Farmland Mut. Ins. Co. v. Scruggs

• Decision Date: 16 September 2004
• Docket Number: No. 2003-CA-00874-SCT.,2003-CA-00874-SCT.
• Citation: 886 So.2d 714
• Parties: FARMLAND MUTUAL INSURANCE COMPANY v. Mitchell SCRUGGS, Eddie Scruggs, Scruggs Farm Supply, Inc., Scruggs Farm Joint Venture, HES Farms, Inc., MES Farms, Inc. and MHS Farms, Inc.
• Court: Mississippi Supreme Court

886 So.2d 714

FARMLAND MUTUAL INSURANCE COMPANY v. Mitchell SCRUGGS, Eddie Scruggs, Scruggs Farm Supply, Inc., Scruggs Farm Joint Venture, HES Farms, Inc., MES Farms, Inc. and MHS Farms, Inc.

No. 2003-CA-00874-SCT.

Supreme Court of Mississippi.

September 16, 2004.

Rehearing Denied December 2, 2004.

J. Collins Wohner, James A. Becker, Jr., Jackson, Marc A. Biggers, Steven Cavitt Cookston, Greenwood, attorneys for appellant.

James Lawton Robertson, Jackson, Jim Waide, Lisa Scruggs, attorneys for appellees.

Before SMITH, C.J., CARLSON and GRAVES, JJ.

GRAVES, Justice, for the Court.

¶ 1. For centuries farmers have saved their planting seed. This is a process by which a farmer selectively "keeps back" some of his seed, particularly from those crops that have performed well. Instead of purchasing new seed every year, a savvy farmer can save time and expense and increase harvests by using saved seed. One simply takes seeds from the most productive plants and attempts to multiply them through successive years of re-planting.

¶ 2. Modern technologies have drastically changed all facets of farming — even the very crops that farmers grow. In 1996 the Monsanto Company introduced types of soybean and cotton seeds that were resistant to the popular herbicide Roundup, also manufactured by Monsanto. The seeds were "Roundup Ready" — genetically altered to resist the very effective herbicide. This drastically increased the ability of farmers to inhibit weed growth and increase crop harvests.

¶ 3. Yet complicated legal theory was intertwined with the seeds. The seeds were no longer simply "seeds" — they fell under the protection of two separate registered United States Patents, Nos. 5,633,435 (the "435" patent) and 5,352,605 (the "605" patent). Because the seeds had a high value due to their patented resistances, Monsanto did not just sell the seeds: it actually licensed them to seed companies and required those licensees to also license them to individual customers. The licenses were strict; purchased seed could only be used for one planting season and the seed could not be saved. See generally Monsanto Co. v. McFarling, 363 F.3d 1336, 1338-39 (Fed.Cir.2004).

¶ 4. Monsanto quickly discovered that many customers were not complying with the licensing requirements and began aggressive litigation to protect its product. The company's concerns of losing control of the product were grounded in fact: one source has estimated that 36 bags of seed could be generated from just one bag of the patented seed in just one year. Under that reasoning, one bag of patented seed might produce over forty-six thousand bags of seed in only three years of saving the seed. The users of the saved seed also realized a deep discount, since they could avoid the premiums Monsanto charged and also avoid the licensing fee, undercutting Monsanto's profits and the value of the 435 and 605 patents.

¶ 5. In 2001 Monsanto filed a complaint against Mitchell and Eddie Scruggs and their supply company, Scruggs Farm Supply, Inc., located in Lee County, Mississippi. Monsanto alleged the Scruggses obtained a supply of unlicensed Roundup Ready seed from an unauthorized source and planted it in 2000. The company alleged the Scruggses were seen spraying Roundup on a field planted with the non-licensed seed — but that the crops were not damaged. This was a telltale sign the seed was Roundup Ready. A sample of the unlicenced seed was obtained — retrieved without trespass from a public right-of-way — and laboratory analysis confirmed its identity as Roundup Ready.

¶ 6. Monsanto sued the Scruggses under seven theories of recovery. The first five were for the infringements of patents 435 and 605 and three other patents, allegedly committed by the defendants "with full knowledge and with notice [of the violation] of Monsanto's patent rights." Fifth, Monsanto alleged the intentional tort of conversion — that the "defendants intentionally and wrongfully exercised dominion, ownership and control over Roundup Ready technology." This action was allegedly "malicious and willful," to the point "Monsanto is entitled to punitive damages." Lastly, Monsanto alleged that the defendants were unjustly enriched through their actions.

¶ 7. That lawsuit is what triggered the case before us. In 1999 the Scruggses purchased insurance from Farmland Mutual Insurance Company, and later expanded their coverage to include a commercial general liability policy ("GCL") and an umbrella policy (collectively "the policy"). The GCL had a $2 million limit to liability, and the umbrella added another $20 million on top of that. The terms of the two parts of the policy are substantially the same.

