Court Opinion

ID: 9352494
Source: CourtListenerOpinion
Date Created: 2023-01-06 19:00:26.262803+00
Date Added: 2024-06-11T16:57:37.500589
License: Public Domain

Case: 21-60907        Document: 00516600297             Page: 1      Date Filed: 01/06/2023

               United States Court of Appeals
                    for the Fifth Circuit
                                                                                 United States Court of Appeals
                                                                                          Fifth Circuit

                                                                                        FILED
                                                                                  January 6, 2023
                                       No. 21-60907                                Lyle W. Cayce
                                                                                        Clerk

   DeMarkus Bradley, individually and on behalf of all
   others similarly situated; Angela Hawkins,

                                               Plaintiffs—Appellants/Cross-Appellees,

                                            versus

   Viking Insurance Company of Wisconsin,

                                               Defendant—Appellee/Cross-Appellant.

                    Appeal from the United States District Court
                      for the Southern District of Mississippi
                              USDC No. 3:20-CV-640

   Before Jones, Southwick, and Ho, Circuit Judges. 1
   Leslie H. Southwick, Circuit Judge.
           Two significant questions of Mississippi insurance law are posed in
   this appeal of a denial of coverage for an automobile accident. One is whether

           1
            Judge Ho would certify the questions presented in this appeal to the Mississippi
   Supreme Court. See, e.g., JCB, Inc. v. The Horsburgh & Scott Co., 941 F.3d 144, 145 (5th
   Cir. 2019).
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                                    No. 21-60907

   uninsured motorist coverage can be denied simply because the driver, who
   was the son of the insured, was not listed on the policy? We answer that
   question “no.” The other is whether the policy can be voided because the
   insured committed a material misrepresentation by failing in her application
   for insurance to name, as required, those of driving age who lived in her
   household? We answer that question “yes” and AFFIRM.
           FACTUAL AND PROCEDURAL BACKGROUND
          In March 2016, Angela Hawkins, DeMarkus Bradley’s mother,
   applied for an automobile insurance policy with Viking Insurance. The
   application required that certain other potential drivers be named:
          I understand that I must report to the Company all persons of
          legal driving age or older who live with me temporarily or
          permanently, including all children at college. I understand
          that I must report all persons who are regular operators of any
          vehicle to be insured, regardless of where they reside.
   The policy relevantly defined “regular operator” as a person old enough to
   drive who resides in the insured’s home.
          The application emphasized the importance of accuracy. One place it
   did so was to declare that Viking relied on the answers:
          We [Viking] rely upon you to provide us with accurate
          information. This policy, your application (which is made a
          part of this policy as if attached), and your Declarations Page
          include all the agreements between you and us relating to this
          insurance. If you have made any misrepresentations in your
          application or when subsequently asked, this policy may not
          provide any coverage.
   Further, the policy defined “misrepresentation” relatively broadly as
          providing information to us that is known by you to be false,
          misleading or fraudulent. This could be presented to us during

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            the application for coverage, or during the policy period. It
            must affect either the eligibility for coverage and/or the
            premium that is charged. Concealing information relevant to
            the application, or maintenance of coverage, is also
            misrepresentation.
   Finally, the policy stipulated that “[i]f you misrepresent any fact or condition
   that affects whether a risk is eligible or contributes to a loss, we reserve the
   right to rescind the policy and/or deny coverage.”
            At the time of Hawkins’ March 2016 insurance application, Bradley
   lived with Hawkins, was a resident of her household, and was of legal driving
   age. 2   Thus, Bradley was a regular operator of the Hawkins vehicles.
   Hawkins, though, failed to disclose Bradley on her insurance application as a
   regular operator. For policy renewals between March 2016 and the accident
   in April 2018, Hawkins never added Bradley to her policy.
            In April 2018, Bradley was operating Hawkins’ vehicle when he was
   struck by an uninsured motorist. After the accident, Bradley submitted a
   claim for uninsured motorist (UM) insurance. Hawkins’ policy contained
   UM coverage 3 and stated that Viking
            will pay damages for bodily injury which an insured person is
            legally entitled to recover from the owner or operator of an
            uninsured motor vehicle. The bodily injury must be caused by
            a car accident and result from the ownership, upkeep or use of
            an uninsured motor vehicle.

