Opinion ID: 1859481
Heading Depth: 1
Heading Rank: 5

Heading: Punitive Damages/Bad Faith Claim

Text: ¶ 18. Punitive damages should be assessed with caution and within narrow limits as an example and warning. Standard Life Ins. Co. v. Veal, 354 So.2d 239, 247 (Miss.1977). The plaintiff has a heavy burden when seeking punitive damages based on a bad faith insurance claim. Life & Cas. Ins. Co. v. Bristow, 529 So.2d 620, 623 (Miss.1988)(citing Blue Cross & Blue Shield of Miss., Inc. v. Campbell, 466 So.2d 833, 842 (Miss.1984)). This Court addressed the issue of punitive damages for a denial of an insurance claim in State Farm Mut. Auto. Ins. Co. v. Grimes, 722 So.2d 637 (Miss.1998). In Grimes, this Court set out the two-step analysis for assessing punitive damages for a bad faith insurance claim as follows: 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. Grimes, 722 So.2d at 641 (citing Bristow, 529 So.2d at 622). This Court held that these questions are both questions of law to be decided by the trial judge. Bristow, 529 So.2d at 623. If an insurance company fails to pay a claim based upon an arguable or legitimate reason, however, punitive damages will not lie. Veal, 354 So.2d at 248. ¶ 19. The Jenkinses claimed that Ohio Casualty acted in bad faith and the punitive damage claim should have been submitted to a jury based upon the following allegations: (1) Farm Bureau was clearly denying coverage; (2) Ohio Casualty knew the Jenkinses were under financial hardship; (3) Ohio Casualty paid some benefits within a month of the accident; (4) under the lying exception a factual dispute was created which made summary judgment improper; (5) Ohio Casualty had a duty to continue an investigation and evaluate its position and waiting for the resolution of the declaratory action constituted bad faith; and (6) Ohio Casualty turned down an offer to pay the Jenkinses with protection of subrogation rights. ¶ 20. In brief, Ohio Casualty countered the Jenkinses' claims by claiming that it did not act in bad faith. Ohio Casualty had an arguable and legitimate reason for initially denying the uninsured motorist claim. In addition, there was no evidence of a wilful or malicious wrong or that Ohio Casualty acted with gross and reckless disregard for the Jenkinses' rights. The trial court made a determination as to the facts in the case and found that no punitive damage claim was warranted. ¶ 21. Ohio Casualty claims that the filing of the declaratory judgment action by Farm Bureau did not constitute a denial of coverage. Holton was defended during the pendency of the declaratory action. While Ohio Casualty was sympathetic to the financial hardship of the Jenkinses, there was no obligation or provision under the uninsured motorist policy to pay for hardship reasons. The payment of towing and storage fees by Ohio Casualty was a matter of good will and good faith by Ohio Casualty and done at the prompting of the Jenkinses' counsel. The lying exception is applied when the insured's defense is based on grounds of deliberate falsehood and fabrication, neither of which were alleged by the Jenkinses. Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1183 (Miss.1990). Ohio Casualty claimed that a reasonable investigation was performed. Farm Bureau advised the Ohio Casualty insurance agent that Holton was not denied coverage; however, a declaratory action was filed to determine obligations afforded Holton. As to subrogation rights, Ohio Casualty claimed that Farm Bureau was providing coverage to Holton. Any payment to the Jenkinses would have been voluntary without obligation and without recourse. ¶ 22. While opposing counsel discussed the various contentions in great detail in their briefs, this Court need not address each assertion individually as many of the contentions fail to address or support the relevant issue. The focus, rather, should be directed toward the few material facts. ¶ 23. Tony Jenkins's uninsured motorist policy stated in pertinent part that an uninsured motor vehicle means a land motor vehicle or trailer of any type ... (4) to which a bodily injury liability bond or policy applies at the time of the accident but the bonding or insuring company: (a) denies coverage.... ¶ 24. The June 22, 1998, summary judgment Order of the Circuit Court of Neshoba County stated: ... the Court, having thoroughly and maturely considered said [Summary Judgment] Motion and being fully advised in the premises, is of the opinion and finds that said Motion is well taken and should be granted. ¶ 25. The question of whether the Jenkinses were entitled to uninsured motorist benefits under the Ohio Casualty policy hinged upon the denial of coverage by Farm Bureau, Holton's insurance company. Neither the Jenkinses nor Ohio Casualty disputed that denial of coverage by Farm Bureau was the key issue to prompt payment of benefits to the Jenkinses under the Ohio Casualty uninsured motorist policy. There was no dispute of material facts in this case, only a differing interpretation. ¶ 26. Ohio Casualty had no duty to pay the Jenkinses under the uninsured motorist policy until such time as Holton was determined to be uninsured. The Chancery Court of Rankin County adjudicated that Farm Bureau had no obligation to Holton in September 1997. Once Holton was declared uninsured, Ohio Casualty had a duty to pay the Jenkinses. When Holton was declared uninsured, Ohio Casualty promptly paid the Jenkinses. Payment was made within a month of the determination by the Chancery Court of Rankin County. ¶ 27. Following the two-step analysis in Grimes, the issue of punitive damages could not be submitted to a jury because the trial court impliedly found that Ohio Casualty had an arguable or legitimate basis for denying the claim, and Ohio Casualty did not commit a wilful or malicious wrong, or act with gross and reckless disregard for the insured's rights. Ohio Casualty paid the Jenkinses' uninsured motorist policy claim within a month of the Rankin County Chancery Court adjudication and Farm Bureau's denial of insurance coverage.