insurance companies in an effort on the part of the automobile insurance industry to alleviate some of the problems associated with the rapidly increasing number of uninsured vehicles. In effect, the uninsured motorist policy idea was adopted by the insurance industry as an alternative to publicly administered judgment-funds and compulsory insurance programs. Genesis of Uninsured Motorist Coverage, 32 Atl.L.J. 341 (1968). See J. Donaldson, Uninsured Motorist Coverage, 36 Ins. Coun.J. 397 (1969); D. Fairgrave and K. Forney, Uninsured Motorist Coverage, 31 Ins.Coun.J. 665 (1964). In any case, many states, including Mississippi, now require that all automobile liability policies issued in the state include an uninsured motorist endorsement; thus, Mississippi Code 1942 Annotated Section 8285-51 (Supp. 1972) states: In interpreting similar, if not identical statutes, the vast majority of jurisdictions have stated that the purpose of such uninsured motorist laws is to provide protection to innocent insured motorists and passengers injured as a result of the negligence of financially irresponsible drivers. A fine pronouncement of the policy considerations underlying uninsured motorist legislation is as follows: See also Continental Insurance Co. v. Wallace, 233 So. 2d 195, 196 (3d Dist.Ct. App.Fla. 1970); Indiana Insurance Company v. Noble, 265 N.E.2d 419, 426 (Ind. App. 1970); Webb v. State Farm Mutual Automobile Ins. Co., 479 S.W.2d 148, 151 (Mo. Ct. App. 1972); Jones v. Southern Farm Bureau Casualty Company, 251 S.C. 446, 163 S.E.2d 306, 309 (1968) (Bussey, J., Dissenting). The appellee argues on appeal that the family of Doris Rampy should not be allowed to collect the proceeds available under the uninsured motorist endorsement on the Wooten policy since the Rampys failed to give State Farm notice of the Tennessee tort action. It is argued, therefore, that since the Tennessee statute of limitations on torts had expired prior to State Farm's knowledge of the Rampy tort action, State Farm no longer enjoys rights of subrogation against the uninsured motorist. We disagree with the contentions of appellee for several reasons. Without pausing to point out in detail that Section 8285-53, supra, obviously means process in suits begun in Mississippi courts and it is not a requirement to be performed by clerks of foreign courts, we move directly to the issue presented. We take special note of the fact that Mississippi Code 1942 Annotated Section 8285-53 (Supp. 1972) of the Uninsured Motor Vehicles Act states that when the named insured brings an action against the uninsured tort-feasor, notice of the suit will be given to the insurer. It is significant that this Code section specifies the named insured as opposed to, for instance "all of those seeking to recover under the uninsured motorist endorsement," (as is the case with the family of Doris Rampy). We must, therefore, hold that Mississippi Code 1942 Annotated Section 8285-53 (Supp. 1972) does not require persons seeking to recover under the uninsured motorist provisions of an automobile liability policy to have given the insurer notice of a previous tort action against the uninsured motorist, unless the insured is a "named insured" in the liability policy, and then only when substantial prejudice to the rights of the insurer would result but for notice to the insurer from a party seeking to recover under the uninsured motorist endorsement on the judgment obtained in the tort action. If the legislature had not intended that the notice be given by the "named insured," a contracting party, the legislature would have in effect imposed an impossible burden on persons who were not contracting parties and who did not have possession of the insurance policy, and could not notify an insurance company of which they had no knowledge about a suit against a negligent motorist, especially when they were ignorant of the fact that he was uninsured. In the instant case, there is no indication in the record that appellants knew or had reason to believe that the tort-feasor was either uninsured or impecunious at the time the Tennessee tort action was filed. Apparently, appellants did not discover that the tort-feasor was uninsured and, for all practical purposes, judgment proof until after appellants' unsuccessful attempt to obtain execution of the Tennessee judgment. Since State Farm is in no way bound in terms of liability on the uninsured motorist policy by virtue of the Tennessee judgment, it appears that the appellants' failure to give notice to State Farm in no way resulted in prejudice to State Farm. The courts in several other jurisdictions have examined the