¶ 8. The Scruggses notified Farmland of the pending suit, but were flatly denied coverage on the basis that their actions were intentional. The Scruggses filed this suit against their insurer in the Circuit Court of Lee County, and this case was appealed to us after the circuit court disposed of three motions. First, it denied summary judgment for Farmland, who urged that it was not required to defend the suit. Second, the trial court entered partial summary judgment for the Scruggses, determining that the Farmland policy did cover Monsanto's suit and that Farmland had a duty to defend. Third, the circuit court entered a preliminary injunction requiring Farmland to defend the suit and also pay all current and outstanding legal bills; at the time the preliminary injunction was entered that amount was roughly $300,000, and the order noted that another $500,000 might be incurred.

¶ 9. Determined that the injunction and partial summary judgment are incorrect and that the policy does not cover the Monsanto suit, Farmland appeals that decision to this Court, assigning three errors. Despite the technological complexity of the underlying facts, we only need to address one basic legal issue to resolve this matter: does the Scruggses' insurance policy cover the torts complained of in Monsanto's lawsuit? After a review of our jurisprudence and the language of the policy, we answer that question in the negative.

DISCUSSION

¶ 10. The proper construction of an insurance contract provision is a question of law which we review de novo. Radmann v. Truck Ins. Exchange, 660 So.2d 975, 977 (Miss.1995). We review a trial court's grant of a summary judgment motion de novo as well. Miller v. Meeks, 762 So.2d 302, 304 (Miss.2000). We have long held that when a contract is clear and unambiguous to its wording, its meaning and effect are matters of law. U.S. Fidelity & Guar. Co. v. Omnibank, 812 So.2d 196, 198 (Miss.2002); Sumter Lumber Co. v. Skipper, 183 Miss. 595, 608, 184 So. 296, 298 (1938) ("When the language of the deed or contract is clear, definite, explicit, harmonious in all its provisions, and free from ambiguity throughout, the court looks solely to the language used in the instrument itself, and will give effect to each and all its parts as written").

¶ 11. It is also bedrock law "that ambiguous terms in an insurance contract are to be construed most strongly against the preparer, the insurance company." Omnibank, 812 So.2d at 198; Caldwell v. Hartford Acc. & Indem. Co., 248 Miss. 767, 776, 160 So.2d 209, 212-13 (1964) ("The rule that the insurance policy prepared by the insurer must be construed more strongly against the insurance company, and that any fair doubt should be resolved in favor of the insured, is so well-settled in the law of insurance that we hesitate to cite any cases"). We must refrain from altering or changing a policy where the terms are unambiguous, even if there is a resulting hardship on the insured party. Titan Indem. Co. v. Estes, 825 So.2d 651, 656 (Miss.2002); State Farm Mut. Auto. Ins. Co. v. Scitzs, 394 So.2d 1371, 1373 (Miss.1981). Like any other contract, if an insurance contract is plain and unambiguous, it should be construed as written. Estes, 825 So.2d at 656; Scitzs, 394 So.2d at 1372; see generally Jeffrey Jackson, Mississippi Insurance Law & Practice § 1:7 (2001).

¶ 12. The Scruggses argue they are protected from Monsanto's suit by virtue of multiple sections in their Farmland insurance policy, namely the "Property Damage" section, the "Personal Injury" section, the "Duty to Defend" section, and the absence of pertinent exclusions and the inapplicability of the intentional acts exclusion. We turn to that policy to ascertain its terms.

The Policy

¶ 13. It is critical to understand the terms used between the parties in construing any contract. Many contracts are highly specific in defining terms to avoid the specter of ambiguity. That specter arises when a reasonable person could have understood the terms to have more than one reasonable meaning. Universal Underwriters Ins. Co. v. Ford, 734 So.2d 173, 176 (Miss.1999); J & W Foods Corp. v. State Farm Mut. Auto. Ins. Co., 723 So.2d 550, 552 (Miss.1998); Jackson, Mississippi Insurance at § 1:5. Simply because the parties disagree about the meaning of a provision of a contract does not make the contract ambiguous as a matter of law. Burton v. Choctaw County, 730 So.2d 1, 6 (Miss.1997). The Scruggses claim coverage under three sections of the policy: bodily injury and property damage coverage, personal injury coverage, and advertising injury coverage. Farmland denies any form of coverage.

Bodily Injury and Property Damage

¶ 14. Under the "Bodily Injury and Property Damage" section of the policy, Farmland agreed to "pay those sums that the insured becomes legally obligated to pay as damages, including punitive and exemplary damages, because of bodily injury or property damage to which this insurance applies... The bodily injury or property damage must be caused by an occurrence ... We will have the right and the duty to defend any suit seeking those damages."

¶ 15. "Bodily injury" is defined as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." The...