* Pursuant to Local Rule 47.5, the court has determined

that this opinion should not be published and is not precedent

except under the limited circumstances set forth in Local Rule

47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 95-60165

Summary Calendar

_____________________

BOBBY WILLIAMS

Plaintiff - Appellant

v.

DIXIE SPECIALTY INSURANCE, INC.; STAR INSURANCE COMPANY;

WORLDWIDE WEATHER INSURANCE AGENCY

Defendants - Appellees

_______________________________________________________

_________

Appeal from the United States District Court

for the Southern District of Mississippi

(3:93cv447BN)

_________________________________________________________________

April 16, 1996

Before KING, SMITH, and BENAVIDES, Circuit Judges.

PER CURIAM:*

Bobby Williams brought a breach of contract action against

Dixie Specialty Insurance, Inc. ("Dixie"), Star Insurance Company

("Star"), and Worldwide Weather Insurance Agency ("Worldwide"),

(collectively, the "Defendants"), for compensatory and punitive

damages arising out of an agreement for rain insurance coverage
2

for an outdoor concert. Williams appeals the district court's

granting of the Defendants' motion for judgment as a matter of

law and denial of his motion for judgment as a matter of law, or

in the alternative, for a new trial. We affirm. 

I. BACKGROUND

Williams contacted Alberta Gibson about purchasing rain

insurance for an outdoor concert that he was promoting. The

concert was to be held on June 7, 1992, at Kickapoo Park in Hinds

County, Mississippi. On May 26, 1992, Williams, a resident of

Jackson, Mississippi, and Gibson, an employee of State-wide

General Insurance Agency ("State-wide"), submitted an application

for a quote through Dixie to Worldwide. State-wide was a

licensed independent insurance agency operating in Mississippi. 

Dixie was a Mississippi corporation and a wholesale insurance

broker. Worldwide was an out-of-state corporation and the

managing agent of Star. Star was a Michigan corporation. 

Williams signed an application for rain insurance dated May 28,

1992. There was conflicting evidence as to how the application

was completed. Gibson testified that she completed the

application according to Williams's instructions. Williams

testified that Gibson discussed all of the questions with him

except one; he claimed that Gibson did not ask the question

pertaining to where the rain was to be measured. As to this

question, Gibson checked the space on the application

corresponding to "Closest National Hourly Weather Station." 
 

2 The claims adjuster for Star testified that consecutive

dry hours "means that there are so many hours in a row that are

dry." The Director of special events at Worldwide testified that

"1/2 inch" and "consecutive dry hours," are "two entirely

different types of coverage." She stated: "Either you have half

inch or you have consecutive; you can't have both. . . . 

[C]onsecutive dry hours is purchased only by film commercials or

movie productions." She added that consecutive dry hours

coverage is offered at a 55% rate--or approximately $17,000 for

$30,000 worth of coverage, as opposed to the 10% rate charged for

.50 inches coverage--$3,000 for $30,000 worth of coverage. 

Although both the quote given by Worldwide and the insurance

policy issued by Star specified .50 inches coverage and made no

mention of consecutive dry hours coverage, the insurance

application stated that the application would "BE ATTACHED TO AND

MADE PART OF THE POLICY." Adding to the confusion regarding

whether Williams's policy included consecutive dry hours coverage

and, if so, to what extent, was the response on the application

specifying "6" consecutive dry hours coverage, despite the fact

that the application indicated the event was to take place

between 12 p.m. and 7 p.m.--seven hours.

3

Additionally, in response to the options listed under the heading

"Measurement of weather peril against: Rain," Gibson checked "1/2

inch (.50) or more." With regard to "Coverage Format for Rain

Only," Gibson checked "Consecutive Dry Hours" and included a "6"

in parenthesis next to her check mark.2 Williams sent the

application for insurance to Worldwide, along with a check in the

amount of $3000--10% of the $30,000 coverage requested. Williams

testified that he did not read the application. 

