United States Court of Appeals,
Fifth Circuit.
No. 94-60306.
Earnest GREER, Plaintiff-Appellee Cross-Appellant,
v.
Hardye BURKHARDT, et al., Defendants,
United States Fidelity & Guaranty Insurance Company, Defendant- Appellant Cross-Appellee.
July 20, 1995.
Appeal from the United States District Court for the Southern District of Mississippi.
Before REAVLEY, KING and WIENER, Circuit Judges.
REAVLEY, Circuit Judge:
Ernest Greer won a judgment against his insurance carrier,
United States Fidelity & Guaranty Insurance Company (USF & G), for
$225,000 in mental anguish damages. Greer claimed that USF & G
failed to defend a personal injury suit brought against him,
resulting in a default judgment. On appeal, USF & G argues, inter
alia, that Mississippi law does not allow for mental anguish
damages under the circumstances presented here. Greer
cross-appeals, arguing that the district court erred in denying his
claim for punitive damages. We reverse and render.
FACTUAL BACKGROUND
Greer had a homeowner's policy with USF & G. USF & G agreed
under the policy to provide a defense to covered personal injury
claims. It required Greer to "forward to us every notice, demand,
summons or other process" relating to an accident or occurrence
1 under the policy. Greer obtained the policy through a local agent,
Pickens Insurance Agency.
In 1986 Nora Levy fell when she slipped on a toy at Greer's
residence. Greer gave notice of this occurrence to a Pickens
employee, Hardye Burkhardt. A USF & G claims adjuster investigated
this claim, meeting with Greer and Levy, and obtaining a recorded
statement from Greer. Several months later, the adjuster closed
the file on this incident, because of "lack of interest" by both
the claimant and the insured.
Some four years later, on February 21, 1990, Don Barrett,
Levy's attorney, wrote to Greer, informing him that a suit against
Greer had been filed. A copy of the unfiled complaint, with cause
number left blank, was enclosed with the letter. The letter
advised Greer that "[y]ou should go ahead and give this copy of the
Complaint to your insurance company, and they will handle the
matter."
There is no dispute that Greer took the unfiled complaint to
Burkhardt. Greer testified that Burkhardt told him she "would take
care of it." Burkhardt testified that she made a copy of the
complaint for her file and mailed a copy to USF & G. USF & G
witnesses, however, testified that USF & G never received the copy
in the mail. USF & G contends that the letter forwarding the copy
of the unfiled complaint was lost in the mail.
On February 22, 1990, Levy's suit was filed, and Greer was
served with process in March. Greer testified that he took a copy
of the filed complaint to Burkhardt, while Burkhardt testified that
2 she had no further contact with Greer until 1991.
In May of 1990 a default judgment was entered in state court
against Greer for $225,000. An amended judgment was later entered,
reducing the amount of the judgment to $90,000.
On February 6, 1991 Levy's attorney notified Greer of the
default judgment by letter. The letter stated that Levy intended
to execute on Greer's property and garnish his wages unless
arrangements were made to pay off the judgment by February 11,
1991. On February 11, 1991, Levy's attorney filed suggestions for
writ of garnishment on several banks and an execution on judgment.
The sheriff's office tagged certain pieces of Greer's farm
equipment on February 21, 1991. Greer also received a letter from
his bank notifying him that his bank account, with a balance of
$1137, had been seized. On February 22, 1991, Greer filed this
suit.
Burkhardt testified that neither she nor USF & G knew of the
default judgment until February 20, 1991, when Greer's attorney
notified her of the judgment, and that she immediately contacted
USF & G's claims office. Greer testified that he notified
Burkhardt of the default judgment shortly after receiving the
February 6 letter from Levy's attorney. On February 27, USF & G
paid the judgment and obtained a release and cancellation of the
judgment.
The district court, after hearing the evidence, instructed the
jury that USF & G was negligent, in effect directing a verdict on
liability. It refused Greer's request for a jury instruction on
3 punitive damages, and asked the jury to determine actual damages
for mental anguish. The jury awarded $225,000 in mental anguish
damages. The jury was also instructed to award $1500 in attorney's
fees, an amount to which the parties had stipulated as reasonable.
