Reece v. State Farm Fire & Cas. Co.

• Decision Date: 22 December 1987
• Docket Number: Civ. A. No. EC 85-433-D-D.
• Parties: James REECE and Montez Reece, Plaintiffs, v. STATE FARM FIRE & CASUALTY COMPANY, Defendant
• Court: U.S. District Court — Northern District of Mississippi

684 F. Supp. 140

James REECE and Montez Reece, Plaintiffs, v. STATE FARM FIRE & CASUALTY COMPANY, Defendant

Civ. A. No. EC 85-433-D-D.

United States District Court, N.D. Mississippi, E.D.

September 17, 1987.

Supplemental Opinion December 22, 1987.

Thomas A. Coleman, Ackerman, Miss., for plaintiffs.

Guy T. Gillespie, III, Robert H. Faulks, Oxford, Miss., for defendant.

MEMORANDUM OPINION

DAVIDSON, District Judge.

This cause is presently before the court on the defendant's motions for partial summary judgment as to extra-contractual damages based on breach of the defendant's "Loss Payment" policy provision and for punitive damages based on an alleged wrongful refusal to pay a "just debt". Having reviewed the parties' briefs and being otherwise fully advised in this matter, the court finds that the defendant's motion for partial summary judgment as to extra-contractual damages for breach of the "Loss Payment" policy provision should be denied and its motion for partial summary judgment as to punitive damages should be sustained.

FINDINGS OF FACT

This cause is an action by plaintiffs, Mr. James Reece and Mrs. Montez Reece ("the Reeces"), a married couple, to recover policy proceeds from a fire which occurred at plaintiffs' property in Weir, Mississippi on or about February 27, 1985. On April 23, 1979, plaintiffs' home was first insured by defendant State Farm Fire & Casualty Company ("State Farm") against loss by fire in the amount of $50,000 for the dwelling, $5,000 for appurtenant private structures, $25,000 for unscheduled personal property, and $10,000 for additional living expenses. On February 27, 1985, the plaintiffs' home was insured for $66,000, their other structures for $6,600, personal property for $33,000, and loss of use for $13,200.00.

On Wednesday evening, February 27, 1985, at approximately 8:00 p.m., a passing motorist noticed that plaintiffs' home was on fire. The motorist notified plaintiffs' neighbors who called the Weir, Mississippi Fire Department which responded to the fire. As a result of the fire, plaintiffs sustained substantial damage to the dwelling and to its contents. State Farm received notice of the fire on or about February 28, 1985.

State Farm set about investigating the fire and, on or about March 5, 1985, employed Mr. Donald F. Zwick, who inspected, examined, and analyzed the remnants of plaintiffs' burned home. He communicated his findings to State Farm on or about March 12, 1985. State Farm's claims office received plaintiffs' sworn proof of loss form on March 27, 1985 and subsequently received their personal property inventory forms on April 9, 1985.

Both Mr. and Mrs. Reece were deposed on April 17, 1985. Their depositions were requested once again on May 24, 1985, to be taken on June 6, 1985. On May 29, 1985, State Farm's Resident Claim Superintendent, Terry H. Blalock, wrote the Reeces and informed them that although State Farm was not denying liability, it nevertheless declined to make any payment at that time. Plaintiffs were requested to submit to examination under oath again on June 18, 1985 and July 11, 1985. The June 18, 1985 examination did not take place because Mr. Reece was under a doctor's care in Jackson, Mississippi at the time; however, the plaintiffs were examined once again on July 11, 1985 in the office of their attorney at Ackerman, Mississippi.

In a letter dated August 21, 1985, plaintiffs and their counsel were advised by Dan W. Webb, attorney for State Farm, that State Farm had decided to deny the Reece's claim for fire loss under the policy of insurance. State Farm's denial of the claim was allegedly denied for several reasons, including but not limited to: intentional burning of the dwelling and contents by the Reeces, and material representations and concealments by the Reeces during the course of State Farm's investigation of the fire loss.

The Reeces filed this complaint against State Farm on October 24, 1985. The present motions by State Farm request: 1) dismissal of the plaintiffs' claim that they are entitled to damages based on State Farm's alleged breach of its "Loss Payment" policy provision, which allegedly obligated State Farm to complete its investigation and communicate a decision on the claim for fire damages within 60 days of State Farm's receipt of the sworn proof of loss from the plaintiffs; and 2) dismissal of the Reeces' claim for punitive damages based on State Farm's alleged wrongful refusal to pay a "just debt" owed the Reeces.

