Opinion ID: 1875795
Heading Depth: 2
Heading Rank: 1

Heading: the trial court erred in overruling defendants' motions for directed verdict and peremptory instruction and in submitting the issue of punitive damages to the jury.

Text: Initially the appellant calls our attention to the familiar refrain, The rule in Mississippi is settled that punitive damages are not recoverable for a breach of contract unless such breach is attended by intentional wrong, insult, abuse, or such gross negligence that amounts to an independent tort. New Hampshire Ins. Co. v. Smith, 357 So.2d 119 (Miss. 1978)... . but, If the Appellant had a legitimate, allowable or arguable reason not to pay the claim of the Appellee, then punitive damages will not lie. (Cites omitted.) Aetna Cas. & Sur. Co. v. Steele, 373 So.2d 797, 801 (Miss. 1979). These premises are then followed by the cautionary language in Consolidated American Life Ins. Co. v. Toche, 410 So.2d 1303, 1304 (Miss. 1982), wherein we stated, 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 company 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... .
The cornerstones of the appeal having been placed, the argument follows. The first is that Billy Wilson's initial denial of the claim was simple negligence and is not a proper basis for punitive damages. The appellant submits it occurred because their Claim Adjuster, Billy Wilson, did not normally handle coverage questions, was not familiar with the Lowery decision, and the agency wanted an immediate decision at a time when their attorney was out of the office. Following this explanation it is contended Wilson's mistake was at most simple negligence and because it was not intentional, willful, or attended by insult, abuse, or gross negligence it comes within the shadow of our decisions in Consolidated American Life Ins. Co. v. Toche, supra , and Bellefonte Ins. Co. v. Griffin, 358 So.2d 387 (Miss. 1978). However, we think these cases are bottomed on clearly different and distinguishable facts which brings us to a conclusion different from that of the appellant. In Lowery, supra, we held the provisions of an uninsured motorists policy void which excluded coverage for injuries received by the son of an insured. At the time of the son's injury he was operating a motorcycle owned by him but which was not listed in the uninsured motorist policy held by the father for his family. This Court held the exclusion restricting uninsured motorists coverage to the vehicles enumerated in the policy was against public policy because it violated the manifest intention of the Act. For whatever reason Employers Mutual might have had, it retained and continued to use the condemned exclusion in their policies within this State. The exclusion, by its plain terms would lead any reasonable reader to the belief that injuries resulting from the use of an unlisted vehicle would be excluded from coverage. The exclusion: We do not provide Uninsured Motorists Coverage for bodily injury sustained by any person: 1. While occupying, or when struck by, any motor vehicle owned by you or any family member which is not insured for this coverage under this policy. This includes a trailer of any type used with that vehicle. (Emphasis added.) Billy Wilson, an experienced claim adjuster of the defendant company, read the exclusion to mean Tompkins had no coverage because the motorcycle he was riding when injured was not listed in the policy. We think Wilson did not make a simple mistake, or any mistake as a matter of fact, in construing the policy as he did for its terms permitted no other reasonable interpretation. His conceded simple mistake was not in misreading the exclusion but in correctly reading a void exclusion contained in his company's policies. The fault at this juncture lies within the company rather than its claims adjuster. We therefore reject the argument that Wilson made a simple mistake and that the issue of punitive damages was erroneously submitted to the jury.

In reliance upon the advice of local counsel Tompkins' claim in excess of $20,000.00 was denied. It is contended the soundness of this advice is not the issue, but rather the insurer's reliance upon the legal opinion of an experienced insurance attorney when the offer was made. We are urged to hold the insurer had the right to this defense, and although conceding an erroneous interpretation of the policy, that such mistake did not justify punitive damages. Lincoln National Life Ins. Co. v. Crews, 341 So.2d 1321, 1322 (Miss. 1977), does hold, The mere fact that Lincoln rejected the claims under the provisions of its policy and defended this suit and lost does not justify the imposition of punitive damages. Gulf Guaranty Life Ins. Co. v. Kelley, 389 So.2d 920 (Miss. 1980), and Aetna Cas. & Sur. Co. v. Steele, 373 So.2d 797 (Miss. 1979), are cited as supporting authority. From this it is contended the legal opinion constituted a legitimate or arguable reason for the insurer to limit its offer to $20,000.00 and consequently the trial court erred in submitting the issue of punitive damages to the jury. This contention overlooks, however, the time interval from the first denial of the claim on September 3, 1981, based upon the exclusion and the offer of $20,000.00 shortly after February 1, 1982. Unquestionably during this interval Employers Mutual was not relying on the advice of counsel but upon the void clause in the policy as stated by Wilson to the Tompkins. It is true that subsequent to the attorney's opinion an offer of $20,000.00 was tendered to Tompkins but this also must be reviewed in context with the policy exclusion in the Lowery decision and other cases mentioned in assignment (b) below.
