Case Name: CAPITAL CITY INSURANCE CO., INC., Appellant v. RINGGOLD TIMBER COMPANY, INC., Appellee
Court: Mississippi Court of Appeals
Jurisdiction: Mississippi
Decision Date: 2004-10-05
Citations: 898 So. 2d 680
Docket Number: No. 2001-CA-01354-COA
Parties: CAPITAL CITY INSURANCE CO., INC., Appellant v. RINGGOLD TIMBER COMPANY, INC., Appellee.
Judges: KING, C.J., BRIDGES, P.J., IRVING AND MYERS, JJ., CONCUR. GRIFFIS, J., CONCURS IN PART AND DISSENTS IN PART WITH A SEPARATE WRITTEN OPINION JOINED BY CHANDLER AND BARNES, JJ. ISHEE, J., NOT PARTICIPATING.
Reporter: Southern Reporter, Second Series
Volume: 898
Pages: 680–687

Head Matter:
CAPITAL CITY INSURANCE CO., INC., Appellant v. RINGGOLD TIMBER COMPANY, INC., Appellee.
No. 2001-CA-01354-COA.
Court of Appeals of Mississippi.
Oct. 5, 2004.
Rehearing Denied Feb. 1, 2005.
Certiorari Denied April 7, 2005.
Jeffrey Stephen Moffett, H. Wesley Williams, Jackson, attorneys for appellant.
0. Marvin Oates, Bay Springs, Robert C. Boyd, Clinton, James Randal Wallace, attorneys for appellee.

Opinion:
LEE, P.J.,
for the Court.
PROCEDURAL HISTORY AND FACTS
¶ 1. In May 1996, Billy and Barbara Jo Walker authorized Ringgold Timber Company, Inc. to cut trees located on their property. However, the land in question was actually owned by John Boutwell. Upon learning that Ringgold had commenced cutting trees on his land, Boutwell advised Ringgold that the particular property did not belong to the Walkers and therefore Ringgold should cease from operations. At the time of the incident, Ringgold was insured by Capital City Insurance Company, Inc. Included in their policy was a clause providing "fire damage and overcutting of timber liability coverage" with a limit of liability of $25,000 for each occurrence.
¶ 2. On November 15, 1996, Boutwell filed a complaint against the Walkers and "John Doe" Timber Company for the loss of his trees. Although Boutwell's complaint was not amended until August 12, 1998, to name Ringgold as the timber company involved, there was evidence that Ringgold became aware that they were the "John Doe" identified in the lawsuit as early as one month after the original complaint was filed. Ringgold filed a claim with Capital City on January 22, 1999, which Capital City denied on January 26, 1999. In denying coverage to Ringgold, Capital City stated that failure to provide notice of the claim violated the terms of Ringgold's policy.
¶3. Following Capital City's denial of coverage, Boutwell filed a direct action for declaratory judgment against Capital City pursuant to Mississippi Rules of Civil Procedure 57(b). The chancellor was asked to determine the issue of insurance coverage as well as the underlying claim for the timber overcut'. ' On August 8, 2001, the chancellor found the Walkers, Ringgold, and Capital City jointly and severally liable to the Boutwells. in the amount of $48,699.50. Capital City'-eventually paid the full amount of the judgment. Aggrieved, Capital City now appeals to this Court asserting the following issues: (1) the chancellor erred in finding that the notice requirement in Capital City's insurance policy with Ringgold was not a condition precedent to coverage; (2) the chancellor erred in holding that Capital City had not suffered prejudice from Ringgold's delay in providing notice of the incident; and (3) the chancellor erred in finding Capital City jointly and severally liable where no party had alleged Capital City committed a tort. Although we find no error in the first two issues, we do find that the chancellor abused his discretion in regards to the third isshe; thus, we affirm in part and reverse and render in part.
