S. Healthcare Servs., Inc. v. Lloyd's of London

Decision Date25 April 2013
Docket NumberNo. 2011–CA–01833–SCT.,2011–CA–01833–SCT.
Citation110 So.3d 735
PartiesSOUTHERN HEALTHCARE SERVICES, INC., Medforce Management, LLC d/b/a Willow Creek Retirement Center and Daleson Enterprises, LLC d/b/a Jones County Rest Home v. LLOYD'S OF LONDON a/k/a Underwriters at Lloyd's of London and Certain Underwriters at Lloyd's, London.
CourtMississippi Supreme Court


David Mullin, Richard Biggs, Derek Andrew Henderson, attorneys for appellants.

Richard O. Burson, Laurel, Peeler Grayson Lacey, Jr., Shirley M. Moore, Laurel, attorneys for appellants.


COLEMAN, Justice, for the Court:

¶ 1 The insureds filed suit against their insurers in the Circuit Court for the First Judicial District of Jones County, claiming they were unaware their insurance policy had a $250,000 per-claim deductible and alleging that the insurer breached its insurance contract by refusing to provide a defense until the insureds paid the $250,000 deductible for each of five separate claims. The circuit court granted summary judgment for the insurers and the insureds appeal. We affirm the circuit court's grant of summary judgment.


¶ 2 Daleson Enterprises, LLC (“Daleson”) operated Jones County Rest Home in Ellisville. Medforce Management, LLC (“Medforce”) operated Willow Creek Retirement Center in Byram. Southern Healthcare Services, Inc. (“Southern Healthcare”) managed both Daleson and Medforce. Southern Healthcare purchased professional and general liability insurance from Lloyd's of London (“Lloyd's”) to cover Daleson, Medforce, and others. Southern Healthcare was the first named insured on the policy. Southern Healthcare, Daleson, and Medforce will be referred to collectively as the “Insureds.”

¶ 3 In 2001, a previous operator of Jones County Rest Home had purchased an insurance policy from Lloyd's with a $25,000 deductible. An agent at Fox–Everett, Inc. facilitated the purchase. Daleson assumed the operation of Jones County Rest Home in 2002, and the Insureds asked the Fox–Everett agent to obtain an insurance policy similar to the one held by the previous operator. The Fox–Everett agent obtained a policy from Lloyd's in October 2002, and the Insureds claim that they thought the policy was nearly identical to the policy the previous owner had in place. The Insureds contend the Fox–Everett agent informed them their new policy had a higher premium and lower policy limit. Otherwise, the Insureds believed their new policy was identical to the previous one. In fact, the policy had a $250,000 per-claim deductible. The Insureds claim Fox–Everett failed to inform them about the different deductible. They also claim they did not receive a copy of the policy until eleven months after the purchase. The policy was renewed in October 2003. Again, the Fox–Everett agent informed them that the premium was going up, but the Insureds claim the agent said nothing about the $250,000 deductible.

¶ 4 In 2003 and 2004, various plaintiffs filed five lawsuits against the Insureds. When each civil action arose, the Insureds notified Lloyd's in accordance with the policy terms. Caronia Corporation (“Caronia”) acted as the third-party administrator for Lloyd's, and Caronia sent a reservation of rights (“ROR”) letter to the Insureds acknowledging receipt of each claim. Via the ROR letters, Caronia informed the Insureds that “Lloyd's would not provide coverage under the policies until the $250,000 deductibles were paid in full.”

¶ 5 The ROR letters were standard communications that included claim information, acknowledged receipt of the lawsuit, stated that indemnification and defense would be provided, and set forth any issues that would not be covered under the policy or that would be defended under a reservation of rights. The letters provided the name and contact information of the attorneys Lloyd's had hired to defend the Insureds. Each letter included the following language about the deductible:

As you are aware, Southern Healthcare Services, Inc., d/b/a Jones County Rest Home [Willow Creek Retirement Center] has a $250,000 deductible for each and every Professional Liability claim. Therefore, the first $250,000 of indemnity and/or claims related expenses will be paid directly by Southern Healthcare Services, Inc., d/b/a/ Jones County Rest Home [Willow Creek Retirement Center].

The Insureds claim they were “thunderstruck” by the above-quoted language regarding the operation of the deductible.

