Holcomb Dunbar - North Mississippi Attorneys

Mississippi Insurance Law – Part 2

MISSISSIPPI Insurance-Related Law  — An A to Z Guide

Here’s the next post sharing our 2016 update.  If you like a full copy or have any questions, please email or call.

Bad Faith

 

Punitive damages are available to the insured in addition to the amount of the claim in some cases when the insurance company wrongfully refuses to pay a claim.  The jury may consider these damages only when the evidence has established that the insurer acted with (a) malice or (b) gross negligence or reckless disregard for the rights of others.  Scott v Transport Indemnity Co., 513 So. 2d 889 (Miss. 1987).  See also, Miss. Code Ann. § 11-1-65, regarding punitive damages.

 

If the insurer has a “legitimate or arguable reason” for denying the claim, the insurer cannot be liable for bad faith. Jenkins v. Ohio Cas. Ins. Co., 794 So. 2d 228 (Miss. 2001).  It is important to document all support and explanation for denying or delaying a claim.  See also Negligent Investigation.

 

Excess Verdicts – Settlement within Policy Limits

 

When a suit covered by a liability insurer is for an amount in excess of the policy limits, and an offer of settlement is made within the policy limits, the insurer has a fiduciary duty to look after the insured’s interest to the same extent as its own, and also to make a knowledgeable, honest and intelligent evaluation of the claim in consideration with its ability to do so.  A failure to do this may subject the carrier to all damages, even in excess of the policy.  Hartford Acc.& Indem. Co. v. Foster, 528 So. 2d 255, 265 (Miss. 1988).

 

Extra-contractual damages – Mistake or Clerical Errors

 

A carrier can be liable for certain expenses incurred by an insured even if the conduct falls short of bad faith or punitive conduct.  If an insurer’s failure to pay a claim was the result of a mistake or clerical error, the insurer may be liable for extra-contractual damages caused by anxiety resulting from the delay in payment.  Additional expenses including attorney’s fees which are reasonably incurred in an effort to correct the mistake may also be recovered. These kinds of damages are often referred to as “Veasley damages” after the case that created the rule.  Universal Life Ins. Co. v. Veasley, 610 So. 2d 290, 295-96 (Miss. 1992).

 

Negligent Investigation

 

An insurer has a duty to perform an adequate and prompt investigation of an insurance claim.  The denial of a claim without the proper investigation may give rise to punitive damages.  Gilbert v. Infinity Ins. Co., 769 So. 2d 266, 269 (Miss. App. 2000) (citing Bankers Life & Casualty Company v. Crenshaw, 483 So. 2d 254, 276 (Miss. 1985)).

 

“Obviously, some delay in evaluating claims is inevitable, legitimate and socially useful. Insurers are entitled, and in fact legally obligated, to investigate fully the legitimacy of claims, and some skepticism in evaluating claims is appropriate. Since an insurer has an obligation under Mississippi law to investigate claims, discharging that duty is not bad faith. However, an inadequate investigation of a claim may create a jury question on the issue of bad faith.”  Pilate v. American Federated Ins. Co., 865 So. 2d 387 (Miss. App. 2004) (quoting Jeffrey Jackson,  Mississippi Insurance Law § 12:5 (2001)).

 

At a minimum, the insurer must determine whether the policy provision at issue has been voided by state or federal court, interview its agents and employees to see if they have knowledge relevant to the claim, and make a reasonable effort to secure all relevant medical records before denying the claim.  Eichenseer v. Reserve Life Insurance Co., 682 F.Supp 1355, 1366 (N.D. Miss. 1988).

 

See also Delay of Payment of Claim

 

Delay of Payment of Claim

 

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.  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. 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. 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. 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 v. Alfa Ins. Co., 686 So.2d 1092, 1098 (Miss. 1996)(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).

 

A recent Federal Court case in the 5th Circuit analyzed a delay in payment of a UM claim by State Farm.  The court found several three to six month periods of delay in the three year claims history that State Farm had no arguable or legitimate basis for.  Accordingly, these gaps of unjustified delay and inactivity created a jury question of bad faith against the carrier.  See James v. State Farm, 743 F.3d 65 (5th Cir. 2014).

 

A delay is not attributable to an insurer where the insured or his counsel refuses to cooperate or provide the necessary information.  If an insured’s lawyer advises the insurer to stop its investigation pending his sending medical records, the resulting delay until the lawyer sends the records is attributable to the insured. However, as the burden is on the insurer to gather all necessary medical records, if the insurer fails to inform the lawyer of critical information necessary to further its investigation, the delay in obtaining that information is not attributable to the lawyer but to the insurer.  See James v. State Farm, 743 F.3d 65 (5th Cir. 2014).

 

Cancellation

 

Cancellation/Auto

 

The statutory cancellation scheme for auto policies applies once the initial policy has remained in effect for 60 days.  Miss. Code Ann. § 83-11-3(2).  Cancellation may be for any reason prior to the 60th day of the initial policy term as long as it is mailed or delivered by the insurer prior to that date.  Id.

