Uninsured Motorist and Underinsured Motorist Coverage in Mississippi

The Fifth Circuit Court of Appeals overturned a summary judgment ruling by Hinds County Circuit Court Judge Wingate. The Plaintiff's bad faith claim was dismissed but the 5th Circuit found that State Farm's denying or delaying payment of an Uninsured Motorists policy was bad faith.

Plaintiff is entitled to attorney time and extra-contractual damages brought on as a result of the denial of uninsured motorist benefits.

State Farm's duty to pay these benefits did not stop as a result of plaintiff's filing of a lawsuit.

Text of the Opinion is attached below:
http://600camp.com/wp-content/uploads/2013/06/James-v.-State-Farm.pdf

Before STEWART, Chief Judge, and GARZA and ELROD, Circuit Judges.

CARL E. STEWART, Chief Judge:

Defendant-Appellee State Farm Mutual Automobile Insurance Co. (“State

Farm”) tendered the policy limit on its uninsured motor vehicle coverage to

Plaintiff-Appellant Faith James nearly thirty months after James was injured

in a car accident. James brought a bad faith claim under Mississippi law, and

the district court granted State Farm’s motion for summary judgment. For the

following reasons, we AFFIRM in part, REVERSE in part, and REMAND.

I. BACKGROUND

A. Facts

On February 3, 2006, James was involved in a car accident with Jarvis

Smith. The parties do not dispute that Smith’s negligence was the sole cause of

United States Court of Appeals

Fifth Circuit

F I L E D

June 21, 2013

Lyle W. Cayce

Clerk

 Case: 11-60458 Document: 00512283135 Page: 1 Date Filed: 06/21/2013No. 11-60458

the accident. James’s vehicle turned over at least once, and she was taken from

the scene in an ambulance to Wayne General Hospital. James received

numerous stitches for a head wound and testified in her deposition that she felt

significant pain in her chest, back, and head immediately after the accident.

At the time of the accident, James and/or her husband owned four State

Farm insurance policies. The policy on the vehicle James was driving at the

time of the accident included $5,000 in medical payments coverage, collision

coverage, and $10,000 per person in uninsured/underinsured motor vehicle

(“UM”) coverage. Each of the other three policies also provided $10,000 per

person UM coverage for a stacked total of $40,000 in UM benefits. The parties

do not dispute that James’s policies were in effect at the time of the accident.

After James promptly notified State Farm of the accident, State Farm quickly

paid out under its medical payments and collision coverage.

At issue is State Farm’s delay in paying James benefits under her UM

coverage. As the timeline of events contained in the record underpins our

analysis of James’s claims, we refrain from a lengthy factual recitation here and

instead present critical events in our below discussion. We now continue our

summary of this case’s background with an overview of its procedural history.

B. Procedural History

On October 23, 2007, James and her husband1

filed a complaint against

State Farm in federal district court on diversity grounds. On February 13, 2008,

James filed an amended complaint, which alleged that State Farm was

intentionally engaging in delaying tactics to avoid paying on the policies.

Because of this delay, the complaint alleged that State Farm had, inter alia,

committed the tort of bad faith.2 The complaint requested a jury trial and

1

James’s husband later voluntarily dismissed his complaint.

2

James also asserted that State Farm’s actions were “a breach of Defendant’s duties

of good faith and fair dealings and duty to fairly and promptly adjust claims under the

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sought $40,000 due under the policy, compensatory damages, and punitive

damages.

Over the next several months, the magistrate judge granted two motions

to compel against State Farm. On July 29, 2008, State Farm paid its stacked

UM policy limit of $40,000 to James. State Farm then filed a motion for

summary judgment on October 29, 2008. On May 6, 2011, the district court

granted State Farm’s motion for summary judgment, entered final judgment in

favor of State Farm, and dismissed the complaint with prejudice. No. 4:07-CV-

137, 2011 WL 1743421 (S.D. Miss. May 6, 2011). This appeal followed.3

II. DISCUSSION

On appeal, James makes two arguments related to her bad faith claim: (1)

State Farm withheld payment under one policy in order to coerce a lower

settlement for claims under other policies, and (2) State Farm unreasonably

delayed payment on the claim without a legitimate or arguable basis for doing

so.

A. Standard of Review

We review a district court’s grant of summary judgment de novo. Bradley

v. Allstate Ins. Co., 620 F.3d 509, 516 (5th Cir. 2010) (citation omitted).

Summary judgment is appropriate when “the movant shows that there is no

genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.” Fed. R. Civ. P. 56(a). A genuine dispute about a material

Plaintiffs’ policy.” Even if the pleadings indicate James may have asserted these as claims

separate from her bad faith claim, James has pressed only her bad faith claim on appeal.

3 On appeal, James appears to assert a separate breach of contract claim. The district

court apparently interpreted this claim as a sub-issue within James’s bad faith claim. On

appeal, James combines this claim with her argument as to the independent tort of bad faith.

Assuming arguendo that James intended to assert a breach of contract claim separate from

her bad faith claim, we hold this claim to have been waived on appeal because James points

to no policy provisions supporting this claim. See Fed. R. App. P. 28. Accordingly, we affirm

the district court to the extent that it granted summary judgment to State Farm on a breach

of contract claim.

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fact exists when the evidence presented on summary judgment is such that a

reasonable jury could find in favor of the non-moving party. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). We view all facts and evidence in the light

most favorable to the non-movant, here James. Bradley, 620 F.3d at 516

(citation omitted). When a defendant moves for summary judgment and

identifies a lack of evidence to support the plaintiff’s claim on an issue for which

the plaintiff would bear the burden of proof at trial, then the defendant is

entitled to summary judgment unless the plaintiff is able to produce “summary

judgment evidence sufficient to sustain a finding in plaintiff’s favor on that

issue.” Kovacic v. Villarreal, 628 F.3d 209, 212 (5th Cir. 2010) (citations

omitted) (quoting Thompson v. Upshur Cnty, Tex., 245 F.3d 447, 456 (5th Cir.

