Booker ex rel. Lloyd's of London v. Pettey

• Decision Date: 24 August 2000
• Docket Number: No. 1998-CA-01439-SCT.,1998-CA-01439-SCT.
• Citation: 770 So.2d 39
• Parties: Steven Bruce BOOKER, on Behalf of CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, Signatory to Certificate No. HR-400213-S v. Holmes PETTEY and Holmes Pettey, Inc.
• Court: Mississippi Supreme Court

770 So.2d 39

Steven Bruce BOOKER, on Behalf of CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, Signatory to Certificate No. HR-400213-S v. Holmes PETTEY and Holmes Pettey, Inc.

No. 1998-CA-01439-SCT.

Supreme Court of Mississippi.

August 24, 2000.

Rehearing Denied November 9, 2000.

Joseph C. Gibbs, Clarksdale, Attorney for Appellant.

Richard B. Lewis, Ralph Edwin Chapman, Dana J. Swan, Clarksdale, Attorneys for Appellees.

BEFORE BANKS, P.J., WALLER AND DIAZ, JJ.

BANKS, Presiding Justice, for the Court:

¶ 1. Here we treat the cancellation of an insurance policy. If the insured is deemed to have canceled it, there is no coverage for the loss claimed by the injured party. If the insurer canceled, there is coverage. That determination turns on whether the procuring agent was in fact or law acting on behalf of the insurer when the policy was canceled. We conclude that the jury determination of this issue in favor of the insured is flawed because of a faulty instruction. Accordingly, we reverse and remand for a new trial.

I.

¶ 2. The complaint in this case was initially filed on February 3, 1986, in the Circuit Court of Coahoma County, Mississippi, by Holmes Pettey and Holmes Pettey, Inc. ("Pettey") against H.J. Riverside, Inc., Bolivar Delinting Company a subsidiary of H.J. Riverside, and Planters Gin Co., Inc. of Indianola.

¶ 3. During the farming season of 1985, Pettey purchased cotton seed from H.J. Riverside, Inc., with the representation that the seeds would germinate at eighty-six per cent (86%). The seeds failed to germinate, and Pettey suffered damages to his crop yield for that year. H.J. Riverside, Inc., is a corporation whose principal stock holder and manager is Robert "Bob" Jones. Riverside had a policy of insurance, through Lloyd's of London ("Lloyd's"), that provided for $100,000 coverage less a $5,000 deductible against the type of loss that Pettey suffered. Riverside's insurance was placed with Lloyd's through the Bobo Insurance Agency, a local insurance agent in Clarksdale, Mississippi, owned by Bob Bobo, Jr. The Bobo Insurance Agency secured the policy with Lloyd's through Lloyd's United States agent, Illinois R.B. Jones, Inc. The claims made policy was in force from March 1985 until March 15, 1986.

¶ 4. H.J. Riverside ceased operations in December of 1985 because of financial difficulties. On December 20, 1985, representatives of Bobo Insurance Agency and Bob Jones met at Riverside's place of business and canceled all of his insurance policies. One of the policies canceled was the policy that is subject of this appeal. Although the policy was canceled on December 20, 1985, the policy provided that the coverage period would extend for one year if the insurer caused the cancellation.

¶ 5. Pettey sued Riverside on February 3, 1986, for the negligent manufacture, sale, and delivery of the cotton seed. The Bobo Insurance Agency notified Lloyd's agent by letter of the suit on or about February 24, 1986.

¶ 6. Neither H.J. Riverside nor Bolivar Delinting made an appearance in this case. A default was taken against H.J. Riverside Inc. only on May 21, 1986. On or about July 15, 1986, H.J. Riverside, Inc. filed for bankruptcy and Pettey moved the bankruptcy court to lift the stay to proceed against Riverside's insurer, Lloyd's. Thereafter, the bankruptcy court lifted the automatic stay against H.J. Riverside permitting Pettey to proceed with the suit.

¶ 7. On or about March 14, 1988, the circuit court entered a default judgment against H.J. Riverside, Inc. in the amount of $264,375. Thereafter, the Plaintiffs issued a writ of garnishment against Underwriters at Lloyd's of London on the Certificate of Insurance that had been previously issued to H.J. Riverside and was canceled effective December 20, 1985.

¶ 8. This case proceeded as a garnishment action against Lloyd's. Initially this case was heard on cross motions for summary judgment. The trial court granted the plaintiffs' motion for summary judgment and denied Lloyd's motion for summary judgment. An appeal was taken to this Court, which reversed and remanded the case on October 17, 1996. Booker v. Pettey, 691 So.2d 1021 (Miss. 1996)(Not Published).¹

¶ 9. The case then proceeded to a jury trial resulting in a verdict in favor of the plaintiffs against Lloyd's in the amount of $95,000, the limit of the available insurance coverage, plus interest from and after March 14, 1988. Judgment was entered accordingly.

