United States Fidelity & Guar. v. Knight
Citation | 882 So.2d 85 |
Decision Date | 24 June 2004 |
Docket Number | No. 2001-CA-00334-SCT.,2001-CA-00334-SCT. |
Court | Mississippi Supreme Court |
Parties | UNITED STATES FIDELITY & GUARANTY COMPANY v. Elizabeth KNIGHT. |
Luther T. Munford, Jackson, Charles G. Copeland, Ridgeland, Rebecca L. Hawkins, Jackson, J. Wade Sweat, attorneys for appellant.
Dana J. Swan, Ralph Edwin Chapman, Clarksdale, attorneys for appellee.
EN BANC.
¶ 1. This is a bad faith insurance case brought by Elizabeth Knight against her uninsured motorist insurance carrier, United States Fidelity & Guaranty Company (USF&G), following an automobile wreck. Knight claims USF&G acted in bad faith by refusing to consent to a settlement offered to her by the alleged tortfeasor's liability carrier. A Coahoma County jury agreed, and awarded Knight $5,000,000 in punitive damages.
¶ 2. On December 9, 1988, Kenneth Boyett approached the intersection where Highway 322 formed a "T" with South State Street near Clarksdale, in Coahoma County. Boyett claims a couple of cars were ahead of him, stopped at the stop sign. As he attempted to stop, he found his brakes had failed,1 so he moved into the left (oncoming) lane to avoid hitting the rear end of the stopped cars, and proceeded through the stop sign and struck the vehicle driven by Knight.
¶ 3. At the time of the accident, Boyett was covered by an insurance policy issued by State Farm, which provided liability policy limits of $25,000.2 Knight was covered by an insurance policy issued by USF&G, which provided uninsured motorist coverage of $300,000. It also contained a "consent" clause which stated that the policy did not provide uninsured motorist coverage for bodily injury "sustained by any person, if that person or the legal representative settles the "bodily injury" claim without [USF&G's] consent."
¶ 4. The record provides little detail of the parties' activities for the five years following the accident. Apparently, having been put on notice of a potential claim, USF&G sent a representative to investigate at the end of 1992. The investigator's notes, offered into evidence, indicate that State Farm had previously made an offer to Knight's brother, who was acting as her attorney at the time,3 to pay the $25,000.00 liability policy limits in exchange for a release of Boyett.
¶ 5. Thereafter, Knight hired William G. Willard, Jr., as local counsel and, on June 28, 1993, filed a negligence suit against Boyett and USF&G, demanding compensatory damages of $325,000. Both defendants answered and denied liability, claiming that the accident was not due to negligence, but rather to the sudden, unexpected brake failure for which Boyett would not be liable. ¶ 6. Knight filed a motion for summary judgment on May 12, 1995, claiming Boyett was negligent and, thus, liable as a matter of law. The trial court denied the motion, holding that genuine issues of triable fact existed as to the issue of Boyett's liability.
¶ 7. On June 14, 1995, Willard4 sent a letter to USF&G's counsel, C. Richard Benz, Jr., which:
¶ 8. On behalf of USF&G, Benz responded on July 24, 1995, refusing to waive subrogation rights, and demanding that Knight comply with the policy provision which required her to do nothing to prejudice USF&G's subrogation rights. Benz pointed out that both liability and damages were contested.
¶ 9. Having said that, Benz communicated an offer from USF&G to Knight with the following provisions:
¶ 10. Knight's response to the offer was provided by Willard in an August 7, 1995 letter which stated that the offer was "unacceptable" and "in all probability contrary to Mississippi law." Willard opined that, since State Farm had offered $25,000 for a release of its insured, the ultimate value of Knight's claim was immaterial. Willard demanded that USF&G either consent to the settlement with State Farm, thereby waiving its subrogation rights, or pay the $25,000 with "no strings attached."
¶ 11. In its response provided on August 22, 1995, through its counsel, Marc A. Biggers, USF&G pointed out that Knight's refusal to accept the previous offer seemed inconsistent with a good faith belief that her claim exceeded $25,000.5 The letter further stated that, since Knight had threatened to "collect all damages directly from USF&G and not Mr. Boyett," USF&G was willing to deal directly with Knight, and would offer her $25,000, in exchange for "a dismissal of [sic] prejudice of a lawsuit as against USF&G, a release executed in favor of USF&G as well as an assignment from Ms. Knight of all rights to recover against Mr. Boyett." We find no response to this letter in the record.
¶ 12. On March 3, 1998, Circuit Judge John Hatcher entered an order bifurcating and separating the personal injury claim and the bad faith claim. Then, inexplicably, on March 8, 2000, Judge Hatcher entered an order which purported to be in response to a motion filed by defendant.6 The order "severed" the bad faith claim from the "remaining portions of Plaintiff's suit against Kenneth Boyett and [USF&G]," and ordered that the bad faith claim against USF&G be tried prior to the underlying tort claim.7
¶ 13. The bad faith claim was then set for trial,8 which began on September 18, 2000, and concluded on September 21, 2000, with a verdict for Knight, against USF&G, in the amount of Five Million dollars in punitive damages.
¶ 14. USF&G now brings this appeal, claiming numerous instances of reversible error. We will address only those necessary for disposition of the case.
¶ 15. The record in this case casts considerable doubt as to whether anyone clearly understood the nature of Knight's suit against USF&G. For instance, instruction P-11B, given by the court, provided that, in order to recover punitive damages, the plaintiff was required to prove "USF&G denied payment of her claim without an arguable reason." This case involved neither a claim nor the denial of one by USF&G.
¶ 16. As another example, beginning with her counsel's August 7, 1995 letter, Knight has consistently charged USF&G with bad faith for its "unreasonable" refusal to consent to the settlement offer made by State Farm. Nevertheless, the court granted jury instruction D-12, which stated:
The Court instructs the jury that the consent clause is not a mere notice clause. The duty of good faith and fair dealing does not require USF&G to give up rights it has pursuant to the contract. The consent clause is a legal right of USF&G under the insurance contract and USF&G's refusal to consent cannot be the basis for a finding of bad faith.
¶ 17. The record reflects considerable confusion at trial as to whether Knight was required to pursue (or indeed did pursue) compensatory damages, as a prerequisite to recovery of punitive damages. Knight's counsel initially claimed that Judge Hatcher's order (requiring the bad faith claim to be tried prior to the tort claim) eliminated the usual requirement to prove compensatory damages suffered by Knight as a result of the accident. This exchange then took place:
¶ 18. The record reflects no demand at trial for compensatory damages, no jury instruction which would guide the jury in awarding compensatory damages, and no award of compensatory damages.
¶ 19. Finally, the record casts doubt as to whether Knight carefully analyzed the counter offer from USF&G. Upon doing so, we find no set of circumstances under which she would have fared worse than any recovery she might have received at trial. We also fail to find any detriment9 to her to accepting USF&G's counter offer, as opposed to settling with Boyett. We cannot guess her reason for refusing the offer, and we certainly cannot see a basis for rejecting the offer out of hand, with no suggested changes or counter offer, and filing a "bad faith" lawsuit. Nevertheless, her reasons are immaterial at this point.
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