            2
           There is record evidence that DeMarkus Bradley was born in about 1994, and so
   would have been around 22 years old in 2016.
            3
              Hawkins rejected UM coverage for her initial Viking policy, issued in 2016. By
   the time of her 2018 renewal, which is the operative policy for the accident underlying this
   litigation, she had UM insurance.

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            An “insured person” under the Policy includes “a relative” of the
   named insured and “any other person occupying [the] insured car with the
   permission of” the named insured. Bradley therefore qualified as an insured
   person. However, the policy stated that UM coverage was unavailable when
   an unlisted regular driver is operating the vehicle:
            This [UM] coverage does not apply to bodily injury sustained
            by an insured person described by any of the following.
            ...
            (8) While your insured car is being operated by a regular
            operator who was not reported to us. The regular operator
            must be reported on the original application for insurance or
            otherwise disclosed to us and listed on your Declarations Page
            before the car accident.
            Viking denied Bradley’s claim because it found that Bradley was a
   regular operator of Hawkins’ vehicle but had not been disclosed. Hawkins
   admitted that Bradley was a driver living in her household who had not been
   disclosed. Viking subsequently force-placed Bradley on the policy.
            In October 2020, Bradley and Hawkins sued Viking, seeking damages
   for a wrongful denial of benefits.      Bradley and Hawkins asserted that
   excluding drivers not listed on the policy violated Mississippi’s statutorily
   prescribed UM coverage requirements.
            After discovery, both parties moved for summary judgment. The
   district court concluded that Viking’s unnamed driver exclusion was without
   effect. Bradley v. Viking Ins. Co. of Wis., 570 F. Supp. 3d 389, 394 (S.D. Miss.
   2021).     Bradley, “as a resident member of Hawkins’ household and as a
   person operating the vehicle with her permission, was an ‘insured’ for UM
   purposes and was not excluded from coverage by” the policy’s unnamed
   driver exclusion. Id.

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          Nonetheless, the district court denied coverage because Hawkins had
   failed to disclose in her initial application or in any renewal that Bradley was
   a regular operator of the insured vehicle.       Id. at 399.    Those failures
   constituted misrepresentations. Id. at 396. Under the policy, Viking could
   deny coverage if the insured “misrepresent[s] any fact or condition that
   affects whether a risk is eligible or contributes to a loss” and defined
   “misrepresentation” as information that is “known by you to be false . . .
   [and] affect[s] either the eligibility for coverage and/or the premium that is
   charged.”      Id. at    397    (quotation marks      omitted).      Hawkins’
   misrepresentation, the court found, affected the premium charged, and
   Viking therefore had the right to deny Bradley’s UM claim. Id. The court
   granted Viking’s motion for summary judgment. Id. Both parties appealed.
                                  DISCUSSION
          We review the grant of summary judgment de novo. Nationwide Mut.
   Ins. Co. v. Baptist, 762 F.3d 447, 449 (5th Cir. 2014). “When, as here, cross-
   motions for summary judgment have been ruled upon,” this court examines
   “each party’s motion independently.” Balfour Beatty Constr. L.L.C. v.
   Liberty Mut. Fire Ins. Co., 968 F.3d 504, 509 (5th Cir. 2020) (quotation marks
   and citation omitted).    Summary judgment is proper when “there is no
   genuine dispute as to any material fact.” FED. R. CIV. P. 56(a). In reviewing
   the record, “the court must draw all reasonable inferences in favor of the
   nonmoving party, and it may not make credibility determinations or weigh
   the evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150
   (2000).
          We address two issues. The first is the subject of Viking’s cross-
   appeal — does its unnamed driver exclusion violate public policy? The
   second is appellants’ issue — did Viking properly deny coverage based on
   misrepresentation?