DISCUSSION
A. Mental Anguish Damages
USF & G complains that the evidence presented by Greer does
not support an award of actual damages for mental anguish under
Mississippi law. The evidence on mental anguish consisted solely
of Greer's testimony. When asked to describe his reaction to the
February 6, 1991 letter, Greer stated that "it was frustrating. It
was humiliating. I felt as if someone had shoveled bricks in my
stomach. I had problems resting, and I—it was just a humiliating
situation. I knew I didn't have $90,000 to pay." When asked to
describe his "reaction to the sheriff seizing your property and
your reaction to the Bank of Yazoo County giving up your accounts,"
he testified: "It was embarrassing. It was embarrassing. It was
the most embarrassing thing that had ever happened to me in my
life."
In this diversity case we face the vexing problem of
determining how the Mississippi Supreme Court would decide this
issue. After carefully reviewing recent Mississippi cases on
mental anguish damages, we find ourselves in agreement with USF &
G.
In Strickland v. Rossini, 589 So.2d 1268 (Miss.1991), the
plaintiff, who had purchased a home, sued an inspection company and
4 its employee for negligently representing that the home was free of
termites. The jury awarded $62,000 in actual damages, a portion of
which consisted of mental anguish damages. The Mississippi Supreme
Court held that a long line of cases had led to the present rule
that a "a plaintiff may recover for emotional injury proximately
resulting from negligent conduct, provided only that the injury was
reasonably foreseeable by the defendant." Id. at 1275. The court
held, however, that the record proof on mental anguish damages was
legally insufficient to support such an award. The evidence
consisted of the plaintiff's boyfriend's testimony that plaintiff
was "very upset," "very depressed" and unable to sleep over the
incident.1
In Universal Life Ins. Co. v. Veasley, 610 So.2d 290
(Miss.1992), the court upheld an award of $500 in mental anguish
damages. The plaintiff was the beneficiary of her daughter's life
insurance policy. After plaintiff's daughter died, the insurer
initially denied coverage. Several weeks later, the insurer
realized that it had wrongfully denied coverage and paid the claim.
While agreeing with the insurer that punitive damages were not
Free access — add to your briefcase to read the full text and ask questions with AI
United States Court of Appeals,
Fifth Circuit.
No. 94-60306.
Earnest GREER, Plaintiff-Appellee Cross-Appellant,
v.
Hardye BURKHARDT, et al., Defendants,
United States Fidelity & Guaranty Insurance Company, Defendant- Appellant Cross-Appellee.
July 20, 1995.
Appeal from the United States District Court for the Southern District of Mississippi.
Before REAVLEY, KING and WIENER, Circuit Judges.
REAVLEY, Circuit Judge:
Ernest Greer won a judgment against his insurance carrier,
United States Fidelity & Guaranty Insurance Company (USF & G), for
$225,000 in mental anguish damages. Greer claimed that USF & G
failed to defend a personal injury suit brought against him,
resulting in a default judgment. On appeal, USF & G argues, inter
alia, that Mississippi law does not allow for mental anguish
damages under the circumstances presented here. Greer
cross-appeals, arguing that the district court erred in denying his
claim for punitive damages. We reverse and render.
FACTUAL BACKGROUND
Greer had a homeowner's policy with USF & G. USF & G agreed
under the policy to provide a defense to covered personal injury
claims. It required Greer to "forward to us every notice, demand,
summons or other process" relating to an accident or occurrence
1 under the policy. Greer obtained the policy through a local agent,
Pickens Insurance Agency.
In 1986 Nora Levy fell when she slipped on a toy at Greer's
residence. Greer gave notice of this occurrence to a Pickens
employee, Hardye Burkhardt. A USF & G claims adjuster investigated
this claim, meeting with Greer and Levy, and obtaining a recorded
statement from Greer. Several months later, the adjuster closed
the file on this incident, because of "lack of interest" by both
the claimant and the insured.
Some four years later, on February 21, 1990, Don Barrett,
Levy's attorney, wrote to Greer, informing him that a suit against
Greer had been filed. A copy of the unfiled complaint, with cause
number left blank, was enclosed with the letter. The letter
advised Greer that "[y]ou should go ahead and give this copy of the
Complaint to your insurance company, and they will handle the
matter."
There is no dispute that Greer took the unfiled complaint to
Burkhardt. Greer testified that Burkhardt told him she "would take
care of it." Burkhardt testified that she made a copy of the
complaint for her file and mailed a copy to USF & G. USF & G
witnesses, however, testified that USF & G never received the copy
in the mail. USF & G contends that the letter forwarding the copy
of the unfiled complaint was lost in the mail.
