Opinion ID: 1707287
Heading Depth: 3
Heading Rank: 2

Heading: substantial change in interpretation of bad faith law

Text: As stated, the courts of this state have not yet recognized this exception to the law of the case doctrine. Because it is not dispositive, we discuss it but save the adoption of this exception for another case. According to Gloria Simpson, an important aspect of the law of bad faith changed between the time Simpson I was handed down by this Court and the trial in Simpson II. We view this assignment in the context of bad faith law between the time Simpson I was handed down, August 14, 1985, and the time of the second trial, October 27, 1986. See also Delano v. Kitch, 663 F.2d 990 (10th Cir.1981) (law of case doctrine must yield to a controlling decision between the first ruling and retrial). Prior to the decision in Simpson I, this Court had been implementing a procedure for submission of punitive damages to the jury in bad faith cases. The procedure was discussed in Reserve Life Insurance Co. v. McGee, 444 So.2d 803 (Miss. 1983). According to Reserve Life, the trial court would decide as a matter of law whether the insurer had an arguable reason to deny payment of the claim in question. An arguable reason to deny meant that the issue of punitive damages could not be submitted to the jury. The trial court's inability as a matter of law to find that there was an arguable reason to deny would send that issue to the jury. Submission of this question to the jury would be followed by another decision of law for the trial court, whether or not a punitive damages instruction was warranted. Reserve Life, 444 So.2d at 809. Reserve Life was followed by Blue Cross & Blue Shield of Miss. v. Campbell, 466 So.2d 833 (Miss. 1984). This Court granted a petition for rehearing in order to clarify its holding in Reserve Life. Campbell emphasized that the question of bad faith was not always one for the jury. A reasonably arguable basis for denial of the claim, in law or fact, would prevent the submission of the question of bad faith. It was further stated in Campbell: It can be argued with considerable persuasion that unless the trial judge grants a directed verdict to the insured plaintiff on the contract claim, then, as a matter of law, the insurance carrier has shown reasonably arguable basis to deny the claim; and, therefore, the carrier should never be subjected to the possibility of punitive damages based upon `bad faith.' There is compelling logic behind this argument and this would certainly appear to be true in the vast majority of cases. This criterion should ordinarily determine the answer to the question. Yet, the test is not infallible. Under some contrived or specious defense, an insurance carrier may be entitled to have the jury pass upon the issue of liability under the contract, yet not thereby insulate itself against a punitive damage claim based upon bad faith. There may be other reasons not yet encountered which will give an insurance carrier a defense on the contract itself, and yet nevertheless the carrier should be subject to a bad faith claim. Campbell, 466 So.2d at 843. Next came Simpson I. This Court reversed and rendered on punitive damages, finding that State Farm should have received a peremptory instruction on this issue. In doing so the Court repeated the rule from Campbell, that a directed verdict in favor of the insured on the contract claim should be in the majority of cases a reasonable prerequisite to punitive damages. Simpson I, 477 So.2d at 252. This was the state of the law at the time of Simpson I. Gloria Simpson's objection is that after the decisions of Campbell and Simpson, the law has evolved whereby punitive damages are allowed without first obtaining a directed verdict on contractual damages and are assessed when the insurer improperly investigates claims and arbitrarily denies them. Yet, it was in the directed verdict frame of mind that this Court decided in Simpson.  The bad faith cases decided by the Court between August 1985, and October 1986, included Bankers Life & Casualty Co. v. Crenshaw, 483 So.2d 254 (Miss. 1985), National Life & Accident v. Miller, 484 So.2d 329 (Miss. 1985), Southern United Life Insurance Co. v. Caves, 481 So.2d 764 (Miss. 1985), Mississippi Farm Bureau Mutual Insurance Co. v. Todd, 492 So.2d 919 (Miss. 1986), Aetna Casualty & Surety Co. v. Day, 487 So.2d 830 (Miss. 1986) and Employers Mutual Casualty Co. v. Tompkins, 490 So.2d 897 (Miss. 1986). As is stated in Simpson I, the requirement of a directed verdict for the insured on the contract claim before the issue of punitive damages may be submitted to the jury may be appropriate in the majority of cases, but there are exceptions. This requirement has been ignored in Bankers Life, Miller, and Tompkins. The procedure was followed in Caves and Todd, and was emphatically reaffirmed in Day. The trial judge did not err when he found that this exception to the law of the case doctrine was inapplicable to the case at bar.