Richards v. Amerisure Ins. Co.

• Decision Date: 16 January 1996
• Docket Number: Civil Action No. 3:94-cv-717WS.
• Citation: 935 F. Supp. 863
• Parties: Claude Anthony RICHARDS, Plaintiff, v. AMERISURE INSURANCE COMPANY and White Rose, Inc., d/b/a White Rose Rental Laundry, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

935 F. Supp. 863

Claude Anthony RICHARDS, Plaintiff, v. AMERISURE INSURANCE COMPANY and White Rose, Inc., d/b/a White Rose Rental Laundry, Defendants.

Civil Action No. 3:94-cv-717WS.

United States District Court, S.D. Mississippi, Jackson Division.

January 16, 1996.

Paul A. Koerber, Jackson, MS, for plaintiff.

Douglas R. Duke, Shell, Buford, Bufkin, Callicutt & Perry, Jackson, MS, for defendants.

MEMORANDUM OPINION AND ORDER

WINGATE, District Judge.

Before this court is the motion of the defendants for summary judgment pursuant to Rule 56(b),¹ Federal Rules of Civil Procedure. Originally filed in state court, this lawsuit was removed to this court by defendants Amerisure Insurance Company and White Rose, Inc., D/B/A White Rose Rental Laundry, in accordance with Title 28 U.S.C. § 1441(a)² on the basis of Title 28 U.S.C. § 1332,³ diversity of citizenship.⁴ Plaintiff Claude Anthony Richards filed this lawsuit against the defendants, charging them with bad faith breach of their contractual obligation to pay plaintiff workers' compensation benefits. By their present motion before the court, defendants contend that both the applicable law and undisputed material facts favor a judgment in their favor. Having heard and studied the various arguments of the parties under the command of Celotex Corporation v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), this court finds itself in agreement with the defendants and hereby grants summary judgment in their favor.

I. PERTINENT FACTS

The factual backdrop pertinent to this case began on September 24, 1992, when the plaintiff, Claude Anthony Richards (hereinafter "plaintiff"), while going about his routine duties as a route salesman and truck driver for the defendant White Rose, Inc., d/b/a White Rose Rental Laundry (hereinafter "White Rose"), was rear-ended by another automobile and suffered a neck injury. At the time of this work-related injury, the workers compensation carrier for White Rose was Continental Insurance Company (hereinafter "Continental"). Immediately after the accident, says plaintiff, his condition worsened progressively and he sought medical treatment at an emergency care clinic. According to plaintiff, the emergency clinic's physician took x-rays which revealed nothing unusual. Plaintiff says that in order to relieve his symptoms of pain and stiffness, the emergency clinic physician gave him a prescription for aniprox. Plaintiff says he took three days off from his employment and his condition seemed to improve. However, over time the symptoms persisted and plaintiff says he was advised to see a doctor. Plaintiff then consulted Dr. Isaac A. Aultman, White Rose's company physician, on February 1, 1993, and was found to have a herniated cervical disc in the C6-7 region of his spine. Dr. Aultman referred plaintiff to Dr. John P. Gorecki, a neurologist, who treated plaintiff with rest, pain relievers and traction. Plaintiff was released to return to work on March 3, 1993. Dr. Gorecki advised plaintiff to limit the amount of heavy lifting he performed on the job. The cost of Richard's medical consultation and treatment was paid by Continental, the workers compensation carrier for White Rose at the time of plaintiff's accident.

Plaintiff returned to work and performed his duties without incident until July 20, 1994. On that date, plaintiff says he was picking up a relatively light bag of laundry when he felt a sensation of tingling and pain which traveled down his spine and into his extremities. Over the next few days, plaintiff continued to work, but he says he suffered symptoms of increasing stiffness, numbness, and pain. Plaintiff revisited Dr. Aultman on July 27, 1994, and again on August 1, 1994. What initially was diagnosed as a severe neck strain was found to be a large right focal herniation of Richard's cervical disc at the C6-7 region. Plaintiff was referred for treatment to another neurosurgeon, a Dr. E.E. Robinson, on August 3, 1994. Dr. Robinson's statement dated that same day says that plaintiff was advised of the surgical options available to correct the herniation of the cervical disc. The statement also says that plaintiff denied any other accidents or serious injuries and that the present problem began about one month before "without any real known cause, accident, injury or other such." Dr. Robinson's statement also notes that plaintiff was aware of his herniated disc problem in early 1993, and that he had done "fairly well" with "some ups and downs" until his visit to Dr. Aultman in August of 1994. Additionally, plaintiff's own statement dated August 9, 1994, says that he coped with pain after his 1992 accident which "never did completely leave me."

