Gallagher Bassett Services v. Jeffcoat, No. 98-CA-00192-SCT.

• Decision Date: 09 September 2004
• Docket Number: No. 98-CA-00192-SCT.
• Citation: 887 So.2d 777
• Parties: GALLAGHER BASSETT SERVICES, INC. v. Charles H. "Bo" JEFFCOAT, Jr.
• Court: Mississippi Supreme Court

887 So.2d 777

GALLAGHER BASSETT SERVICES, INC. v. Charles H. "Bo" JEFFCOAT, Jr.

No. 98-CA-00192-SCT.

Supreme Court of Mississippi.

September 9, 2004.

Rehearing Denied December 16, 2004.

Christopher Thomas Graham, Michael A. Heilman, attorneys for appellant.

Phillip J. Brookins, and John Leonard Walker, William Walker, Jackson, attorneys for appellee.

EN BANC.

SMITH, Chief Justice, for the Court.

¶ 1. This appeal involves the civil liability for compensatory and punitive damages of an insurance adjuster, Gallagher Bassett Services, Inc. (Gallagher), arising from its adjusting work on Charles "Bo" Jeffcoat, Jr.'s uninsured motorist claim.

¶ 2. On October 21, 1994, after unsuccessful attempts to recover under his employer's automotive insurance policy, Jeffcoat filed suit in Jeffcoat I. This suit named Cleo Bogan, Gallagher Bassett Services, Inc., and Reliance Insurance Company as defendants. The complaint sought compensatory damages from Bogan, as well as compensatory and contract damages from Gallagher and Reliance Insurance Company. It also requested punitive damages. The Hinds County Circuit Court entered a default judgment on the issue of negligence against Bogan because she did not defend against Jeffcoat's claims.

¶ 3. The contract claim in Jeffcoat I alleged that Gallagher failed, refused and neglected to: properly determine the amount of coverage available under the policy; promptly investigate and determine what portion of coverage the companies believe to be applicable the Jeffcoat's claims, and; pay or offer to pay any amount of the uninsured motorist coverage. The complaint alleged that Gallagher had offered only one excuse for its delay, namely, that it was unable to determine the number of vehicles covered under the policy.

¶ 4. On June 23, 1995, Jeffcoat filed suit in Jeffcoat II against Bogan, several entities affiliated with Reliance,¹ and Juana Love, the Gallagher employee who adjusted Jeffcoat's claim. This suit alleged that Reliance, Gallagher, and Love violated their respective contractual obligations to Jeffcoat by failing to: admit the amount of coverage available under the policy; investigate and determine the amount of coverage available on Jeffcoat's claim; and offer any excuse for their delay other than their inability to determine the number of vehicles covered under the policy. The complaint asserted that a fiduciary relationship existed between Reliance, Gallagher, and Jeffcoat. According to the complaint, after Jeffcoat made a claim for UM benefits, Gallagher and Love had a duty to promptly investigate and determine the amount of coverage available; pay such benefits; disclose all material facts to Jeffcoat; and to act in good faith and deal fairly with Jeffcoat. The suit alleged that Gallagher and Love willfully, wantonly, and with gross negligence breached their respective duties of good faith and fair dealing to Jeffcoat. Further, the suit alleged that Reliance, Gallagher, and Love conspired to defeat Jeffcoat's uninsured motorist claim and his negligence claims. The suit requested damages of $1,000,000 against Gallagher.

¶ 5. The trial court granted Jeffcoat partial summary judgment in Jeffcoat I, finding that the policy produced by Reliance and Gallagher was a true and correct copy and it included a provision for UM coverage. The Reliance entities subsequently settled with Jeffcoat for $1,850,000, and Jeffcoat by settlement agreement released those entities from any further claims.

¶ 6. Jeffcoat moved to consolidate the two lawsuits. After a hearing, the trial court consolidated the two cases and ordered Jeffcoat to file an amended complaint regarding his claims against the defendants. Jeffcoat filed his amended complaint, which removed the Reliance entities but retained Gallagher, Love, and Bogan as defendants. The amended complaint alleged that Gallagher's and Love's actions were grossly negligent, malicious, and/or evidenced reckless disregard for Jeffcoat's rights. Moreover, it alleged that Gallagher exhibited a pattern of false statements and representations to Jeffcoat and the court. The complaint alleged that Gallagher sought to fraudulently and unlawfully circumvent enforcement of certain Mississippi insurance laws. Jeffcoat alleged that as a result of Gallagher's unreasonable delay and failure to promptly determine and pay the amount of coverage under the policy, he experienced extreme emotional trauma and severe depression. Jeffcoat asserted that Gallagher's actions triggered post-traumatic stress disorder and that he would continue to suffer damages to his mind, body, and economic opportunity. His complaint requested punitive damages. After a bench trial on the issue of damages caused by Bogan's negligence, the trial judge awarded Jeffcoat $1,900,000. Jeffcoat testified that he did not collect any of this judgment.