On June 3, 1992, Star issued a Commercial Inland Marine

Weather Insurance Policy to Williams whereby Star agreed to

indemnify Williams for loss in the amount of $30,000 caused by

.50 inches or more of rainfall on June 7, 1992 between the hours

of 12 p.m. and 7 p.m. as recorded at the closest national hourly

weather station. The closest national hourly weather station was

the government weather station located at the Jackson Airport,
4

approximately twenty miles from the concert site. The Director

of special events at Worldwide testified that the policy was

faxed to Dixie three days before the concert. The policy was not

delivered to Williams until after the day of the concert.

Williams was unable to proceed with the concert on June 7,

1992, due to rain at the site. There was no measurement of rain

taken on location with any type of gauge. Earl Gasson, a retired

meteorologist living approximately three miles from Kickapoo

Park, recorded approximately .84 inches of rainfall at his home

during the twenty-four hour period from 6 a.m. on the morning of

June 7, to 6 a.m. on the morning of June 8. Gasson testified

that he did not know how much rain fell at the concert site. 

Williams made a claim for benefits under the policy issued

by Star. He calculated that the out-of-pocket expenses he

incurred as a result of the cancellation of the concert totalled

$30,160.96. Star denied the claim because less than .50 inches

of rain was measured during the time period at the location

specified in the policy. 

On June 4, 1993, Williams filed suit against Star, Dixie,

and Worldwide in the Circuit Court of the First Judicial District

of Hinds County, Mississippi. Claiming breach of contract, 

Williams sought to recover compensatory and punitive damages for

alleged losses sustained as a result of Star's failure to pay his

claim under the rain insurance policy. He alleged that Dixie and

Worldwide were agents of Star. The Defendants removed the case

to the United States District Court for the Southern District of
5

Mississippi. Additionally, the Defendants filed a third-party

complaint against State-Wide. 

Williams filed a Motion for Leave to File Amended Complaint

in order to add an independent state law claim against Dixie for

negligent infliction of emotional distress. The United States

Magistrate Judge denied Williams leave to file his amended

complaint. Williams filed a Motion to Remand the case to state

court alleging that Defendants' removal was improper. Denying

Williams's motion to remand, the court found that there was no

possibility that Williams could establish a cause of action

against Dixie in state court because Williams asserted no

independent tort by Dixie and under Mississippi law an agent for

a disclosed principal cannot be liable for breach of contract by

his principal. 

Trial of the lawsuit began on December 15, 1994. After

Williams rested, he moved for a directed verdict on the issue of

liability and the Defendants moved for Judgment as a Matter of

Law. The district court denied Williams's motion and granted in

part the motion of the Defendants. The court ruled that no proof

had been presented from which a reasonable jury could find that

either Dixie or Worldwide had done anything that would entitle

Williams to obtain a judgment against them. Ruling that both

Dixie and Worldwide were agents for Star--a disclosed principal,

the district court dismissed all of Williams's claims against

them.
6

Additionally, the district court granted Star's Motion for

Judgment as a Matter of Law with regard to Williams's claims for

extra-contractual and punitive damages and Williams's claims for

coverage under the insurance policy for .50 inches or more of

rain. The remaining issue to be presented to the jury was

whether the insurance policy provided coverage for consecutive

dry hours. Williams and Star settled on this issue and the

district court's Final Judgment and Order was entered on December

16, 1993. Williams filed a Renewal of Motion for Judgment as a

Matter of Law, or in the Alternative, for a New Trial, which the

district court denied. On February 28, 1995, Williams timely

filed his Notice of Appeal. 

II. ANALYSIS 

In the instant appeal, Williams asks this court to reverse

the district court and to remand his cause for a new trial on the

question of extra-contractual and punitive damages. It is wellsettled under Mississippi law that punitive damages are

appropriate only in the rare and extreme case. Greer v.

Burkhardt, 58 F.3d 1070, 1074 (5th Cir. 1995). "[T]hey should be

allowed only with caution and within narrow limits." Beta Beta

Chapter of Beta Theta Pi Fraternity v. May, 611 So. 2d 889, 894

(Miss. 1992). "[B]efore punitive damages may be recovered from

an insurer, the insured must prove by a preponderance of the

evidence that the insurer acted with (1) malice, or (2) gross

negligence or reckless disregard for the rights of others." Hans
7

Constr. Co., Inc. v. Phoenix Assurance Co., 995 F.2d 53, 55 (5th

Cir. 1993) (quoting Universal Life Ins. Co. v. Veasley, 610 So.

