Essinger v. Liberty Mut. Fire Ins. Co.

• Decision Date: 07 July 2008
• Docket Number: No. 07-60376.,07-60376.
• Citation: 534 F.3d 450
• Parties: Patrick Joseph ESSINGER, Sr., individually and as administrator of the estate of Jolee Paige Essinger, deceased; Constance Lorraine Essinger, individually, and as administrator of the estate of Jolee Paige Essinger, deceased, Plaintiffs-Appellants, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

534 F.3d 450

Patrick Joseph ESSINGER, Sr., individually and as administrator of the estate of Jolee Paige Essinger, deceased; Constance Lorraine Essinger, individually, and as administrator of the estate of Jolee Paige Essinger, deceased, Plaintiffs-Appellants, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant-Appellee.

No. 07-60376.

United States Court of Appeals, Fifth Circuit.

July 7, 2008.

Robert H. Tyler (argued), Tyler Law Firm, Biloxi, MS, for Plaintiffs-Appellants.

Clifford K. Bailey, III (argued), Wells, Marble & Hurst, Ridgeland, MS, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

ON PETITION FOR REHEARING

Before DAVIS and SOUTHWICK, Circuit Judges, and CLARK, District Judge.^*

SOUTHWICK, Circuit Judge:

We deny the petition for rehearing. We discuss only one of the issues that was presented in the petition, but all have been considered.

The Essingers argue that an issue we raised sua sponte in our original opinion should result in reversal and remand. We disagree. The initial opinion gave the broader context for our discussion of the punitive damage issue by pointing out that Mississippi caselaw provides for more than one form of damages when an insurance company has tortiously breached its contract. The equity in Mississippi's approach arises from the fact that an insurance company's financial default under a policy provision may be less than the cost to the insured of judicially forcing a correct payment. The level of extra-contractual damages an insured may be entitled to varies based on the nature of the conduct by the insurance company. JEFFREY JACKSON, MISS. INS. LAW & PRAC. § 13:21 (2007).

In practice, two separate categories of damages are recognized. Punitive damages are available for egregious conduct. The lesser level of damages may be appropriate where the insurer lacks an arguable basis for delaying or denying a claim, but the conduct was not sufficiently egregious to justify the imposition of punitive damages. See Universal Life Ins. Co. v. Veasley, 610 So.2d 290, 295 (Miss.1992). These damages are an intermediate form of relief between simply receiving incidental costs of suit (but not attorneys' fees), and getting punitive damages. Id. at 295 ("Additional inconvenience and expense, attorneys fees and the like should be expected in an effort to have the oversight corrected. It is no more than just that the injured party be compensated for these injuries.").

The Mississippi Supreme Court described the kind of conduct that gives rise to the lower level of damages:

Applying the familiar tort law principle that one is liable for the full measure of the reasonably foreseeable consequences of her actions, it is entirely foreseeable by an insurer that the failure to pay a valid claim through the negligence of its employees should cause some adverse result to the one entitled to payment.

Id. Thus, Mississippi law recognizes that negligent conduct of the insurance company can justify recovery of, for example, attorneys' fees; punitive damages require bad faith by the insurance company.

Even though attorneys' fees and certain other expenses are an alternative to punitive damages when bad faith has not been shown, the Essingers did not present that option for this court's review. Earlier in the controversy, that alternative was recognized. Starting with the release between the Essingers and Liberty Mutual, the right to pursue claims "including, but not limited to, breach of contract and/or bad faith," was reserved. Then, the Essingers' complaint in this suit asserted a claim for "tortious breach of contract" and sought actual as well as punitive damages. The Essingers' claim for extra-contractual damages was ignored in the parties' summary judgment arguments. Although Liberty Mutual acknowledged in the opening paragraph of its Motion for Summary Judgment that the Essingers sought both "punitive and other extra contractual damages," the remainder of its motion focused solely on whether the imposition of punitive damages would be appropriate. In response, the Essingers also focused only on punitive damages. The district court did the same.

We were faced with the same abbreviated arguments on appeal. The Essingers argued that an issue on appeal is whether Liberty Mutual can be "ignorant of Mississippi law ... and not be subject to a jury finding that it committed bad faith." Their brief focused only on whether the district court erred in rejecting their claim for punitive damages. Our original opinion on this appeal agreed with the district court that Liberty Mutual's actions did not justify the imposition of punitive damages. The Essingers on rehearing insist that we should remand to consider the lesser damages.

We noted in our original opinion that no appellate argument was made concerning a possible right to the extra-contractual damages of attorneys' fees and other expenses if the insurance company's conduct was not sufficiently egregious to support punitive damages. Because the conduct did not descend to that level, does our rejection of the only objection presented to us also require that we affirm on the remainder of what might have been argued?

The Essingers argue that another panel of this Circuit recently resolved that issue for us. Broussard v. State Farm Fire & Cas. Co., 523 F.3d 618, 628-29 (5th Cir. 2008). There, a jury awarded punitive damages, but that award was reversed on appeal. Id. at 631-32. The court then remanded for consideration of extra-contractual damages such as attorneys' fees even though neither party raised that issue on appeal. Id. The central problem with arguing that Broussard is relevant here is that we are concerned with the failure to argue error, i.e., we are facing the problem of waiver. The Broussard plaintiffs were not alleging error — they won in the district court. It was only after the appellate court found that the evidence was insufficient to sustain a jury finding of bad faith that the question became relevant of whether the evidence might at least support extra-contractual damages such as attorneys' fees. Had the court not itself noticed the point, it would have been a valid one for a petition for rehearing since that issue then...