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          I.      Unnamed driver exclusion
          Mississippi’s UM statutes are set forth in Mississippi Code Sections
   83-11-101 through 83-11-111. Section 83-11-101 requires that all automobile
   insurance policies provide an “insured” with coverage of damages caused by
   “the owner or operator of an uninsured motor vehicle,” unless a form
   rejecting all UM coverage is signed by the insured. Miss. Code Ann. §§ 83-
   11-101(1), (2), (4). 4 “Insured,” for purposes of UM coverage, includes
          the named insured and, while resident of the same household,
          the spouse of any such named insured and relatives of either,
          while in a motor vehicle or otherwise, and any person who uses,
          with the consent, expressed or implied, of the named insured,
          the motor vehicle to which the policy applies, and a guest in
          such motor vehicle to which the policy applies, or the personal
          representative of any of the above.
   Id. § 83-11-103(b). It is undisputed that Bradley, as a resident relative of
   Hawkins, is an “insured” under this provision. Our initial question is
   whether an insurer can limit this mandatory UM coverage through policy
   language. Viking on cross-appeal insists that it can.
           The Mississippi Supreme Court has not decided whether unnamed
   driver exclusions violate the state’s statutory UM scheme. It has addressed
   other exclusions, though.        Most helpful is an opinion from that court
   addressing a “named driver exclusion” in a policy which precluded coverage
   if the insured’s husband were driving her car. Atlanta Cas. Co. v. Payne, 603
   So. 2d 343, 344–45 (Miss. 1992). There, the husband of the insured was
   driving when the vehicle collided with an uninsured motorist; the insurer

          4
            An insured has the right to reject all UM coverage by executing a form approved
   by the state Department of Insurance. Miss. Code Ann. § 83-11-101(4). This appeal
   concerns whether a limited rejection can be imposed through a policy provision.

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   denied benefits.   Id.   The court stated that Mississippi’s UM statute
   “commands that the injured party shall be able to recover from the UM carrier
   ‘all sums which he shall be legally entitled to recover as damages for bodily
   injury or death from the owner or operator of an uninsured motor vehicle.’”
   Id. at 346 (quoting § 83-11-101). It summarized that “the overwhelming
   number of [UM exclusions] that this Court has considered have been found
   to be void and against public policy,” and the named driver exclusion was no
   exception. Id. at 347.
          Since the Mississippi Supreme Court voids policy language that
   excludes a specific individual from UM coverage, we have little doubt it
   would void a more expansive unnamed driver exclusion. Yet, Viking spots
   other language in Payne that, to its eyes, dictates the opposite conclusion.
   The language appears after the Payne court held that named driver exclusions
   are void, when it stated that “in order to limit uninsured motorist coverage,
   ‘it must be done in clear and unambiguous language.’” Id. at 348 (quoting
   Hartford Accident & Indem. Co. v. Bridges, 350 So. 2d 1379, 1381 (Miss. 1977)).
   The court continued by holding that “the burden of proof [is] on the insurer
   to show that such an exclusion or any other quasi-rejection of uninsured
   motorist insurance was a knowing and informed decision.” Id.
          We find that were we to interpret this odd section of Payne to mean
   that a partial exclusion of UM coverage will be valid so long as the policy
   provision is clear and adequately disclosed, the opinion’s earlier holding as
   to the named-driver exclusion would be eviscerated. Either the inconsistency
   of the two sections was not recognized by the Payne court or their consistency
   has been missed by this one. A federal district court attempted to explain
   Payne by relying on the fact that the statement in Payne about limiting
   coverage with unambiguous language was a quote from a precedent that
   addressed “stacking” of UM coverages. Godwin v. United States, 2016 WL
   6127405, No. 3:14-CV-00391, at *3 (S.D. Miss. Oct. 19, 2016) (discussing

