Titan Indem. Co. v. Williams, 98-CA-00361-COA.
| Decision Date | 18 May 1999 |
| Docket Number | No. 98-CA-00361-COA.,98-CA-00361-COA. |
| Citation | 743 So.2d 1020 |
| Parties | TITAN INDEMNITY COMPANY, Appellant, v. Dwight WILLIAMS, NCM, By and Through His Mother, Next Friend and Conservator, Bessie Williams, Appellee. |
| Court | Mississippi Court of Appeals |
Robert O. Allen, Sally Burchfield Doty, Brookhaven, Attorneys for Appellant.
Merrimen McKay Watkins, Crystal Springs, Attorney for Appellee.
BEFORE KING, P.J., BRIDGES, DIAZ AND LEE, JJ.
DIAZ, J., for the Court:
¶ 1. This appeal arises from a complaint for declaratory judgment seeking a determination of whether either of two liability policies issued to the Hazlehurst Separate School District by the Titan Indemnity Company provided coverage for a claim for damages filed on behalf of Dwight Williams against the District, its school superintendent, members of the school board, and two teachers. The chancellor found that the "claims made" policy issued by the insurer provided coverage for the District. Aggrieved by the decision, Titan now asks this Court to consider whether the complaint for declaratory judgment is an impermissible direct action against an insurance company; whether the lower court's extension of the policy's notice requirement effectively re-wrote the contract of insurance between the District and Titan; and whether the professional liability exclusion contained within the policy prohibits coverage for Williams' claims. We find that Williams had standing to seek a declaratory judgment in this case. However, the chancellor's decision effectively converted a "claims made" policy to an occurrence policy, impermissibly rewriting the contract between the insured and the insurer. So finding, we do not reach the merits of whether the professional services exclusion of that policy was applicable, but note the chancellor's error in concluding that the "professional services" provided by a teacher do not include disciplinary and supervisory responsibilities. We therefore reverse and render the lower court's decision.
FACTS
¶ 2. On March 30, 1994, Dwight Williams, through his mother, Bessie Williams, filed suit against the Hazlehurst School District, the school superintendent, members of the school board and two teachers in the Circuit Court of Copiah County. The complaint alleged that Williams, who has Downs Syndrome, had been sexually abused at school by unidentified fellow students six and one-half years earlier in the fall of 1987, when he was a fifteen-year-old special education student in the District. Prior to the filing of the lawsuit, the District had received a written notice of a claim for damages from Williams' attorney on August 26, 1993.
¶ 3. On August 30, 1993, the District filed a general liability loss claim with its insurance carrier, Titan Indemnity Company. After investigating the claim, Titan advised the District that coverage was denied under Policy No.11-CM-01309 because of the policy's "abuse and molestation" exclusion. Williams then filed a declaratory judgment action in the chancery court to determine if coverage existed under that policy and further, whether an additional policy issued to the District, No.11-CM-00333, provided coverage. In his findings of fact and conclusions of law, the chancellor held that the "abuse and molestation" exclusion contained within the policy was indeed valid. However, he held that the second policy, a so-called "claims made" policy, provided the District with alternate coverage. Titan now appeals the chancellor's finding that it is liable to the District pursuant to the "claims made" provisions of the policy covering the period between February 4, 1988 and February 4, 1989. The policy contained a 180-day extension period for notice of claims, thus providing coverage for claims made through August 2, 1989.
DISCUSSION
¶ 4. As a threshold defense, Titan argues that Williams lacks standing to bring this action. Relying on Westmoreland v. Raper, 511 So.2d 884 (Miss.1987), Titan claims that the prohibition against direct actions by third parties on insurance policies bars Williams' request for declaratory judgment. Titan's reliance on Westmoreland and its progeny is misplaced. Rule 57 of the Mississippi Rules of Civil Procedure affords Williams the opportunity to have his rights adjudicated through a declaratory action. Moreover, to the extent that Westmoreland, Clark v. City of Pascagoula, 507 So.2d 70 (1987) and Hunt v. Preferred Risk Mut. Ins. Co., 568 So.2d 253 (Miss.1990) have been construed as precluding a third party from bringing substantive claims against an insurer in a Rule 57 action, they have been overruled by the Mississippi Supreme Court. State Farm Mut. Automobile Ins. Co. v. Eakins, 96-CT-00034-SCT, ___ So.2d ___, 1999 WL 798573 (¶ 9)(Miss.1998). Thus, Mississippi's longstanding prohibition against litigating a claim against an alleged tortfeasor's liability insurer without first obtaining a judgment against the insured has been limited in the interests of judicial economy; indeed, a separate claim for declaratory judgment, like that filed by Williams, now may be joined with an action for damages. Id. at (¶ 10).
