IN THE SUPREME COURT OF MISSISSIPPI
NO. 2012-CA-00107-SCT
MINNESOTA LIFE INSURANCE COMPANY f/k/a MINNESOTA MUTUAL LIFE INSURANCE COMPANY; RUSSELL LAVERNE BAYNE, JR.; CHARLES SPENCER BOYD; LISA WAGONER; AND MARTIN ROBERT WAGONER
v.
COLUMBIA CASUALTY COMPANY d/b/a CNA AND/OR d/b/a CNA INSURANCE COMPANIES; CONTINENTAL CASUALTY COMPANY d/b/a CNA AND/OR d/b/a COLUMBIA CASUALTY COMPANY AND/OR d/b/a CNA INSURANCE COMPANIES
ON MOTIONS FOR REHEARING
DATE OF JUDGMENT: 12/20/2011 TRIAL JUDGE: HON. ROBERT P. KREBS TRIAL COURT ATTORNEYS: CLYDE H. GUNN, III CHRISTOPHER C. VAN CLEAVE SHEILA J. CARPENTER BETH GROVER WIEDERHOLT BEN E. SHEELY DAVID A. JONES KIMBERLY E. BLAIR JOHN A. BANAHAN H. BENJAMIN MULLEN REBECCA L. ROSS HELEN ALFORD JOHNSON ARTHUR MADDEN COURT FROM WHICH APPEALED: JACKSON COUNTY CIRCUIT COURT ATTORNEYS FOR APPELLANTS: CHRISTOPHER COLLINS VAN CLEAVE CLYDE H. GUNN, III WILLIAM CORBAN GUNN DAVID NEIL HARRIS, JR. ATTORNEYS FOR APPELLEES: H. BENJAMIN MULLEN JOHN A. BANAHAN REBECCA L. ROSS NATURE OF THE CASE: CIVIL - INSURANCE DISPOSITION: AFFIRMED IN PART; REVERSED IN PART AND REMANDED - 05/07/2015 MOTION FOR REHEARING FILED: 12/15/2014 MANDATE ISSUED:
BEFORE RANDOLPH, P.J., LAMAR AND KITCHENS, JJ.
RANDOLPH, PRESIDING JUSTICE, FOR THE COURT:
¶1. The motion for rehearing filed by Appellants is denied. The motion for rehearing filed
by Appellees is denied. The original opinion is withdrawn and this opinion is substituted
therefor.
¶2. The Jackson County Circuit Court granted summary judgment in favor of Columbia
Casualty Company and Continental Casualty Company1 (collectively “Columbia”), finding
there was no wrongdoing in denying coverage to four former insureds (collectively “Ex-
Agents”) and Minnesota Mutual Life Insurance Company (“Minnesota Life”). The trial court
also denied the Ex-Agents’ and Minnesota Life’s motion to strike certain affidavits and
exhibits submitted by Columbia in support of its motions for summary judgment and in
defense of the Ex-Agents’ and Minnesota Life’s summary judgment motions. We find that
the trial court properly denied the motion to strike and properly granted summary judgment
1 CNA Financial Corporation is not a party to this appeal. The trial court granted CNA’s motion for summary judgment after the Ex-Agents and Minnesota Life withdrew their claims against CNA. The Ex-Agents and Minnesota did not appeal the trial court’s ruling as to CNA.
2 in favor of Columbia as to Minnesota Life’s claim but erred in its reasoning for granting
summary judgment as to the Ex-Agents’ claims. Therefore, we affirm in part and reverse in
part and remand.
FACTUAL/PROCEDURAL BACKGROUND2
¶3. In 1997, Martin Wagoner, Lisa Wagoner, Charles Spencer Boyd, and Russell Bayne
(collectively “Ex-Agents”) were employed by C. Douglas Gulley Jr. and Associates, Inc.,
(“Gulley Agency”) as agents for Minnesota Life. Douglas and all the Ex-Agents were
afforded the opportunity to purchase coverage under an Insurance Agents Errors &
Omissions Policy. Gulley and the Ex-Agents separately purchased and paid for such
coverage. A policy was issued by Columbia, covering the period from March 1, 1997, to
March 1, 1998 (“1997 Policy”). This policy subsequently was renewed by the policyholder,
Minnesota Life, for the period from March 1, 1998, to March 1, 1999 (“1998 Policy”).3
2 Some of the events, facts, and dates are disputed. Their recitation herein is for analyses of policy coverage, coverage periods, coverage exclusions, and coverage exceptions, inter alia. In the proceedings on remand, the trial court is not bound by its prior rulings or this Court’s synopsis of a vast record. The trial court is bound only by this Court’s decision on policy interpretation and its conclusions found in ¶¶ 69-72, infra. See, e.g., Johnson v. State, 529 So. 2d 577, 579 (Miss. 1988) (“where a case has been reversed and remanded for a new trial, a trial de novo follows. Thus, on remand, where the defendant desires to introduce new evidence not considered at the first trial, the trial judge is required to permit a new evidentiary hearing. This is true even though the issue had been determined at the first trial, and this Court expressly affirmed the trial court’s ruling on the first appeal.”). Stated otherwise, the proceedings on remand are controlled by applicable law and the evidence admitted in that new proceeding. 3 For the issues pertinent to this opinion, the 1997 and 1998 policies are nearly identical.
