Opinion ID: 1088707
Heading Depth: 2
Heading Rank: 2

Heading: Did the trial court err in submitting extracontractual/punitive damages to the jury?

Text: ¶ 101. An abuse of discretion standard is used when this Court reviews the trial court's decision on whether a case warrants punitive damages to be considered by the trier of fact. Bradfield v. Schwartz, 936 So.2d 931, 936 (Miss.2006) (citations omitted). As a general rule, exemplary or punitive damages are `added damages' and are in addition to the actual or compensatory damages due because of an injury or wrong. The kind of wrongs to which punitive damages are applicable are those, which besides the violation of a right or the actual damages sustained, import insult, fraud, or oppression and not merely injuries, but injuries inflicted in the spirit of wanton disregard for the rights of others. Id. (citations omitted). ¶ 102. Pursuant to Miss.Code Ann. Sect. 11-1-65, this trial was bifurcated, and the trial judge submitted the punitive damages issue to the jury after a finding for compensatory damages. The jury awarded Natalie $900,000 in punitive damages. Citing State Farm Automobile Insurance v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003), the trial court found this award to be proper after remittitur, as this amount did not exceed nine times Natalie's compensatory damages, the guideline suggested in Campbell. ¶ 103. United argues the trial court erred in submitting the punitive damages issue to the jury for two reasons. The first of these is that Natalie was denied her motion for directed verdict. In its brief, United relies on this Court's holding in State Farm Mutual Auto Insurance Co. v. Grimes, wherein this Court held that after denial of a motion for directed verdict on a contract claim, this denial generally indicates that a punitive damage instruction should not have been submitted. State Farm Mut. Auto Ins. Co. v. Grimes, 722 So.2d 637, 640 (Miss.1998). Nevertheless, United failed to cite the very next sentence which held, However, this Court has, in recent cases, backed away from a blanket holding that a punitive damages instruction should be not submitted to the jury if a directed verdict was denied on the underlying contract. Grimes further held, This Court in [ Dixie Insurance v.] Mooneyhan[, 684 So.2d 574 (Miss.1996) ], 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.  Id. at 640 (emphasis added). Accordingly, United's argument that the trial judge erred in submitting the punitive damages issue to the jury due to the denial of the motion for directed verdict is without merit. ¶ 104. This Court has held, 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. Hollins, 830 So.2d at 1239 (citations omitted). ¶ 105. In Windmon v. Marshall , this Court, citing Murphree v. Federal Insurance Co., held, [I]f there is a finding that there was a reasonable arguable basis to deny the claim then the [appellant] is not entitled to have the jury consider any bad faith award against the insurance company. Windmon v. Marshall, 926 So.2d 867, 872 (Miss.2006) (citing Murphree v. Federal Ins. Co., 707 So.2d 523, 529 (Miss. 1997)). United claims its arguable basis for denial is the dispositive issue on which to decide that the trial court erred in its decision to submit punitive/extracontractual damages to the jury. ¶ 106. Where an insurance carrier denies or delays payment of a valid claim, punitive damages will not lie if the carrier has a reasonable cause for such denial or delay. Murphree, 707 So.2d at 529. United unpersuasively argues it had an arguable basis for denying the claim. United submits that at trial, it showed that question six on the policy should have been answered yes as to congestive heart failure. United submits it provided proof of this through two cardiologists (one of whom was the medical director for United) who testified, based on the medical records obtained by United, that Robert was treated for congestive heart failure in the three years preceding the application. United argued that the claim file showed Robert's family doctor treated Robert for ischemic cardiomyopathy and coronary artery disease, although neither condition is included in the application questionaire. ¶ 107. Natalie argues, to the contrary, that United did not have an arguable basis for denying the claim based on this Court's holding in Williams. In Williams, the application form was filled out by the agent for Andrew Jackson and the application did not include a heart condition which Williams stated he disclosed to the agent. Further, Williams claimed the agent misrepresented the provisions of the policy to him. See Williams, 566 So.2d at 1187. Williams held, Such misrepresentations created a jury issue of whether Andrew Jackson's denial was arguable. Id. Natalie asserts her facts are analogous to the facts in Williams because Robert revealed to Triplett, who filled out the application, that he had had bypass surgery and even showed her his scar. Further, Triplett failed to include this information on Robert's application. This Court has held, We have not hesitated to allow jury consideration of punitive damages in cases where an insurer denied a claim because of a material misrepresentation made by an agent. Lewis v. Equity Life, 637 So.2d 183, 186 (Miss.1994). ¶ 108. Natalie