There are two policy provisions relevant to the plaintiffs' claim for damages. Item 2, "Your Duties After Loss", found under "Section 1—Conditions", provides that the insured is to:

... submit to us State Farm, within sixty days after we request, your signed, sworn proof of loss which sets forth, to the best of your knowledge and belief.... 6. an inventory of damaged personal property....

The provision on which plaintiffs directly rely, Item 10, "Loss Payment", reads as follows:

We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Loss will be payable 60 days after we receive your proof of loss and:

a. reach an agreement with you; or

b. there is an entry of a final judgement; or

c. there is a filing of an appraisal award with us.

CONCLUSIONS OF LAW

I. Extra-contractual Damages for Breach of "Loss Payment" Provision

The question which must be addressed here is whether the "Loss Payment" provision set out above can reasonably be construed to support the plaintiffs' claim for damages based on State Farm's inability to communicate a denial within 60 days after receipt of the plaintiffs' proof of loss statement.

State Farm correctly states that a motion for partial summary judgment is an appropriate procedure for resolving disputes involving the interpretation of unambiguous contract provisions and terms. Union Planters Nat. Leasing, Inc. v. Woods, 687 F.2d 117 (5th Cir.1982). Interpretation of contractual provisions is a question of law for the court to decide when the meaning of the terms is clear and unambiguous. Aero Intern v. United States Fire Ins. Co., 713 F.2d 1106, 1109 (5th Cir.1983); Hicks v. Quaker Oats Co., 662 F.2d 1158, 1175 (5th Cir.1981). Furthermore, under Mississippi law, words of a contract are to be given their ordinary meaning. Mississippi Power & Light Co. v. United Gas Pipeline, 760 F.2d 618, 622 (5th Cir.1985). The Mississippi Supreme Court has held that contractual provisions are ambiguous where they are susceptible of two or more reasonable interpretations, or where one provision is in direct conflict with another provision, or where terms are unclear or of doubtful meaning. Dennis v. Searle, 457 So.2d 941 (Miss.1984). As this court stated in another context in the case of DeMarion Janitorial Serv. v. Universal Development, 625 F.Supp. 1353, 1356 (N.D.Miss. 1985):

It is firmly entrenched in the jurisprudence of Mississippi that this court must, in this diversity case, construe the written contract as made by the parties, giving the words of the document their commonly accepted meaning. If no ambiguity exists, this court must accept the plain meaning of the instrument as the intent of the parties and give effect to the instrument accordingly. The court recognizes that contracts are solemn obligations and the court must give them effect as written. (citations omitted)

This court has also held that as a general rule, insurance policies are to be construed in accordance with general principles of contractual construction. Western Line Consol. Sch. v. Continental Cas. Co., 632 F.Supp. 295 (N.D.Miss.1986).

The question for the court to decide is whether there is an ambiguity in the "Loss Payment" provision of the policy in question. Whether any ambiguity exists is a question of law for the court to decide. Hicks v. Quaker Oats Co., supra, at 1175. State Farm suggests that there is no language in the subject provision which compels it to complete its investigation and to communicate a decision on a claim within 60 days of receipt of the insured's proof of loss. The Reeces argue that the provision should be construed as written, i.e., payment was due 60 days after State Farm received the plaintiffs' proof of loss.

There is no dispute that State Farm received the plaintiffs' proof of loss on March 27, 1985 and their personal property inventory forms on April 9, 1985. According to the Reeces, therefore, State Farm was obliged either to make payment or to communicate its denial of the Reeces' claim by June 8, 1985. No denial was communicated to the Reeces until August 21, 1985, over 130 days after State Farm received the Reeces' personal property inventory forms. Construing the 60-day period in the "Loss Payment" provision literally and strictly, State Farm did not meet its obligation to make payment or deny the claim within the contractually mandated time period. It is well settled in this circuit that insurance contracts, and each and every provision thereof, are to be construed strongly against the drafter. Brander v. Nabors, 443 F.Supp. 764 (N.D.Miss.), aff'd, 579 F.2d 888 (5th Cir.1978). State Farm drafted the language in question.

State Farm argues that the 60-day provision does not apply to the situation seen in the present case. In fact, State Farm contends there is no language in the "Loss Payment" provision which requires State Farm to complete its investigation and to communicate a decision within 60 days of its receipt of the proof of loss.¹ Rather, State Farm suggests that an insurer is permitted a "reasonable period of time to complete an investigation of a fire loss." Defendant's Memo at 5. No Fifth Circuit nor Mississippi Supreme Court authority is offered in support of State Farm's argument; State Farm cites only a Seventh Circuit and Tenth Circuit opinion and a quotation from Appleman, Insurance Law and Practice (Rev. ed. 1972). These authorities are only...