U.S. Fidelity and Guar. of Ms v. Martin

• Decision Date: 30 October 2008
• Docket Number: No. 2007-CA-00193-SCT.,2007-CA-00193-SCT.
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY OF MISSISSIPPI v. Debbie MARTIN d/b/a Cartmell Gallery and Cartmell Gallery, Ltd., LLC.
• Court: Mississippi Supreme Court

998 So.2d 956

UNITED STATES FIDELITY AND GUARANTY COMPANY OF MISSISSIPPI v. Debbie MARTIN d/b/a Cartmell Gallery and Cartmell Gallery, Ltd., LLC.

No. 2007-CA-00193-SCT.

Supreme Court of Mississippi.

October 30, 2008.

Rehearing Denied January 29, 2009.

J. Wade Sweat, Ridgeland, Marisa Campbell Atkinson, Clarksdale, attorneys for appellant.

Charles W. Wright, Jr., Meridian, attorney for appellee.

Before DIAZ, P.J., CARLSON and GRAVES, JJ.

GRAVES, Justice, for the Court.

¶ 1. United States Fidelity and Guaranty Company of Mississippi ("USF & G") appeals from a jury verdict in Debbie Martin's favor. USF & G raises four claims on appeal: 1) that the trial court should have granted summary judgment as to ambiguity of its insurance policy; 2) that the trial court should have granted judgment notwithstanding the verdict for Martin's failure to present sufficient evidence of sewer or drain backup; 3) that the trial court should have granted judgment notwithstanding the verdict for Martin's failure to present sufficient evidence of fine arts coverage; and 4) that the trial court should not have excluded evidence of Martin's flood insurance claim and carpet cleanup from 2004. Martin cross-appeals, arguing that 1) the trial court should not have granted a remittitur; and 2) the trial court should not have granted summary judgment as to her punitive damages claim. We find some issues with merit and some without.

FACTS

¶ 2. On April 7, 2003, a heavy rain or flood¹ in Meridian, Mississippi damaged the Cartmell Gallery (the "Gallery"), an art gallery owned by Debbie Martin. When she and her business partner Greg Cartmell were first notified of the damage early in the morning on April 7, 2003, both Martin and Cartmell went to inspect the Gallery. They found several inches of standing water in the Gallery and discovered that there was significant damage from the water. Martin and Cartmell promptly contacted Mike Gardner of Gardner's Carpet Cleaning and hired him to extract the water from the Gallery and clean the carpets. Gardner's Carpet Cleaning began cleaning on April 7, 2003. Martin and Cartmell testified that on April 7, 2003, and for several days afterward, the Gallery smelled of sewage. Gardner testified that starting April 8, 2003, the Gallery smelled of sewage.

¶ 3. Prior to the incident, on February 6, 2001, Martin bought an insurance policy (the "Policy") for the Gallery from USF & G. Martin renewed this policy on February 6, 2003 and the renewed policy was in effect at the time of the damage. On April 7, 2003, Martin filed a claim with USF & G for the damage to the Gallery. Shortly after April 7, 2003, Martin drafted a list of damaged items. On April 23, 2003, Robert Hewitt, a claim specialist for USF & G, sent Martin a letter denying her claim. Martin obtained an expert's opinion that the Policy provided coverage for her claim and submitted a demand letter to USF & G with the expert opinion letter attached. USF & G denied the claim again on March 2, 2004.

¶ 4. On April 7, 2004, Martin, d/b/a Cartmell Gallery, filed a complaint against USF & G. On September 14, 2005, USF & G filed a motion for summary judgment. USF & G argued that 1) the water exclusion in the Policy clearly and unambiguously precluded coverage for Martin's claim because the damage was caused in whole or in part by flooding; and 2) Martin should not be permitted to submit a punitive damages claim to the jury. On March 23, 2006, the trial court denied summary judgment on the first ground and granted summary judgment on the second. This case was tried before a jury from September 27, 2006 through September 29, 2006. After Martin presented her case, both parties moved for directed verdicts, which the trial court denied.

¶ 5. On September 29, 2006, the jury returned unanimous verdicts on all three counts submitted for their decision. As to Count I, the jury found for Martin and awarded her $39,329 for damage caused by sewer or drain backup. On Count II, the jury found for Martin and awarded her $2,215 for damage under the fine arts provision of the Policy. As to Count III, the jury found for Martin and awarded her $3,084 for damage under the electronic data processing system provision of the Policy. The total damage award was $44,628.