On February 22, 1990, Levy's suit was filed, and Greer was
served with process in March. Greer testified that he took a copy
of the filed complaint to Burkhardt, while Burkhardt testified that
2 she had no further contact with Greer until 1991.
In May of 1990 a default judgment was entered in state court
against Greer for $225,000. An amended judgment was later entered,
reducing the amount of the judgment to $90,000.
On February 6, 1991 Levy's attorney notified Greer of the
default judgment by letter. The letter stated that Levy intended
to execute on Greer's property and garnish his wages unless
arrangements were made to pay off the judgment by February 11,
1991. On February 11, 1991, Levy's attorney filed suggestions for
writ of garnishment on several banks and an execution on judgment.
The sheriff's office tagged certain pieces of Greer's farm
equipment on February 21, 1991. Greer also received a letter from
his bank notifying him that his bank account, with a balance of
$1137, had been seized. On February 22, 1991, Greer filed this
suit.
Burkhardt testified that neither she nor USF & G knew of the
default judgment until February 20, 1991, when Greer's attorney
notified her of the judgment, and that she immediately contacted
USF & G's claims office. Greer testified that he notified
Burkhardt of the default judgment shortly after receiving the
February 6 letter from Levy's attorney. On February 27, USF & G
paid the judgment and obtained a release and cancellation of the
judgment.
The district court, after hearing the evidence, instructed the
jury that USF & G was negligent, in effect directing a verdict on
liability. It refused Greer's request for a jury instruction on
3 punitive damages, and asked the jury to determine actual damages
for mental anguish. The jury awarded $225,000 in mental anguish
damages. The jury was also instructed to award $1500 in attorney's
fees, an amount to which the parties had stipulated as reasonable.
DISCUSSION
A. Mental Anguish Damages
USF & G complains that the evidence presented by Greer does
not support an award of actual damages for mental anguish under
Mississippi law. The evidence on mental anguish consisted solely
of Greer's testimony. When asked to describe his reaction to the
February 6, 1991 letter, Greer stated that "it was frustrating. It
was humiliating. I felt as if someone had shoveled bricks in my
stomach. I had problems resting, and I—it was just a humiliating
situation. I knew I didn't have $90,000 to pay." When asked to
describe his "reaction to the sheriff seizing your property and
your reaction to the Bank of Yazoo County giving up your accounts,"
he testified: "It was embarrassing. It was embarrassing. It was
the most embarrassing thing that had ever happened to me in my
life."
In this diversity case we face the vexing problem of
determining how the Mississippi Supreme Court would decide this
issue. After carefully reviewing recent Mississippi cases on
mental anguish damages, we find ourselves in agreement with USF &
G.
In Strickland v. Rossini, 589 So.2d 1268 (Miss.1991), the
plaintiff, who had purchased a home, sued an inspection company and
4 its employee for negligently representing that the home was free of
termites. The jury awarded $62,000 in actual damages, a portion of
which consisted of mental anguish damages. The Mississippi Supreme
Court held that a long line of cases had led to the present rule
that a "a plaintiff may recover for emotional injury proximately
resulting from negligent conduct, provided only that the injury was
reasonably foreseeable by the defendant." Id. at 1275. The court
held, however, that the record proof on mental anguish damages was
legally insufficient to support such an award. The evidence
consisted of the plaintiff's boyfriend's testimony that plaintiff
was "very upset," "very depressed" and unable to sleep over the
incident.1
In Universal Life Ins. Co. v. Veasley, 610 So.2d 290
(Miss.1992), the court upheld an award of $500 in mental anguish
damages. The plaintiff was the beneficiary of her daughter's life
insurance policy. After plaintiff's daughter died, the insurer
initially denied coverage. Several weeks later, the insurer
realized that it had wrongfully denied coverage and paid the claim.
While agreeing with the insurer that punitive damages were not
1 The entirety of the boyfriend's testimony concerning the plaintiff's emotional state consisted of the following:
She's been very depressed. Her kids have been very upset over all this and emotional. They've gone through a lot of stress and worry over the way their mother has been upset and sick and not able to sleep at night. I've been called to come out there and sit with her [on] occasions at night because of being [sic] so upset, and it's just ..[.] it's been a very detrimental thing for her.