2d 290, 293 (Miss. 1992)). Punitive damages are unavailable if

the insurance company had a legitimate or arguable reason for

failing to pay a claim. Id.; Guy v. Commonwealth Life Ins. Co.,

894 F.2d 1407, 1411 (5th Cir. 1990) (citing Standard Life Ins.

Co. v. Veal, 354 So. 2d 239, 248 (Miss. 1977)). An insurer is

also shielded from extra-contractual damages--e.g. reasonable

attorney fees, court costs, and other economic losses--where

there was an arguable reason for denying a claim. Hans v.

Phoenix, 995 F.2d at 56. 

Williams raises two sets of issues for consideration on

appeal: (1) whether the district court committed reversible

error by limiting the introduction of certain evidence--evidence

of extra-contractual and punitive damages, and certain evidence

offered for impeachment purposes; and (2) whether the district

court erred in finding that Star had an arguable reason to deny

payment of Williams's claim. We address these issues in turn.

A. Excluded Evidence

The district court ruled in the instant case that evidence

of extra-contractual and punitive damages could be presented only

after a finding of bad faith. The court based this ruling on the

provisions of Miss. Code Ann. § 11-1-65, which states in

pertinent part:

(1) In any action in which punitive damages are sought:

 . . . .

 (b) . . . the trier of fact shall first determine

whether compensatory damages are to be awarded and in
 

3 Williams contends that his claims fell outside the

statute because of the exclusion set forth in § 11-1-65(2)(a). 

However, in an action based upon the bad faith of an insurance

company, such as the case sub judice, "punitive damages may not

be awarded in the absence of finding an independent tort separate

from the breach of contract." Andrew Jackson Life Ins. Co. v.

Williams, 566 So. 2d 1172, 1186 (Miss. 1990) (citations and

internal quotation marks omitted). 

To the extent that the district court followed the guidance

of § 11-1-65 in this case, we find that it committed no

reversible error. See Dixie Ins. Co. v. Mooneyhan, No. 91-CA01124-SCT., 1996 WL 97535, at *12 & *18 n.1 (Miss. March 7, 1996)

(noting, in case regarding punitive damages on bad faith denial

of insurance claim, that "the Mississippi Legislature has passed

a statute setting out procedures to be followed in actions where

punitive damages are sought. . . . § 11-1-65").

 

4 Prior to rendering judgment, the district court

determined that it correctly bifurcated the trial in regard to

punitive damages but that it should have allowed proof as to badfaith extra-contractual damages to be presented during Williams's

case in chief. The court determined that this error was

harmless, however, because Williams did not prove a case for

either punitive or extra-contractual damages. 

8

what amount, before addressing any issues related to

punitive damages.

 (c) If, but only if, an award of compensatory damages

has been made against a party, the court shall promptly

commence an evidentiary hearing before the same trier

of fact to determine whether punitive damages may be

considered.

 (d) The court shall determine whether the issue of

punitive damages may be submitted to the trier of fact;

and, if so, the trier of fact shall determine whether

to award punitive damages and in what amount.

. . . .

(2) The provisions of Section 11-1-65 shall not apply

to:

 (a) Contracts; . . .

Miss. Code Ann. § 11-1-65.3

On appeal, Williams argues that limiting the introduction of

evidence of extra-contractual and punitive damages was reversible

error.4 However, Williams did not object to this ruling either

prior to or during the trial. Williams first objected to the
 

5 At the close of his own case in chief, Williams moved

for a directed verdict on the issue of liability.

9

district court's ruling to bifurcate the extra-contractual and

punitive damages in his motion for a new trial. Because Williams

did not move for judgment as a matter of law on the issue of

extra-contractual and punitive damages at the close of all the

evidence,5 his post-trial motion on this issue was not properly

raised. Fed. R. Civ. P. 50. This court will not consider on

appeal an issue not properly raised in the proceedings below

unless it involves a pure legal question and the failure to

consider it would result in a miscarriage of justice. Auster Oil

& Gas, Inc. v. Stream, 835 F.2d 597, 601 (5th Cir.), cert.

dismissed, 486 U.S. 1027, and cert. denied, 488 U.S. 848 (1988). 