 

Once the 60 day time period has passed an insurer may only cancel a policy based on (1) nonpayment of a premium; (2) the suspension or revocation of an insured’s, or regular operator’s, drivers license or motor vehicle registration, or (3) the insured’s failure to make timely payment of dues to an association or organization as required by the policy.  Miss. Code Ann. § 83-11-3(1).

 

Cancellation requires 30 days notice for any reason other than non-payment of premium.  Cancellation for non-payment of premium requires at least 10 days notice.  Miss. Code Ann. § 83-11-5.

 

Cancellation/Homeowners

 

Miss. Code Ann. § 83-5-28 applies the above general guidelines to cancelations, reductions, or non-renewals of liability insurance coverage, fire insurance coverage, or single premium multiperil insurance coverage.

 


Non-Renewal

 

Notice of non-renewal must be given at least thirty (30) days in advance. Miss. Code Ann. § 83-11-7.  Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal.  Miss. Code Ann. § 83-11-7.  Cancellation for non-payment of premium requires at least 10 days notice.  Miss. Code Ann. § 83-11-5.

 

Comparative Negligence

 

Mississippi is a pure comparative fault jurisdiction.  A claimant 99% at fault may recover 1% from a responsible party.  Damages will be diminished by the jury in proportion to the amount of negligence attributable to the person injured.  Miss. Code Ann. § 11-7-15.  See also, Joint and Several Liability.

Consortium

 

Damages for loss of consortium include conjugal rights, and a broad range of services performed by the spouse, in addition to intangible mental and emotional damages.  Coho Resources, Inc. v. McCarthy, 829 So. 2d 1, 20 (Miss. 2002) (citing Tribble v. Gregory, 288 So. 2d 13, 16-17 (Miss. 1974)).

 

In a loss of consortium action, the plaintiff’s recovery is reduced by the relative percentage of the injured spouse’s comparative negligence.  Choctaw, Inc. v. Wichner, 521 So. 2d 878 (Miss. 1988).

 

Losses of consortium claims are not separate occurrences under the terms of a standard insurance policy.   The claim of the injured person as well as the spouse are payable under the same “per person” limit.  Crum v. Johnson, 809 So. 2d 663, 666 (Miss. 2002).

 

Contribution

 

The right of contribution exists between those held jointly liable in a judgment.  A defendant will be liable for contribution to other joint defendants only for the percentage of fault assessed to him.  Miss. Code Ann. § 85-5-7(4).  The right of contribution exists between those held joint and severally liable due to defendants acting in concert.  Miss. Code Ann. § 85-5-7(6).

 

Cooperation and Assistance

 

A breach of the cooperation clause in an insurance contract is considered a material breach if prejudicial to the defense and relieves the insurer of the duty to defend or indemnify its insured under the policy.  State Farm Mut. Auto. Ins. Co. v. Commercial Union Ins. Co., 394 So. 2d 890, 893 (Miss. 1981).  However, non-prejudicial misrepresentations will be considered immaterial.  Id.

 

The insurer bears the burden of showing both attempted diligence in securing the insured’s cooperation, and failure of the insured to cooperate in a material matter.  Nationwide Mut. Ins. Co. v. Tillman, 161 So. 2d 604, 616 (Miss. 1964).

 

The insured may also breach the cooperation clause by misrepresenting facts surrounding the accident or by collusively assuming liability for the accident. Employers Mut. Cas. Co. v. Ainsworth, 164 So. 2d 412, 418 (Miss. 1964).  However, unintentional misrepresentations do not establish a breach of the duty to cooperate, especially if the insured promptly corrects the misrepresentations.  Id.

 

Courts

 

Mississippi has a two-tier appellate court system, the Mississippi Supreme Court and the Mississippi Court of Appeals.  Decisions of the Chancery, Circuit, and Court of Appeals may be appealed to the Supreme Court.  Supreme Court: 9 justices, Court of Appeals: 10 judges.  Circuit Court has a jurisdictional minimum of $200 and no maximum.  Miss. Code Ann. § 9-7-81.  County Court has a jurisdictional limit of $200,000.  Miss. Code Ann. § 9-9-21.  Justice Court has jurisdiction over small claims of $3,500 or less.  Miss. Code Ann. § 9-11-9.

 

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A word of caution is necessary whenever legal issues are at stake. The information contained in these posts is for general guidance on matters of interest only.  The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, there may be omissions or inaccuracies in information contained in this report or laws may have changed or been reinterpreted.  Accordingly, the information in this report is provided with the understanding that the authors are not herein engaged in rendering legal, tax, or other professional advice and services.  As such, it should not be used as a substitute for consultation with legal or other competent advisers.  Before making any decision or taking any action, particularly before denying any first-party claims, you should consult with your counsel or the attorneys at Holcomb Dunbar.

2018