Opinion ID: 1652424
Heading Depth: 2
Heading Rank: 3

Heading: the amount of the punitive damages is excessive.

Text: ¶ 10. A closer issue is presented by the jury's award of $1,250,000.00 in punitive damages. The trial judge refused to grant Grimes a directed verdict with regard to the denial of the theft claim, and State Farm argues that this fact indicates that it did in fact have an arguable basis for denying the claim. This Court has held that the fact that a trial judge denied a motion for directed verdict on the underlying contract claim generally indicates that a punitive damages instruction should not have been submitted to the jury. Blue Cross & Blue Shield of Mississippi, Inc. v. Campbell, 466 So.2d 833, 843 (Miss.1984). However, this Court has, in recent cases, backed away from a blanket holding that a punitive damages instruction should not be submitted to the jury if a directed verdict was denied on the underlying contract issue. This Court noted in Dixie Insurance Co. v. Mooneyhan, 684 So.2d 574 (Miss.1996) that: Where the trial judge determines there was no arguable reason to deny the claim and the insurer may be deemed to have acted unfairly and in bad faith, the issue of punitive damages should be submitted to the jury regardless of whether or not a directed verdict was granted to the insured. Id. at 583 (citing Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1185 (Miss. 1990)). ¶ 11. This Court in Mooneyhan thus noted that a judge may validly conclude that an insurer lacked an arguable reason to deny the claim and that it acted in bad faith notwithstanding the fact that he refused a directed verdict on the underlying contract claim. There are subtle yet important differences in the applicable standards for deciding upon a directed verdict on the underlying contract claim and in deciding whether a punitive damages instruction should be submitted to the jury. [1] It is also true that there is a natural tendency on the part of many trial judges to allow an empaneled jury, which has given up its time and diligently viewed the evidence, to reach a decision on the merits of the case rather than rendering judgment himself. A strict rule of law which held the denial of a directed verdict motion to be inconsistent with the submission of a punitive damages instruction to the jury, while containing a certain logic and appeal, would therefore be unsound. ¶ 12. The law of this State does not impose punitive damages in cases in which a carrier is determined to have merely reached an incorrect decision in denying a given claim. The issue of punitive damages should not be submitted to the jury unless the trial court determines that there are jury issues with regard to whether: 1. The insurer lacked an arguable or legitimate basis for denying the claim, and 2. The insurer committed a wilful or malicious wrong, or acted with gross and reckless disregard for the insured's rights. Life & Cas. Ins. Co. of Tennessee v. Bristow, 529 So.2d 620, 622 (Miss.1988). This Court held in Standard Life Ins. Co. of Indiana v. Veal, 354 So.2d 239, 248 (Miss.1977) that [o]f course, if an insurance company has a legitimate reason or an arguable reason for failing to pay a claim, punitive damages will not lie. ¶ 13. In determining whether State Farm had an arguable basis for denying the claim in the present case, the Court should consider the facts that were available to State Farm at the time the claim was denied. In this regard, State Farm submits that: State Farm had the following information at the time of denial of the claim. The disappearance of the car was suspicious because there were no signs of forced entry to the car or steering column and the car could not be steered without the key. Grimes had the only set of keys.... The physical facts were inconsistent with theft because the condition of the vehicle was much neater than the typical vehicle recovered after theft. Hard-to-remove parts were taken while easily-removed parts were not.... The car was recovered in front of the apartment manager's office, so it would be discovered, and not stripped further. There was no damage to fiberglass, which negated the possibility of this low-slung body having been towed by a standard wrecker.... The behavior of Grimes was inconsistent with theft beginning with his two-hour delay in reporting the theft.... Grimes had a financial motive to stage the loss because he had tried unsuccessfully to sell the car. He had frequent mechanical problems with the car and was, in his own words, tired of messing with it.... He was adept at trading engines and parts between vehicles, gave three different versions of where the engine came from, and could not recall the serial number of the engine although he ran it on the NCIC when he bought the car. He collected on a prior vandalism loss to the Corvette and had the car totally repainted, and changed the color.... Other matters tending to implicate Grimes included the word on the street that the theft was an inside job and that the parts were at Joe's Garage. ¶ 14. In the view of this Court, most of the evidence which State Farm cites in support of its denial of the claim is rather weak. State Farm's vague reference to the word on the street is less than convincing, as is the assertion that Grimes' financial problems gave him a motive to commit fraud. Grimes' financial problems, as evidenced by his maxed out credit cards, were no different than those faced by many, and there should not be a different standard for the payment of claims of wealthy claimants than those with financial difficulties. ¶ 15. Slightly more persuasive is State Farm's evidence indicating that the theft of the Corvette was not typical of auto thefts. The day after the theft was reported, Grimes met with Jackson County Deputy Sheriff Hartwell Lott in order to look at the car. Lott eventually testified on behalf of State Farm at trial that the car's condition was not typical of any thefts he had investigated before. In particular, Lott testified that he was surprised by the