We find that failure to consider the bifurcation of extracontractual and punitive damages from Williams's case in chief

would not result in a miscarriage of justice. Therefore, we need

not address this issue further.

As to the issue of excluded impeachment evidence, Williams

argues that the district court erred in preventing him from

introducing two affidavits for the purpose of impeaching Gibson. 

The court excluded the evidence, ruling: "That testimony, even

if it is used for impeachment purposes, is improper under [Fed.

R. Evid.] 404(b). Also under the circumstances of this case, its

probative value is outweighed by the prejudice that it would have

. . . ." In contrast to the issue of extra-contractual and
 

6 Additionally, Williams maintains that the dismissal of

Worldwide and Dixie was improper. Beyond noting this in a

footnote, however, he does not address this issue. 

The district court ruled that, because Dixie and Worldwide

were agents for Star--a disclosed principal, no proof had been

presented from which a reasonable jury could find that either

Dixie or Worldwide had done anything that would entitle Williams

to obtain a judgment against them. We find that the dismissal of

Worldwide and Dixie was not improper.

10

punitive damages evidence, we consider this issue because

Williams properly preserved error in the district court. 

We review the evidentiary rulings of the district court

under the deferential abuse-of-discretion standard. Kelly v.

Boeing Petroleum Servs., Inc., 61 F.3d 350, 356 (5th Cir. 1995). 

We will not reverse such evidentiary rulings unless they are

erroneous and substantial prejudice results. Fed. R. Evid.

103(a). The burden of proving substantial prejudice lies with

the party asserting error. FDIC v. Mijalis, 15 F.3d 1314, 1318-

19 (5th Cir. 1994). 

As to the affidavits excluded by the district court, we find

that reversal is inappropriate. We conclude that none of

Williams's evidentiary arguments warrant reversal of the district

court's judgment.6

B. Arguable Reason to Deny Payment

We review the district court's ruling on a motion for

judgment as a matter of law de novo, applying the same legal

standard as did the trial court. Conkling v. Turner, 18 F.3d

1285, 1300 (5th Cir. 1994); Omnitech Int'l, Inc. v. Clorox Co.,

11 F.3d 1316, 1322-23 (5th Cir. 1994). Judgment as a matter of

law is proper after "a party has been fully heard on an issue and
11

there is no legally sufficient evidentiary basis for a reasonable

jury to have found for that party with respect to that issue." 

Fed R. Civ. P. 50(a). In evaluating such a motion, we view the

entire trial record in the light most favorable to the non-movant

and draw all inferences in its favor. Conkling, 18 F.3d at 1300;

Omnitech, 11 F.3d at 1322-23. "The decision to grant a directed

verdict is not a matter of discretion, but a conclusion of law

based upon a finding that there is insufficient evidence to

create a fact question for the jury." Conkling, 18 F.3d at 1300;

Omnitech, 11 F.3d at 1322-23 (citations, ellipsis, and internal

quotation marks omitted).

In insurance contract cases, it is up to the trial court to

decide whether the issue of punitive damages should be submitted

to the jury. Andrew Jackson Life Ins. Co. v. Williams, 566 So.

2d 1172, 1187 (Miss. 1990). To this end, the trial court "is

responsible for reviewing all evidence before it." Lewis v.

Equity Nat. Life Ins. Co., 637 So. 2d 183, 185 (Miss. 1994)

(quoting Veasley, 610 So. 2d at 293). The trial court should

refuse to grant an instruction on the issue of punitive damages

where the insurer had a legitimate or arguable reason for denying

the claim. Id. "An arguable reason is one in support of which

there is some credible evidence. There may well be evidence to

the contrary. A person is said to have an arguable reason for

acting if there is some credible evidence that supports the

conclusions on the basis of which he acts." Guy, 894 F.2d at

1411 (quoting Blue Cross & Blue Shield v. Campbell, 466 So. 2d
 

7 The Director of special events at Worldwide testified

that the paperwork for consecutive dry hours coverage is

different than that for .50 inches coverage, and that it includes

a definition of "consecutive dry hours." The policy form issued

to Williams did not mention or include a definition of

"consecutive dry hours." 

