Cox v. Western Heritage Insurance Company, CIVIL ACTION NO. 1:97CV104-A (N.D. Miss. 5/4/1998)

• Decision Date: 04 May 1998
• Docket Number: CIVIL ACTION NO. 1:97CV104-A.
• Parties: FREDDIE COX, PLAINTIFF, v. WESTERN HERITAGE INSURANCE COMPANY, DEFENDANT.
• Court: U.S. District Court — Northern District of Mississippi

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FREDDIE COX, PLAINTIFF, v. WESTERN HERITAGE INSURANCE COMPANY, DEFENDANT.

CIVIL ACTION NO. 1:97CV104-A.

United States District Court, N.D. Mississippi, Eastern Division.

May 4, 1998.

MEMORANDUM OPINION

The court has before it the motion of defendant Western Heritage Insurance Company ("Western Heritage") for entry of summary judgment on its behalf in the above-captioned case. Plaintiff Freddie Cox is attempting to recover uninsured motorist benefits under a contract of insurance with Western Heritage. Plaintiff's wife, June Cox, was originally a plaintiff in this action, but she agreed to voluntarily dismiss her claims against Western Heritage, and the court directed that she be dismissed as a plaintiff.¹ The district court's jurisdiction over these federal claims arises under 28 U.S.C. § 1332 and rests upon diversity of citizenship of the parties. In accordance with the provisions of 28 U.S.C. § 636(c), the parties consented to have a United States magistrate judge conduct all the proceedings in this case, including an order for entry of a final judgment. Therefore, the undersigned has authority to decide this motion for summary judgment.

FACTUAL SUMMARY²

Plaintiff Freddie Cox owns and operates Cox Auto Sales, a used car dealership. In 1995 Mr. Cox sought to procure insurance coverage for the cars on his lot, and on the recommendation of other car dealers Cox contacted insurance agent B. J. Hall. (Defendant's Motion for Summary Judgment ("Motion"), Ex. C.) Cox completed the paperwork Mr. Hall gave him to obtain insurance with Western Heritage, and he mailed a $1045.24 premium check to Hall. (Id.) The effective dates of the policy were April 27, 1995 through April 27, 1996. The policy itself was a garage policy, and the contract listed the insurer as Western Heritage and the named insured as "Freddy Cox dba Cox Auto Sales." (Id., Ex. D.) Prior to expiration of the policy, Mr. Cox received a renewal notice together with an application from Hall, but the premium quoted for 1996-97 exceeded the $1045.24 premium for 1995-96. Cox testified in his deposition that he complained about the premium increase, and Hall told him to mail a check for the same amount as the 1995-96 premium. There is a factual dispute as to whether Cox mailed to Hall a completed application for insurance along with the premium check. On July 25, 1996, Cox and his wife, June Cox, were involved in an automobile accident with a vehicle driven by Barbara Kyle. (Id., Ex. A.) The accident was Kyle's fault, not that of the plaintiff or his wife. Subsequently, Mr. and Mrs. Cox submitted a claim to Western Heritage for uninsured motorist benefits,³ which Western Heritage denied. This lawsuit ensued.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c) (1996). The party seeking summary judgment carries the burden of demonstrating that there is an absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L. Ed. 2d 265 (1986). After a proper motion for summary judgment is made, the non-movant must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986); Brothers v. Klevenhagen, 28 F.3d 452, 455 (5^th Cir. 1994); Hanks v. Transcontinental Gas Pipe Line Corp., 953 F.2d 996, 997 (5^th Cir. 1992). If the non-movant sets forth specific facts in support of allegations essential to his claim, a genuine issue is presented. Celotex, 477 U.S. at 327. "Where the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538 (1986); Federal Savings and Loan, Inc. v. Krajl, 968 F.2d 500, 503 (5^th Cir. 1992). The facts are reviewed drawing all reasonable inferences in favor of the non-moving party. Matagorda County v. Russel Law, 19 F.3d 215, 217 (5^th Cir. 1994); King v. Chide, 974 F.2d 653, 656 (5^th Cir. 1992).

