Guideone Elite Ins. Co. v. Ministries
| Decision Date | 23 January 2017 |
| Docket Number | No. 15-60915,15-60915 |
| Parties | GUIDEONE ELITE INSURANCE COMPANY; GUIDEONE INSURANCE COMPANY, Plaintiffs - Appellees Cross-Appellants v. MOUNT CARMEL MINISTRIES; ALPHA CHRISTIAN SCHOOL; SEAWAY BANK AND TRUST COMPANY, Defendants - Appellants Cross-Appellees |
| Court | U.S. Court of Appeals — Fifth Circuit |
Appeals from the United States District Court for the Southern District of Mississippi
Before KING, OWEN, and HAYNES, Circuit Judges.
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After a tornado severely damaged properties in Hattiesburg, Mississippi, this insurance coverage dispute ensued. The district court concluded on summary judgment that coverage was in place at the time of the tornado, and then awarded damages after a four-day bench trial. The insurer appeals the district court's conclusions that its notice of cancellation of the insurance policywas ineffective, and therefore, there was coverage at the time of the loss. The insured and its mortgage holder appeal various aspects of the district court's damages award, as well as several evidentiary rulings. Finding no reversible error by the district court, we AFFIRM.
Mount Carmel Ministries, which owns and operates the Alpha Christian School in Hattiesburg, Mississippi (collectively, Mount Carmel), purchased a commercial property insurance policy, effective July 7, 2012 to July 7, 2013 (the policy), from GuideOne Elite Insurance Company (GuideOne). On October 2, 2012, Seaway Bank and Trust Company (Seaway), Mount Carmel's mortgagee, initiated foreclosure proceedings against Mount Carmel due to Mount Carmel's default on its mortgage note. GuideOne, after learning of the impending foreclosure, sent Mount Carmel a notice canceling the policy. The notice was dated October 29, 2012, and stated an effective date of cancellation of November 20, 2012—22 days later.
Mount Carmel and Seaway entered into a forbearance agreement on November 7, canceling the foreclosure sale. When Seaway discovered that GuideOne had canceled the policy, Seaway purchased force-placed coverage1 for Mount Carmel's buildings, effective January 7, 2013 to February 7, 2013. On January 29, 2013, Mount Carmel asked GuideOne to reinstate the policy, but GuideOne did not immediately respond. Though Seaway allegedly informed Mount Carmel that it would continue purchasing force-placedinsurance, Seaway apparently mistakenly failed to renew the coverage after February 7.
On February 10, 2013, after the force-placed coverage had expired, a tornado struck Hattiesburg, severely damaging several of Mount Carmel's buildings. The evidence shows that the next day, GuideOne employees communicated amongst themselves about the tornado and Mount Carmel's pending request for reinstatement. On February 18, GuideOne denied the request for reinstatement, explaining that the policy "was canceled on November 20, 2012." The pastor of Mount Carmel then signed an affidavit stating that Mount Carmel had no insurance other than force-placed insurance. However, on April 22 and 23, Seaway and Mount Carmel sent GuideOne letters asserting that the cancellation of the policy was ineffective.
GuideOne then filed suit in the District Court for the Southern District of Mississippi seeking a declaration that the policy was cancelled and not in force on the date of the loss. Mount Carmel and Seaway each filed defenses and counterclaims. Each party then moved for summary judgment. Seaway and Mount Carmel argued that GuideOne's cancellation of the policy was ineffective because it did not provide sufficient notice of cancellation under either Mississippi law or the terms of the policy.2
The district court granted Mount Carmel's and Seaway's motions for partial summary judgment on the issue of coverage and partially granted GuideOne's motion for summary judgment on the issue of punitive damages. The district court first determined that GuideOne's notice of cancellation wasineffective under both the Mississippi statute and the policy, and therefore, the policy was in effect at the time of the tornado. The district court also found that GuideOne breached the policy by providing insufficient notice of cancellation and granted summary judgment to Seaway on its breach of contract counterclaim. However, it determined that GuideOne had an arguable basis for denying coverage at the time, and thus, punitive damages were not proper under Mississippi law. It accordingly partially granted GuideOne's motion for summary judgment with respect to Mount Carmel's counterclaims for punitive damages.
Following the court's ruling, the parties proceeded to a four-day bench trial to determine the amount of damages. In a written order following the trial, the district court awarded Mount Carmel and Seaway $1,693,035 in damages, representing what would have been the cost to repair or replace the property roughly six weeks after the tornado, less depreciation. Mount Carmel and Seaway had sought a much higher amount to compensate for the severe deterioration in the buildings that occurred after the initial damage estimate.
