Opinion ID: 63756
Heading Depth: 3
Heading Rank: 1

Heading: Bad-Faith Breach of Contract

Text: As a threshold matter, this contract dispute is governed by Mississippi law. See Krieser v. Hobbs, 166 F.3d 736, 739 (5th Cir. 1999) (holding that a 3 No. 08-60060 federal court sitting in diversity applies the substantive law of the state in which it sits). Under Mississippi law, contract interpretation is a question of law, not fact. Johnson v. Preferred Risk Auto. Ins. Co., 659 So.2d 866, 871 (Miss. 1995) (en banc). Any insurance policy that is plain and unambiguous will be construed as written. Pate v. Conseco Life Ins. Co., 971 So.2d 593, 595 (Miss. 2008). Any ambiguity will be construed against the drafter and in favor of the insured. Johnson, 659 So.2d at 871. When an insurance policy has two reasonable meanings, it is construed as to give greater indemnity to the insured. Caldwell v. Hartford Accident & Indem. Co., 160 So.2d 209, 213 (Miss. 1964). To prevail on a bad-faith breach of contract claim against an insurer, the “plaintiff must show that the insurer lacked an arguable or legitimate basis for denying the claim, or that the insurer committed a wilful or malicious wrong, or acted with gross and reckless disregard for the insured’s rights.” Liberty Mut. Life Ins. Co. v. McKneely, 862 So.2d 530, 533 (Miss. 2003) (en banc); see also State Farm Mut. Auto. Ins. Co. v. Grimes, 722 So.2d 637, 641 (Miss. 1998) (en banc). Bad faith is characterized as “conduct which violates standards of decency, fairness or reasonableness.” Cenac v. Murry, 609 So.2d 1257, 1272 (Miss. 1992). Bad faith requires a showing of more than bad judgment or negligence; indeed, bad faith “implies the conscious doing of a wrong because of dishonest purpose or moral obliquity.” Bailey v. Bailey, 724 So.2d 335, 338 (Miss. 1998) (en banc). Tarver argues that the district court erred in granting summary judgment in favor of Colonial on his bad-faith breach of contract claim because: (1) the policy’s “at home” provision was ambiguous, (2) Colonial substituted the treating physician’s determination that Tarver was “totally disabled” for its own medical 4 No. 08-60060 consultant’s assessment of Tarver’s condition, and (3) Colonial failed to investigate his claim and pay the benefits due. These arguments are without merit.
Tarver argues that the contract is ambiguous because the policy does not specify a temporal component and does not list all of the activities from which one must be restricted; however, we hold that the terms of the policy are clear. Under the “Benefits for Sickness” heading, the policy defines “totally disabled or disabled” as being “unable to work at your job for pay or benefits” and “under the care of a doctor.” A policyholder who is unemployed will receive benefits if the claimant is kept “at home” by the illness and “under the care of a doctor.” The policy further defines “at home” as “in your house or yard.” However, a policyholder may leave home if so directed by a physician. “Under the care of a doctor” is defined as “being cared for on a regular basis by a doctor other than yourself unless the doctor states that continued treatment in the future would be of no benefit to you.” Coverage depends on a physician’s assessment of a claimant’s unique condition and attendant restrictions. The insurance policy provides $1,000 of total disability benefits per month up to a twelve-month period for those who qualify under the “at home” provision. Thus, the period of the disability itself is irrelevant as are the particular activities from which a claimant is restricted. The “at home” contract language does not evidence an attempt by Colonial to disregard Tarver’s rights or deny his claim without a legitimate basis. Because the contract language is not ambiguous, Tarver’s argument based on the “at home” provision fails to support a finding of bad-faith breach of contract. (2) Did Colonial act in bad faith in reaching its conclusion that 5 No. 08-60060 Tarver was not totally disabled under the terms of the policy? The record shows that Colonial reviewed Tarver’s own claim statement, the treating physician’s assessment of his condition, his physical therapist’s analysis of his functional capabilities, and also sought the advice of its own medical consultant. Although Tarver’s surgeon stated that, in his opinion, Tarver was totally disabled, the surgeon never stated that Tarver was confined “at home.” The surgeon’s opinion that Tarver was disabled, without an attendant finding that he met the “at home” provision, is not sufficient to qualify under the disability requirements of the policy. None of the professionals who examined Tarver or his medical records found him to be totally disabled as defined by the policy. Colonial based its decision on evidence from several medical experts and did not act in bad faith in denying Tarver’s claim. (3) Did Colonial fail to investigate Tarver’s claim and pay the benefits due? The record reveals that from August 24, 2003, when Tarver filed his claim with Colonial, to February 7, 2005, when Tarver filed suit, Colonial repeatedly attempted to ascertain whether Tarver was restricted to his home by his doctor, the length of the restriction, and the conditions that led to this decision by his doctor. Through its review of available evidence, Colonial determined that Tarver’s shoulder surgery may have caused some period of disability, if only for the period of recovery. Thus, Colonial paid Tarver seven weeks of disability while continuing to seek medical records to substantiate a longer disability period. Colonial sought waivers from Tarver to review his medical files and sent follow-up questions to his surgeon. Colonial’s investigation of Tarver’s claim cannot be characterized as conduct that violates standards of decency, fairness, 6 No. 08-60060 or reasonableness. See Cenac, 609 So.2d at1275.1