Hemphill v. State Farm Mut. Auto. Ins. Co.

Decision Date16 October 2015
Docket NumberNo. 15–60058.,15–60058.
Citation805 F.3d 535
PartiesPatrick K. HEMPHILL, Plaintiff–Appellant v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant–Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

William Harold Jones, Esq., William H. Jones Law Office, Petal, MS, Michael V. Ratliff, Johnson, Ratliff & Waide, Hattiesburg, MS, for PlaintiffAppellant.

Michael Franklin Myers, Esq., Joseph Walter Gill, Esq., William Henry Creel, Jr., Esq., Currie Johnson Griffin & Myers, P.A., Jackson, MS, DefendantAppellee.

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

Before BENAVIDES, CLEMENT, and HIGGINSON, Circuit Judges.



This appeal involves an insurance dispute between an insured and his insurance carrier regarding the handling of a third-party claim. PlaintiffAppellant Patrick K. Hemphill (Hemphill), the insured, appeals the district court's grant of summary judgment to DefendantAppellee State Farm Mutual Automobile Insurance Company (State Farm), the insurer. For the reasons below, we AFFIRM.


This case arises out of a motor vehicle accident that occurred in Forrest County, Mississippi. On February 1, 2009, Hemphill ran a stop sign, resulting in a collision between the vehicle he was driving and a vehicle driven by Rodney Taylor (“Mr. Taylor”), in which Mr. Taylor's wife Heather Taylor (“Mrs. Taylor”) (collectively, the “Taylors”) was a passenger. As a result of the accident, Mr. Taylor was rendered paraplegic. Hemphill's father owned the vehicle driven by Hemphill at the time of the accident. State Farm insured the vehicle under an automobile liability policy issued to Hemphill's father as the named insured. The policy provided $50,000 per person liability coverage for bodily injury.

Initially, Hemphill and his girlfriend, a passenger in his vehicle at the time of the accident, claimed the girlfriend had been driving because Hemphill's license was suspended. Hemphill and his girlfriend also initially claimed they did not run the stop sign and Mr. Taylor caused the accident. Hemphill later admitted to his father that he was the driver, and they contacted an attorney. Hemphill, Hemphill's father, and two attorneys then met with the Mississippi Highway Patrol, at which time Hemphill admitted he was the driver and he ran the stop sign. State Farm did not receive notice of Hemphill's admission that he ran the stop sign until it received the Mississippi Highway Patrol's accident report on February 25, 2009. On that same date, a State Farm investigator called Mrs. Taylor and advised her that State Farm was accepting liability and sending her medical authorizations. State Farm claims this investigator also explained the $50,000 policy limit to Mrs. Taylor during this conversation, but Hemphill disputes this claim. Mr. Taylor had approved State Farm to speak to Mrs. Taylor about his claim, although he continuously communicated with Mrs. Taylor about his claim as she handled it.

State Farm proceeded to request the Taylors' medical bills from their healthcare providers. State Farm finally received all the medical bills on June 2, 2009. One bill showed Medicaid involvement, so State Farm began to investigate a Medicaid lien on Mr. Taylor's recovery. State Farm offered to settle Mrs. Taylor's claim for $15,000 on July 6, 2009, Mrs. Taylor declined this offer on July 14, 2009, and State Farm then offered to settle Mrs. Taylor's claim for $20,000 on July 17, 2009. State Farm has provided evidence that during this same time, it also offered to settle Mr. Taylor's claim for $50,000 subject to the Medicaid lien, but Hemphill has provided evidence that State Farm did not offer to settle Mr. Taylor's claim at this time. On August 10, 2009, Mr. Taylor filed a personal injury lawsuit against Hemphill in Mississippi state court (the “Underlying Lawsuit”). On August 12, 2009, State Farm offered to settle Mrs. Taylor's claim for $20,000 and Mr. Taylor's claim for $50,000. At this time, State Farm provided a certificate of coverage to Mr. Taylor's attorney. The Taylors declined this settlement offer. On September 1, 2009, State Farm offered to settle both Mr. and Mrs. Taylor's claims for $50,000 each, which the Taylors declined. The Taylors did not make any settlement offers or counteroffers of their own, nor did they manifest any interest in settling.

Two years later, on August 11, 2011, a jury in the Underlying Lawsuit returned a verdict in Mr. Taylor's favor for $2,862,920.84, plus interest. State Farm subsequently paid the $50,000 policy limits, with interest, to Mr. Taylor in partial satisfaction of the judgment.