12

833, 851 (Miss. 1984) (Robertson, J., concurring in denial of

rehearing)). Williams contends that Star had no arguable reason

to deny his claim because the insurance policy was ambiguous. He

argues that the policy was ambiguous because it was unclear

whether he had .50 inches coverage or consecutive dry hours

coverage or both. Because an ambiguous contract must be

construed against the drafter--the Defendants, in this case,

Banks v. Banks, 648 So. 2d 1116, 1121 (Miss. 1994), Williams

contends that there could be no arguable reason for Star to deny

his claim. Notwithstanding the ambiguous policy, this argument

is unpersuasive. See Western Line Consol. Sch. Dist. v.

Continental Casualty Co. & CNA, 632 F. Supp. 295, 304 (N.D. Miss.

1986) (finding that insurer had a reasonably arguable basis to

deny payment on claims despite ambiguity in policy). The

district court found that:

[i]n this case there are in fact two ambiguities. One

is as to whether there is one coverage or two types of

coverage; the other is in regard to the consecutive dry

hours coverage as to whether or not that coverage is to

be gauged by how much rain fell at the airport during

the time period in question.

The second ambiguity did not arise as a result of imperfect

drafting but as a result of factual circumstances peculiar to

this case.7 The district court found that Star had an arguable

reason to decline consecutive dry hours coverage because of this
 

8 Conversely, "[s]ubmission of the punitive-damages issue

may not be warranted--notwithstanding an absence of an arguable

basis for the denial or breach." Andrew Jackson, 566 So. 2d at

1185. Moreover, even where the insurer is not liable for

punitive damages, an award of extra-contractual damages may be

proper upon presentation of sufficient proof. Id. at 1186 n.13.

13

fact-based ambiguity. We conclude that the ambiguities regarding

Williams's coverage did not justify submitting the issues of

extra-contractual and punitive damages to the jury.

Under certain circumstances, despite the presence of an

arguable reason to deny the claim, the issues of extracontractual and punitive damages may be submitted to the jury.8

Lewis, 637 So. 2d at 185. "For example, an insurer who denies a

claim on an arguable basis could conceivably be held for punitive

damages if the insured's financial straits were used as

settlement leverage," Andrew Jackson, 566 So. 2d at 1186, or if

the insured committed "sufficiently repugnant acts in dealing

with the insured and the disputed claim." Id. The Mississippi

Supreme Court has enumerated several other such circumstances,

"including those where the insurer (1) denies a claim because of

a material misrepresentation by its own agent, (2) denies a claim

without proper investigation, (3) inordinately delays processing

the claim, and (4) engages in `post-claim under-writing.'" 

Greer, 58 F.3d at 1074 (citing Lewis, 637 So. 2d at 186-89). 

Williams argues that the "lying exception" is applicable in

the instant case. This exception arises when an insurance

company's defense "is based wholly on the issue of the

truthfulness of the insurance company's witnesses." Blue Cross,
14

466 So. 2d at 852 (Robertson, J., concurring in denial of

rehearing). The lying exception is "operative only where the

jury is asked to reject on grounds of deliberate falsehood or

fabrication the insurer's defense to the underlying contract

claim." Id. 

Williams also argues that Star did not properly investigate

his claim. The Mississippi Supreme Court has "established that

the denial of a claim without proper investigation may give rise

to punitive damages. [It has] recognized that an insurance

company has a duty to the insured to make a reasonably prompt

investigation of all relevant facts." Lewis, 637 So. 2d at 187

(citations and internal quotation marks omitted). In the health

insurance context, one Mississippi court found that as a part of

an insurance company's investigation, the insurance company must

interview its agents and employees to determine whether they have

knowledge relevant to the claim. Id. (citing Eichenseer v.

