Myrick v. Prime Ins. Syndicate, Inc.

• Decision Date: 26 January 2005
• Docket Number: No. 00-1726.,00-1726.
• Parties: Jimmy MYRICK, Plaintiff-Appellee, v. PRIME INSURANCE SYNDICATE, INCORPORATED, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

395 F.3d 485

Jimmy MYRICK, Plaintiff-Appellee, v. PRIME INSURANCE SYNDICATE, INCORPORATED, Defendant-Appellant.

No. 00-1726.

United States Court of Appeals, Fourth Circuit.

Argued: February 28, 2001.

Decided: January 26, 2005.

ARGUED:

Thornwell Forrest Sowell, III, Sowell, Gray, Stepp & Laffitte, L.L.C., Columbia, South Carolina, for Appellant. John Frank Hardaway, Columbia, South Carolina, for Appellee.

ON BRIEF:

Allen Jackson Barnes, Sowell, Gray, Stepp & Laffitte, L.L.C., Columbia, South Carolina; Scott Seelhoff, Howell, Gibson and Hughes, Beaufort, South Carolina, for Appellant. Robert A. Muckenfuss, McNair Law Firm, P.A., Columbia, South Carolina, for Appellee.

Before WIDENER, NIEMEYER, and LUTTIG, Circuit Judges.

Affirmed in part, reversed in part, and remanded with instructions by published opinion. Judge WIDENER wrote the opinion, in which Judge LUTTIG concurred. Judge NIEMEYER wrote a dissenting opinion.

WIDENER, Circuit Judge:

Prime Insurance Company (Prime) appeals the district court's refusal to grant its motion for judgment as a matter of law, renewed motion for judgment as a matter of law, and relief under Rules 59 and 60 of the Federal Rules of Civil Procedure following a jury verdict in Jimmy Myrick's (Myrick) favor for breach of contract and a bad faith cause of action under South Carolina law. It also appeals jury consideration of the district court's grant of sanctions, attorney's fees, and prejudgment interest. For the reasons that follow, we affirm in part and reverse in part the decisions of the district court and remand the case for proceedings not inconsistent with this opinion. Because we decide on the merits all necessary points raised, we do not address Rules 59 and 60.

I.

In May 1998, Jimmy Myrick and Donald Brandt planned to start a logging business with each other. Entry into the logging business requires three pieces of equipment a fellerbuncher, a skidder, and a loader.¹ Brandt already owned a skidder (Model Franklin 170) and a fellerbuncher (Model 311C Hydro-Ax). Myrick bought a loader (Hood Model 2400) in June 1998 in anticipation of this venture.

Greg Matthews (Matthews), a local insurance agent for American Interstate Insurance Company (American Interstate), helped set up general liability and workers' compensation insurance for the new business, but American Interstate did not write the required kind of property and casualty insurance; Matthews therefore contacted Johnson Insurance Associates (Johnson Insurance) to place this coverage. Johnson Insurance, in turn, contacted MGA Insurance Company, which issued the insurance effective June 28, 1998. Soon after, Myrick and Brandt decided to abandon the venture, and they canceled this insurance without penalty. The three pieces of equipment insured were the Franklin skidder, the Hood loader, and the Hydro-Ax fellerbuncher.

Myrick subsequently, later in the summer of 1998, decided to enter business on his own, and he called his new business Palmetto Timber Products. Because he already owned a loader, he only needed to acquire a fellerbuncher and a skidder for his business. Myrick bought a used Model Barko 775 fellerbuncher on July 30, 1998 for $42,000 and spent $8000-$9000 to repair the engine to place it in service. He also acquired a Model Timberjack 450A skidder in August 1998. Myrick hired Caroline Harper Rivers as Palmetto's secretary. He then called Matthews to arrange insurance on his three pieces of equipment.

Matthews again indicated he could not write the insurance; he would have to refer the insurance request to Johnson Insurance. Myrick told Matthews the three pieces of equipment to insure and that his secretary, Mrs. Rivers, would give him the required serial numbers. Matthews stated that he would provide the pertinent information to Johnson Insurance, including the serial numbers for the three pieces of equipment. Conflicting stories emerged at trial regarding which serial numbers were relayed to Matthews. Mrs. Rivers testified that she telephoned Matthews the following serial numbers:

17109 — Barko 775 (fellerbuncher)

355147 — Timberjack 450A (skidder)

243399 — Hood 2400 (loader)

Matthews testified that Mrs. Rivers may have telephoned only the addition of a new skidder, and also that he was uncertain whether it was Myrick who called him, or Myrick's secretary, Mrs. Rivers.