further disputes the evidence put forth by United to claim it had an arguable basis for denial. Natalie submits that, although United's medical director testified Robert's medical records indicated he had congestive heart failure, none of the documents which it based its denial on contained the words congestive heart failure, and that none of those documents state anywhere, nor contain any evidence, that Mr. Merrill was told by a doctor or anyone else that he had or had been treated for congestive heart failure. ¶ 109. These arguments by the parties clearly presented a factual dispute for which a jury determination was necessary and proper. [W]here the parties dispute the existence and legitimacy of the carrier's reason for delay or denial, these issues are ones of material fact, and the plaintiff is entitled to have a jury pass upon his claim for punitive damages if reasonable minds could differ as to the legitimacy of the carrier's reason. Murphree, 707 So.2d at 529 (citations omitted). Thus, the first requirement for submitting punitive damages to the jury, pursuant to Hollins, was met. See Hollins, 830 So.2d at 1239. ¶ 110. As to the second prong stated in Hollins, United provides only a citation and states it did not act with gross negligence or reckless disregard for Natalie's rights, but provides no argument. ¶ 111. Natalie submits to this Court that United acted with gross negligence and reckless disregard for her rights, as United did not conduct a proper investigation. Lewis held, `[T]he denial of a claim without proper investigation may give rise to punitive damages.' Lewis, 637 So.2d at 187 (citing Crenshaw, 483 So.2d at 276). Proper investigation, the Crenshaw court held, means obtaining `all available medical information relevant to [the policyholder's] claim.' Id. (citing Crenshaw, 483 So.2d at 272). United failed to undertake a full investigation of Natalie's claim until after it was denied. Furthermore, as recommended by United's legal department, United failed to obtain a statement from Triplett, as United attempted to contact her only once by phone. Natalie also argues the delay of the claim denial for 278 days shows negligence and reckless disregard for her rights. Lastly, Natalie states United acted recklessly when it sent two representatives to her home to collect premiums after her claim had been denied. Natalie stated it caused her to be upset when two men from United knocked on her door and upon Natalie asking them to leave, they presented to her a card from United which stated she still owed the $54.00 a month premiums. ¶ 112. Natalie submits that the amount of damages awarded was proper. United argues that extracontractual/punitive damages should not have been submitted to the jury at all. However, United did not contest the amount of damages awarded, either in its pleadings, or during oral argument before this Court. ¶ 113. Mississippi law recognizes four factors to be applied in determining the amount of punitive damages: 1) The amount should punish the insurer and deter it from engaging in similar actions in the future. 2) The amount should serve as a deterrent for others. 3) The amount should account for the insurer's financial worth. 4) The amount should compensate the plaintiff for her public service in holding the insurer accountable. Williams, 566 So.2d at 1190. ¶ 114. Natalie argues all elements have been met, that United should be punished for its actions, and that this award will be for the public good. Natalie further states this award is sufficient to punish United, and to deter it from taking similar actions, and that it compensates her for her public service in holding United accountable. Further, United's net worth was shown to be $184,638,000 after having paid dividends to its parent company of $128,000,000. ¶ 115. This award is less than five times the amount of compensatory damages and is less than one-half of one percent of United's net worth. Further, as stated by the trial judge in his opinion, this award is consistent with this Court's holding in Hollins, 830 So.2d at 1241-42, and with the holding of the United States Supreme Court in State Farm v. Campbell . Campbell held, [C]ourts must ensure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. at 426, 123 S.Ct. 1513. ¶ 116. Measurement of the amount is solely fettered to the jury's discretion. Williams, 566 So.2d at 1190. Furthermore, We will disturb a jury verdict on appeal only if it `is so contrary to the overwhelming weight of the evidence that to allow it to stand would sanction an unconscionable injustice.' Burr v. Miss. Baptist Med. Ctr., 909 So.2d 721, 730 (Miss.2005). ¶ 117. Additionally, [w]here punitive damages are awarded by the jury, attorney's fees are justified. The reasonableness of an attorney's fee award is determined by reference to the factors set forth in Rule 1.5 of the Mississippi Rules of Professional Conduct. Miss. Power & Light Co. v. Cook, 832 So.2d 474, 486 (Miss.2002) (internal citations omitted). The attorney's fees awarded to Natalie were reasonable, as stipulated by United, without waiving its argument that attorney's fees should not have been considered by the jury at all. ¶ 118. The final judgment comports with the law of this state and that of the United States, and was supported by substantial evidence.