Opinion ID: 1722984
Heading Depth: 1
Heading Rank: 7

Heading: the issue of punitive damages

Text: We are of the opinion the term legitimate or arguable reason, although spawning much comment in our cases and in briefs and arguments of counsel, is nothing more than an expression indicating the act or acts of the alleged tortfeasor do not rise to the heightened level of an independent tort. Additionally, the very term expresses the holding of this Court establishing a distinction between ordinary torts, the product of forgetfulness, oversight, or the like; and heightened torts, which are the product of gross, callous or wanton conduct, or, if intentional, are accompanied by fraud or deceit. Lincoln Nat'l. Life Ins. Co., supra. This is only to say that not all denied claims constitute the gross, wanton or intentional conduct essential to the creation of an independent tort for which punitive damages will lie. The mere fact that Lincoln rejected the claims under the provisions of its policy and defended the suit and lost does not justify imposition of punitive damages, Lincoln National Life Ins. Co. v. Crews, 341 So.2d at 1322. And see Blue Cross & Blue Shield of Miss. v. Campbell, supra ; Bellefonte Ins. Co. v. Griffin, 358 So.2d 387 (Miss. 1978). In returning to this case we observe the Simpsons' claim was denied on November 21, 1978, within the time frame of the policy. It states in part, The amount of the loss for which this company may be liable shall be payable sixty (60) days after proof of loss, as herein provided, is received by this company ... The denial occurred 47 days after the Simpsons' proof of loss and 98 days after the fire according to our computation. We next consider some of the facts and circumstances State Farm had before it when the claim was denied. In doing so we do not give consideration to the several suits filed in both federal and state courts with varied charges and counter charges leading to allegations of malicious prosecution, abuse of process, etc. [3] primarily because they are subsequent to the claim's denial. State Farm in deciding to deny the claim of the Simpsons on November 1, 1978, had before it the following items to consider in reaching its decision. 1. The report from Systems Engineering Associates which stated the fire was of incendiary origin. 2. The photographs taken by Systems Engineering Associates which graphically depict the burn pattern. 3. The statement of Clay Ellison that Robert Simpson told him as they watched the flames that he was barely able to get his family out of the house. He thought this unusual because Simpson was fully dressed at the time of the conversation. 4. The statement of Fireman Robert Auth that the house was totally engulfed in flames when he arrived at the scene. He also stated that when firemen arrive quickly after being notified of a burning dwelling, the flames are usually restricted to one area. Auth further stated that Simpson told him that he was at home about an hour before the fire and left to take his babysitter home and upon returning, found his home in flames. 5. The statement of Laurie Cantonwine that Mr. Gurley told her that Simpson told him that he (Simpson) set the house on fire with cooking oil and went back to watch the end of the movie. (Obviously this is hearsay and not admissible in a court of law. This is not to say that State Farm could not consider it in deciding whether to pay the claim.) 6. The statement of the Simpsons that they never discussed moving to Alabama with anyone. (They did move to Alabama four days after the fire.) 7. The statement of Glenn Reed, realtor, that the Simpsons' house was for sale because the Simpsons desired to move to Alabama. 8. Statement of Mary Murphy, real estate broker and a neighbor of the Simpsons, that Simpson asked her to list their house for sale because they wanted to return to Alabama. 9. Statement of Marcus Barnham, of Kimbrough Investment Company, the Simpsons' mortgagee, that Simpson told him he was considering letting the house go back to the Veterans Administration because he wanted to return to Alabama and work for a relative. 10. The statement of Delores Freeman, Robert Simpson's sister, which was inconsistent to that given by the Simpsons as to their whereabouts on the night of the fire. In Blue Cross & Blue Shield of Miss. v. Campbell, supra , the court stated: 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. 466 So.2d at 843. In the above case and numerous other cases we have held that when the presentation of all evidence has been completed it is the responsibility and therefore the function of the trial court to determine whether the carrier had an arguable basis, either in fact or in law, to deny the claim. This question, whether an insurer has an arguable reason to deny the claim, is to be passed upon or should be passed upon by the trial court at this stage of the proceeding under the same rules as are applicable in any other jury trial. See Paymaster Oil Mill Co. v. Mitchell, 319 So.2d 652, 657 (Miss. 1975), and its progeny. After reviewing the facts in this case, we conclude the trial court erred when it denied defendant's request for a peremptory instruction on punitive damages and erred in granting a punitive damages instruction. Given the evidence in the light most favorable to the Simpsons, State Farm had an arguable reason to reject the claim at the time it was denied and at all times subsequent thereto. Obviously, if State Farm had an arguable reason to refuse to pay, it must follow that the plaintiff has not presented sufficient evidence to create a jury question on the issue that State Farm was guilty of gross, callous or wanton conduct or intentional conduct accompanied by fraud or deceit.