¶ 6. After the trial court entered a judgment according to the jury verdict, USF & G moved to remit the jury award under Count I, for sewer or drain backup, to $25,000. USF & G also filed a Motion for Judgment Notwithstanding the Verdict and Opposition to Award of Costs ("JNOV"), arguing, inter alia, that 1) the jury should not have been permitted to decide whether or not the damage to the Gallery was caused by sewer or drain backup and that the trial court incorrectly denied summary judgment on ambiguity grounds; 2) the trial court erroneously prevented USF & G from introducing evidence regarding Martin's successful flood insurance claim and cleanup of the Gallery after an incident in 2004; and 3) the jury verdict was contrary to the overwhelming weight of the evidence and should be overturned.

¶ 7. After a hearing, the trial court granted the remittitur and denied the JNOV. The trial court decreased the jury award under Count I to $25,000 (for a total damage award of $30,299). On January 19, 2007, USF & G appealed and on January 27, 2007, Martin cross-appealed.

ANALYSIS

¶ 8. USF & G raises four issues on appeal and Martin raises two issues on cross-appeal.

I. Whether Summary Judgment Was Properly Denied as to Ambiguity of the Policy.

¶ 9. USF & G claims that the trial court should have granted its motion for summary judgment because the Policy clearly and unambiguously excludes coverage for Martin's claim. Section I of the Policy states, in relevant part:

A. Coverage Provided.

We will pay for direct physical loss to Covered Property at the premises described in the Schedule of Premises caused by or resulting from any Covered Cause of Loss.

1. Covered Property. [Omitted.]

2. Property Not Covered. [Omitted.]

3. Coverage Extensions. [Omitted].

4. Additional Coverage.

...

v. Sewer or Drain Backup.

We will pay for direct physical loss to Covered Property at the premises described in the Schedule of Premises if the loss is caused by water that:

(1) Backs up through sewers or drains, or

(2) Enters into and overflows from within:

(a) A sump pump,

(b) A sump pump well, or

(c) Any other system, designed to remove subsurface water from the foundation area.

The most we will pay for this Additional Coverage is $25,000 or the Limit of Insurance shown in the Property Coverage Part Declarations for Sewer or Drain Backup, whichever is greater.

B. Covered Causes Of Loss. [Omitted.]

C. Exclusions.

1. We will not pay for loss to Covered Property caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. Unless otherwise stated, the following exclusions apply to all SECTION I-Coverages.

a. Water.

(1) Flood, surface water, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not.

...²

¶ 10. USF & G claims that the trial court wrongly denied its motion for summary judgment as to ambiguity of the Policy. USF & G argued in part that "[t]he insurance policy clearly and unambiguously excludes coverage for the Plaintiffs' water damage claim." USF & G claimed that the water exclusion in the Policy is "almost identical" to a water exclusion found by the Southern District of Mississippi to be clear and unambiguous. Eaker v. State Farm Fire & Cas. Ins. Co., 216 F.Supp.2d 606, 622 (S.D.Miss.2001). Martin argued that the policy was ambiguous and should, therefore, be construed in her favor.

¶ 11. After a hearing, the trial court denied summary judgment on the grounds of ambiguity. The trial court first reviewed the relevant case law and set out the rules of construction for insurance contracts:

1. Where, an insurance contract is plain and unambiguous, it should be construed as written, like other contracts.

2. Insurance Contracts are construed most strongly against party drafting contract, and most favorably to the policyholder.

3. Where terms of insurance contracts are ambiguous or doubtful, contract must be construed most favorably to insured and against insurer.

4. Insurance contracts must be given a reasonable and sensible interpretation, and where policy is subject to two interpretations equally reasonable, that which gives the greater indemnity to the insured should be adopted.

5. Where there is no practical difficulty in making the language of an insurance contract free from doubt, any doubtful provision in the policy should be construed against the insurer.

6. Terms of insurance policies are construed favorably to insured wherever reasonably possible, particularly exclusion clauses.

7. Although ambiguities of insurance contract should be construed against insurer, court cannot alter or change contract where terms are not ambiguous, despite resulting hardship on insured.

State Farm Mut. Auto. Ins. Co. v. Scitzs, 394 So.2d 1371, 1372-73 (Miss.1981). The trial court noted that there is no case exactly on point from this Court. The trial court then distinguished Eaker. Eaker, 216 F.Supp.2d at 622. In Eaker, the insurance policy excluded coverage for damage from water, which it explicitly defined as including flood, surface water, overflow of a body of water, and "water from outside the plumbing system that enters through sewers or drains, or water which enters into and overflows from within a sump pump, sump pump well or any other system designed to remove subsurface water which is drained from the foundation area...." Id., 216 F.Supp.2d at 622. The trial court reasoned that since the policy in Eaker explicitly excluded water from sewer or drain backup, it was distinguishable from this case, where 1) the water exclusion does not...