AMERICAN BANKERS'INS. CO. OF FL. v. Wells

• Decision Date: 06 December 2001
• Docket Number: No. 1999-CA-00523-SCT.,1999-CA-00523-SCT.
• Citation: 819 So.2d 1196
• Parties: AMERICAN BANKERS' INSURANCE COMPANY OF FLORIDA, Fidelity Financial Services, Inc. and Fidelity Acceptance Corporation, v. Linda M. WELLS and James E. Oliver.
• Court: Mississippi Supreme Court

819 So.2d 1196

AMERICAN BANKERS' INSURANCE COMPANY OF FLORIDA, Fidelity Financial Services, Inc. and Fidelity Acceptance Corporation, v. Linda M. WELLS and James E. Oliver.

No. 1999-CA-00523-SCT.

Supreme Court of Mississippi.

December 6, 2001.

W. Scott Welch, III, Robert M. Frey, Butler, Snow, O'Mara, Stevens & Cannada, PLLC, Jackson, Franklin G. Burt, Roland C. Goss, Charles E. Griffin, Jackson, James W. Craig, Ross F. Bass, Jr., William C. Brabec, Phelps Dunbar LLP, Jackson, Attorneys for Appellants.

William R. Couch, John M. Deakle, John M. Deakle, P.A., Hattiesburg, Forrest Marvin Morris, III, Anthony Sakalarios, Morris & Sakalarios, Hattiesburg, John Michael Sims, Heidelberg, Attorneys for Appellees.

EN BANC.

WALLER, Justice, for the Court:

¶ 1. Fidelity Financial Services, Inc.¹ is in the business of providing consumer loans. It financed the purchase of automobiles by both Linda M. Wells and James E. Oliver. Fidelity required both Wells and Oliver to obtain and maintain insurance to protect Fidelity's security interest in the automobiles. Under the terms of the security agreement, if the automobile became uninsured during the life of the promissory note, Fidelity had the right to purchase collateral protection insurance ("CPI") at a rate which is subject to approval by the State Department of Insurance. After the insurance was canceled on Wells's and Oliver's automobiles, Fidelity purchased CPI from American Bankers' Insurance Company of Florida. Claiming that Fidelity and American Bankers conducted business improperly, including charging an excessive rate for the CPI, Wells and Oliver filed suit in the Circuit Court of Claiborne County, and following a jury trial, were awarded judgments of $100,000 and $125,187.50, respectively, in compensatory damages and $75,000 each in punitive damages.

¶ 2. American Bankers, Fidelity Financial and Fidelity Acceptance Corporation appeal from the judgments in favor of Wells and Oliver. The appeal raises issues including whether: Wells's and Oliver's claims are barred by the statute of limitations, a claim for excessive premiums is barred by the filed rate doctrine, a claim for tortious conduct in the performance of a contract should fall under the purview of the Department of Insurance or in the courts of this State, Fidelity and American Bankers owed Wells and Oliver a fiduciary duty or the duty of good faith and fair dealing, Fidelity and American Bankers engaged in fraudulent behavior, and Wells and Oliver may recover for emotional distress.

¶ 3. We affirm in part, reverse and remand in part, and reverse and render in part.

FACTS

¶ 4. On June 4, 1990, Wells purchased a 1989 Subaru automobile for $7,791, financing the purchase with a 36 month loan from Fidelity. Wells's insurance was cancelled for failure to pay the premiums, and she received notice in August 1992 that Fidelity had placed CPI on her car. Faced with higher insurance rates than she had been paying, Wells purchased her own insurance coverage, whereupon the CPI purchased by Fidelity was canceled.

¶ 5. On June 7, 1993, James Oliver purchased a 1992 Ford Explorer and financed the purchase with a loan from Fidelity. The loan agreement similarly required insurance to be maintained against loss:

Insurance: The Collateral shall be at my risk. I agree that I will keep the Collateral insured at my expense against fire, theft, and accidental physical damage, until such time as my obligations secured by this security agreement are fully paid.... [I]n the event I fail to keep the Collateral insured you may purchase insurance, although you do not have a duty to do so. You may purchase vendor's single interest coverage protecting your interest only. Any sums paid by you for insurance, or paid with respect to any taxes or liens on any Collateral, shall be repaid by me to you upon your demand, or may be added to the unpaid Principal Balance of my loan.

¶ 6. Fidelity force-placed insurance on Oliver's automobile on two occasions. First, Fidelity placed CPI on Oliver's car for the period from November 1, 1993, to November 1, 1994. This policy was canceled prior to November 1, 1994, however, when Oliver presented proof that he had purchased his own insurance. Second, Fidelity placed CPI on Oliver's car for the period December 25, 1994, to March 3, 1995. This insurance, which was not placed until April, 1995, was canceled as of March 3, 1995, when Oliver provided proof of his own insurance.