A fax dated June 25, 1998 from Myrick to Matthews was produced at trial. The document originally was sent by Myrick to Matthews regarding insurance for equipment of the abandoned joint venture. Handwritten notations by Matthews replace the skidder from the Franklin 170 Model to the Timberjack 450A model. No notations regarding the loader and fellerbuncher were made. On September 2, 1998, Matthews relayed Myrick's request for insurance and forwarded the fax with his notations to Johnson Insurance.

Woodrow Wilson Power, Jr. (Power), a producer² for Johnson Insurance, filled out an application for coverage from Prime on a scheduled,³ inland marine⁴ insurance policy with the information he received from Matthews. The application for insurance scheduled the following items:

355147 — Timberjack 450A (skidder)

311C2377 — Hydro-Ax 311C (fellerbuncher)

243399 — Hood 2400 (loader)

This application listed Brandt's Hydro-Ax fellerbuncher — the one Brandt owned for purposes of the abandoned joint venture. Myrick did not own this fellerbuncher. He never saw the completed application. Neither party disputes that the effective date of the policy of insurance was September 2, 1998 for the listed equipment.

On September 16, 1998, Myrick's Barko 775 fellerbuncher was destroyed by fire prior to his receipt of any verification information regarding the insurance. Myrick called Matthews that day to tell him of the loss.

On September 17, 1998, Prime learned of the loss, and Myrick received a letter from Johnson Insurance requesting premium payments and attaching certificates of insurance. Conflicting stories emerged regarding which certificates of insurance were included. Myrick stated that certificates were included only for the loader and the skidder. Mrs. Waller, of Johnson Insurance, stated that her file indicated that three certificates had been sent out on September 11, 1998 — including one for a Hydro-Ax fellerbuncher.

On September 18, 1998, Power called Prime and indicated in a voice mail to Rick Lindsey, Prime's President, that the destroyed fellerbuncher was not the scheduled fellerbuncher.⁵ Prime then sent Mitchell Bazen (Bazen), an independent adjuster, to investigate the claim. Bazen concluded that the fellerbuncher destroyed by the fire was not scheduled in the policy.

On September 21, 1998, Myrick paid his premium. On September 28, 1998, Lewis Hansen (Hansen), claims manager for Prime, wrote to Myrick denying coverage for the Barko 775 fellerbuncher. Hansen stated that an insurance contract existed between the parties,⁶ but that the insurance policy listed a 1985 Hydro-Ax 311C fellerbuncher instead of a 1989 Barko 775 fellerbuncher.

On October 6, 1998, Myrick received an insurance certificate for a Hydro-Ax fellerbuncher, with Brandt, a loss payee. Myrick subsequently scheduled a 1989 Hydro-Ax 511B fellerbuncher effective on October 29, 1998, and the premium increased.⁷

After the denial of the claim, Myrick complained to the South Carolina Department of Insurance about Prime's failure to investigate the claim, explaining that he had no interest in the fellerbuncher listed in the policy. South Carolina forwarded the letter to Prime, and Prime responded to the letter. South Carolina subsequently wrote to Myrick indicating that it was taking no further action.

On December 11, 1998, Myrick filed a two-count complaint in South Carolina state court alleging breach of contract and bad faith. Prime removed⁸ the action to the district court, answered the complaint, and filed a counterclaim for a declaratory judgment regarding its non-liability under the policy because the destroyed fellerbuncher was not scheduled on the policy.

During discovery, Prime did not produce its complete underwriting and claims file to Myrick. The request for the file was the subject of a Motion to Compel filed by Myrick on April 5, 1999. Prime produced a part of the files, but during a subsequent deposition, Myrick discovered that a tape recording, and electronic information had not been produced. The tape had not yet been transcribed, and thus was not part of the file initially. Additionally, the other information was housed on the hard-drive of a computer, and Prime stated that it inadvertently forgot to print the information out. Before trial, and upon a motion for sanctions, the district court imposed sanctions and allowed Myrick to question Prime's witnesses before the jury regarding the failure to disclose the documents immediately.

On July 19, Prime moved for summary judgment because Myrick's Barko 775 fellerbuncher was not scheduled under the policy. Prime's motion was denied, and the matter was tried on February 10 and 11, 2000. At the close of the plaintiff's case, Prime moved for judgment as a matter of law. The court denied the motion. The jury returned a verdict in favor of the plaintiff for breach of contract and awarded $50,000 in damages. It also found in favor of the plaintiff on the cause of action for bad faith and awarded $250,000 in punitive damages.

The district court entered judgment on the jury's verdict, and Prime moved for a new trial or judgment as a matter of law on February 18, 2000. On April 5, 2000, the district court denied the motion. The district court granted Myrick's unopposed motion for prejudgment interest and attorney's fees. The district court calculated interest on the $50,000 judgment from September 16, 1998 to February 14, 2000 at an interest rate of 8.75% per year, a total of $6,114.90. The attorney's fees and costs added an additional $21,487.16 to the verdicts.

Prime subsequently moved the district...