¶ 6 Caronia sent the ROR letters directly to the nursing homes, rather than to Southern Healthcare. Daleson and Medforce initially paid the attorneys directly until the dispute arose over the deductible. In early 2005, Daleson and Medforce filed for bankruptcy and stopped paying the defense attorneys. They claim they had no choice but to file for bankruptcy because they could not pay the total $1.25 million for the five claims. However, Southern Healthcare did not file for bankruptcy; as the first named insured, Southern Healthcare was the only entity actually responsible for paying the deductible.1 In March 2005, Lloyd's or Caronia told the lawyers to continue defending and that they would pay the attorneys' fees since the Insureds had filed for bankruptcy. A year later, none of the attorneys' fees had been paid by Lloyd's or Caronia, and the attorneys withdrew. Between December 2006 and August 2007, the defense attorneys were rehired. Lloyd's paid the defenseattorneys, and all five suits were settled.


¶ 7 In August 2006, the Insureds filed suit against Lloyd's, Caronia, and Fox–Everett (collectively the “Insurers”) in the Circuit Court for the First Judicial District of Jones County. Against Lloyd's, the Insureds alleged breach of contract for failure to provide coverage and defense costs. Against both Lloyd's and Caronia, they alleged fraud and breach of the duty of good faith and fair dealing for misrepresenting that the Insureds had to pay the deductibles in full before they were entitled to coverage. Against Fox–Everett, they asserted breach of contract, breach of fiduciary duty, negligent misrepresentation, and gross negligence for allegedly procuring the policy without informing the Insureds of the $250,000 deductible.

¶ 8 Lloyd's counterclaimed, alleging breach of contract against Southern Healthcare and seeking a declaratory judgment that Southern Healthcare must pay the $250,000 deductible for each of the underlying suits. After settling the underlying claims, Lloyd's moved for summary judgment on the Insureds' claims against it and Caronia. Lloyd's also moved for summary judgment on its counterclaim. The trial judge, Judge Robert G. Evans, found no issues of material fact and granted Lloyd's summary judgment. The ruling required the Insureds to reimburse Lloyd's in the amount of $701,153.54 for the costs of defense and settlement that fell within the per-claim deductible. Pursuant to Rule 54(b) of the Mississippi Rules of Civil Procedure, the trial judge entered a final judgment as to the Insureds' claims against Lloyd's and Caronia on March 26, 2008. The trial judge entered a final judgment as to Lloyd's counterclaim against Southern Healthcare on July 11, 2008. The Insureds' claims against Fox–Everett were not part of the summary judgment.

¶ 9 The Insureds appealed, and the case was assigned to the Court of Appeals. The Court of Appeals dismissed the appeal as improperly certified because the claims against Fox–Everett had not been disposed of, and it found those claims to be “intertwined” with the claims for damages. S. Healthcare Servs., Inc. v. Lloyd's of London, 20 So.3d 84, 88 (¶ 14) (Miss.Ct.App.2009). The majority did not address the propriety of summary judgment. Four judges dissented, writing that the appeal should not have been dismissed because the claims against Fox–Everett were not relevant to the claims against Lloyd's and Caronia and the appeal was properly before the court. Id. at 92 (¶¶ 33–34). In addition, the dissenting judges would have reversed the trial court's grant of summary judgment and remanded for a trial on the merits. Id. at 99 (¶ 63).

¶ 10 On remand, the Insureds filed a motion to reconsider summary judgment. Judge Evans died before the motion could be considered, and Judge Joe N. Pigott was appointed as Special Judge to preside over the case. Judge Pigott scheduled a hearing on the motion to reconsider summary judgment and for a status conference on March 10, 2011. At the hearing, Judge Pigott vacated the summary judgments granted by Judge Evans, directed the parties to proceed with discovery, and set a trial date.

¶ 11 Following the March 10th hearing, the litigation continued as though all parties were again in the suit and proceeding to trial in September. At a hearing on a motion to compel discovery held on June 16, 2011, Judge Pigott did not remember vacating the summary judgments, and an order had not been entered vacating them. However, an order dated August 16, 2011, nunc pro tunc to March 10, 2011, is in the record.

¶ 12 On September 29, 2011, the parties were before Judge Pigott at a hearing on another motion to compel and a motion for leave to amend the complaint. At the hearing, Judge Pigott reinstated the grants of summary judgment in favor of Lloyd's and Caronia, finding that they were never reversed and were still in effect. Judge Pigott said Fox–Everett was the only defendant left in the case, and the Insureds were to proceed to trial against Fox–Everett only. He denied the Insureds' motion to amend the complaint, because the amendments pertained only to Lloyd's. Judge Pigott entered new final judgments dismissing the Insureds' claims against Lloyd's and Caronia and dismissing Lloyd's counterclaim against the Insureds. After entry of the final judgments, the Insureds filed multiple motions indicating they believed Judge Pigott did not allow their arguments into the record. The Insureds also filed a motion for a new trial, which the trial court d...

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