Case Name: CONSOLIDATED AMERICAN LIFE INSURANCE COMPANY v. William R. TOCHE, Sr.
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1982-02-03
Citations: 410 So. 2d 1303
Docket Number: No. 52934
Parties: CONSOLIDATED AMERICAN LIFE INSURANCE COMPANY v. William R. TOCHE, Sr.
Judges: PATTERSON, C. J., SMITH and SUGG, P. JJ., and BROOM and ROY NOBLE LEE, JJ., concur.
Reporter: Southern Reporter, Second Series
Volume: 410
Pages: 1303–1308

Head Matter:
CONSOLIDATED AMERICAN LIFE INSURANCE COMPANY v. William R. TOCHE, Sr.
No. 52934.
Supreme Court of Mississippi.
Feb. 3, 1982.
Rehearing Denied March 31, 1982.
Heidelberg, Woodliff & Franks, Sam E. Scott, Keith R. Raulston, Jackson, for appellant.
Levi & Denham, Dempsey M. Levi, Ocean Springs, for appellee.

Opinion:
WALKER, Justice,
for the Court:
This is an appeal from the Circuit Court of Jackson County wherein William R. Toche, Sr., the appellee, filed his declaration against the defendant, Consolidated American Life Insurance Company, demanding damages, both actual and punitive. Consolidated answered, denying liability. The matter was submitted to a jury which returned a verdict for $10,000 in actual damages and $20,000 in punitive damages against the insurance company.
Thereafter, Consolidated filed its motion for J.N.O.V. or a new trial. The court ordered a new trial on damages only unless Toche consented to a reduction of the verdict for actual damages from $10,000 to $1,094.65. Toche consented to the reduction and was granted a judgment in the amount of $1,094.65 actual damages and punitive damages in the amount of $20,000 against the appellant, Consolidated American Life Insurance Company.
Feeling aggrieved, Consolidated American Life Insurance Company has appealed.
We affirm the judgment as to actual damages in the amount of $1,094.65, but reverse and render as to punitive damages.
This case involves the question of whether the action of the insurance company in initially denying benefits to Mr. Toche and then, after allowing the claim, erroneously refused to pay an additional $29.71 per month which was due to him and for which he had paid a premium, acted with some element of aggression or some color of insult, malice or gross negligence, evidencing a ruthless disregard for the rights of others so as to take the case out of the ordinary rule. Generally, punitive damages are not recoverable for the breach of a contract unless such breach is attended by intentional wrong, insult, abuse or such gross negligence as to consist of an independent tort. Standard Life Ins. Co. of Indiana v. Veal, 354 So.2d 239 (Miss.1977).
We have attempted to make it clear that since punitive damages are assessed as an example and warning to others, they should be allowed only with caution and within narrow limits. If an insurance com-' pany has a legitimate reason or an arguable reason for failing to pay a claim, punitive damages will not lie. Neither will they lie in cases of simple negligence involving miscalculation of premiums or benefits. For an excellent discussion of when punitive damages are allowable against an insurance company for failure to pay benefits, see Standard Life Insurance Company of Indiana, supra.
The underlying question here is whether the evidence in this case supports an award for punitive damages?
On December 5, 1978, Toche obtained a loan from the First Mississippi National Bank in the amount of $2,965.92. At the same time he obtained, through the bank, credit life and disability insurance covering the loan and paid a premium of $88.97 for disability and $59.31 for credit life. Consolidated American Life Insurance Company was the insurer. Mr. Toche also had two other loans outstanding at that time, one dated September 26,1977, in the amount of $6,884.44, and another dated March 24, 1978, in the amount of $1,126.80. On December 5, 1978, the same day that he applied for the loan of $2,965.92, Toche visited a Dr. Alexander for what he thought was a chest cold that had been bothering him for the past five days. Thereafter, he experienced chest pain and inflammation of the throat intermittently until December 29, 1978 (approximately three weeks after his last loan was obtained from the bank), when he visited another physician, Dr. Grace, who ordered chest x-rays. When Toche's symptoms persisted, Dr. Grace referred him to a third physician, Dr. Heitz-man.
After a surgical diagnostic procedure, Mr. Toche was advised on January 22, 1979, forty-eight days after his last loan application, that he had melanoma (a form of cancer) of the lungs. On January 23, 1979, surgeons removed Mr. Toche's lung. Mr. Toche remained in the hospital approximately one and one-half weeks, and received chemotherapy treatments. It was necessary for Mr. Toche to quit his job as a senior scheduler at Ingalls Shipyard, and he also became inactive in the daily operation of the grocery store which he owned. The record also reveals that Mr. Toche suffered from malignant melanoma several years earlier, which required the surgical removal of one of his eyes. Mr. Toche's claims for benefits directed to the insurance company arrived in the Consolidated offices in Jackson on May 9, 1979. Upon receipt of the claims, Mr. John W. Emory, Jr., Vice President of Consolidated in charge of credit insurance, pursuant to an authorization by Mr. Toche, ordered medical records immediately from the Ocean Springs Hospital as well as the bank.