On September 23, 2013, Hemphill filed the present lawsuit against State Farm in the United States District Court for the Southern District of Mississippi, contending inter alia that State Farm's breach of its fiduciary duty caused the excess judgment in the Underlying Lawsuit. On January 13, 2015, the district court granted State Farm's motion for summary judgment, finding any alleged breach of duty did not cause the excess judgment. Hemphill now appeals the district court's order. Mr. Taylor's attorneys in the Underlying Lawsuit represent Hemphill in the present lawsuit.


We review a district court's ruling on a motion for summary judgment de novo and apply the same legal standards as the district court.” Bellard v. Gautreaux, 675 F.3d 454, 460 (5th Cir.2012). “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.’ Rogers v. Bromac Title Servs., L.L.C., 755 F.3d 347, 350 (5th Cir.2014) (quoting Fed.R.Civ.P. 56(a) ). A dispute “is ‘genuine’ if the evidence is sufficient for a reasonable jury to return a verdict for the non-moving party.” Burrell v. Dr. Pepper/Seven Up Bottling Grp., 482 F.3d 408, 411 (5th Cir.2007). “A fact issue is ‘material’ if its resolution could affect the outcome of the action.” Id. We must view the evidence and draw reasonable inferences in the light most favorable to the nonmoving party.” Cox v. Wal–Mart Stores E., L.P., 755 F.3d 231, 233 (5th Cir.2014). “Summary judgment may not be thwarted by conclusional allegations, unsupported assertions, or presentation of only a scintilla of evidence.” McFaul v. Valenzuela, 684 F.3d 564, 571 (5th Cir.2012). We are not limited to the district court's reasons for its grant of summary judgment and may affirm the district court's summary judgment on any ground raised below and supported by the record.” Rogers, 755 F.3d at 350 (internal quotation marks omitted).


“When, as in this case, subject matter jurisdiction is based on diversity, federal courts apply the substantive law of the forum state—here, [Mississippi].” Boyett v. Redland Ins. Co., 741 F.3d 604, 607 (5th Cir.2014) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ). “To determine the forum state's law, we look first to the final decisions of that state's highest court—here, the [Mississippi] Supreme Court.” Id. “In the absence of a final decision by the [Mississippi] Supreme Court, we must make an Erie guess and determine, in our best judgment, how that court would resolve the issue if presented with the same case.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir.2007). In making an Erie guess, we “may look to the decisions of intermediate appellate state courts for guidance.” Howe v. Scottsdale Ins. Co., 204 F.3d 624, 627 (5th Cir.2000).


This appeal presents two main issues. The first issue is whether an insurer can be liable for an excess judgment against its insured absent a settlement offer within policy limits by a third-party claimant. Specifically, Hemphill contends an insurer can be liable absent a settlement offer by a third-party claimant in two instances: (i) when the insurer does not timely offer to settle a claim in which the claim amount greatly exceeds the policy limits, and (ii) when the insurer does not timely disclose the policy limits to the third-party claimant. The second issue is whether there is a genuine dispute of material fact that the excess judgment in this case was caused by State Farm's failure to advise Hemphill of his potential excess exposure and his right to retain independent counsel. Each issue is addressed in turn.

A. An Insurer's Liability for an Excess Judgment Against its Insured Absent a Settlement Offer Within Policy Limits by a Third–Party Claimant

The Mississippi Supreme Court “consistently ha[s] held that an insurer must act in the best interest of the insured.” Indem. Ins. Co. of N. Am. v. Guidant Mut. Ins. Co., 99 So.3d 142, 150 (Miss.2012). The insurer has a fiduciary “duty to protect the interests of its insured” when defending, negotiating, and settling “all claims made against its insured.” Id. at 150–51. The Mississippi Supreme Court has defined the scope of this duty when a third-party claimant makes a settlement offer within the policy limits:

[W]hen [a] suit covered by a liability insurance policy is for a sum in excess of the policy limits, and an offer of settlement is made within the policy limits, the insurer has a fiduciary duty to look after the insured's interest at least to the same extent as its own, and also to make a knowledgeable, honest[,] and intelligent evaluation of the claim commensurate with its ability to do so. If the carrier fails to do this, then it is liable to the insured for all damages occasioned thereby.

Id. at 151 (quoting Hartford Accident & Indem. Co. v. Foster, 528 So.2d 255, 265 (Miss.1988) ) (second and third alterations in original) (internal quotation marks omitted). Thus, an “insurer is not required to accept a settlement offer simply because it is within the policy limits,” but when such an offer is made, an insurer has a duty to evaluate the claim and settle if the offer is “objectively reasonable.” S. Healthcare...

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