Coverage Analysis
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  Mississippi places more emphasis than most states on the "accidental" nature of the insured's conduct in assessing whether any resulting injuries are an "occurrence."  The Mississippi Supreme Court has stated that "the only relevant whether the chain of events leading to the injuries complained of were set in motion and followed a course consciously devised and controlled by the insured without the unexpected intervention of any third person or extrinsic force and...the likely (and actual) effect of those acts was well within [defendant]'s foresight and anticipation.'"  Berry v. McLemore, 795 F.2d 452 (5th Cir. 1986) (quoting Allstate Ins. Co. v. Moulton, 464 So.2d 507, 509 (Miss. 1985).  The court refused to focus on whether the harm was intended and instead limited its review on the act which caused the harm.  Id..  See also Gulf Ins. Co. v. Lloyd, 651 F.Supp. 518, 519 (S.D. Miss. 1986). 

  Federal district courts have twice ruled that pollution resulting from an insured’s routine discharge of waste materials from its facility are not the result of an “accident.”  See USF&G v. T.K. Stanley, Inc., 764 F.Supp. 81 (S.D. Miss. 1991) (insured's deliberate discharge of hydrogen sulfide was not an "accident" and therefore not an occurrence) and Great American Insurance Company v. Wood Treating, Inc., No. 1:95CV48 (S.D. Miss. March 28, 2000)(soil contamination resulting from drippage from treated poles and discharge from waste pipe not “accidental”).

  The state Supreme Court has ruled that an “intentional acts” exclusion barred coverage for a wrongful death claim arising even though the insured only meant to cause property damage.  In Louis v.  Allstate Ins.  Co., 1998 WL 839231 (Miss.  December 3, 1998), the insured had thrown a Molotov cocktail into a house where the decedent was sleeping.  While plainly troubled by the prospect of transferring an intent to cause property damage to unintended bodily injuries, the court was nonetheless persuaded that such a conclusion was compelled by Allstate’s exclusion, which stated that “this exclusion applies even if the bodily injury or property damage is of a different kind or degree, or is sustained by a different person or property, than that intended or expected.”  Two dissenting justices argued that the exclusion was only meant to apply to injuries of a different degree than the one expected and would not transfer intent to damage of a wholly different type.  

  In a related context, the Fifth Circuit has ruled in Reliance National Ins. Co. v. Estate of Tomlinson, No. 98-60486 (5th Cir. April 20, 1999)(“owned aircraft” exclusion) that theories of negligent entrustment do not reinstate coverage where the conduct is otherwise excluded.

  A claim for sexual harassment has been ruled to fall within the "intentional acts" exclusion in American States Ins. Co. v. Natchez Steam Laundry, 131 F.3d 551 (5th Cir. 1998).

  Where certain portions of the claim are clearly not covered and some reasonable means of segregating defense costs attributable to such non-covered claims, the Fifth Circuit ruled in EEOC v. Southern Publishing Co., Inc., 705 F.Supp. 1213 (S.D. Miss. 1988), aff'd 894 F.2d 785 (5th Cir. 1990) that the insured must pay this share of defense costs.

  Where a complaint alleges both covered and uncovered claims, the Mississippi Supreme Court has ruled in Moeller v. American Guaranty & Liability Ins. Co., No. 92-CA-008829 (Miss. September 19, 1996), that the liability insurer may only hire an attorney to defend the covered claims and should leave the insured to retain separate counsel of its own choosing to defend the uncovered claims.  If the insurer defends the entire complaint subject to a reservation of rights, the resulting conflict of interest would cause it to lose control of the defense.


  Appeals are heard in the first instance by the Mississippi Court of Appeals.


  Unfair or deceptive consumer practices are proscribed by Miss. Code Ann. § 75-24-1 (1991 & Supp. 1993).

