Essinger v. Liberty Mut. Fire Ins. Co.

• Decision Date: 20 May 2008
• Docket Number: No. 07-60376.,07-60376.
• Citation: Essinger v. Liberty Mut. Fire Ins. Co., 529 F.3d 264 (5th Cir. 2008)
• 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

529 F.3d 264

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.

May 20, 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.

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

SOUTHWICK, Circuit Judge:

A policy-holder brought suit for punitive damages against its insurance company for a failure to recognize the effect of Mississippi law on the calculation of benefits that were owed. The district court granted the company's motion for summary judgment, finding no malice or gross negligence in the company's initial failure to understand how state law affected what was owed.

We affirm.

I. Facts and Procedural History

On August 5, 2002, seventeen-year-old Jolee Paige Essinger was killed in a single-car accident in which she was a passenger. Her parents are the plaintiffs in this litigation. The driver was Tabitha O'Brien, and there was another passenger, Christopher Gore. O'Brien lost control while negotiating a curve, causing the vehicle to overturn. O'Brien and Gore sustained injuries, while Jolee Essinger was pronounced dead at the scene.

This case involves two insurance policies. One was purchased by Kevin Speice, a resident of Pennsylvania, who owned the single vehicle involved in the accident. Speice maintained coverage under a State Farm policy providing $25,000 in liability coverage for bodily injury, $15,000 in uninsured motorist's coverage, and $10,000 in medical payments coverage.

Jolee Essinger was insured under a policy purchased from the Defendant Liberty Mutual by her parents, Patrick and Constance Essinger. The relevant coverage under the Liberty Mutual policy was $50,000 in uninsured motorist's coverage for each of the Essingers' two vehicles and $1,000 in medical coverage. The driver, O'Brien, had no insurance. Therefore, the claims made after the accident for insurance benefits solely involved the State Farm and Liberty Mutual policies.

On September 11, 2002, the Essingers notified Liberty Mutual of their daughter's accident and death. Mr. Essinger stated in his deposition that he called Liberty Mutual inquiring whether there were benefits to defray Jolee's funeral expenses. Liberty Mutual records indicate that Mr. Essinger called the "800 Center" and inquired whether "he is due anything under his policy." The following day, Liberty Mutual's Eathel James spoke to Mr. Essinger and mailed a letter advising the Essingers of the $1,000 of medical payments coverage. A medical payments claim form was included with the letter. Liberty Mutual's letter stated that "Your policy has a limit of $1000.00 per person."

On September 19, 2002, James again spoke with the Essingers and advised them to submit documentation about funeral expenses and any funds received from other insurance companies. The Essingers responded with relevant documents. Liberty Mutual issued the Essingers a check for $1,000 on October 14, 2002, and took no further action on the file at that time.

In the record is a letter from the Essingers, dated October 25, 2002, that was addressed to Eathel James at Liberty Mutual. The letter stated "My daughter's Estate is receiving $25,000 from State Farm. State Farm's insurance information is enclosed. Please let me know if the Estate is entitled to any further recovery from Liberty Mutual." Liberty Mutual's brief states that "there is no evidence that Liberty Mutual ever received this letter." The parties do not discuss whether this letter created some duty on Liberty Mutual's part. Thus, the fact issue of whether it was ever received is immaterial to the appeal.

On January 28, 2003, the Essingers' daughter, Rebecca Weyant, contacted Liberty Mutual to initiate an uninsured motorist claim. The following day, Liberty Mutual's Jennifer Gilcrease set up the claim, ordered the police report, and attempted to contact the Essingers at home. On January 31, 2003, Gilcrease sent the Essingers a letter with her contact information. Mrs. Essinger stated that during a phone call, adjuster Gilcrease asked whether the Essingers were going to retain counsel, then stated, "I don't care how many lawyers you get, you're only going to get $5,000." On the other hand, Gilcrease stated that Mrs. Essinger first asked if they should seek legal counsel, and Gilcrease responded that Gilcrease personally would not because an attorney would only take part of the settlement.

