Kaplan v. Harco Nat. Ins. Co.

• Decision Date: 24 March 1998
• Docket Number: No. 95-CA-01154-COA,95-CA-01154-COA
• Citation: 716 So.2d 673
• Parties: Eva KAPLAN, Appellant, v. HARCO NATIONAL INSURANCE COMPANY, Appellee.
• Court: Mississippi Court of Appeals

Page 673

716 So.2d 673

Eva KAPLAN, Appellant, v. HARCO NATIONAL INSURANCE COMPANY, Appellee.

No. 95-CA-01154-COA.

Court of Appeals of Mississippi.

March 24, 1998.

Certiorari Denied June 25, 1998.

Marc A. Biggers, Lonnie D. Bailey, Upshaw Williams Biggers Beckham & Riddick, Greenwood, for Appellant.

H.D. Brock, Whittington Brock Swayze & Dale, Greenwood; Sam D. Blair, Jr., Heiskell Donelson Bearman Adams Williams & Caldwell, Memphis TN, for Appellee.

Before McMILLIN, P.J., and HINKEBEIN and SOUTHWICK, JJ.

SOUTHWICK, Judge, for the court:

¶1 The original opinion is withdrawn and the following is substituted. The motion for rehearing is denied.

¶2 Eva Kaplan challenges the grant of summary judgment by the Circuit Court of Leflore County in favor of Harco National Insurance Company. Kaplan claims that the trial court erred in the following respects: (1) granting summary judgment to Harco; (2) finding that Kaplan did not have standing to pursue a direct action against Harco; (3) ruling that the bad faith claims of Russell Peters and Paradise Trucking, Inc. were not assignable; and (4) determining that the actions of Harco did not rise to the heightened level of tortious conduct sufficient to allow a jury to consider whether to assess punitive damages. Finding the trial court in error, we reverse and remand.

FACTS

¶3 On February 13, 1992 Eva Kaplan was involved in an accident with a tractor-trailer driven by Russell Peters. At the time of the accident, Peters was employed by Paradise Trucking, Inc.; his tractor was leased to them, and it carried the ICC number registered to Paradise. The trailer attached to his tractor was owned by Paradise and insured by Harco for Paradise. After the accident, Peters called Paradise to report the accident. When Peters went to the Paradise offices, he discussed the accident with Duckworth, the insurance agent who obtained the Harco insurance policy for Paradise. Duckworth had a copy of the accident report which he showed to Peters as they discussed the accident. According to Peters, Duckworth warned him not to discuss the accident with anyone, especially lawyers, and told Peters that he would take care of it. Peters testified that no one from Harco has ever contacted him to discuss the accident.

¶4 In March of 1992, Kaplan's attorney contacted Paradise about her claim, and Paradise referred them to Duckworth. Duckworth stated that an adjuster would contact Kaplan's attorney. On July 16, 1992 Peters was served with the suit and reported it to Paradise. Peters also discussed the suit with Duckworth who again told Peters that he would take care of it. No contact was made until receipt of the lawsuit by Harco in August of 1992. Dave Leary, a claims manager with Harco, contacted Kaplan's attorney who advised Leary that unless Harco responded, Kaplan would seek default judgment. Harco failed to respond; therefore, on October 13, 1992, default judgement was entered against Peters and Paradise in the amount of $35,000 plus interest and costs.

¶5 In an effort to collect on the judgment, Kaplan's attorney provided a copy of the default judgment to both Peters and Paradise on December 3, 1992. A copy of the judgment was also furnished to Duckworth and Leary. Throughout the process, Kaplan was unsuccessfully trying to obtain a copy of the policy. When efforts through correspondence failed, Kaplan filed a writ of garnishment to ascertain the existence of the policy. Harco failed to comply with the writ of garnishment and claimed that there was no policy in effect that provided Paradise with liability coverage on February 13, 1992. This claim was later proven to be false based on the existence of the MCS-90 endorsement to the policy.

¶6 The purpose of the MCS-90 endorsement is to protect the public against undercapitalized and underinsured common carriers. The endorsement provides that the insurer will pay any final judgment recovered against the insured from negligence in the operation of commercial motor vehicles. The insurer has to pay the injured party despite a limitation or condition in the policy or endorsement stating otherwise. Additionally, the duty to pay is not contingent on the vehicle being specifically described in the policy.