¶ 7. The case went to trial, and the jury returned a verdict against Gallagher for $3,000,000 in actual damages and $500,000 in punitive damages. The jury returned a verdict in favor of Juana Love. After the close of Jeffcoat's case, Gallagher moved for a directed verdict. The trial court denied this motion. After entry of judgment in accordance with the verdict, Gallagher filed a motion for j.n.o.v. and new trial, as well as a motion for setoff. The court denied these motions as well.

FACTS

¶ 8. On June 23, 1992, Jeffcoat was driving an automobile owned by his employer, NHL. A car driven by Cleo Bogan collided with another vehicle driven by Mary King. This collision resulted in King's vehicle crashing into the side of Jeffcoat's vehicle. Jeffcoat sustained a herniated disk in his spine which necessitated surgery.

¶ 9. Bogan's vehicle was uninsured, and King was without fault. Therefore, Jeffcoat attempted to obtain payment under NHL's uninsured motorist insurance ("UM") policy. Planet Insurance Company was the insurer of the vehicle. Planet subsequently changed its name to Reliance National Indemnity Company ("Reliance"). Gallagher had contracts with NHL and Reliance to adjust claims under the policy. Thus, Gallagher was the separate, independent adjusting company that was contractually obligated to adjust this claim. Jeffcoat notified Gallagher of his claim on May 10, 1994, nearly two years after his accident. Upon receipt of the claim, Mary Cole, a Gallagher claims supervisor, assigned the claim to Juana Love, a claims representative.

¶ 10. Pursuant to its contract with Reliance, Gallagher was authorized to settle claims for $10,000 prior to the filing of a lawsuit. That is, prior to Jeffcoat's suit, Gallagher had the authority to settle with Jeffcoat for up to $10,000. Love stated at trial that there was no question that Jeffcoat's claim had a value in excess of $10,000. Love stated that it was, therefore, "just a matter of getting the medical bills to document the $10,000 and issue a check to Mr. Jeffcoat." Love opened the file and requested Jeffcoat's medical authorization. In July 1994, Jeffcoat sent Gallagher his medical bills and the signed medical authorization form. As of July 18, Love believed that she did not have all the pertinent bills or records.

¶ 11. In a subsequent telephone conversation, Jeffcoat's lawyer informed Juana Love that stacking is available in Mississippi. Love stated that she was familiar with stacking in a general sense, but she did not know how it applied in Mississippi. After learning that stacking was potentially available, Love called the insurance broker and Pam Mason at Reliance to determine how many vehicles were in the NHL fleet. To verify that stacking was available, Love looked at an automotive liability guide, which discussed anti-stacking provisions and stated that stacking is allowed in Mississippi. Based on the conversation with Jeffcoat's lawyer and what she learned in her own research, Love decided that she would need a legal opinion to determine if stacking applied to Jeffcoat's claim; that is, Love stated she "definitely needed someone who was familiar with [stacking in Mississippi] to basically tell [her] how this all applied." She stated that adjusters at Gallagher have access to local defense counsel in jurisdictions with which they are not familiar. At the time she received Jeffcoat's claim, Love had never handled a Mississippi stacking case, and it did not occur to her that stacking might be available in Mississippi until Jeffcoat's lawyer told her.

¶ 12. Love believed that she could not obtain a legal opinion on the issue of stacking until she found a "fleet schedule," which purportedly listed the number of vehicles in the NHL fleet. A section on the second page of the insurance policy lists NHL's covered vehicles. In that section, the "description" box reads "as per schedule on file with company." Love testified that this representation "gives the impression that there is a schedule somewhere that lists all of the vehicles on this particular policy." This was the representation she was relying on when seeking the fleet schedule. Cynthia Friedhoff, Love's supervisor, testified that the number of covered vehicles was not in the policy. Therefore, on September 28, 1994, Friedhoff contacted Reliance and requested the number of covered vehicles so that the policy limits could be determined. Friedhoff again requested this information from Reliance on December 9, 1994. In response, Richard Colantuono, Claim Account Manager at Reliance, stated that Reliance's underwriting department did not have any information on the number of vehicles in NHL's fleet. He expressed surprise that neither the broker nor the insured had that information. Colantuono stated in an affidavit that he was unable to find a schedule of vehicles covered under the policy. ¶ 13. In the premium endorsement of the policy, there was an estimated annual premium for the policy. In that section, there was reference to the "rate per power unit," and the "number of units" was listed as 3664. Friedhoff testified that ...