notice requirements of their statutes, which have often closely resembled those existing in Mississippi. For instance, in McDaniel v. State Farm Mutual Automobile Ins. Co., 205 Va. 815, 139 S.E.2d 806 (1965), the Supreme Court of Appeals of Virginia held: See also Gunnels v. American Liberty Insurance Company, 251 S.C. 242, 161 S.E.2d 822 (1968); P. Pretzel, Uninsured Motorists §§ 25.3-25.4, at 77-81 (1972). But cf. 7 Am.Jur.2d Automobile Insurance § 137, at 464 (1963); 19 G. Couch, Cyclopedia of Insurance Law 2d §§ 82.1:6-82.1:7, at 1072-1073 (1968). The appellee's argument that the insurer has lost a valuable right of subrogation against the defaulting Tennessee motorist in the instant case is not realistic, even if the deceased were a "named insured", because the testimony shows that the uninsured motorist was an indigent, sometimes called "... an impecunious derelict, someone who is mere flotsam and jetsam floating on the sea of economic irresponsibility." [Lovering v. Erie Indemnity Company, 412 Pa. 551, 195 A.2d 365 (1963)]. Moreover, the burden of proof is upon the insurer to show prejudice, because of the failure of the named insured to have process issued. It is widely recognized that: In California, the following test has been adopted in determining whether or not the insurer has suffered "substantial prejudice" on account of the insured's failure to give timely notice: There can be no question that the foregoing test of "substantial prejudice" imposes a very stringent burden of proof on the insurer. Nonetheless, considering the remedial purpose underlying our Uninsured Motor Vehicles Act, we are inclined to hold that the insurer must demonstrate to the satisfaction of the Court that the outcome of the insured's action against the uninsured tort-feasor would have been radically altered had the "named insured" complied with the notice provisions of Mississippi Code 1942 Annotated Section 8285-53 (Supp. 1972). In the case of Harthcock v. State Farm Mutual Automobile Ins. Co., 248 So. 2d 456 (Miss. 1971) this Court had an opportunity to examine Section 8285-55, Mississippi Code 1942 Annotated (Supp. 1972). This Code section is in the following language: In interpreting the foregoing Code section, we stated: Therefore, appellee's argument is without merit wherein it contends that recovery under the uninsured motorist policy should be disallowed since the insurance company did not receive notice of the Tennessee tort action until the suit was concluded and the Tennessee one-year statute of limitations had expired. Here, appellants do not seek to use the Tennessee judgment as a basis for establishing State Farm's liability under the uninsured motorist policy (as in a garnishment proceeding). Furthermore, there is no indication that State Farm's interests have been prejudiced in any way by appellants' single-handed prosecution of the Tennessee tort action. In summation, we hold as follows: (1) Section 8285-53, Mississippi Code 1942 Annotated (Supp. 1972) is directory and not mandatory. (2) The process required in a suit against the uninsured motorist applies only to the "named insured", one of the contracting parties. See Section 8285-52, Mississippi Code 1942 Annotated (Supp. 1972). (3) In order to invoke a forfeiture against a "named insured" by an insurance company for the failure to have process served upon the insurance company in a suit against an uninsured motorist, it is necessary for the insurance company to show that it has been prejudiced because of the lack of notice. (4) In any case, the failure to give a copy of the process to the insurance company of the original suit against an uninsured motorist does not work a forfeiture of the right to sue the insurance company under the uninsured motorist clause in the contract, unless the judgment obtained is used as the basis of a suit or garnishment against the insurance company sought to be charged. (5) It is not necessary to first sue the faulting motorist in order to establish liability under the uninsured motorist clause in the policy, but suit may be brought directly against the insurance company under its insurance contract in the first instance. The judgment of the trial court is hereby reversed and judgment entered here in favor of the appellants against the appellee State Farm Mutual Automobile Insurance Company in the sum of three thousand three hundred thirty-three dollars and thirty-three cents ($3,333.33), the balance of the money due under its uninsured motorist clause after having paid two other persons injured in the above mentioned accident. Reversed and rendered. INZER, SMITH, ROBERTSON and WALKER, JJ., concur.