Henderson v. U.S. Fidelity and Guaranty Co., 78-2528

• Decision Date: 03 July 1980
• Docket Number: No. 78-2528,78-2528
• Citation: 620 F.2d 530
• Parties: H. H. HENDERSON, Dwaine Lee Henderson et al., Plaintiffs-Appellees Cross- Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant-Appellant Cross- Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 530

620 F.2d 530

H. H. HENDERSON, Dwaine Lee Henderson et al Plaintiffs-Appellees Cross- Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY Defendant-Appellant Cross- Appellee.

No. 78-2528.

United States Court of Appeals Fifth Circuit.

July 3, 1980.

M. M. Roberts, S. Wayne Easterling, Hattiesburg, Miss., for defendant-appellant cross-appellee.

Guy M. Walker, Laurel, Miss., for H. H. Henderson, Dwaine Lee Henderson, et al.

J. C. Martin, Waynesboro, Miss., Horton Hillman, Leakesville, Miss., for plaintiffs-appellees cross-appellants.

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

Before WISDOM, FAY and TATE, Circuit Judges.

FAY, Circuit Judge:

An insured brought this diversity action against its insurance carrier for additional coverage and punitive damages under Mississippi law. Both sides appeal from district court rulings and a jury verdict for plaintiffs. ¹ The insurance company, United States Fidelity and Guaranty Company (USF&G), contests the sufficiency of evidence of coverage, and the filing of two amended complaints. Plaintiffs cross-appeal, challenging the district court's denial of their punitive damages claim. Finding that the coverage question was one for the jury, we affirm the verdict, which was supported by substantial evidence. The decisions to allow amendments to the complaint are affirmed since no abuse of discretion is shown. We reverse, however, the denial of the punitive damages claim, because sufficient evidence existed to submit the issue to the jury.

I. Background For This Suit

Plaintiff Henry Henderson owns a logging and lumberyard business in Mississippi. He owns many contracts of insurance on his property, and evidently does not possess copies of them all.

On November 7, 1969, Henderson purchased from USF&G's agent Sigler a liability insurance policy, number C3111037, with $50,000 coverage on a 1969 truck and trailer. Henderson habitually buys his liability coverage from Sigler. Henderson claims he never received a copy of the C3111037 policy. In 1970, Sigler billed Henderson for the renewal premium. It was paid approximately two weeks after the November 7 renewal date. The policy covers replacement vehicles if notice of the replacement is given to the insurance company within thirty days of purchase. Henderson replaced his 1969 truck with a 1971 Chevrolet truck. C3111037 was modified to cover the 1971 replacement, which pulled the same trailer as the 1969 truck.

On November 2, 1971, one of Henderson's employees turned the 1971 truck over in the woods, wrecking it beyond repair. On November 10, Henderson purchased a 1972 GMC truck to replace the 1971 truck and to pull the same trailer. That same day, Henderson purchased another USF&G policy from the Ross-King-Walker agency, as he was required to do by the GMC loan financer. Henderson testified that he ordered only property collision insurance because he knew he had liability coverage through Sigler. The Ross agency, however, actually wrote a policy which gave Henderson $10,000 in liability coverage in addition to the collision coverage. Approximately two weeks after the wreck of the 1971 truck, Henderson sold it as junk.

On November 23, 1971, the new 1972 truck which was connected to the old trailer stalled while making a U-turn, causing Grady Stevison's vehicle to collide with the truck, and costing Stevison his life. The next day, Henderson claims he informed Sigler of the new 1972 replacement vehicle and the fatal accident. He says Sigler assured him he was covered. Sigler denies that this conversation occurred. Henderson states that on November 27, he received from USF&G a notice that C3111037 would not be renewed. The notice did not identify the property covered by C3111037, and since Henderson did not have a copy of the policy, he did not know which one the company was not renewing. The notice from USF&G was dated October 7, 1971, although at trial, no certificate of mailing was produced. Under Mississippi law, a nonrenewal is ineffective without thirty days' notice. ²

Stevison's administratrix commenced a state court action in Greene County against Henderson and his truck driver. She offered to settle for $40,000. Henderson, confident In the Stevison trial, the administratrix was granted a directed verdict on liability. The jury awarded $100,000 damages; with six-percent postjudgment interest. After appeal to the Supreme Court of Mississippi, USF&G tendered to the court $10,000 plus a five-percent penalty for appeal, plus interest. Henderson, the employee-driver, and Stevison's administratrix refused to release USF&G from further liability, claiming that a $50,000 policy existed. This action followed in federal district court, in which the plaintiffs claim that USF&G is liable under a $50,000 policy and is subject to punitive damages for wrongful denial of coverage and failure to settle the Stevison lawsuit.