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   Bridges, 350 So. 2d at 1381). As the Bridges court put it, “[t]he question of
   law is whether uninsured motorists coverage on three separate automobiles
   in one policy of insurance can be aggregated or stacked.” Bridges, 350 So. 2d
   at 1380. Thus, Godwin’s suggested meaning for Payne is that, as in Bridges,
   the minimum UM coverage must be provided, but clear policy language can
   block aggregating minimum coverage by stacking.                 Godwin, 2016 WL
   6127405, at *3. Perhaps, but prohibiting the multiplication of UM coverage
   if clear policy language is used is different than allowing an unambiguous
   named-driver exclusion to carve out an exception to minimum UM coverage.
   Of course, the Godwin court likely was not satisfied with its effort to explain,
   either.
             An excellent treatise on Mississippi insurance law does not suggest
   Payne modified the requirement to provide minimum UM coverage:
             The UM statute sets the minimum requirements for UM
             coverage. An insurer may provide more coverage, but not less,
             than that mandated by the statute. On the other hand, for
             coverage beyond what is required by the statute — so-called
             excess coverage — the parties to the insurance contract may
             freely agree to restrictions as they see fit (or, more realistically,
             as the insurer will impose).
   JEFFREY JACKSON AND D. JASON CHILDRESS, MISSISSIPPI INSURANCE LAW
   AND   PRACTICE § 18:6 (2022). Payne is cited as one of the examples of
   decisions striking policy provisions as unenforceable because they deny
   minimum UM coverage. Id. at n.8.
             We conclude, notwithstanding Payne’s reference to unambiguous
   policy language, that Mississippi law requires the following: if UM coverage
   is not rejected completely by the insured, the policy may provide more
   coverage, but not less, than the statutory minimum. Therefore, whatever

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   the confusing language from Payne means, it does not allow an unnamed
   driver exclusion to eliminate the mandatory UM coverage set by statute.
          II.    Misrepresentation
          The second issue is whether Viking properly denied UM coverage
   based on misrepresentation. The district court stated that “coverage is
   defeated by Hawkins’ failure to disclose in the application for coverage, or at
   any other time prior to the accident, that she was not the only member of her
   household of driving age and/or who had regular access to the insured
   vehicle(s).” Bradley, 570 F. Supp. 3d at 394. The court referred to policy
   language that Viking had the right to “deny coverage if the insured ‘made
   any misrepresentations in your application or when subsequently asked,’ and
   it defines misrepresentation as providing knowingly false information.” Id.
   at 396. The court wrote that “it is undisputed that [Hawkins] knew she had
   failed to provide required information” when she did not report to Viking all
   persons of driving age who lived with her. Id.
          The plaintiffs’ brief on appeal insists the district court erred by
   allowing Viking’s common law right to void an insurance policy due to
   material misrepresentations to defy “the UM Act that mandates all
   automobile liability insurance policies contain uninsured motorist coverage
   unless the coverage is rejected in writing.” The plaintiffs argue that because
   Bradley is an “insured” under the UM statute, Hawkins’ policy could not
   diminish his coverage.
          On this issue, we have guidance from a Mississippi precedent
   addressing required liability coverage. See Safeway Ins. Co. v. Dukes, 185 So.
   3d 977 (Miss. 2015). There, Tiffany Dukes applied for insurance with
   Safeway Insurance and completed an application that required her to disclose
   all “regular, frequent” drivers of her vehicle. Id. at 978. Robert Hudson, not
   disclosed on Dukes’s policy, was driving Dukes’s car when he injured a child.

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   Id. Safeway denied the claim, concluding that the policy was voidable due to
   the failure to list Hudson as a regular, frequent driver on her application. Id.
   In an action between the injured child and Hudson, Safeway moved for
   summary judgment, arguing that Dukes’s policy was void because she made
   a false representation on her application. Id. The trial court disagreed that
   the policy was void, concluding that the insurer was arguing for an exclusion
   from the minimum liability (not UM) coverage required by state statute. Id.
   at 979; see Miss. Code Ann. § 63-15-4.
          On appeal, the Mississippi Supreme Court saw the question
   differently. “[W]hether the terms of [Dukes’s] policy with Safeway covered
   the accident” under Mississippi’s statutory insurance scheme and “whether
   the policy, itself, was voidable” because of a false warranty, were two
   separate issues. Id. at 981 (quoting Jones–Smith v. Safeway Ins. Co., 174 So.
   3d 240, 242 (Miss. 2015)) (emphasis omitted). “[T]he question is whether
   the policy itself is voidable, not whether the terms of the policy covered the
   accident.” Id. at 981. Because “Dukes’s statement warranting that there
   were no other regular, frequent drivers is not literally true,” her policy was
   voidable and Safeway could properly deny coverage. Id. at 981.
          As in Safeway, Viking is not seeking to enforce an “invalid exclusion
   within a valid insurance policy.” Id. (quoting Jones–Smith, 174 So. 3d at 242)
   (emphasis omitted). Instead, it argues coverage can be denied based on
   misrepresentation. Though Safeway involved liability and not UM coverage,
   we conclude the same reasoning applies here. Under Safeway’s logic, the
   validity of an unnamed driver exclusion does not have any bearing on whether
   Viking has the right to void its policy based on misrepresentation.
          Before we consider how to apply Safeway, we address a distinction.
   The Safeway Insurance Company applications in the two cited cases each
   had language of warranty: “Applicant warrants that all regular, frequent