neatness and precision with which the various parts of the automobile had been taken apart. Lott specifically referred to the fact that the thief had taken the time to replace the hood of the automobile after being forced to remove it in order to take out the engine. Lott also found it unusual that the wires had been removed with electrical tools instead of being cut. ¶ 16. Virgle Luke, a retired auto theft investigator with the Mississippi Highway Patrol, testified on behalf of State Farm at trial that the location and manner in which the vehicle was found ... the physical damage or what was missing of the vehicle is not consistent with actual theft. Luke further testified that he had never seen the front shocks taken off of a stolen car, nor had he seen a stolen car in which the thief took the time to put the hood of the car back on. Luke also testified that normally there is some type of forced entry and some method to use to make ignition and remove the car. In addition to the evidence of the unusual nature of the theft, State Farm points to the fact that Grimes was a former mechanic who possessed the skill and expertise to remove the engine and transmission if he had been so inclined. ¶ 17. Although the present issue is a very close one, this Court concludes that a jury could have validly found that State Farm lacked an arguable basis for denying the claim. State Farm's case is based largely on innuendo and testimony that the crime was atypical of auto thefts in this State. Most conspicuous in its absence is any direct evidence whatsoever that Grimes committed the fraud, such as testimony by witnesses who saw Grimes stripping the Corvette or to whom Grimes admitted to having committed the fraud. The thief left the stripped car outside an apartment complex on the night of the theft, but State Farm introduced no testimony that Grimes was spotted outside the complex on the night of the crime. State Farm submits that the word on the street indicated that this was an inside job and that the parts were at Joe's Garage. However, State Farm did not introduce any testimony from employees or customers of Joe's Garage indicating that Grimes had taken the parts to the garage. ¶ 18. State Farm's evidence as to the unusual nature of the theft was, in the view of this Court, sufficient to submit the case for further review and investigation, and State Farm did just that, referring the case to their Special Investigations Unit. However, a jury could have validly concluded that, absent some direct evidence that Grimes had committed the fraud in question, a denial of the claim was not sufficiently supported by credible evidence as to lead a reasonable insurer to deny the claim. This Court thus affirms the jury's finding that the claim was denied without arguable basis. ¶ 19. This is not a case in which the insurance company was found to have had an arguable reason to deny a claim. Nor is it a case in which the claim was denied because of some clerical error or other inadvertence for which the imposition of punitive damages would simply be unfair. See Universal Life Ins. Co. v. Veasley, 610 So.2d 290 (Miss. 1992). On the contrary, here the jury could conclude that the insurer deliberately refused to pay in the face of knowledge that it could not reasonably expect to succeed on any claimed defense based upon the insured's suspected involvement in the theft of his automobile. This was not inadvertence promptly corrected; the evidence was amenable to the conclusion that there was deliberate indifference if not hostility to the right of the insured which was never corrected. After an investigation over a period which was clearly reasonable in duration from the standpoint of the insurance company, the company simply had no proof that a theft had not occurred to refute the insured's sworn claim that there was a theft supported by the fact that a motor and transmission was indubitably missing. It should have paid, and, because it did not, the issue of punitive damages was properly put before the jury. ¶ 20. There are other possible interpretations of the impact and import of the words this claim stinks, used at the onset of the investigation conducted by State Farm, which would differ from that which we must assume was arrived at by the jury. The inference possibly drawn by this jury, however, is also within the range of possible inferences. The jury had the benefit of seeing the witnesses testify in person. It is for the jury to assess whether State Farm conducted a good faith investigation as opposed to one designed to reach a desired result, the denial of the claim. Theft cases are difficult. Because there is an opportunity for financial gain, a motive to fabricate is always present. The owner/insured usually has the opportunity and capability to dispose of the property. Thieves behave differently in terms of method. ¶ 21. The issue, then, is to determine when an insurer is justified in refusing to pay a theft claim based upon suspicion. That is, under what circumstances is it reasonable as a matter of law for an insurance company to refuse payment and put the insured to the expense of litigation? And, what risk does the insurer take when it is found to have acted unreasonably in refusing payments? The suggestion that consequential damages should be awarded has some merit. It is a half-measure, however. ¶ 22. The question remains whether any court, when faced with a knowing deliberate action as opposed to an isolated clerical error, can further distinguish those cases in which the insurer has no reasonable basis to deny and is therefore liable for consequential damages, from those in which the insurer has no reasonable basis to deny and may be liable for punitive damages. We conclude that this Court, as an appellate court, has no basis for making such a distinction. Where the trial court allows the question of reasonableness to be put to the conscience of the community, the civil jury, that decision should stand absent compelling grounds for reversal. We find no compelling grounds here.