Universal Life Ins. Co. v. Veasley

• Citation: 610 So.2d 290
• Decision Date: 19 February 1992
• Docket Number: No. 07-CA-59316,07-CA-59316
• Parties: UNIVERSAL LIFE INSURANCE COMPANY v. Martha VEASLEY.
• Court: Mississippi Supreme Court

Page 290

610 So.2d 290

UNIVERSAL LIFE INSURANCE COMPANY v. Martha VEASLEY.

No. 07-CA-59316.

Supreme Court of Mississippi.

Feb. 19, 1992.

Rehearing Denied Dec. 31, 1992.

Dissenting Opinion by Justice McRae on Denial of Rehearing

Dec. 31, 1992.

Leonard B. Melvin, Billie J. Graham, Len Melvin, Melvin & Melvin, Laurel, for appellant.

John M. Deakle, Hattiesburg, Charles G. Blackwell, James M. Brown, Laurel, for appellee.

Paul S. Minor, Minor & Guice, Biloxi, for amicus curiae.

Before HAWKINS, P.J., and ROBERTSON and BANKS, JJ.

BANKS, Justice, for the Court:

I

The primary question put to the Court in this matter is whether the failure to honor a claim without justification is a sufficient circumstance to support an award of punitive damages in the absence of evidence This matter is before the Court on appeal from a judgment of the Circuit Court of Jones County reflecting a jury verdict awarding actual damages in the amount of $3552.76 and punitive damages in the amount of $175,000. Universal Life Insurance Company, (Universal) aggrieved by the verdict and judgment, appeals and, in the end, we affirm as to actual damages and reverse and render as to punitive damages.

that the failure was willful or caused by any thing other than simple negligence, where the claim was honored within seventy-five days of when it was filed and five days of the first written protest of its dishonor. Applying traditional principles governing the award of punitive damages we answer the question in the negative.

II

In August 1985, Teretha Veasley (Teretha) purchased a life insurance policy from Regina Battle, an agent of Universal Life Insurance Company. She named her mother, Martha Veasley (Veasley), as the sole beneficiary of the policy. Concomitant with the completion of the application, Teretha paid one premium in the amount of $7.29. Subsequently, she received notice that the policy was approved with a higher risk rating and that premiums would be $10.76. The first premium was due September 18, 1985. That premium was never paid. The policy provided for a thirty-one (31) day grace period in which it would remain in effect following the due date of a premium not paid.

Teretha died in Laurel, Mississippi, on October 18, 1985, as a result of complications from childbirth. Thereafter, Veasley contacted Viola Malone at the Malone Funeral Home in Laurel to make funeral arrangements. She gave the insurance policy in issue to Malone who agreed to file a claim so that the proceeds could be used to pay the funeral bill. She asked that the balance of any monies due be paid to her. At that time, Malone, who coincidentally, is a writing agent for Universal, contacted Universal's main office in Memphis, Tennessee and inquired about coverage. She was informed by a male employee that coverage was in effect, because Teretha died one day within the grace period.

Malone handled all of the paperwork in submitting the claim form. For reasons not fully explained in the record, she did not mail the claim until July 1, 1986, more than eight months after Teretha's funeral. On July 3, 1986, the claim packet was received by Universal. Universal had two death claims analysts. When this claim came up for review, one of the analysts was out and a death claims clerk was filling in as a replacement. That clerk drew the claim in question. Feeling uncertain about the claim, she consulted the other regular analyst who told her that the claim should be denied because the policy had lapsed.

The death claims clerk handling the matter then turned it over to another clerk for communication of the denial of coverage. For bases unexplained in the record, that clerk mailed a notice of denial of coverage on July 16, 1986, indicating that coverage was denied because the policy had not been in force the required period of time and because there was "no value in the policy." Although these reasons are applicable to some policies and claims thereon, they had no application whatever to the policy and claim in question.

Later in July, Malone inquired as to the status of the claim and a copy of the denial form was mailed to her. Nothing in the record reflects that any other contact was made with Universal's claims office until Charles Blackwell (Blackwell), an attorney consulted by Veasley, sent a letter in September of 1986 questioning the reasons for denial and inquiring as to whether there was a problem with the policy.

