UNFAIR CLAIMSSETTLEMENT PRACTICES ACT
2010 Bill Tracking MS S.B. 2384 02/02/2010
Died in committee. 2010 Bill Tracking MS S.B. 2384
In Mississippi, one of the prerequisites in bringing a bad faith action against an insurer is that there must actually be coverage under an insurance policy. “Under Mississippi law, a finding of coverage is a necessary predicate to bringing a punitive damages claim.” Sobley v. S. Nat. Gas Co., 210 F.3d 561, 564(5th Cir. 2000). “In order to recover punitive damages against an insurance company for bad-faith refusal to pay a claim, or refusal to honor an obligation under an insurance policy, the insured must first demonstrate that the claim or obligation was in fact owed .... Second, the insured must demonstrate that the insurer has no arguable reason to refuse to pay the claim or to perform its contractual obligation. Finally, in order to recover punitive damages from the insurer for bad faith, the insured must demonstrate that the insurer’s breach of the insurance contract ‘results from an intentional wrong, insult, or abuse as well as from such gross negligence as constitutes an intentional tort.’” Essingerv. Liberty Mut. Fire Ins. Co., 529 F.3d 264, 271 (5th Cir. 2008).
- Can insureds sue for bad faith (i.e., first party bad faith)? Yes. Seminal case is Standard Life Ins. Co. v. Veal, 354 So.2d 239 (Miss. 1978).
- Can third parties sue for bad faith (i.e., third party bad faith)? No. See Davidson v. Davidson, 667 So.2d 616, 621-22 (Miss. 1995).
FIRST PARTY BAD FAITH
- Are here statutory grounds for the bad faith cause of action? If so, identify the source (i.e., an Unfair Claims Practices Act, or some other consumer protection statute) and its main provisions. Miss. Code Ann. § 83-5-45: Gives the Commissioner the right to bring claims against insurance companies for unfair business practices
- Is there a common law/judicially created bad faith cause of action (i.e., the implied covenant of good faith)? If so, identify the major case(s) and language of the standards applicable to bad faith cases. Independent cause of action forbad faith as a tort: Universal Life Ins. Co. v. Veasley, 610 So.2d 290(Miss. 1992) Implied Covenant of Good Faith and Fair Dealing: Stewart v. Gulf Guar. Life Ins. Co., 846 So.2d 192, 201 (Miss. 2002); Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1188-89 (Miss. 1990)
- What are the applicable statutes of limitations? Three years. Oak v. Sellers, 953 So.2d1077, 1084 (Miss. 2007) (applying Miss. Code Ann. § 15-1-49)
- What defenses are available to the bad faith cause of action (e.g.., the "genuine dispute of fact" doctrine; "wrong but reasonable")? Legitimate Question of Liability on Claim (arguable reason for denial or delay): Windmon v. Marshall, 926 So.2d 867, 872 (Miss. 2006);Liberty Mut. Ins. Co. v. McKneely, 862 So.2d 530, 533 (Miss. 2003); State Farm Mut. Auto. Ins. Co. v. Grimes, 722 So.2d 637, 641 (Miss. 1998); Murphree v. Federal Ins. Co., 707 So.2d 523, 529 (Miss. 1997)
- What are the recoverable damages for the bad faith cause of action? The full measure of the reasonably foreseeable consequences of the insurer’s acts: Universal Life Ins. Co. v. Veasley, 610 So.2d 290 (Miss. 1992)
- Are punitive damages recoverable? If so, what is the standard that must be met to recover them? Mississippi has a number of punitive damage cases with very high verdicts. See discussion in Sessums v. Northtown Limousines, Inc., 664 So.2d 164, 169-170 (Miss. 1995) (punitives upheld unless “so excessive that it evinces passion, bias and prejudice on the part of the jury so as to shock the conscience of the court”); see also United American Ins. Co. v. Merrill, 978 So.2d 613 (Miss. 2007) (award of $900,000not excessive where less than 5 times compensatory damages and less than one-half of one percent of net worth); American Income Life Ins. Co. v. Hollins,830 So.2d 1230, (Miss. 2002) (punitives of $100,000 not constitutionally excessive, even though 250 times the compensatory damages of $400, where the insurer was a corporation with a net worth of over $63 million).
Law requires a finding of “bad faith plus”, based on a preponderance of the evidence, before punitive damages may be awarded. Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1188-89 (Miss. 1990). Punitive damages are available for breaches of insurance policies attended by (1) lack of an arguable or legitimate basis for denial or delay and (2) a wilful or malicious wrong, or action with gross or reckless disregard for the insured’s rights. Jenkins v. Ohio Cas. Ins. Co., 794 So.2d 228, 232-33 (Miss. 2001) (citing State Farm Mut. Auto Ins. Co. v. Grimes, 722 So.2d 637, 641 (Miss. 1998); Life & Cas. Ins. Co. v. Bristow,529 So.2d 620, 622 (Miss. 1988); see also Murphree v. Fed. Ins. Co., 707So.2d 523 (Miss. 1997) (even if insurer lacks reasonable basis for denial, punitive damages can be sought only if the insurer acted with malice, gross negligence, or reckless disregard for the insured’s rights).
Chartwell Law represents the interests of insurers and employers, as such, we continue to continue to monitor the legal landscape. If you have any questions about issues associated with right of action for bad faith claims, our attorneys are available to help. Please contact your Chartwell Law attorney.