It is argued that the uninsured motorists coverage in excess of the minimum stacked amount of $20,000.00 required by statute is not subject to the exclusion and arguably is legally correct because it is supported in law, particularly Miss. Code Ann. § 83-11-101, § 83-11-111 (1972), and Talbot v. State Farm Mutual Automobile Ins. Co., 291 So.2d 699, 701 (Miss. 1974), wherein we stated: There is no requirement that the coverage shall be more than the minimum thus stated. As to any policy which grants the coverage required by the aforesaid Act, any excess or additional coverage shall not be subject to the provisions of this article. Miss. Code Ann. § 83-11-111 (1972). The coverage Insured contends for in this case is excess or additional to that required by the statute and by the express terms of the statute is not subject to its provisions. It follows that the parties to this suit were free to contract as to uninsured motorist coverage in any respect so long as the required coverage is not cut down by the policy provisions. See Harthcock v. State Farm Mutual Automobile Insurance Co., 248 So.2d 456 (Miss. 1971). If State Farm and Insured could contract free of statutory restraint as to excess coverage, they could also contract to limit the coverage to that required by statute. They did this by the Limits of Liability provision. Thus the limitation clause is consistent with the statute. If our consideration went no further and overlooked the interval from the first denial, September 3, 1981, until the first offer, February 1982, it would appear the insurer had a justifiable reason for denying the claim. In our opinion, however, we should not so narrowly limit our review. When we broaden our evaluation, the exclusion is again doggedly before us. As we read it we note there is no mention of restricting the exclusion to the minimum sums of the Uninsured Motorists Act. Neither do we find the Tompkins were advised the exclusion was fragmented so that a portion of the uninsured motorists benefits was retained in the policy but that a greater portion was excluded because it exceeded the minimal amount leaving the parties free to contract as to it. Stated differently, the argument overlooks the fact that the minimal amount and the excess amount are considered as one under the exclusion without informing the insured of the legal nuances now signaled from Talbot, supra . In our opinion the exclusion could only mean there was no coverage arising from any vehicle not listed in the policy. The same argument now urged upon us was rejected in Richards v. Allstate Ins. Co., 693 F.2d 502 (1982), by the United States Court of Appeals for the Fifth Circuit. There the insurer contended a similar exclusion should be retained as applying to the coverage in excess of the mandatorily required minimal amount. After noting the policyholders were not informed of the undisclosed coverage, the court stated: Allstate contends that retaining Exclusion 2 was justified in spite of Lowery and makes two arguments in support of this claim. Both are wholly without merit. First, Allstate asserts that Exclusion 2 was valid insofar as coverage in excess of that required by law was concerned. But this does not explain the fact that Exclusion 2 eliminated all coverage, not just that above the statutory minimum. In this case, for example, Richards' claim was within the statutory minimum, but it was denied based on the language of Exclusion 2. Second, Allstate contends that Exclusion 2 was in effect erased by provision 5 of the policy which stated: [S]uch terms of this policy as are in conflict with statutes of the state in which this policy is issued are hereby amended to conform. In Allstate's view, this provision corrected any deficiency in the policy. Therefore, it contends that deletion of Exclusion 2 was not required. This argument strains credibility. If it were accepted, Allstate could include in its policies any sort of invalid exclusion and then rely on change provision 5 when challenged. This would mean that policyholders, not insurance companies, would bear the burden of keeping abreast of changes in the law. Clearly this is not the intent of Mississippi's insurance code. Exclusion 2 as written and as retained in Allstate's policies from 1973 until well after 1977 was invalid under Lowery. Under the court's instructions the jury necessarily found that Allstate's failure to remove Exclusion 2 from its standard automobile policy until after this suit was filed was grossly negligent. This finding is supported by the proof. 693 F.2d at 505. The present situation and its exclusion are nearly identical, therefore, we are of the opinion that local counsel's advice was not altogether reasonable because it relied upon Talbot's broad terms while overlooking the great probability the insured would read the exclusion as written oblivious to any legal implications imposed upon it by Talbot. We find this assignment to be without merit. Although the appellant contends that Richards v. Allstate Ins. Co., supra , is not controlling, we find it persuasive to support the result reached by the trial court in this case and therefore adopt it as precedent.