  A right of action for punitive damages against an insurer was recognized by the Mississippi Supreme Court in Progressive Cas. Co. v. Keys, 317 So.2d 396 (Miss. 1975), wherein the court limited recovery to claims where the insured's breach of contract was accompanied by "intentional wrong, insult, abuse or such gross negligence as to constitute an independent tort." Eichenseer v. Reserve Life Ins. Co., 881 F.2d 1355 (5th Cir. 1989) and Tutor v. Ranger Ins. Co., 804 F.2d 195, 1398 (5th Cir. 1986).  However, an insured faces a "heavy burden" in such cases and must demonstrate that the insurer had no "justifiable reason or arguable basis for denying a valid claim."  Bankers Life & Cas. Co. v. Crenshaw, 483 So.2d 7254, 275 (Miss. 1985), cited with approval in Evangelista v. Nationwide Ins. Co., 726 F.Supp. 1057 (S.D. Miss. 1988).   Rogers v.  Hartford Accident & Indemnity Co., 113 F.3d 309 (5th Cir.  1998) insurer acts in bad faith it it denies coverage without a legitimate or arguable reason for doing so).

  Under Mississippi law, a finding of coverage is a necessary predicate to bringing a punitive damages claim. See McCain v. Northwestern Nat’l Life Ins. Co., 484 So.2d 1001, 1002 (Miss. 1986).  Once coverage is established, the issue of punitive damages should be submitted to the jury if the trial court determines that there are jury issues with regard to whether: (1) the insurer lacked an arguable or legitimate basis for denying the claims, and (2) the insurer committed a wilful or malicious wrong, or acted with gross and reckless disregard for the insured’s rights.  State Farm Mutual Automobile Ins. Co. v. Grimes, 722 So.2d 637, 641 (5th Cir. 1998).  

  Addressing an issue of first impression in Mississippi, the Fifth Circuit has ruled that the issue of whether a property insurer had a “reasonably arguable” basis for denying coverage may only be considered based on the reasons stated in its denial letter.  In Sobley v. State Farm Lloyds, No.  99-60149 (5th Cir. May 5, 2000), the court distinguished State Farm Mutual Automobile Ins. Co. v. Grimes, 722 So.2d 637, 641 (5th Cir. 1998), in which the Fifth Circuit had ruled that an insurer’s alleged bad faith must be judged based on the “facts” known at the time of denial, noting that Grimes said nothing about the “reasons” for denial.

  An insurer’s good faith obligations do not end when coverage litigation begins. Gregory v. Continental Ins. Co., 575 So.2d 534, 541-42 (Miss. 1990)(“an insurance company’s duty to promptly pay a legitimate claim does not end because a lawsuit has been filed against it for nonpayment”).

  Whereas an insurer's delay in paying benefits owed under a policy may give rise to a finding of bad faith, the Mississippi Supreme Court has limited such awards to cases in which the insurer has denied coverage.  On the other hand, the court refused to find that an insurer's delay warranted an award of punitive damages where the insurer had not denied coverage and was still investigating the insured's claim. Caldwell v. Alfa Ins. Co., No. 93-CA-00722 (Miss. December 19, 1996)

  Only the insured and a third party beneficiary of an insurance contract have standing to sue an insurer to enforce coverage or to assert a claim for bad faith.  Cowley v. Texas Snubbing Control, Inc., C.A. No. J89-0032 (S.D. Miss. December 8, 1992).  A third-party tort claimant has no right to assert bad faith claims against the tortfeasor’s liability insurer.   Nichols v.  USF&G, 318 F.Supp.  334 (N.D. Miss.  1970).  However, such claims can be pursued by a third party under an assignment from the insured.  Kaplan v. Harco National Ins. Co., 1997 WL 771225 (Miss. App. December 16, 1997).


  Pure emotional distress held not to be a "bodily injury" in EEOC v. Southern Publishing Co., Inc., 705 F.Supp. 1213 (S.D. Miss. 1988), aff'd on other grounds 894 F.2d 785 (5th Cir. 1990).