Id.
5 warranted, the court upheld the award of mental anguish damages.
The court reasoned that even in cases that involve no more than
simple negligence:
[I]t is entirely foreseeable by an insurer that the failure to pay a valid claim through the negligence of its employees should cause some adverse result to the one entitled to payment. Some anxiety and emotional distress would ordinarily follow, especially in the area of life insurance where the loss of a loved one is exacerbated by the attendant financial effects of that loss.... It is no more than just that the injured party be compensated for these injuries.
Id. at 295.
The court set out the evidence plaintiff had offered in
support of mental anguish damages:
[Plaintiff] 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 [plaintiff] admitted that she had some of the same problems before and after her daughter's death.
Id. at 292.
In Finkelberg v. Luckett, 608 So.2d 1214 (Miss.1992), the
plaintiff sued his broker for refusing to allow him to withdraw
funds from a jointly-held account, while allowing his wife to do
the same, all while plaintiff and his wife were in the midst of
divorce proceedings. The plaintiff claimed that without the money
the wife had withdrawn from the account, she would not have been
able to leave the state with their children. When asked how he had
been damaged by the broker's conduct, he testified:
I gave them my life savings and I trusted them to take this money and to use it to help me make money and for them to make money. I was intentionally told that I could not get the money when I went to get it when, in fact, I went to the
6 lawyer, I was able to get the money. I guess the most important way that I've been harmed is I've been without my children for two years. It's been a very difficult time and—
Id. at 1218. The court concluded that the evidence presented at
trial did not support an award of mental anguish damages under
Mississippi law:
The coup de grace on any claim for damages for mental anguish in this record, however, is the total absence of proof justifying it. In the seminal case of Sears Roebuck & Co. v. Devers, we held that in a case of simple negligence damages for mental anguish unaccompanied by physical injury would be upheld only "if there is a resulting physical illness or assault upon the mind, personality or nervous system of the plaintiff which is medically cognizable and which requires or necessitates treatment by the medical profession." 405 So.2d [898] at 902 [ (Miss.1981) ]. Quoted with approval in Wirtz v. Switzer, 586 So.2d 775, 784 (Miss.1991).
Id. at 1221.
Doing our best to determine how the Mississippi Supreme Court
would decide our case, we conclude that it would not sustain the
award of mental anguish damages. While Veasley appears to support
the award given in our case, both Rossini and Finkelberg support
USF & G's position. Rossini accepts that mental anguish damages
are recoverable even in simple negligence cases where such damages
are reasonably foreseeable, but does not allow them where the proof
offered consists of nothing more than generalized testimony that
the plaintiff was very upset and depressed, and was unable to
sleep. In our case, the proof offered did not rise above this
level, consisting solely of Greer's testimony that he was
embarrassed, humiliated and "had problems resting." Finkelberg
permits mental anguish damages only where the injury results in a
medically cognizable condition which requires professional medical
7 treatment, a requirement that was not met here. We also note that
Finkelberg was decided after Veasley, and that the dissent in
Finkelberg pointed out the apparent inconsistency in the two
cases.2 608 So.2d at 1226. Further, Finkelberg was decided by the
court sitting en banc, while Veasley was decided by a three-judge
panel of the court.
B. Punitive Damages and Attorney's Fees
Greer complains that the district court erred in refusing an
instruction on punitive damages, in effect directing a verdict in
favor of USF & G on this claim. Again, Mississippi law in this
area is not crystal clear. We conclude, however, that the district
court did not err in denying punitive damages.
The Mississippi Supreme Court has often stated that punitive
damages are appropriate only in the rare and extreme case. In
Veasley, for example, the court allowed mental anguish damages but
reversed the award of punitive damages. It noted that punitive
damages are only allowed where the plaintiff proves "(1) malice, or
(2) gross negligence or reckless disregard for the rights of
others," and that the facts in that case suggested no error that
was "anything more that clerical" and "an unfortunate episode of a
failure of competence." 610 So.2d at 293-94. Likewise, in
Finkelberg, the court reversed the award of punitive damages,
noting that such damages "are to be awarded only in extreme cases,"
2 Although Finkelberg is the later decided case, it appears earlier in the Southern Reporter, perhaps because the Veasley opinion as published includes a opinion dissenting from the denial of a petition for rehearing.