DISCUSSION OF ISSUES
I. DID THE CHANCELLOR ERR IN FINDING THAT THE NOTICE REQUIREMENT IN CAPI- ' TAL CITY'S INSURANCE POLICY WITH RINGGOLD WAS NOT ' A CONDITION PRECEDENT TO COVERAGE?"'
¶ 4. In its first issue, Capital City claims that the. chancellor erred in finding that the notice requirement in the insurance policy with Ringgold was not a condition precedent to coverage. Capital City argues that the notice provision was a condition precedent to coverage and, therefore, coverage was properly denied. The supreme court has stated that questions concerning the construction and in terpretation of contracts are questions of law; thus, our standard of review is de novo. Warwick v. Gautier Utility Dist., 738 So.2d 212(¶ 8) (Miss.1999).
¶ 5. In looking at the contract, Section I states that Capital City "will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily damage' or 'property damage' to which this insurance applies." The notice provision that Capital City alludes to in its refusal to pay is contained within Section IV. Section IV(2)(a) states that Ringgold "must see to it that we are notified as soon as practicable of an 'occurrence' or an offense which may result in a claim." Section IV(2)(b) states that, "If a claim is made or suit is brought against any insured, you must: (1) [i]mmediately record the specifics of the claim or 'suit' and the date received; and (2) [n]otify us as soon as practicable. You must see to it that we receive written notification of the claim or 'suit' as soon as practicable." The contract further states, under Section IV(3), that "[n]o person or organization has a right under this Coverage Part . (b) [t]o sue us on this Coverage Part unless all of its terms have been fully complied with."
¶ 6. According to the supreme court in Commercial Union Ins. Co. v. Dairyland Ins. Co., 584 So.2d 405 (Miss.1991), insurers who wish to make notice a condition precedent must do so clearly. The court wrote that "[the insurer] could have specifically stated that failure to give notice will render any obligations under this policy void." Id. at 408. In the case sub judice, the notice provision in Section IV(2) makes no mention of the contract being void if late notice is received. A contract that is conditioned to become void on a specified event is one subject to a condition subsequent. Weems v. Am. Sec. Ins. Co., 450 So.2d 431, 435 (Miss.1984). Although coverage is granted in Section I, this coverage can be defeated by a later lack of notice as in Section IV; thus, the notice provision is a condition subsequent. As the notice provision is a condition subsequent then Capital City must show prejudice in order to deny Ringgold's coverage. See Harris v. Am. Motorist Ins. Co., 240 Miss. 262, 126 So.2d 870 (1961). We find that the notice provision was not a condition precedent; therefore, this issue is without merit. We proceed now to determine whether the chancellor erred in finding that Capital City was not prejudiced by Ringgold's delay of notice.
II. DID THE CHANCELLOR ERR IN FINDING THAT CAPITAL CITY HAD NOT SUFFERED PREJUDICE FROM RING-GOLD'S DELAY IN PROVIDING NOTICE OF THE INCIDENT?
¶ 7. In its second issue, Capital City argues that the chancellor erred in finding that Capital City had suffered no prejudice as a result of Ringgold's delay in providing notice of the incident. Capital City further contends that there was substantial evidence that the delay increased the cost of defense, increased the amount of damages recoverable by Boutwell, and decreased its ability to adequately defend the claims. Prejudice is a question of fact to be determined by the chancellor; therefore, we will only reverse a chancellor's decision if it is manifestly wrong. Harris, 240 Miss. at 274-75, 126 So.2d at 875-76.
¶ 8. The chancellor noted that Capital City had an affirmative duty to show substantial prejudice. Furthermore, the chancellor also noted that, pursuant to Rampy v. State Farn Mutual Auto. Ins. Co., 278 So.2d 428, 434 (Miss.1973), Capital City must show that the outcome in the liability action "would have been radically altered" had the insured complied with the notice provision. The chancellor noted the following in determining that Capital City failed to show substantial prejudice. The chancellor said that although Capital City states it would have investigated Ring-gold's claims, Capital City denied Ring-gold's claim in less than three days. Capital City contends that it was impossible for it to obtain a stump count in order to determine the amount of timber removed from Boutwell's property due to the passing of time. However, Capital City's forester indicated that a stump count could have been performed, just at a higher cost.