Employers Mutual next argues good faith in filing an action for a declaratory judgment in Federal Court and in making an immediate offer of $50,000.00 to the Tompkins upon receipt of an unfavorable decision. Although the timing of the declaratory judgment action, one day after the State's suit was filed, invites comment that it was to delay Tompkins' claim, we nevertheless hold the filing of the Federal action was an act in good faith because the doors of that court were open to the appellant for the presentation of its theory of the Uninsured Motorists Act. Although such was not accepted by the Federal Court we cannot state the filing was prompted in gross disregard of the claimants' rights. The jury being correctly instructed on this point we opine no prejudice resulted to the defendant from the suit.
While it is true that several courts have questioned whether an insurer in uninsured motorists claims is ever liable for judgment in excess of policy limits by way of punitive damages or statutory penalties; this jurisdiction, obviously, has not done so. The argument is made however, that several courts have held that bad faith claims should not be permitted as a matter of law in uninsured motorists cases because of the relationship between the insurer and the insured. In Baxter v. Royal Indemnity Co., 285 So.2d 652 (Fla.App. 1973), cert. discharged 317 So.2d 725 (Fla. 1975), the court held that punitive damages were not warranted in an uninsured motorists claim even though the initial refusal of the insurer to settle the claim was motivated by bad faith. The court reasoned as follows: The legal relationship existing between the insured and his insurer on claims for collision damages or damages caused by uninsured motorists is that of debtor and creditor in which no fiduciary relationship is present. It would be a strange quirk in the law to hold that each time a debtor fails or refuses to pay demands made upon it by a creditor, the debtor would be liable for both compensatory and punitive damages even though his failure or refusal was motivated by spite, malice, or bad faith. 285 So.2d at 657. Also cited are Midwest Mutual Insurance Co. v. Brasecker, 311 So.2d 817 (Fla.App. 1975), cert. denied, 327 So.2d 31 (Fla. 1976), as well as Fletcher v. Aetna Cas. & Sur. Co., 80 Mich. App. 439, 264 N.W.2d 19 (1978); Short v. Grange Mut. Cas. Co., 307 F. Supp. 768, 772 (S.D.W.V. 1969), and McNutt v. State Farm Mut. Auto. Ins. Co., 369 F. Supp. 381 (W.D.Ky. 1973). We think these cases have little, if any, application to the familiar rule on punitive damages in this State. We repeat that which is stated in New Hampshire Ins. Co. v. Smith, 357 So.2d 119, 121 (Miss. 1978), Punitive damages are not recoverable for a breach of contract unless such breach is attended by intentional wrong, insult, abuse, or such gross negligence that amounts to an independent tort. (Cites omitted.) In our opinion the uninsured motorists provision in question is nothing more than a contract to be enforced in accord with its terms and public policy. If a breach occurs as the result of an intentional wrong, insult, abuse, or such gross negligence that an independent tort arises therefrom, then, in that event and only in that event, punitive damages may be awarded. The contingency being not the right to seek punitive damages but whether there are facts from which a conclusion can be safely reached that they are, in their grossness, the equivalent of an independent tort. We remain convinced the right to seek punitive damages serves a valid and justiciable place in our system of jurisprudence. We therefore think this assignment of error is without merit.