Upon receipt of the medical information on May 21, 1979, Mr. Emory personally reviewed it and based upon this review, on May 22,1979, he was of the opinion that the claims based on the September 26, 1977, loan and the March 24, 1978, loan should be allowed, but was of the opinion that the claim with respect to the loan of December 5, 1978, should be denied. Mr. Emory was of the opinion that Mr. Toche's lung cancer preexisted the inception date of the policy (December 5, 1978) and, therefore, was excluded from coverage under the terms of the policy.
The appellant promptly paid the installments on the first two loans, although it was not the disability insurance company which had written the original credit disability insurance. These notes were paid pursuant to an internal agreement between the bank and appellant. John W. Emory, Jr. explained that the bank "can put us out effective August 1,1980 and put in another company, simply by notifying us." In that event Toche's claim would be picked up by a new company. Emory went on to say that when the company picks up the insurance of another carrier, they do not go back and research to see if anyone is in good health or bad health. Whatever the note is, the company picks it up subject to the limitations.
Mr. Emory's decision to decline payment of the December 5, 1978, note was based upon his prior dealings with claims for twenty-five (25) years or more and his honest opinion that the cause of disability in all probability had its beginning prior to December 5, 1978, and therefore was not covered under the terms of Toche's policy.
Thereafter, supplemental medical information was supplied to Emory. On or about July 16, 1979, the bank urged Emory to pay the December 5, 1978, loan, stating that Toche had been a good customer of the bank.
On October 11, according to the testimony of Emory, he made the decision to pay the December 5, 1978, note installments subject to a limitation of $300.00 per month being placed on the total amount of the notes due each month on all three loans. This had the effect of reducing the payment made by the insurance company on the third loan from $123.58 — the amount due each month to the bank, to $93.87 per month. This left the sum of $29.71 per month for Toche to pay on the December 5, 1978, installment loan.
Based upon the facts presented by this record — where the very onset of Mr. Toche's illness was traceable to the very day that he obtained the last loan, it can hardly be contended that the insurance company did not have an arguable reason for initially denying Toche's claim of benefits involving the third loan, even though it was ultimately determined that the benefits should be paid. Certainly, there is no element of aggression, insult, malice or gross negligence which would evince a ruthless disregard for the rights of Toche by his insurance company.
In appellee's brief, he states:
It is the contention of the Appellant that it acted in good faith and your Appellee agrees that the Appellant acted in good faith up to a point. The Appellant committed bad faith at that point in time when it realized that the disease of Toche did not come about on a specific date and when it elected to pay the claim of Toche but imposed a limitation which by the clear and unambiguous language of the policy had no right to impose. As stated, even after Appellant had decided to pay the claim of Toche, it then committed an additional wrongful and wanton act constituting gross negligence as it applied to Toche. Emory had testified . that Toche had only ©he loan with an effective date after the commencement of the master policy. He was therefore not subject to the limitation as set forth in the master policy....
Assuming that the insurance company erroneously applied the $300.00 per month limitation on the amount of the total installments which it would pay on Mr. Toche's loan, this record does not indicate, nor does the appellee argue that this error was even brought to the attention of the insurance company until after suit was filed. At most, this appears to be no more than a clerical error or honest mistake on the part of the agent of the insurance company. There is nothing about this conduct which would warrant the imposition of punitive damages.
For the foregoing reasons, the judgment of the circuit court is affirmed as to actual damages in the amount of $1,094.65, but is reversed and judgment is rendered here for the defendant, Consolidated American Life Insurance Company, on the question of punitive damages.
AFFIRMED IN PART, REVERSED IN PART AND RENDERED.
PATTERSON, C. J., SMITH and SUGG, P. JJ., and BROOM and ROY NOBLE LEE, JJ., concur.
BOWLING, J., dissents.
HAWKINS and DAN LEE, JJ., take no part.
. Since the opinion of Standard Life Insurance Company of Indiana v. Veal, supra, this Court has decided several cases involving the issue of punitive damages in insurance contracts. Punitive damages were allowed in the following: Travelers Indem. Co. v. Wetherbee, 368 So.2d 829 (Miss. 1979). Punitive damages were denied in the following: Bellefonte Ins. Co. v. Griffin, 358 So.2d 387 (Miss. 1978); Gulf Guaranty Life Ins. Co. v. Kelley, 389 So.2d 920 (Miss. 1980); State Farm Mut. Auto. Ins. Co. v. Roberts, 379 So.2d 321 (Miss. 1980); Aetna Cas. & Sur. Co. v. Steele, 373 So.2d 797 (Miss. 1979); New Hampshire Ins. Co. v. Smith, 357 So.2d 119 (Miss. 1978).