The Essingers initially retained attorney Bryan Vonder Bruegge, who contacted Gilcrease on February 11, 2003. Gilcrease told him that Liberty Mutual was prepared to pay $75,000. The attorney rejected the offer, asserting that Liberty Mutual owed $15,000 additional coverage but refused to explain why. On February 12, 2003, after internal review and contact with State Farm to confirm its coverage and offer of policy limits, Liberty Mutual sent a letter to the Essingers' attorney offering a settlement of $75,000, which it stated to be the applicable policy limits available to the Essingers. It is undisputed, now, that the policy limit was actually $90,000 because of the operation of Mississippi caselaw that we will discuss.

On March 5, 2003, Gilcrease called the Essingers' attorney again. The attorney said that Liberty Mutual had not offered the policy limits and refused to explain his calculation. Gilcrease sent the attorney a letter asking for his analysis of the policy limits, but the Essingers' attorney did not respond.

On March 28, 2003, Gilcrease contacted State Farm's attorney. She was told that the State Farm policy provided a limit of $15,000 on uninsured or underinsured motorist coverage, and a limit on liability for bodily injury of $25,000. As a preview of what is ahead, we will note that the $15,000 uninsured motorist coverage under the State Farm policy is central to the misunderstood Mississippi law.

On April 3, 2003, Liberty Mutual received a letter from Robert Tyler, the Essingers' new attorney who was retained to handle a claim for bad faith against Liberty Mutual. The letter states that Liberty Mutual had a duty to be aware of state law in a jurisdiction in which it issues automobile policies, including the method of stacking of uninsured motorist benefits and credits or offsets and the manner in which they are computed for liability payments. He advised Liberty Mutual that it was not his position to render legal advice to Liberty Mutual and that the company should confer with Mississippi counsel on the subject.

Gilcrease contacted Liberty Mutual's Mississippi counsel, Rick Norton, who called Tyler. After State Farm's coverage was confirmed, Liberty Mutual then became aware that $90,000 was the policy limit after a set-off, not $75,000. The Essingers, through counsel, accepted the $90,000 settlement offer but reserved the right to pursue claims against Liberty Mutual for its handling of the Essingers' claim.

On July 7, 2003, the Chancery Court of Harrison County, Mississippi, approved the settlement for the Essingers to receive $90,000 from Liberty Mutual and $25,000 from State Farm as administrators of Jolee's estate. Attorneys' fees were paid and the remaining funds were divided among seven wrongful death beneficiaries as determined by the Chancellor.

On December 29, 2005, the Essingers filed this action in the Circuit Court of Harrison County. Liberty Mutual removed the action to federal court, and filed a motion for summary judgment. The district court granted Liberty Mutual's motion for summary judgment on April 12, 2007. The Essingers timely appealed.

II. Discussion

The sole issue the Essingers present in this appeal is whether the district court erred in granting summary judgment in favor of Liberty Mutual. The Essingers phrase the issue as whether Liberty Mutual "can be ignorant of Mississippi law, adjust a Mississippi claim in violation of Mississippi law, and not be subject to a jury finding that it committed bad faith." We review the district court's grant of summary judgment de novo, viewing the facts and inferences in the light most favorable to the nonmoving party. Armstrong v. American Home Shield Corp., 333 F.3d 566, 568 (5th Cir.2003).

We examine first the error that Liberty Mutual committed in making its calculation of maximum liability, and then consider how that error fits under Mississippi caselaw on bad faith of insurance companies.

1. "Stacking"

The law that was misunderstood is called "stacking," a concept applicable to uninsured motorist coverage in insurance policies. Several Mississippi precedents have defined and refined the doctrine, as explained in detail in a learned treatise. JEFFREY JACKSON, MISS. INS. LAW & PRAC., §§ 18:16-18:23 (2007). We start with one of the statutory definitions of an "uninsured motor vehicle." The definition applies "when the liability insurer of such vehicle has provided limits of bodily injury liability for its insured which are less than the limits applicable to the injured person provided under his uninsured motorist coverage." Miss.Code Ann. § 83-11-103(c)(iii) (2008). We thus compare the liability limits of $25,000 in the State Farm policy purchased by the owner of the vehicle in which she was riding, to all the uninsured motorist coverage ("UM coverage") to which Jolee Essinger was entitled. Her estate could draw on the $15,000 in UM coverage provided in the vehicle owner's State Farm policy. Mississippi law provides that Jolee Essinger's estate was also entitled to the UM coverage in her parents'...