J & W FOODS CORP. v. State Farm Mut. Ins.

• Decision Date: 14 May 1998
• Docket Number: No. 96-CA-00136-SCT.,96-CA-00136-SCT.
• Citation: 723 So.2d 550
• Parties: J & W FOODS CORPORATION and Jerrie Lynn Kelly Hughes v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
• Court: Mississippi Supreme Court

723 So.2d 550

J & W FOODS CORPORATION and Jerrie Lynn Kelly Hughes v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.

No. 96-CA-00136-SCT.

Supreme Court of Mississippi.

May 14, 1998.

Rehearing Denied August 13, 1998.

James W. Nobles, Jr., Jackson, for Appellants.

William H. Creel, Jr., Edward J. Currie, Jr., Currie, Johnson, Griffin, Gaines & Meyers, Jackson, for Appellee.

En Banc.

McRAE, Justice, for the Court:

¶ 1. Before this Court is the question of whether the mother of a shareholder in a closely held corporation qualifies as an insured pursuant to an uninsured/underinsured motorist (UM/UIM) provision in an insurance policy where the corporation is the named insured. The record is insufficient to support judgment on the pleadings as granted by the county court and affirmed by the circuit court below. Further, because we take this opportunity to establish guidelines to be followed in interpreting policies like the one in the case sub judice, we reverse and remand.

I.

¶ 2. The accident giving rise to this cause of action occurred on March 23, 1994, when Julia Kelly was fatally injured while riding in a vehicle being driven by Edna Edwards. Both parties agree that Edwards's negligence caused the accident. Edna Edwards was an underinsured motorist at the time of the collision. Prior to her death, Julia Kelly lived with her daughter and son-in-law, Jerrie Lynn Kelly Hughes and Wayne P. Hughes, at their residence.

¶ 3. Jerrie and Wayne Hughes own one hundred (100) percent of J & W Foods Corporation, a Subchapter S (closely held) corporation which operates a Dairy Queen store in Jackson, Mississippi. They are the sole officers of the corporation. The Hugheses reside at 2096 Monaco Street in Jackson. J & W Foods is also domiciled at 2096 Monaco Street in Jackson. The Hugheses own a 1991 GMC Pickup truck titled in the corporation's name and insured by State Farm Automobile Insurance Company for Automobile Liability and Uninsured and Underinsured Motorists Bodily Injury Liability Insurance. It is under this policy that Jerrie Hughes made a claim for underinsured motorist coverage based on her mother's death.

¶ 4. Section III of the policy, Uninsured Motor Vehicle Coverages, states that "We [State Farm] will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle. The bodily injury must be caused by an accident arising out of the operation, maintenance or use of an uninsured motor vehicle." This section also defines an "insured" under the policy:

Who is an Insured—Coverages U and U1

Insured—means the person or persons covered by uninsured motor vehicle coverage.

This is:

1. you;

2. your spouse;

3. your relatives; and

4. any other person while occupying:

a. your car, a temporary substitute car, a newly acquired car, or a trailer attached to such a car. Such vehicle has to be used with the consent of you or your spouse; or

b. a car not owned by you, your spouse or any relative, or a trailer attached to such a car. It has to be driven by the first person named in the declarations or that person's spouse and with the owner's consent.

Such other person occupying a vehicle used to carry persons for a charge is not an insured.

II.

¶ 5. Under the Mississippi Uninsured Motorist Coverage provisions,

[t]he term "insured" shall mean 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. The definition of the term "insured" given in this section shall apply only to the uninsured motorist portion of the policy.

Miss.Code Ann. § 83-11-103(b).

¶ 6. Generally, the "named insured" refers only to the name actually appearing on the insurance policy. According to the language of the policy in this case, only J & W Foods Corporation was the named insured; no individuals were designated as named insureds. Further, the decedent could not be a spouse of the named insured. Additionally, the decedent was not occupying a vehicle belonging to the insured, nor was she occupying a vehicle not owned by the corporation but driven by the insured. Therefore, to be recognized as an insured, Julia Kelly must be included within the "your relatives" language of the UM/UIM provision.

¶ 7. This is a case of first impression before this Court. We begin with the basic principles in analyzing contracts between individuals and insurance companies. Before recovery is warranted, we must decide whether the decedent is an insured under the insurance contract. State Farm Mut. Auto. Ins. Co. v. Davis, 613 So.2d 1179, 1180 (Miss. 1992). The central factor in making this determination, which involves a question of law for this Court to resolve, is whether the policy provision under review is ambiguous. If this Court finds an insurance policy ambiguous, we must necessarily find in favor of coverage.