that he had $50,000 liability coverage, conveyed the offer to USF&G. USF&G claimed that its only liability was for $10,000, informing Henderson for the first time of the Ross agency's liability policy on the 1972 truck. When USF&G refused to settle, Henderson brought a separate state court action in Wayne County attempting to uncover the $50,000 policy and to settle USF&G's liability under it. He sued under the only $50,000 policy of which he had a copy, but it was not the right one. When discovery efforts failed to produce the $50,000 vehicle liability policy, the Wayne County suit was dismissed without prejudice.

As in the Wayne County suit, Henderson originally filed this action under the wrong policy. Not until Sigler's files were produced at his deposition were the records of C3111037 supplied to Henderson. The complaint was then amended to allege the correct policy number.

II. The Parties' Theories

Henderson asserts that he was covered under the $50,000 policy, C3111037, even though the renewal date has passed without his tendering the renewal premium. Mississippi law provides that an insurer cannot refuse to renew a policy unless it gives thirty days' advance notice. Miss.Code § 83-11-7 (1972). ³ Henderson argues that he did not receive notice of nonrenewal until after the accident; therefore, the policy had not lapsed. His failure to pay the renewal premium does not invalidate the policy because he had established a billing and credit relationship with Sigler and because Mississippi law allows cancellation for nonpayment only after ten days' notice. Miss.Code § 83-11-5 (1972). Not only was the policy effective, but it also covered the 1972 GMC truck because, as provided in the policy, Henderson gave Sigler notice that the 1972 truck was a replacement vehicle within thirty days of its purchase. Henderson reasons, therefore, that USF&G is liable under C3111037 and that the jury verdict should be affirmed as modified. ⁴

Henderson's correlative theory is that USF&G is liable for punitive damages for failing to settle the Stevison case and for denying coverage. Throughout the Stevison trial and the Wayne County suit, Henderson asserted that a $50,000 vehicle liability policy existed. Despite Henderson's claims and discovery attempts, USF&G withheld C3111037. Henderson argues that sufficient evidence exists for granting punitive damages under Mississippi law, and that the trial court's refusal to present this issue to the jury is reversible error.

USF&G contends that Henderson's theory of coverage is one dreamed up long after the events now in question. USF&G's position is that notice of nonrenewal was given on October 7, 1971, and that the policy therefore expired on November 7, before the fatal accident. Furthermore, it argues that the 1972 GMC truck cannot be a replacement because it does not meet the definition of a replacement vehicle and because USF&G did not receive notice of the Besides contesting Henderson's factual allegations, USF&G asserts that Henderson could not have two policies on the same vehicle in effect at once and that he should not have been allowed to amend the complaint to cover C3111037 after Sigler's deposition. USF&G argues that the jury verdict should therefore be reversed.

replacement until this litigation. It also contends that the policy cannot be in force because the premium was never paid.

III. Amendment Was Proper

USF&G contests the trial court's allowance of an amendment to the complaint which brought C3111037, the $50,000 policy, into issue. This action was filed on May 10, 1976. On August 5, 1976, an amended complaint was filed to reflect USF&G's tender into state court of the $15,328.80 owed after appeal under the $10,000 policy. Two days after Sigler's deposition, Henderson moved to amend the complaint to change the policy number upon which this action was based from a premises liability policy to the $50,000 vehicle liability policy. The court granted the motion and the second amended complaint was filed September 22, 1977, nine months before trial. Without citation to authority, USF&G argues that the trial court "had no right or authority" at that late date to permit another amended pleading involving a different insurance contract.

The trial court's authority to permit amendment is found in Fed.R.Civ.P. 15(a). That rule provides that amendment will be "freely (granted) when justice so requires." Appellate review is restricted to determining whether the trial court abused its discretion in granting leave to amend. Harkless v. Sweeny Independent School District, 554 F.2d 1353, 1359 (5th Cir.), cert. denied, 434 U.S. 966, 98 S.Ct. 507, 54 L.Ed.2d 452 (1977). The district court can consider many factors in exercising its discretion, "such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, (and) futility of amendment. . . ." Foman...