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   drivers” are listed. Id. at 978. The Mississippi Supreme Court stated that
   because the statement on the application that there were no other drivers was
   “a warranty and not a misrepresentation, the materiality of Dukes’s failure
   to disclose Hudson is not an issue.” Id. at 981 n.3. When, as here, there is no
   warranty in an application, “[t]he materiality of a representation is
   determined by the probable and reasonable effect which truthful answers
   would have had on the insurer.” Jones–Smith, 174 So. 3d at 245 (quoting
   Sanford v. Federated Guar. Ins. Co., 522 So. 2d 214, 217 (Miss. 1988)).
          Was there, then, a material misrepresentation? This court rephrased
   the standard just quoted by holding that an insurer can void a policy for
   material misrepresentation if an insurance application “(1) [] contain[s]
   answers that are false, incomplete, or misleading, and (2) the false,
   incomplete, or misleading answers [are] material to the risk insured against
   or contemplated by the policy.” Carroll v. Metro. Ins. & Annuity Co., 166 F.3d
   802, 805 (5th Cir. 1999) (emphasis in original). We cited a Mississippi
   precedent that held the particular misstatement there “might reasonably
   have influenced the company not to make the contract of insurance.” Id. at
   805 n.10 (citing Prudential Ins. Co. v. Russell’s Estate, 274 So. 2d 113, 116
   (Miss. 1973)). We then identified additional relevant effects by stating that
   “a fact is material if it might have led a prudent insurer to decline the risk,
   accept the risk only for an increased premium, or otherwise refuse to issue
   the exact policy requested by the applicant.” Id. at 805.
          “Misrepresentation” also was defined in the Viking policy:
   “providing information to us that is known by you to be false, misleading or
   fraudulent.” Thus, the policy requires knowledge of the falsity. The
   plaintiffs argue “the phrase ‘known by you to be false’ converts the inquiry
   from an objective analysis to a subjective one regarding Hawkins’ intent.”
   Because Hawkins testified she “did not intend to mislead or defraud
   Viking,” the plaintiffs contend there is a fact dispute as to whether there was

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   misrepresentation under the Policy. A standard definition of “knowledge”
   is “awareness or understanding of a fact or circumstance.” BLACK’S LAW
   DICTIONARY 950 (9th ed. 2009). Strictly as matter of definition, knowledge
   exists if an individual is aware of the relevant facts. 5 Intent, as distinguished
   from knowledge, is not a separate factual question.
           Here, a knowing misstatement in the application about the drivers in
   the household was material if it would have caused Viking either not to issue
   the policy or to increase the premium. The following is undisputed. Viking
   required Hawkins to disclose all persons of legal driving age who resided with
   her. Hawkins knew Bradley was living with her, was of driving age, and was
   not disclosed. The only evidence as to the effect of Bradley’s omission is
   from a Viking witness who stated the insured would have had a higher
   premium throughout the life of the policy. In other words, Viking would not
   have refused to insure had it known about the son, but it would have charged
   more. Indeed, that is what Viking did after the accident — force-placed the
   son on the policy and increased the premium.
           In analyzing whether Viking has shown enough, we start with the
   possibility that failure to disclose the additional driver may not have had an
   effect on Viking’s risk for a UM claim. We suggest that possibility because
   “UM coverage proceeds are paid to the injured insured to cover the
   insured’s own claims against uninsured third parties. Liability insurance
   covers claims against the insured by third parties; UM insurance covers
   claims of the insured against uninsured third parties.” JACKSON AND