8 and that the defendant's conduct "was an act of negligence in which
no greed, avarice or oppression was involved, and clearly was not
the degree of negligence which would give rise to punitive damage
liability." 608 So.2d at 1220-21. On the other hand, the
Mississippi Supreme Court recently reversed a lower court's partial
summary judgment denying punitive damages to an insured in Lewis v.
Equity Nat'l Life Ins. Co., 637 So.2d 183 (Miss.1994). The insurer
had refused to pay medical benefits under a policy when the
plaintiff was injured in an automobile accident. The court
cataloged numerous circumstances where punitive damages against an
insurer may be appropriate even where the insurer had an arguable
basis for denying the claim, including those where the insurer (1)
denies a claim because of a material misrepresentation by its own
agent, (2) denies a claim without proper investigation, (3)
inordinately delays processing the claim, and (4) engages in
"post-claim underwriting." Id. at 186-89.
On balance, however, we believe that Mississippi law does not
allow for the award of punitive damages against the insurer here,
where the plaintiff's proof fails to establish any legally
recoverable actual damages. The Mississippi Supreme Court
implicitly recognized such a rule in Travelers Indem. Co. v.
Wetherbee, 368 So.2d 829 (Miss.1979). The court affirmed an award
of punitive damages against an insurer who had intentionally
withheld payment on a fire insurance claim. The court explained
that punitive damages were appropriate, in part because actual
damages consisting of the policy proceeds were properly awarded:
9 In Standard Life Insurance Co. of Indiana [v. Veal, 354 So.2d 239 (Miss.1977) ], we upheld a judgment for punitive damages in conjunction with an award for the policy coverage. In our opinion this satisfied the requirement that punitive damages will not be awarded absent actual damages. We presently think it is fulfilled since the verdict for exemplary damages is in conjunction with compensatory damages including the policy proceeds.
Id. at 836 (emphasis added). In contrast to Wetherbee, the insurer
in our case paid the full amount of the default judgment, and Greer
failed to prove any recoverable actual damages, for the reasons
explained above. In a case of zero actual damages, we believe that
Mississippi law does not allow him any punitive damages.
As for the attorney's fees awarded, the prevailing view in
Mississippi appears to be that attorney's fees are not recoverable
absent an award of punitive damages,3 although some cases indicate
that attorney's fees can be awarded as extra-contractual or
consequential damages even where punitive damages are not
warranted, if the insurer denied a claim without any arguable
basis.4 Finding no authority to the contrary, however, we are
3 See, e.g., Miller v. Allstate Ins. Co., 631 So.2d 789, 795 (Miss.1994) ("In the absence of a showing of gross or willful wrong entitling the Movant to an award of punitive damages, the Mississippi Supreme Court has never approved of awarding attorneys fees to the successful litigant."); Central Bank v. Butler, 517 So.2d 507, 512 (Miss.1987) ("[T]his Court has held that in the absence of contractual provisions or statutory authority, attorneys' fees may not be awarded as damages in a case unless punitive damages are also proper."); Aetna Casualty and Sur. Co. v. Steele, 373 So.2d 797, 801 (Miss.1979) ("Attorney's fees are not recoverable as an element of damages unless the infliction of punitive damages is justified."). 4 See Veasley, 610 So.2d at 295 ("Some justices on this court have suggested that extra-contractual damages ought be awarded in cases involving a failure to pay on an insurance contract without an arguable reason even where the circumstances are not such that punitive damages are proper.... [I]t is entirely foreseeable by
10 persuaded that Mississippi law does not allow the recovery of
attorney's fees where the insured recovers neither actual nor
punitive damages.
REVERSED AND RENDERED.
an insurer that the failure to pay a valid claim through the negligence of its employees should cause some adverse result to the one entitled to payment.... Additional inconvenience and expense, attorneys fees and the like should be expected in an effort to have the oversight corrected. It is no more than just that the injured party be compensated for these injuries."); Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1186 n. 13 (Miss.1990) ("Conceivably, upon presentation of sufficient proof, consequential or extra-contractual damages (e.g., reasonable attorney fees, court costs, and other economic losses) may be awarded in cases involving a lack of a reasonably arguable basis—notwithstanding that the insurer is not liable for punitive damages.").