Mount Carmel and Seaway appeal, challenging various aspects of the district court's damages award. Mount Carmel also appeals various evidentiary rulings. GuideOne cross-appeals the court's determination that the notice of cancellation was ineffective and thus the policy coverage was in place at the time of the tornado.
We review the district court's grant of summary judgment de novo, applying the same standard as the district court. Rogers v. Bromac Title Servs., L.L.C., 755 F.3d 347, 350 (5th Cir. 2014). Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P.56(a). We also review the district court's interpretation of an insurance policy de novo. Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419, 428 (5th Cir. 2007). We review the district court's damages award for clear error. Delahoussaye v. Performance Energy Servs., L.L.C., 734 F.3d 389, 394 (5th Cir. 2013). "To reverse for clear error, this court must have 'a definite and firm conviction that a mistake has been made.'" Id. at 392 (quoting Canal Barge Co. v. Torco Oil Co., 220 F.3d 370, 375 (5th Cir. 2000)). We review the district court's evidentiary rulings and discovery orders for abuse of discretion. Gen. Elec. Co. v. Joiner, 522 U.S. 136, 141 (1997). "A trial court abuses its discretion when its ruling is based on an erroneous view of the law or a clearly erroneous assessment of the evidence." Brown v. Ill. Cent. R. Co., 705 F.3d 531, 535 (5th Cir. 2013) (quoting Knight v. Kirby Inland Marine, Inc., 482 F.3d 347, 351 (5th Cir. 2007)). Finally, we generally review the district court's denial of prejudgment interest for abuse of discretion. Reyes-Mata v. IBP, Inc., 299 F.3d 504, 507 (5th Cir. 2002).
GuideOne appeals the district court's grant of summary judgment on the issue of coverage, arguing that there was no coverage in place because it had effectively canceled the policy before the tornado. Mississippi law provides that the cancellation of an insurance policy "is not effective . . . unless notice is mailed or delivered . . . not less than thirty (30) days prior to the effective date of such cancellation." Miss. Code. Ann. § 83-5-28(1).3 In addition to thisstatutory requirement, the policy contained a notice clause requiring GuideOne to give Mount Carmel 60 days' notice prior to cancellation, and Seaway 30 days' notice. While much of the parties' briefing focuses on the district court's interpretation of the Mississippi statute, we first analyze the effectiveness of GuideOne's notice of cancellation under the policy's more burdensome requirements.
The policy provided that GuideOne could cancel the policy (for any reason other than nonpayment) via a "written notice of cancellation" to the insured mailed "at least . . . 60 days before the effective date of cancellation." The policy further stated that the "[n]otice of cancellation will state the effective date of cancellation" and that the "[t]he policy period will end on that date." (Emphases added.) GuideOne mailed the notice of cancellation to Mount Carmel on October 29, 2012, and the notice stated an effective date of November 20, 2012—22 days later. Clearly, this 22 day notice of cancellation did not comply with the policy's directives that notice of cancellation be mailed no less than 60 days prior to the effective date of the cancellation and that the notice state an effective date in accordance with this notice period. Accordingly, GuideOne's notice of cancellation was not effective under the policy, and therefore, coverage was still in effect at the time of the tornado (February 10, 2013).
GuideOne's arguments to the contrary are unavailing. GuideOne notes that the "majority rule" amongst other jurisdictions is that a too-short notice of cancellation nevertheless becomes effective after the passing of the required notice period. It urges that here too its notice to Mount Carmel should be considered effective 60 days after it sent the notice, i.e., cancellation was nevertheless effective before the tornado struck. Yet, this argument flies in the face of the Mississippi Supreme Court's directive to enforce the plain and unambiguous terms of an insurance policy as they are written. See, e.g., Noxubee Cty. Sch. Dist. v. United Nat'l Ins. Co., 883 So. 2d 1159, 1165 (Miss. 2004). The plain terms of the policy do not allow for such an exception for too-short notices, and we therefore decline to read such an exception into the policy.
GuideOne also cites a Mississippi Supreme Court case in which a cancellation notice's failure to provide the notice required under the policy did not render it ineffective, but merely delayed its effectiveness until after the 5-day notice period required by the policy had passed. See Phenix Ins. Co. of Brooklyn...
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