  Mississippi courts provide that where a policy expressly provides that the giving of notice "as soon as practicable" is a condition precedent to coverage and where there is a finding that the insured has unreasonably delayed giving notice to the insurer, the insurer is not required to prove that it suffered actual prejudice from the delayed notice.  Bolivar County Bd. of Supervisors v. Forum Ins. Co., 779 F.2d 1081 (5th Cir. 1986).  Where, however, there is no stipulation in the policy making notice a condition precedent to recovery, the insured's failure to comply with the notice provision does not relieve the insurer of its liability unless it has suffered prejudice.  Hood v. Fireman's Fund Ins. Co., 412 F.Supp. 846, 852 (S.D. Miss. 1976).  See also  Mississippi Code 1942 Ann. §8285-53 (Supp. 1972).  Rampy v. State Farm Mutual Auto Ins. Co., 278 So.2d 428 (Miss. 1973) (insurer must show result would have been radically altered had insured complied with notice clause); Hague v. Liberty Mut. Ins. Co., 571 F.2d 262 (5th Cir. 1978).


  In Delta Pride Catfish, Inc. v. Home Ins. Co., et al., 697 So.2d 400 (Miss. 1997), the Mississippi Supreme Court recently ruled that a liability insurer had no duty to defend as the allegations were limited to claimed antitrust violations.  The complaint alleged that Delta Pride in part that a seafood wholesaler had sent three separate letters to suppliers, falsely describing the reasons that it had implemented a fixed schedule of minimum prices for catfish.  As a preliminary matter, the court ruled that these episodic communications were not "advertising" as these were not "widespread promotional activities directed to the public at large" under the test adopted by the California Supreme Court in Bank of the West.  Therefore, according to the court, the reference to three letters sent from the insured to three customers did not support an allegation of "widespread promotional activities directed at the public at large."  

  A U.S. District Court ruled in USF&G v. B&B Oil Well Service, Inc., 910 F.Supp. 1172 (S.D. Miss. 1995) that an insured could not circumvent pollution exclusion by arguing that claims by abutting property owners for pollution resulting from well drilling operations was an "invasion of the right of private occupancy."   Although the court conceded that the policy' might cover trespass claims in the abstract, Judge Lee ruled that they clearly would not afford coverage for environmental liability claims where the policies contained unambiguous pollution exclusions.

  A different federal judge took issue with B&B Oil in Great Northern Nekoosa Corp. v. Aetna Casualty & Surety Co., 921 F.Supp. 401 (N.D. Miss. 1996) declaring that property owners' suits for trespass and nuisance based on exposure to dioxin waste streams from the insured's mill plant were claims for "personal injury" that were not subject to the policies' pollution exclusions.

  A federal district court has ruled that once an insurer shows that a claim is for damage resulting from a discharge of “pollutants,” the burden of proving the “sudden and accidental” exception to the pollution exclusion rests with the policyholder.  Great American Insurance Company v. Wood Treating, Inc., No. 1:95CV48GR (S.D. Miss. March 28, 2000).

  An insured seeking to recover under a missing policy has the burden of proving the issuance and material terms of the lost document.  Great American Insurance Company v. Wood Treating, Inc., No. 1:95cv48GR (D. Miss.  November 21, 2000).  Secondary evidence of the missing policy may only be introduced in the event that the insured has established the loss or destruction of the original document.  Bolden v. Greenwood, 164 So.2d 721 (Miss. 1964).  Proof must be by clear and convincing evidence.  Marquette Casualty Company v. Khamis, 129 So.2d 342, 345 (Miss. 1961).  See also Great American Insurance Company v. Wood Treating, Inc., No. 1:95cv48GR (D. Miss.  November 21, 2000)(reference to policy number insufficient to establish existence and material terms of missing liability policy.)


  Mississippi has adopted the "center of gravity" test set forth in Section 6 of the Restatement, (Second) Conflicts of Laws. Boardman v. USAA, 407 So.2d 1024 (Miss. 1985).  In general, there is a presumption that Mississippi law will apply unless the "non-forum contacts are of greater significance."  Mitchell v. Craft, 211 So.2d 509 (Miss. 1968) and Dees v. Hallum, 721 F.Supp. 789, 790 (N.D. Miss. 1989).  Applying the Boardman test, a federal court ruled in Broadhead v. Hartford, 773 F.Supp. 882, 892 (S.D. Miss. 1991) that the law of Texas, as the place of contracting, should be applied to a Mississippi gas well blow out.


  Where a conflict of interest exists, an insurer is required to pay for independent defense counsel of the insured's choosing.  Moeller v. American Guaranty & Liability Ins. Co., 707 So.2d 1062 (Miss. 1996). 