¶ 5. Rule 57 creates a procedure by which the rights and obligations of the parties may be adjudicated in cases involving an actual controversy "that has not yet reached the stage at which either party may seek a coercive remedy, or in which the party entitled to such a remedy fails to sue for it." M.R.C.P. 57 cmt. "The two principal criteria in favor of rendering declaratory judgments are: (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Id.; see also White v. Gautier Utility Dist., 465 So.2d 1003, 1014 (Miss. 1985)("[a]mong the cases where a proceeding for declaratory judgment is most needed are those where there exists an actual dispute with respect to which the parties have a compelling need to know where they stand"). Where, as in the case sub judice, language contained in the insurance contract is thought to need clarification in order to determine the legal positions of the parties, declaratory action is appropriate.
¶ 6. Did Williams, who was not a party to the contracts for insurance between Titan and the District, have standing to seek a declaratory judgment? We believe so. Rule 57(B)(1) provides that:
any person interested under a ... written contract, or other writings constituting a contract, or whose rights, status, or other legal relations are affected [thereunder] may have determined any question of construction or validity arising under the instrument ..., and obtain a declaration of rights, status, or other legal relations thereunder.
M.R.C.P. 57 (emphasis added). Williams' rights and status clearly are affected by the terms of the policy. Without the coverage afforded the District by its liability policies with Titan, Williams has no recourse against the District since, in 1987, when the cause of action arose, it otherwise enjoyed the protective cloak of sovereign immunity.1 See, e.g., Richardson v. Rankin County School Dist., 540 So.2d 5, 8 (Miss.1989). Therefore, whether Williams' claim fell within the ambit of either policy had to be determined before his underlying action against the District for damages might proceed. Neither Titan nor the District apparently felt compelled to seek resolution of the issue, so it was incumbent upon Williams to pursue the matter. The chancellor therefore was correct in finding that Williams could petition for an adjudication of his rights pursuant to Rule 57.
POLICY'S NOTICE REQUIREMENT IMPERMISSIBLY RE-WROTE THE CONTRACT OF INSURANCE BETWEEN THE DISTRICT AND TITAN, ESSENTIALLY CONVERTING A "CLAIMS MADE" POLICY TO AN OCCURRENCE POLICY.
¶ 7. The chancellor, relying on Lawler v. Government Employees Insurance Company, 569 So.2d 1151 (Miss. 1990), found that Williams had timely provided notice of his claim to the District by filing his lawsuit within the six-year statute of limitations then in effect. While acknowledging that the policy at issue in Lawler was an "occurrence" policy, he stated that there was no reason why the same law would not be applicable to a "claims made" policy. In so finding, the chancellor effectively rewrote the conditions of the contract for insurance between Titan and the District.
¶ 8. Titan Indemnity Policy No. 11-CM-00333 provided the District with liability coverage for claims made between February 4, 1988 and February 4, 1989. The policy contained a 180-day extension period for filing notices of claims, thus extending coverage for claims made through August 2, 1989. A "claims made" policy such as this protects the insured against claims made during the term of the policy, unlike an "occurrence" policy, which protects the policy holder from liability for any act done while the policy is in effect. St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 535 n. 3, 98 S.Ct. 2923, 57 L.Ed.2d 932 (1978). In other words, the basic "claims made" policy provides for indemnity, regardless of when the act complained of occurred, if the act was discovered and notice given to the insurer during the policy period. Brander v. Nabors, 443 F.Supp. 764, 767 (N.D.Miss.1978). Conversely, an occurrence policy provides for indemnity, regardless of when the act complained of was discovered or notice provided to the insurer, as long as the act occurred during the policy period. Id.
¶ 9. The District's policy specifically required that written notice of a claim be given before August 2, 1989 as a condition precedent to coverage.2 In relevant part, the policy provided:
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