2001). “[T]he propriety of summary judgment [is] bound up in the burdens of

proof at trial . . . .” Steven Alan Childress & Martha S. Davis, 1 Federal

Standards of Review § 5.02, at 5-26 (4th ed. 2010) (citing Anderson, 447 U.S. at

247-48, 254).

We review the district court’s interpretation of state law de novo, and we

“give no deference to its determinations of state law issues.” Bradley, 620 F.3d

at 516 (citation omitted).

B. Applicable Law

Because James brought this case in federal court on diversity grounds,

Mississippi substantive law applies. See Erie R.R. Co. v. Tompkins, 304 U.S. 64

(1938). “To determine issues of state law, we look to final decisions of the state’s

highest court, and when there is no ruling by that court, then we have the duty

to determine as best we can what the state’s highest court would decide.”

Westlake Petrochems., L.L.C. v. United Polychem, Inc., 688 F.3d 232, 238 n.5 (5th

Cir. 2012) (citation omitted). “In making an [Erie] guess in the absence of a

ruling from the state’s highest court, this Court may look to the decisions of

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intermediate appellate state courts for guidance.” Howe ex rel. Howe v.

Scottsdale Ins. Co., 204 F.3d 624, 627 (5th Cir. 2000) (citation omitted).

1. Claim against insurer for bad faith

James asserts that State Farm committed the tort of bad faith when it

delayed payment on her UM claim. “[A] bad faith refusal claim is an

‘independent tort’ separable in both law and fact from the contract claim

asserted by an insured under the terms of the policy.” Spansel v. State Farm

Fire & Cas. Co., 683 F. Supp. 2d 444, 447 (S.D. Miss. 2010) (alteration in

original) (quoting Hartford Underwriters Ins. Co. v. Williams, 936 So. 2d 888,

895 (Miss. 2006)).

The Mississippi Supreme Court has recognized that claimants can bring

bad faith claims against and recover punitive damages from insurers who refuse

to pay out on a valid claim. See Caldwell v. Alfa Ins. Co., 686 So. 2d 1092, 1098

(Miss. 1996) (holding that denial of a valid insurance claim is critical for the

submission of punitive damages to a jury). Additionally, although Mississippi

courts are skeptical of such claims, they have permitted claimants to recover

damages on bad faith claims when resolution of an insurance claim is merely

delayed rather than ultimately denied.4 See, e.g., Travelers Indem. Co. v.

Wetherbee, 368 So. 2d 829, 834-35 (Miss. 1979)(affirming jury award for punitive

damages where insurer withheld payment for eight months); AmFed Cos., LLC

v. Jordan, 34 So. 3d 1177, 1191 (Miss. Ct. App. 2009) (affirming trial judge’s

decision to submit punitive damages issue to the jury in a delay-of-payment

case); Pilate v. Am. Federated Ins. Co., 865 So. 2d 387, 400 (Miss. Ct. App. 2004)

(“[T]here may be cases where a delay [of payment for one month] could possibly

be sufficient grounds for a bad faith claim.”); see also Essinger v. Liberty Mut.

4 Thus, here, we treat caselaw that refers to a “denial of a claim” as interchangeable

with a “delay of payment on a claim” unless the context indicates that the law pertains

specifically to a denial.

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Fire Ins. Co., 529 F.3d 264, 271 n.1 (5th Cir. 2008) (citation omitted) (“Inordinate

delays in processing claims and a failure to make a meaningful investigation

have combined to create a jury question on bad faith.”); but see Tutor v. Ranger

Ins. Co., 804 F.2d 1395, 1399 (5th Cir. 1986) (per curiam) (reversing jury’s

punitive damage award where payment was delayed during an ongoing dispute

between insured and insurer); Caldwell, 686 So. 2d at 1098 (affirming grant of

summary judgment where insurance company delayed payment for three

months in complex wrongful death claim, including a six-week delay after it

completed its investigation).

Our review of the case law illustrates that whether to submit a delay-ofpayment claim to a jury is a highly fact-sensitive analysis.

2. Compensatory and punitive damages

James seeks to recover compensatory and punitive damages for State

Farm’s payment delay. In Mississippi, compensatory5

and punitive damages are

related. To establish a claim for punitive damages in the context of a bad faith

claim, a party must first establish her entitlement to compensatory damages.

See Broussard v. State Farm Fire & Cas. Co., 523 F.3d 618, 628 (5th Cir. 2008)

(“Mississippi law does not permit parties to recover punitive damages unless

they first prove that they are entitled to compensatory damages.” (citations

omitted)). To do so, the trial judge must decide, as a matter of law, that the

insurer lacked ‘a reasonably arguable basis’ for denying the claim.” See id. at

628 (citation omitted) (quoting Andrew Jackson Life Ins. Co. v. Williams, 566 So.

2d 1172, 1186 n.13 (Miss. 1990); U.S. Fid. & Guar. Co. v. Wigginton, 964 F.2d

487, 492 (5th Cir. 1992) (citation omitted);Fulton v. Miss. Farm Bureau Cas. Ins.

Co., 105 So. 3d 284, 288 (Miss. 2012) (“When an insurer denies a claim without

an arguable basis . . . extracontractual damages may provide [a] form of relief.”

5 For purposes of this appeal, we use compensatory damages interchangeably with

consequential and extra-contractual damages.

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