  Asbestos abatement measures were found to be "damages" in Moore v. W.R. Grace, Jackson County Circuit Court No. 89-5138 (1) (Miss.). Applying Texas law, a U.S. District Court in Mississippi ruled in Broadhead v. Hartford, 773 F.Supp. 882, 901 (S.D. Miss. 1991) that costs incurred by the insured to evacuate citizens after its gas well blew out are covered "damages" since the insured had a statutory obligation to undertake the evacuation and did not voluntarily incur these costs.


  Insurance coverage questions can be resolved in advance of the disposition of the underlying tort claim.  In Lewis v.  Allstate Ins.  Co., 730 S.E.2d 65 (Miss. 1998), the Mississippi Supreme Court declared that an insurer was free to conduct a declaratory judgment action without waiting for the disposition of the underlying tort suit.  Alternatively, an insured or a third-party claimant might request a hearing in the context of the underlying tort suit to resolve the issue of coverage so long as the involvement of a jury was not required.


   --Claims Manuals

   --Drafting History

   --Other Policyholder Claims

   --Reinsurance Information



  The duty to defend is measured by the allegations of the underlying complaint.  J.C. Meng. v. Bituminous Cas. Corp., 626 F.Supp. 1237 (S.D. Miss. 1986). 

  A liability insurer has a duty to defend if the underlying pleadings state facts that bring the claims within the scope of coverage, whether such claims are supported by the actual known facts or not.  State Farm Mutual Automobile Ins. Co. v. Taylor, 233 So.2d 805, 808 (Miss. 1970).  Some cases have suggested that extrinisic facts can also trigger an insurers duty to defend.  Mavar Shrimp & Oyster Co. v. USF&G, 187 So. 2d 871(Miss. 1966) and Merchants v. American Motorists Ins. Co., 794 F. Supp. 611(S.D.Miss. 1992).

  Whereas an insurer's duty to defend may be created by allegations that it knows to be false, the insurer is within its rights to reserve the right to deny coverage in the event a judgment is rendered against the insured on the basis of these facts.  State Farm Mutual Auto Ins. Co. v. Acosta, 479 So.2d 1089, 1092 (Miss. 1985). 

  Where an insured was sued under diverse theories of liability, only one of which was covered, its insurer's defense obligation was limited to the covered count.  Moeller v. American Guaranty & Liability Ins. Co., 1996 WL 532387 (Miss. September 19, 1996).  In such circumstances, the insured should retain counsel of its own choosing to defend the remaining claims it its own expense in cooperation with the defense counsel retained by the insurer to defend the covered count.  Id.  It would be a conflict of interest, however, for the insurer to retain counsel to defend the entire suit while reserving the right to deny coverage for any resulting judgement.  

  A liability insurer has no obligation to reimburse its policyholder for costs incurred before the defense of the action was tendered to it.  Reliance Ins. Co. v. County Line Place, 692 F.Supp. 694, 698 (S.D. Miss. 1988).

  If a primary insurer is found to have breached its duty to defend, it will be liable for all damages that are causally related to the breach.  It is not, however, unconditionally obligated to pay for any subsequent settlement, especially where the sums were paid by an excess insurer to protect its own interests. Liberty Mutual Fire Insurance Company v. Canal Insurance Company, No. 98-60236 (5th Cir. May 26, 1999).


  While an insurer may waive the right to insist upon compliance with conditions to coverage, substantive limitations may not be waived by implication from an insurer’s conduct or inaction.  Yazoo County, Mississippi v.  ISLIC, 616 F.Supp.  153, 156 (S.D. Miss.  1985).  
  Under Mississippi law, an insurer may rely on any exclusion in the policy to show that no coverage existed, whether or not that exclusion was the stated basis for denial.  However, once coverage is established, a court should evaluate whether there was an arguable basis for denial of coverage based solely on the reasons for denial of coverage given to the insured by the insurance company.  Eichenseer v. Reserve Life Ins. Co., 682 F.Supp 1355, 1372 (N.D. Miss. 1988), aff’d 881 F.2d 1355 (5th Cir. 1989), cert. granted and vacated on other grounds, 499 U.S. 914 (1991), on remand and aff’d 934 F.2d 1377; Bankers Life & Cas. Co. v. Crenshaw, 483 So.2d 254, 273 (Miss. 1985) (“the issue is not the defense which [the insurer] finally settled upon to defend the suit, but the reason it gave [the insured] for denying the claim”). 