¶ 9. Capital City also argues that it was prejudiced in the legal proceedings by Ringgold's failure to timely answer admissions. The chancellor found that Capital City participated in discovery, attended depositions, and participated in settlement negotiations. In the admissions, Ringgold was asked inter alia to admit that Ring-gold cut timber off property without the consent of the owner. As Ringgold failed to answer the admissions, the requests were deemed admitted by the chancellor. The chancellor later allowed Ringgold to answer the admissions in order to remove any prejudice to Capital City by the prior acceptance of the admissions. The chancellor subsequently found that Capital City offered no testimony to contradict any of the facts which timely notice would have enabled them to develop.
¶ 10. In reviewing, the record, we cannot find that the chancellor was manifestly wrong in finding that Capital City did not suffer substantial prejudice from Ring-gold's delay in providing notice of the incident. Capital City should have provided coverage to Ringgold; thus, we find this issue is without merit.
III. DID THE CHANCELLOR ERR IN FINDING CAPITAL CITY JOINTLY AND SEVERALLY LIABLE WHERE NO PARTY HAD ALLEGED CAPITAL CITY COMMITTED A TORT?
¶ 11. In its last issue, Capital City claims that the chancellor erred in finding it jointly and severally liable as no party had alleged a tort committed by it. As stated previously, Boutwell joined Capital City as a defendant pursuant to Mississippi Rules of Civil Procedure 57(b) for the limited purpose of obtaining a declaratory judgment -on the issue of coverage. Although Mississippi law bars any type of direct action by an injured party against an insurer, Rule 57(b) was amended in 2000 to modify the traditional rule "in the interest of judicial economy by allowing a direct action for the limited purpose of a declaratory judgment." Rule 57(b)(2) states that "[wjhere an insurer has denied or indicated that it may deny that a contract covers a party's claim against an insured, that party may seek a declaratory judgment construing the contract to cover the claim."
¶ 12. We find that the chancellor abused his discretion in finding Capital City jointly and severally liable for the damages to Boutwell. The chancellor was limited in determining whether there was coverage between Capital City and Ring-gold. At no time did Boutwell allege that Capital City played a role in the overcut of timber by Ringgold. The only claim against Capital City was contractual in nature and the chancellor properly found that coverage did exist. However, the chancellor erred in holding Capital City jointly and severally liable for these damages. The chancellor had no authority at that time to find Capital City liable for the full amount of damages. At most, Capital City, pursuant to its contractual obligation to Ringgold, may have been liable for up to the policy limit of $25,000, after which Ringgold could, if warranted, pursue a bad faith claim or subrogation against Capital City for the amount of damages it incurred over the policy limit.
¶ 13. In conclusion, we find that, although the chancellor was correct in find ing that coverage did exist, the chancellor abused his discretion in holding Capital City jointly and severally liable for the damages to Boutwell. Therefore, we affirm as to the determination that coverage existed between Ringgold and Capital City and that Capital City suffered no prejudice from the late notice, but we reverse and render as to the finding of joint and severally liability in regards to Capital City.
¶ 14. THE JUDGMENT OF THE SCOTT COUNTY CHANCERY COURT IS AFFIRMED IN PART AND REVERSED AND RENDERED IN PART. COSTS OF THIS APPEAL SHALL BE ASSESSED EQUALLY TO THE APPELLANT AND THE APPELLEE.
KING, C.J., BRIDGES, P.J., IRVING AND MYERS, JJ., CONCUR. GRIFFIS, J., CONCURS IN PART AND DISSENTS IN PART WITH A SEPARATE WRITTEN OPINION JOINED BY CHANDLER AND BARNES, JJ. ISHEE, J., NOT PARTICIPATING.