Reserve Life Ins. Co., 682 F. Supp. 1355, 1366 (N.D. Miss. 1988),

aff'd, 881 F.2d 1355 (5th Cir. 1989), vacated on other grounds,

499 U.S. 914 (1991)).

In the instant case, the measurement of rainfall at the

airport was critical to the denial of Williams's claim. Star's

claims adjuster testified that he denied Williams's claim based

on an examination of the insurance policy, a memo from the

Director of special events at Worldwide, a note and radar maps

supplied by Earl Gasson, and the rainfall records of the Jackson

Airport. Williams charges that, when Gibson was filling out the
 

9 In addition to "Closest National Hourly Weather

Station," the only option offered on the insurance application in

regard to a recording location was "Independent Weather Observer

on Location." As to this option the application noted,

"Independent Weather Observers are available on request at least

14 days prior to the event if you do not have access to a

qualified Independent Weather Observer." Williams submitted his

application for a quote on May, 26, 1992--less than fourteen days

before the concert, which was scheduled for June 7, 1992.

15

insurance application for him, she did not offer Williams the

opportunity to choose a different location from which to measure

the rain,9 and that, during his investigation, Star's claims

adjuster did not talk to Gibson about the choice of "Closest

National Hourly Weather Station." We find that, with regard to

the lying exception and improper investigation, Williams's

arguments are meritless. "Any plaintiff asking for punitive

damages, or any special or extraordinary damages based upon `bad

faith' of an insurance company has a heavy burden." Hans Const.

Co., Inc. v. Drummond, 653 So. 2d 253, 263 (Miss. 1995). There

must be a finding of an independent tort--a finding of "bad

faith-plus" before punitive damages may be awarded. Andrew

Jackson, 566 So. 2d at 1188. Ordinary torts do not rise to the

"heightened level of an independent tort." Id. at 1186 (quoting

State Farm Fire & Casualty Co. v. Simpson, 477 So. 2d 242, 250

(Miss. 1985)). Although the Defendants may have made mistakes in

handling Williams's coverage, there is no indication that the

Defendants or any of their employees deliberately made any

misrepresentations. The district court determined, in

particular, that there was no indication that Gibson acted in a

fraudulent or misleading manner. 
 

10 Williams also testified that he did not read any of the

contracts he entered into with the entertainers scheduled to

perform at his Kickapoo Park concert.

16

Furthermore, the investigation conducted by Star was not so

cursory as to rise to the level of gross or willful wrongdoing. 

"[T]he mere fact that an investigation of a claim is deficient or

incompetent is not sufficient to establish malice, gross

negligence, or reckless disregard of the rights of the insured." 

Guy, 894 F.2d at 1413 (citing Fedders Corp. v. Boatright, 493 So.

2d 301, 312 (Miss. 1986); Bellefonte Ins. Co. v. Griffin, 358 So.

2d 387, 391 (Miss. 1978)). In the instant case, the Defendants

could have handled Williams's insurance coverage with more

insight and skill--both at the application stage and the

investigation stage. "The totality of the circumstances,

however, does not suggest more than an unfortunate episode of a

failure of competence." Veasley, 610 So. 2d at 294 (holding that

insurer's denial of life insurance claim was result of mistake

and did not rise to level of gross negligence so as to justify

punitive damages award).

Finally, Williams acknowledged that he never read the

completed insurance application before he submitted it to

Worldwide.10 "Under Mississippi law, unless a party was induced

not to read the contract or have it read to him by fraudulent

representations made by another party, he will be required to

abide by its terms." Pedersen v. Chrysler Life Ins. Co., 677 F.

Supp. 472, 475 (N.D. Miss. 1988). "A person is under an

obligation to read a contract before signing it, and will not as
17

a general rule be heard to complain of an oral misrepresentation

the error of which would have been disclosed by reading the

contract." Godfrey, Bassett & Kuykendall Architects, Ltd. v.

Huntington Lumber & Supply Co., Inc., 584 So. 2d 1254, 1257

(Miss. 1991). We conclude that the lying exception does not

apply to this case--nor does the improper investigation exception

or any of the other exceptions to the arguable basis rule. 

Viewing the trial record in the light most favorable to Williams

and drawing all inferences in his favor, we find that the conduct

of the Defendants in denying Williams's rain insurance claim did

not justify submitting the issues of extra-contractual and

punitive damages to the jury.

III. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the

district court.