¶ 7. Fidelity contracted with American Bankers for the CPI covering Fidelity's interest in the vehicles belonging to Wells and Oliver. On July 15, 1998, Wells and Oliver filed separate yet identical complaints against Fidelity and American Bankers, alleging breach of contract, bad faith, breach of fiduciary duties, fraud, civil conspiracy, negligence, and conduct warranting the imposition of punitive damages. The plaintiffs alleged that Fidelity and American Bankers had improperly used the opportunity of the plaintiffs' default to secure a profit for themselves. Specifically, they alleged that the defendants had charged excessive premiums for the CPI and had engaged in other allegedly fraudulent and inequitable conduct.

¶ 8. The jury trial of Wells and Oliver's consolidated claims began on February 1, 1999, and the jury returned a general verdict awarding compensatory damages of $100,000 in favor of Wells and $125,187.50 in favor of Oliver against Fidelity and American Bankers, jointly and severally. In the punitive damages phase of the trial, the jury awarded Wells and Oliver punitive damages in the total amount of $75,000 each: $25,000 against each of the two Fidelity defendants and $25,000 against American Bankers. Judgment was entered on February 10, 1999, and American Bankers and Fidelity, feeling aggrieved, timely appealed to this Court.

ANALYSIS

I. WHETHER THE TRIAL COURT ERRED IN FAILING TO DISMISS WELLS'S AND OLIVER'S CLAIMS AS BARRED BY THE APPLICABLE STATUTE OF LIMITATIONS.

¶ 9. Fidelity and American Bankers first argue on appeal that Wells's and Oliver's claims for breach of the implied covenant of good faith and fair dealing, breach of fiduciary duties, fraud, conspiracy, and punitive damages are barred by the statute of limitations. Wells and Oliver do not dispute that the three-year statute of limitations in Miss.Code Ann. § 15-1-49 (1995) is applicable to all of these causes of action. Levens v. Campbell, 733 So.2d 753, 758 (Miss.1999); Trammell v. State, 622 So.2d 1257, 1261 (Miss.1993) (tort actions arising from contractual obligations controlled by § 15-1-49). Both of the complaints were filed on July 15, 1998. Therefore, barring some applicable exception to the three-year statute of limitations, Wells and Oliver must demonstrate that their causes of action accrued on or after July 15, 1995.

¶ 10. Wells and Oliver advance a number of arguments for the tolling of the statute of limitations, the most persuasive of which involves tortious conduct in the force-placement of insurance reported in the case of Wells v. First Am. Bank West, 598 N.W.2d 834 (N.D.1999), in which the North Dakota Supreme Court, in reversing a dismissal by a lower court, held that the discovery rule tolled the running of the statute of limitations in a claim involving allegations of tortious conduct in the force-placement of CPI, as follows:

The district court ruled very narrowly. Applying the discovery rule, the placement of the policy could trigger the statute of limitations if Wells knew, or should have known, of the excess coverage that is the basis of his breach of contract and fraud claims. The court did not apply the discovery rule, and notwithstanding Wells's admission that the claim would be barred if the placement of the policy were dispositive, the placement of the policy is not dispositive in this case. There is no mention in the memorandum opinion regarding discovery or what Wells actually knew or should have known regarding when the insurance was force placed. We believe reasonable minds could disagree upon when Wells knew or should have known about his claims for breach of contract and fraud. Therefore, without findings regarding what Wells knew or should have known, designating the time of placement of the policy as the trigger for the statute of limitations was in error.

Id. at 839-40.

¶ 11. The North Dakota Supreme Court did not consider dispositive the fact that the plaintiff in that case had learned that insurance had been force-placed in 1990. The court instead noted that the plaintiff's contention was that the lender had force-placed insurance in excess of that permitted under the loan contract. Id. It concluded that the plaintiff did not learn of that excess force-placement until 1997 and held this date to be controlling for purposes of the discovery rule:

The relevant question is when did Wells discover he had a potential cause of action against the insurance company. When Wells purchased the vehicle, the agreement called for force placed insurance to protect the bank's interest in the property. When Wells failed to insure the vehicle, he received a letter informing him insurance was being purchased and the cost added to his loan. Wells, however, argues the force placed insurance exceeded his obligation under the terms of his loan agreement. He argues he was never told of the excess insurance, and the November 16, 1990, letter from First American stated the excess coverage was for "collision and comprehensive coverage only."

Id. at 838-39.

¶ 12. In the present case, allegations similar to those made by the plaintiff in the North Dakota case have been made: that (a) Fidelity backdated its policies; (b) the vehicles would have to be repossessed in order for the force-placed policy to pay any amount whatsoever or before a claim could be made; and (c) the insurance that was force-placed was based upon a gross over time balance of the loan as opposed to the net payoff of the loan. The issue thus...