  Excess insurer held not to "drop down" over insolvent primary carrier in Ware v. Carron Health Care Products, 727 F.Supp. 300 (N.D. Miss. 1989).

  An insured that settled with its primary insurer for less than the total policy limits had no right of action under its excess policy.  Geiselbreth v. Allstate Ins. Co., 8 F.3d 281 (5th Cir. 1993).


  The Mississippi Supreme Court has ruled that a policyholder is entitled to a separate limit for each of 175 acts of embezzlement committed by an employee.  In Universal Underwriters Ins.  Co.  v.  Buddy Jones Ford, 734 So.2d 173 (Miss. 1999), the court reversed a trial court decision, which had restricted the insured’s coverage to a single year’s policy limit, holding instead that the $10,000 limit of liability for employee dishonesty applied separately to each individual instance of embezzlement.  The court distinguished cases which have aggregated such claims, declaring that the policy in question lacked any “deemer” language aggregating “related acts” as one “occurrence.”  

  In Broadhead v. Hartford, 773 F.Supp. 882, 893 (S.D. Miss. 1991), a U.S. District Court, applying Texas law, ruled that various claims against arising out of a gas well blow out were a single "occurrence."


  Federal district court ruled in USF&G v. T.K. Stanley, Inc., 764 F.Supp. 81 (S.D. Miss. 1991) that exclusion is unambiguous and precludes coverage for intentional discharges of pollutants.  Similarly, in USF&G v. B&B Oil Well Service, Inc., 910 F.Supp. 1172 (S.D. Miss. 1995), Judge Lee ruled that pollution resulting from the insured's drilling operations was not "accidental."  the court held that the "accidental" aspect of the exclusion focused solely on the discharge of pollutants, without regard to whether the insured expected or intended to cause property damage or was even aware that the discharged materials were hazardous in nature.

  In light of B&B, the federal district court has since twice ruled in a wood treatment case that pollution caused by routine plant operations is not “sudden and accidental,” even if the insured did not mean or intend to cause pollution.  In Great American Insurance Company v. Wood Treating, Inc., No. 1:95CV48GR (S.D. Miss. December 20, 1999), a District Court entered summary judgment for U.S. Fire, declaring that contamination resulting from the insured’s wood treatment facility was a consequence of the insured’s daily, intentional disposal of waste waters from its facility and therefore excluded under a “sudden and accidental”-type exclusion.  In the same case, the court entered judgment for Federal on March 28, 2000.  The court declared that under Mississippi law routine and repeated discharges are not “sudden and accidental.”  In view of the evidence that drippings from treated wood had routinely been discharged on to the ground and that wastes had been purposefully discharged into a pipe into a ditch which ultimately led to the Pearl River, the court concluded that the causes of pollution at the site were not “sudden and accidental.”  

 Mississippi courts have also generally upheld the absolute pollution exclusion.  A federal court ruled in American States Ins. Co. v. F.H.S., Inc., 843 F.Supp. 187 (S.D. Miss. 1994) that exclusion precluded coverage for injuries caused by a contractor's accidental release of ammonia fumes inside a cold storage warehouse.  The District Court refused to find ambiguity in the meaning of "pollutant" and rejected the insured's argument that the exclusion should only apply if the release had been of such a quantity as to "pollute" the air or otherwise violate state or federal environmental statutes or regulations.

  The U.S. District Court also ruled in B&B Oil that the "absolute" exclusion precluded coverage for suits by various landowners who alleged that the oil and gas wells that the insured had drilled on their properties had been contaminated with a "naturally occurring radioactive material."  The District Court ruled that Subsection (d) applied and defeated the insured's claim since the underlying lawsuits sought to predicate the insured's liability on a release of pollutants that occurred while B&B was performing operations on the subject properties.  