There was testimony concerning several contacts with Universal selling agents, between the initial denial and the Blackwell letter. Darnell Milsaps (Milsaps), Veasley's son-in-law, made contacts with Regina Battle, the agent who took Teretha's application, and Jack Morgan, another Universal selling agent, in an effort to determine why the claim was not paid. The record does not indicate what, if anything, was done by Finally, Milsaps, on behalf of Veasley, retained Blackwell who wrote the letter alluded to above. Upon reading the letter, Redmond, Universal's claims department manager, had the file pulled. He reviewed the file and realized it should have been paid. Immediately after reading the file, Redmond attempted to call Blackwell. It was after five o'clock and there was no answer. He did speak to Blackwell the following day, September 12, and informed him the claim had been wrongfully denied and that it would be paid promptly. True to the word of its representative, on September 26, 1986, Universal mailed a check in the amount of $1458.00 to the Malone Funeral Home and the balance due under the $4500.00 policy to Veasley.

them. Veasley called the Universal office in Laurel about the problem. She testified that a gentleman, whom she originally identified as Willis McDonald, came to see her. At trial, she retracted her identification of McDonald, who had been made a defendant in this case. In any event, she maintained that the now unidentified gentleman came to her home to discuss the problem and called back the following day to indicate that he had been unsuccessful in changing the decision.

The check mailed to the funeral home was cashed. Veasley consulted her lawyer. At some point she endorsed the check but rather than negotiate it, John Deakle, who had apparently been associated to represent her by this time, tore the check in half and mailed a copy of it to Universal together with a letter asserting a bad faith claim. This litigation ensued.

Veasley's complaint alleged tortious breach of contract, fraud in the inducement, and breach of fiduciary duty. In addition to contractual and punitive damages, she sought extra-contractual damages. Veasley alleged that she suffered emotional distress as a result of Universal's (mis-)handling of her claim. She testified that Universal's refusal to pay her claim caused her worry, nervousness, and depression. She also claimed she had sleepless nights and little or no tolerance for children or noises. She stated she was taking tranquilizers for her problems. There was no medical testimony presented during the trial and Veasley admitted that she had some of the same problems before and after her daughter's death.

Trial was had, at the end of which, the jury was instructed to find for the plaintiff in the amount of $3,052.76, which was the balance due on the contract after the funeral expenses had been paid. The jury, on its own accord, pursuant to instructions allowing it to determine the issues, awarded Veasley $500.00 for actual extra-contractual damages and $175,000.00 in punitive damages.

McDonald had been dismissed at the close of the plaintiff's case. Universal brings this appeal assigning as error the failure of the court to give an instruction directing the jury to find for defendant if the initial failure to pay was a result of clerical error, granting an instruction allowing punitive damages and granting an instruction allowing extra contractual damages. Because we find that this record does not support an instruction allowing punitive damages we pretermit discussion of the issue of the "clerical error" instruction.

III

The primary issue here is whether or not this record supports Veasley's claim for punitive damages. Universal contends the record is devoid of evidence which supports a punitive damage instruction. Veasley, argues to the contrary.

Since the seminal case of Standard Life Insurance Company v. Veal, 354 So.2d 239 (Miss.1978), we have been called upon on numerous occasions to address bad-faith denial by an insurance company in paying claims, and the propriety of assessing punitive damages ¹. The standard The trial court is responsible for reviewing all evidence before it in order to ascertain whether the jury should be permitted to decide the issue of punitive damages. Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1183-1184 (Miss.1990). If the insurer had a legitimate or arguable reason to deny payment of claim, then the trial judge should refuse to grant a punitive damage instruction. Pioneer Life, at 929. Arguable reason is defined as "nothing more than an expression indicating the act or acts of the alleged tortfeasor do not rise to heightened level of an independent tort." Id. at 930.

employed in such cases has been enunciated repeatedly, such that citation to authority is not necessary. Suffice it to say that before punitive damages may be recovered from an insurer, the insured must prove by a preponderance of evidence that the insurer acted with (1) malice, or (2) gross negligence or reckless disregard for the rights of others. Weems v. American Security Ins. Co., 486 So.2d 1222, 1226-27 (Miss.1986); Aetna Casualty & Surety Co. v. Day, 487 So.2d 830, 832 (Miss.1986).

Notwithstanding an absence of an arguable basis for the denial or breach of a policy claim, submission of the punitive damages issue may not be warranted. Andrew Jackson, 566 So.2d at 1185, quoting Pioneer Life, 513 So.2d 927. Indeed, "the fact that an insurance company lacks a legitimate or...