           5
              Knowledge of existing facts can be successfully disputed. In one case, an insured
   omitted he had high blood pressure on his insurance application. Life Ins. Co. of Va. v.
   Shifflet, 359 F.2d 501, 503 (5th Cir. 1966). The facts showed the insured indeed had high
   blood pressure, but he had never been told so. Id. at 503–04. Under Florida law, the court
   held there was no “knowing” misrepresentation. Id. at 504 & 504 n.3. Here, Hawkins had
   actual knowledge of the requested facts.

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   CHILDRESS, MISSISSIPPI INSURANCE LAW § 18:1. Potentially, then, the
   safety record, age, driving abilities, and even the number of insured drivers
   would not affect the premium charged for insuring against the risk that a
   future, as yet unidentifiable, at-fault driver of an uninsured vehicle would
   collide with the insured. Then again, maybe it would. Viking’s evidence,
   though, did not address the risk in that way. The UM coverage was a separate
   component of the premium, but the record is silent as to whether the UM
   component would have changed if another driver were added to the policy.
   The only evidence was that the premium for the policy would have been
   increased because of the additional driver.
           Though we pose this question, there has been no argument here that
   Viking’s evidence was insufficiently focused. In addition, though we find no
   Mississippi state court decisions, this court has held that under that state’s
   law, the specific coverage sought by an insured need not “be related to risks
   concealed by an insurance applicant in order for the concealed facts to be
   material.” Carroll, 166 F.3d at 806 n.18 (quoting Wesley v. Union Nat’l Life,
   919 F. Supp. 232, 234 (S.D. Miss. 1995)). 6 In the absence of any argument
   along these lines, we accept that materiality is not affected by the relationship
   between the false statement and the specific coverage being sought in
   litigation. It is enough that the falsity was material to the decision of the
   company to issue the policy at the agreed price.
           Consequently, Viking could have voided the policy. Of course, Viking
   did not do so. Instead, it chose to deny coverage. By not voiding, Viking’s

           6
              This also seems to be the majority rule: “In most jurisdictions, a
   misrepresentation is considered material and sufficient grounds for rescission or denial of
   a claim regardless of whether the fact misrepresented has any causal connection with the
   death or loss involved in the claim.” John Dwight Ingram, Misrepresentations in Applications
   for Insurance, 14 UNIV. MIAMI BUS. L. REV. 103, 111 (2005).

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   policy remained in effect. Do the statutory and judicial prohibitions against
   limiting minimum UM coverage therefore still apply? We have been shown
   nothing from Mississippi caselaw to assist in deciding whether the rather
   demanding UM caselaw would apply to a voidable, but retained, insurance
   policy. Importantly, though, and to use the vernacular, this does not seem to
   us to be a situation in which the insurance company is trying to have its cake
   and eat it too. That is because the benefit to Viking was relatively small —
   maintaining a policy on one person’s vehicles. Also, the insured received
   some benefit by still having insurance. Though ambiguities in insurance-
   policy terms are interpreted in favor of the insured, Mississippi Farm Bureau
   Cas. Ins. Co. v. Powell, 336 So. 3d 1079, 1084 (Miss. 2022), we are dealing here
   with ambiguity in what Mississippi law would be on these unusual facts.
   Seeking a reasonable legal interpretation will be our approach.
          We conclude that if an insurer declines to exercise the greater power
   to void a policy, it still retains the lesser power to exercise a contractual right
   to deny coverage.       The Safeway court was concerned that material
   misrepresentations undermine insurers’ ability to make proper assessments
   of risk and set premiums. Safeway, 185 So. 3d at 980. Those same concerns
   are present here and are not altered by the fact that Viking chose not to void
   the policy. Accordingly, Viking had the right to deny the plaintiffs’ claim.
          AFFIRMED.

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