  In a case arising in Oklahoma but interpreting Mississippi law, the 10th Circuit ruled that a "total" pollution exclusion was potentially ambiguous as regards a products liability suit against an insecticide manufacturer by a garage mechanic who was accidentally exposed to hazardous chemicals while repairing a cargo truck. Red Panther Chemical Co. v. Ins. Co. of the State of Pennsylvania, 43 F.3d 514 (10th Cir. 1994).  While refusing to adopt the insured's suggestion that such exclusions be restricted solely to "environmental pollution," the court nonetheless held that even unambiguous policy language could be deemed ambiguous in the context of the "unique factual circumstances" of this case.  Accordingly, it remanded the case for further findings with respect to the "proper scope of the exclusion, based on the common usages and understandings of the insurance industry, and the purposes of the exclusion in conjunctions with the hazards and risks" that it was purchased for.


  "All sums" held to include punitive awards.  Anthony v. Frith, 394 So.2d 857 (Miss. 1981).  Punitive damages also ruled to be insurable in Starkville Municipal Separate School Dist. v. Continental Cas. Co., 772 F.2d 168 (5th Cir. 1985).

  Under Mississippi law, punitive damages may only be recovered from an insurer based upon a preponderance of the evidence that the insurer acted with malice or gross negligence or reckless disregard for the rights of others.  Universal Life Ins. Co. v. Beasley, 610 So.2d 290, 293 (Miss. 1992).  Where there is a legitimate or arguable reason for the insurer to deny the claim, the issue of punitive damages is the responsibility of the trial court and should not placed before a jury.  Lewis v. Equity National Life Ins. Co., 637 So.2d 183, 185 (Miss. 1994).  A "legitimate or arguable reason" is "nothing more than expression indicating the act or acts of the alleged tortfeasor do not rise to the heightened level of an independent tort.  Id. at 185.  Mere negligence in the investigation of a coverage claim does not warrant a punitive damage award.  Bellefonte Ins. Co. v. Griffin, 358 So.2d 387 (Miss. 1987) and Pioneer Life Ins. Co. of Illinois v. Moss, 513 So.2d 927, 930 (Miss. 1987).  

  Finally, the amount of damages awarded must (1) serve to deter the insurer from committing similar offenses in the future; (2) should set an example to deter others; (3) should be related to the insurer's financial worth; and (4) should reflect the relative "public service" of the plaintiff in bringing the action.  Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172 (Miss. 1990).  The punitive award must not be grossly disproportionate to the amount of compensatory damages, however.  Dixie Ins. Co. v. Mooneyhan, No. 91CA-01124 (Miss. March 7, 1996)($1 million punitive damage award held unconstitutional where disputed contract amount was only $542).


  Under Mississippi law, insurance policies are to be interpreted in accordance with their clear an unambiguous meanings.  However, where the terms of coverage are ambiguous or doubtful, they will be interpreted in the manner most favorable to the policyholder.  State Farm Mutual Auto Ins. Co. v. Scitzs, 394 S.2d 1371, 1372 (Miss. 1981).  

  A clear and unambiguous policy term will be enforced as written.  Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So.2d 400 (Miss. 1997).  
  The construction of an insurance contract is limited to the written terms of the policy.  Extrinsic evidence is not permitted to interpret policy meaning unless the language is ambiguous and cannot be understood from a reading of the policy as a whole.  Cherry v. Anthony Gibbs, Sage, 501 So.2d 416, 419 (Miss. 1987).  

  An insurer's failure to obtain regulatory approval for an exclusion did not invalidate it where the state insurance commissioner had already approved a broader exclusion than the one at issue.  RTC v. Hedden, C.A. No. 3:92-047 (N.D. Miss. March 9, 1995).


  No cases.


  "Continuous trigger" was adopted for asbestos building claims by trial court in Moore v. W.R. Grace, supra.

  Federal court ruled in Great Northern Nekoosa Corp. v. Aetna Casualty & Surety Co., 921 F.Supp. 401 (N.D. Miss. 1996) that "personal injury" claims based on property owner's emotional distress at coming into contact with dioxin in insured's mill waste was not limited to policy year in which contamination was publicized but should also encompass the years that the actual discharges occurred.

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