¶7 Kaplan secured assignments from both Peters and Paradise. These assignments gave Kaplan "any and all rights, choses in action, causes of action or claims of any kind" that Paradise and Peters may have against Harco arising out of the accident. Based on these assignments, Kaplan filed suit against Harco for bad faith on December 15, 1993. Along with the complaint, Kaplan served a request for production of documents, specifically requesting a copy of the policy. Harco failed to respond; therefore, Kaplan filed a motion to compel on February 25, 1994. On or about March 2, 1994 Harco produced a policy, but it was missing the MCS-90 endorsement. A copy of the complete policy was not produced until July 12, 1994 during Duckworth's deposition. This policy contained the MCS-90 endorsement. Based on the endorsement Kaplan amended her complaint.

¶8 The amended complaint set forth a direct cause of action against Harco. After being served with the amended complaint, Harco paid the default judgment entered against Peters and Paradise and sought summary judgment in this action. The trial court granted summary judgment finding that Kaplan did not have standing to pursue a direct action against Harco, that the action for punitive damages for bad faith was not assignable by Peters and Paradise, and that the alleged actions of Harco did not rise to the necessary level of tortious conduct for punitive damages.

DISCUSSION

1. Summary Judgment

¶9 Kaplan argues that the trial court erred in granting summary judgment to Harco. We resolve the present appeal on questions of law, not fact. Thus whether the trial court was right or wrong on its interpretation of the law, and not on its determination of whether there were disputes of material fact, is what we address. These legal issues, as all legal questions on appeal, are addressed de novo. Mississippi Farm Bureau Cas. Ins. Co. v. Curtis, 678 So.2d 983, 987 (Miss.1996).

2. Direct Action

¶10 Kaplan claims to have a direct cause of action against Harco based on the MCS-90 endorsement. The portion of the endorsement that Kaplan claims gives her the standing to sue reads as follows: "It is further understood and agreed that, upon failure of the company to pay any final judgment recovered against the insured as provided herein, the judgment creditor may maintain an action in any court of competent jurisdiction against the company to compel such payment." The language of this passage is important for two reasons: (1) it identifies Kaplan as a judgment creditor and not a third party beneficiary as argued by Kaplan and (2) it defines the cause of action as one to compel payment. No other cause of action against the insurer is contemplated by the endorsement. Payment has been made in this case and there is nothing left to compel.

¶11 Kaplan is a judgment creditor of Harco by virtue of the MCS-90 endorsement. In Mississippi direct actions by third parties to insurance policies are prohibited absent specific statutory or contractual authority. Westmoreland v. Raper, 511 So.2d 884, 885 (Miss.1987). The endorsement in this case provides authority for the judgment creditor to sue the insurer to compel payment. There was payment. Kaplan's standing under the endorsement expired with payment.

3. Assignment

¶12 Kaplan disputes the trial court's conclusion that a bad faith claim with relief sought for punitive damages could not be assigned by Peters and Paradise to Kaplan. The trial court relied on a case barring assignments of a statutory penalty. National Sur. Corp. v. State, 189 Miss. 540, 198 So. 299 (1940) p 13. To resolve this issue, we find it helpful to divide it into two questions. The first is whether the bad faith claim against Harco could be assigned at all, and secondly, even if assignable, would the assignee be able to seek punitive damages? Thus we are faced with something fundamental in this case: are certain interests so personal that if they are no longer owned by the original party who held them, they no longer exist at all? The answer in part comes from chipping away layers of case law that have built up in discussing assignments, and uncovering the basic common law and statutory rules.

a. Assignment of a claim for bad faith

¶14 The starting point in the analysis is that at common law, a chose in action was not assignable. Chicago, St. Louis & New Orleans R.R. Co. v. Packwood, 59 Miss. 280, 282-83 (1881); Davis v. Herndon, 39 Miss. 484, 504 (1860). By statute, Mississippi eventually changed the common law and held that "[a]ny chose in action or any interest therein, after suit has been filed thereon, may be sold or assigned the same as other property, whether such cause of action or any interest therein was heretofore assignable under the laws of this state or not." Miss.Code Ann § 11-7-7 (1972) (emphasis added). The bad faith claim that supports Kaplan's efforts in this case was a claim that Peters could, but never did bring against Harco. The statute that says "any chose of action" can be assigned "after suit has been filed thereon" is inapplicable since Peters never sued "thereon."

¶15 A different statute states an "assignee of a chose in action may sue for and recover on the same in his own name, if the assignment be in writing." Miss.Code Ann. § 11-7-3 (1972). That is an independent basis for an assignment and has been held not to be in conflict with the previously-quoted statute that requires a suit by the original party in interest to have been filed. Solomon v. Cont'l Baking Co., 174 Miss. 890, 166 So. 376 (1936).

¶16 The phrase "chose in action" is one of the dated legal phrases whose specific meaning tends to get blurred. It simply means a "right of bringing an action or right to recover a...