¶ 8. Initially, in interpreting an insurance policy, this Court should look at the policy as a whole, consider all relevant portions together and, whenever possible, give operative effect to every provision in order to reach a reasonable overall result. Continental Cas. Co. v. Hester, 360 So.2d 695, 697 (Miss.1978). Nevertheless, this Court interprets and construes insurance policies liberally in favor of the insured, especially when interpreting exceptions and limitations. State Farm Mut. Auto. Ins. Co. v. Latham, 249 So.2d 375, 378 (Miss.1971); American Hardware Mut. Ins. Co. v. Union Gas Co., 238 Miss. 289, 293, 118 So.2d 334, 335 (Miss. 1960). Mississippi law also recognizes the general rule that provisions of an insurance contract are to be construed strongly against the drafter. Nationwide Mut. Ins. Co. v. Garriga, 636 So.2d 658, 662 (Miss.1994); Williams v. Life Ins. Co. of Georgia, 367 So.2d 922, 925 (Miss.1979). This rule of insurance construction dictating that ambiguities be resolved in favor of the insured is sometimes referred to as the "contra-insurer rule," which is based upon the doctrine of omnia praesumuntur contra proferentem, literally meaning "all things are presumed against the offeror." See generally 2 Lee Russ and Thomas Segalla, Couch on Insurance, § 22.14 (3d ed.1995); Restatement (Second) of Contracts § 206 (1981).

¶ 9. An ambiguity in an insurance policy exists when the policy can be interpreted to have two or more reasonable meanings. See Insurance Co. of North America v. Deposit Guaranty Nat. Bank, 258 So.2d 798, 800 (Miss.1972)

. When the language of a policy is subject to more than one reasonable interpretation, this Court will apply a construction permitting recovery. State Farm Mut. Auto. Ins. Co. v. Scitzs, 394 So.2d 1371, 1372 (Miss.1981); State Farm Mut. Auto. Ins. Co. v. Taylor, 233 So.2d 805, 811 (Miss.1970). If there is an ambiguity within a policy of insurance, then the intention of the parties to the insurance contract should be determined based upon what a reasonable person placed in the insured's position would have understood the terms to mean. See Key Life Ins. Co. of S.C. v. Tharp, 253 Miss. 774, 781, 179 So.2d 555, 558 (1965). Where a clause of an insurance policy subject to dispute involves exceptions or limitations on the insurer's liability under the policy, this Court construes the policy even more stringently. Cf. Government Employees Ins. Co. v. Brown, 446 So.2d 1002, 1006 (Miss.1984) (adopting theory that, without clear and unambiguous language of limitation by insurer, insurer cannot limit recovery for benefits for which a insured paid a premium); Hartford Acc. & Indem. Co. v. Bridges, 350 So.2d 1379, 1381-82 (Miss.1977) (holding that because language seeking to limit liability of insurer was ambiguous and difficult to understand, aggregating of coverages was warranted).

¶ 10. In a previous uninsured motorist coverage case, this Court allowed coverage for individuals, even though the policy at issue was one in which a non-individual was the named insured. In Cossitt v. Nationwide Mut. Ins. Co., 551 So.2d 879 (Miss.1989), this Court found that a church which paid for uninsured motorist coverage on its buses should not have expectations any different from that of an individual policyowner with regard to stacking. Id. at 884. The insurance policy language in Cossitt was similar to that in the instant case, including voluntary and knowing reference by the insurer to "you or any family member" in a policy issued to a business. Id. This Court, along with both parties in the case, recognized that the injured individuals were insured under the church's policy, despite the fact that they were not actually "occupying" the insured vehicle. Id.

¶ 11. Given this discussion of the law, we cannot say that the record before us is sufficient to determine whether Julia Kelly was an insured under the policy held by J & W Foods Corporation. We really cannot tell from the record what the intent was of the stockholders when the insurance was purchased. Aspects of the relationship between the parties which supported our conclusions in other coverage cases are not reflected here, including whether the shareholders of the corporation actually intended to be covered under the UM/UIM provision, since the policy language specifically refers to "you," "spouse," and "relative," but the insured is a corporation wholly owned by the Hugheses. Was the insurance purchased to cover the family members under the corporation and using the family's address? Was this corporation intended to be run as a family business? Because J & W Foods is a Subchapter S corporation, it is different from other corporations where shareholders only own a few shares of stock. The corporation and its shareholders may have expected...