DISCUSSION

Defendant moves for summary judgment or partial summary judgment on four grounds: (1) No valid and binding insurance contract existed at the time of the accident because Cox did not effectively renew the policy for the 1996-97 term; (2) if the policy was, in fact, renewed, it nevertheless did not afford coverage to plaintiff June Cox;⁴ (3) the maximum recovery available to plaintiffs, via stacking, is $75,000; and (4) Cox is not entitled to punitive damages because he is not entitled to actual damages in the first place, and, even if he can recover actual damages, Western Heritage had an arguable basis for denying benefits and did not act with gross negligence in doing so. Cox argues, in response, that the court must find that an insurance contract existed, that stacking the coverages for twenty-six automobiles is appropriate, and that plaintiff is entitled to punitive damages under Mississippi law.

As to the first issue, the court finds that questions of fact preclude entry of summary judgment on this ground alone. Cox contends that he mailed to Hall a completed application for insurance coverage along with a premium as Hall instructed, thus he assumed that coverage existed for the 1996-97 period. Defendant disputes that Cox mailed a completed application, and the issue is also the subject of defendant's motion to strike a copy of a completed application which plaintiffs failed to disclose during initial disclosure of core information or in response to preliminary discovery requests.⁵ Western Heritage further contends, however, that even if Cox completed the application and mailed it, along with the premium, to Hall, that would be insufficient to afford coverage because an agent's receipt of an insurance premium pending submission of the application to the insurer for acceptance does not, standing alone, bind the insurance carrier. Gladney v. Paul Revere Life Insurance Co., 895 F.2d 238, 241 (5^th Cir. 1991) (citation omitted). Stated differently, the argument by Western Heritage is that in order for a contract to have arisen, the policy had to be received and accepted by Western Heritage itself. In fact, the application Cox allegedly completed bears this notation:

THIS APPLICATION IS NOT AN INSURANCE POLICY OR AN INSURANCE CONTRACT. Your agreement to these terms DOES NOT create an insurance contract or an insurance agreement. Completion of this application by a prospective insurance buyer is for the purpose of transmitting information only. Any agreement or contract binding insurance coverage must be done on a separate document. These terms MUST BE accepted by the insurance company before there is any insurance contract or insurance coverage and coverage will commence only upon the effective date of a separate contract binding insurance coverage (i.e., a policy or official binder form) issued by an agent authorized by the insurance company.

(Motion, Ex. D.) The court finds, however, that a jury could conceivably conclude, on the basis of the evidence currently in the record, that Western Heritage did receive the completed policy application or that Hall was the agent of Western Heritage for this purpose. See Ford v. Lamar Life Insurance Company, 513 So. 2d 880, 888 (Miss. 1987). Counsel for Western Heritage argues that Hall, even as an agent of Western Heritage, lacked authority to unilaterally waive the requirements of the underwriting contract and bind the company, but the extent of Hall's authority as an agent is a question best reserved for a jury. See Id. at 888.⁶ Summary judgment is inappropriate on the first ground.

Assuming a contract of insurance arose, Western Heritage argues that under the uninsured motorist provision of the contract, the dollar amount Cox would be entitled to seek, if any at all, via stacking of the coverages under the policy is limited to $75,000. This amount represents $25,000 in coverage provided for three (3) vehicles. The policy declarations bear the notation "23" in the space provided for "covered autos" under the uninsured motorist portion of the coverage.⁷ (Motion, Ex. D.) This number corresponds to the "covered auto" section of the garage coverage form, which defines the symbol "23" as:

OWNED PRIVATE PASSENGER "AUTOS" ONLY. Only the private passenger "autos" you own. This includes those private passenger "autos" you acquire ownership of after the policy begins.

Id. As this is a garage policy, it covers a continually fluctuating number of automobiles on the Cox Auto Sales lot at any given time. Western Heritage argues that uninsured motorist coverage was only afforded for the three cars on Cox's lot which bore dealer plates, and that this fact is established by the amount of the total premium paid for the uninsured motorist coverage. The declarations page shows the total premium paid for uninsured motorist coverage as $120. An affidavit from Thomas R. Gerlach, the president of what was formerly Delta General Agency, states that the $120 payment is actually an aggregate of three separate $40 premiums, which "represents coverage for three (3) vehicles." (Motion, Ex. I.) Plaintiffs argue that because there were twenty-six cars on the lot, and because they had purchased uninsured motorist coverage as a part of the policy, they should be able to stack uninsured motorist benefits for all twenty-six vehicles for a total potential recovery of $650,000.⁸

Resolution of this issue depends upon interpretation of uninsured motorist law in Mississippi. Recently the Mississippi Supreme Court decided United States Fidelity and Guaranty Company v. Ferguson, 698 So. 2d 77 (Miss. 1997), in which the court...