At the time plaintiff revisited Dr. Aultman in August of 1994, the defendant Amerisure Insurance Company (hereinafter "Amerisure") had replaced Continental as the workers compensation carrier for White Rose. Amerisure conducted its investigation of plaintiff's claim for benefits and entered its Notice of First Payment in the amount of $243.75 with the Mississippi Workmen's Compensation Commission on August 12, 1994. However, on September 1, 1994, Amerisure entered a Notice to Employee of Suspension of Payment. Amerisure's reason for suspension as stated on the Notice was that the "medical report indicates current problems related to 9-'92 work injury." Inasmuch as Continental was White Rose's compensation carrier at the time of plaintiff's September, 1992, accident, Amerisure concluded that it was not the carrier responsible for plaintiff's compensation payments. Subsequently, Continental entered its Notice of First Payment in the amount of $227.18 on October 24, 1994. Continental continued providing workers' compensation benefits to plaintiff, including payments for plaintiff's surgery.

On November 16, 1994, plaintiff filed the instant complaint against his employer White Rose and Amerisure for bad faith breach of contract. According to the complaint, White Rose and Amerisure are liable to pay compensation for plaintiff's injury which occurred on July 20, 1994. Furthermore, according to the complaint, White Rose and Amerisure intentionally and with reckless disregard for plaintiff's rights failed and refused to provide coverage for or to investigate adequately the circumstances of the alleged July 20, 1994, injury. Plaintiff's complaint asks for $500,000.00 in compensatory damages and $1,500,000.00 in punitive damages. Amerisure and White Rose respond that Amerisure, relying on the statements of Dr. Robinson and of the plaintiff himself, discontinued payments only because of its determination that it was not the compensation carrier responsible for costs related to plaintiff's 1992 neck injury.

II. APPLICABLE LAW

A. Summary Judgment Standard

The plain language of Rule 56(c) of the Federal Rules of Civil Procedure mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which the party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The movant must present sufficient evidence to establish the existence of each element for which the movant bears the burden of proof in order to survive a motion for summary judgment. Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. The mere existence of a factual dispute does not by itself preclude the granting of summary judgment. The requirement is that there be no genuine issue of material fact. Anderson v. Liberty Lobby, 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); St. Amant v. Benoit, 806 F.2d 1294, 1296-97 (5th Cir. 1987).

B. Arguable Basis?

In order to recover on a bad faith breach of contract claim, an insured has the burden of showing that the insurer denied the claim (1) without an arguable⁵ or legitimate basis, either in fact or law, and (2) with malice or gross negligence in disregard of the insured's rights. United States Fidelity & Guaranty Company v. Wigginton, 964 F.2d 487, 492 (5th Cir.1992), citing Dunn v. State Farm Fire and Casualty Co., 711 F.Supp. 1362, 1364 (N.D.Miss.1988), aff'd, 927 F.2d 869 (5th Cir.1991). The insurer need only show that it had reasonable justifications, either in fact or in law, to deny payment. Id. Moreover, whether an insurer had an arguable reason to deny an insured's claim is an issue of law for the court. Id.; Banker's Life and Casualty Company v. Crenshaw, 483 So.2d 254, 269 (Miss.1985), aff'd, 486 U.S. 71, 108 S.Ct. 1645, 100 L.Ed.2d 62 (1988). In deciding whether an insurer had an arguable basis to deny insurance liability, Mississippi courts usually apply the "directed verdict test." Under this test,⁶ unless the insured would be entitled to a directed verdict on the underlying insurance claim, an arguable reason to deny an insurance claim exists in most instances. Dunn v. State Farm Fire & Casualty Company, 927 F.2d 869, 873 (5th Cir.1991), citing Blue Cross & Blue Shield v. Campbell, 466 So.2d 833, 843 (Miss.1984) ("Unless the trial judge grants a directed verdict to the insured plaintiff on the contract claim, then, as a matter of law, the insurance carrier has shown reasonably arguable basis to deny the claim ... in the vast majority of cases."); see also Reece v. State Farm Fire & Casualty Co., 684 F.Supp. 140, 146 (N.D.Miss.1987) (when plaintiff is not entitled to directed verdict on policy claim, it "necessarily follows that there was an arguable reason for denying the claim").

In the instant case, this court finds that Amerisure's reliance upon the statement of Dr. Robinson dated August 3, 1994, and plaintiff's statement dated August 9, 1994, provided sufficient arguable reason for Amerisure's suspension of payment.⁷ Amerisure acted upon the reasonable belief that all of plaintiff's symptoms arose from...