¶ 10. A motion for new trial or judgment notwithstanding the verdict was filed by the Underwriters, garnishee, which was denied by order of the circuit court dated August 18, 1998. This case is now appealed to this Court.

II.

¶ 11. In considering whether the trial court erred in denying judgment notwithstanding the verdict this Court will consider the evidence in the light most favorable to the appellee, giving that party the benefit of all favorable inferences that may be reasonably drawn from the evidence. Sentinel Indus. Contracting Corp. v. Kimmins Indust. Ser. Corp., 743 So.2d 954, 960 (Miss.1999). "If the facts so considered point so overwhelmingly in favor of the appellant that reasonable men could not have arrived at a contrary verdict, we are required to reverse and render." Id. On the other hand, if there is substantial evidence in support of the verdict, that is, evidence of such quality and weight that reasonable and fair minded jurors in the exercise of impartial judgment might have reached different conclusions this Court will affirm. Id.

¶ 12. On remand the jury was to decide whether there was a valid cancellation of the certificate of insurance. Also, this Court determined that there was enough evidence for a jury to decide whether Lloyd's received timely notice of the claim, which is a prerequisite to coverage. Booker v. Pettey, Slip op. at 11.

a.

¶ 13. Lloyd's argues that a condition precedent to its liability under the claims made policy was that Riverside must have notified Lloyd', during the period that the policy was in effect, that a claim was being made. Lloyd' argues that since no claim was ever made under the policy, it never became indebted to Riverside. Thus, it owed no debt to Riverside which could become the object of an effective garnishment action by Pettey.

¶ 14. A Seedsmen's Errors and Omissions Certificate provided by Lloyd's is a claims made policy or as denoted in the policy itself a "claims made certificate." Lloyd's notes that the policy provides under its covering provision as follows:

NOW, THEREFORE, this insurance, subject to the terms, exclusions and conditions hereof, will pay on behalf of the Assured all sums which the Assured shall become legally obligated to pay arising out of any claim or claims made against the Assured during the period stated in the said schedule; ...

PROVIDED ALWAYS THAT the Underwriters shall not be liable for any sum arising out of any claim unless the amount thereof exceeds the amount stated in the said Schedule as the deductible, which amount shall be deducted from such sum arising out of each claim and borne by the Assured at their own risk and the Underwriters shall only be liable for loss in excess of such stated amount ...

Booker noted that the deductible, as provided on the renewal certificate HR-400213-S, is $5,000.

¶ 15. Paragraph 3(A) of the insurance policy provides as follows:

It is a condition precedent of this insurance as to any obligation of the Insurer as respects each claim that the Assured shall give to the Underwriters through their representative, Messrs. Lord, Bissell & Brook 115 South La Salle Street, Chicago, Illinois 60603, immediate notice in writing of that claim made against it which is covered by this insurance and which exceeds or appears likely to exceed the amount of the deductible and shall give to the Underwriters such information with respect to such claim as the Underwriters may reasonably require.

(emphasis added).

Lloyd's argues that a claim was never made in accordance with the terms of Paragraph 3(A). Lloyd's notes that Bob Jones, President of Riverside at all relevant times, states that he never gave notice to Lord, Bissell & Brook, or requested that notice be given to them of the pendency of any possible claim by the plaintiff. Bob Bobo testified his first knowledge of a probable claim was upon receipt of attorney Ralph E. Chapman's letter in February 1986.

¶ 16. Lloyd's notes that when the method for calculating the earned premium is the short rate it means that the Assured canceled the policy. Here, the short rate was used so Lloyd's asserts that Pettey must have canceled the policy, not the insurer.

¶ 17. In December of 1985 when Riverside ceased doing business, Bob Jones met with representatives of the Bobo Insurance Agency, which aided him in obtaining coverage with Lloyd's. It is not clear who called the meeting but Jones acknowledged at trial that he requested cancellation of the Seedsmen's Errors and Omissions Certificate HR-400213-S. The claims made policy states that if the policy is canceled by the assured then it is canceled without any further coverage or what is commonly referred to as "tail coverage." Lloyd's states that the cancellation is complete, final and immediate. It notes that Riverside received a check through the Bobo Insurance Agency for the return of the premium signifying the termination of the coverage and based upon short rate cancellation in response to the Assured's request for cancellation. Lloyd's argues that this endorsement, effective December 20, 1985, and return of the premium on short rate basis plus negotiation of the check for the return premium manifested the intent of the assured and agreement of the underwriters to cancel the coverage immediately without any further obligations.

¶ 18. Bobo stated that he had no authority, as agent, to effect the cancellation of the certificate and that it was surrendered to him by Bob Jones. Bob Bobo sent it to Illinois R.B. Jones,...