3 Policy Provisions
¶4. Minnesota Life was the named policyholder of the 1997 and 1998 Policies. The
policies defined an “insured” as a contract agent and any business entity engaged in
professional services which employs the insured. A “contract agent” was defined as an agent
who is under contract with Minnesota Life.
¶5. Under the policies, Minnesota Life also was listed as an “additional insured” pursuant
to an endorsement,4 entitled “VICARIOUS LIABILITY COVERAGE: Co Defendant -
Defense Costs Only,” which limited its liability. The endorsements specifically stated:
In consideration of the premium charged, it is hereby understood and agreed that Minnesota Mutual Life Insurance Company and the companies represented in Item 7 of the Declarations shall be additional Insureds under this policy, but only under Coverage Agreement B and only when it is named as a co-defendant in a Claim against the Insured due to a Wrongful Act attributable solely to an Insured/Agent and not due to any independent negligence or bad faith of Minnesota Mutual Life Insurance Company and/or the companies represented in Item 7 of the Declarations.
Coverage provided pursuant to this endorsement shall be subject to all of the terms, conditions and exclusions of the policy to which this endorsement is attached.
All other terms, conditions and exclusions of this policy remain the same.
(Emphases in original and added.)
¶6. The policies were claims-made policies, meaning coverage was triggered when a
claim was made against the insured(s) during either the policy period or the extended claims-
4 See Endorsement No. 9 of the 1997 Policy; for the 1998 Policy, see Endorsement No. 8.
4 reporting period, if applicable. In capital letters and separated by a box at the top of page
three was the following statement:
THIS IS A CLAIMS-MADE POLICY AND, SUBJECT TO ITS PROVISIONS, APPLIES ONLY TO ANY “CLAIM” FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD. NO COVERAGE EXISTS FOR CLAIMS FIRST MADE AFTER THE END OF THE POLICY PERIOD UNLESS, AND TO THE EXTENT, THE EXTENDED CLAIM REPORTING PERIOD APPLIES.
The COVERAGE section of the policies specifically provided that:
The Insurer shall have the right and duty to defend any Claim or suit against the Insured seeking sums payable under this Insurance, even if any of the allegations of the suit are groundless, false or fraudulent. The Insurer may make such investigation and with the written consent of the insured, make settlement of any claim as it deems expedient, but the Insurer shall not be obligated to pay any claim or judgment or to defend any claim or suit after the applicable limit of the Insurer’s liability has been exhausted by payment of judgments or settlements.
The COVERAGE section also stated that a “wrongful act” must occur during the policy
period or after the policy period if (1) at the time of the effective date of the policy, the
insured had no knowledge of any wrongful act and (2) “there is no other valid and collectible
insurance available to the Insured for any such Wrongful Act.” (Emphases in original and
added.) The policies excluded “any Claim based upon, or arising out of any dishonest,
deliberately fraudulent, malicious or knowingly Wrongful Act, error or omission committed
by or at the direction of the Insured.” (Emphasis in original.)
¶7. The policies provided the following notice requirement:
Upon any Insured becoming aware of any Wrongful Act which would reasonably be expected to result in a Claim against any Insured, written notice
5 with all available particulars shall be given by or for the Insured to the Insurer or its authorized representative. If a Claim is made or suit is brought against any Insured, the Insured shall as soon as practicable during the Policy Period, or during the Extended Claim Reporting Period, if applicable, notify the Insurer and immediately forward to the Insurer every demand, notice, summons or other process received.
. . . Written notice shall be sent to the Insurer to the attention of: Professional Liability Claims Manager CNA Financial Insurance Group CNA Insurance Companies NY, NY 10038.
(Emphasis in original.)
¶8. The policies permitted claims against the Insurer only when “the Insured shall have
fully complied with all the terms of this policy, [or] until the amount of the Insured’s
obligation to pay shall have been finally determined either by judgment against the Insured,
after actual trial or by written agreement of the Insured, claimant and the Insurer.”
(Emphasis in original.) Additionally, the policies provided that the “Insured shall not, except
at their own cost, voluntarily make any payment, assume any obligation or incur any
expense.” (Emphasis in original.)
¶9. The policies’ excess (or other insurance) provision was amended5 to state:
If the Insured has other insurance in force which would apply to a Claim also covered by this policy, including but not limited to the Automatic Extended Claim Reporting Period and/or if elected, the Optional Extended Claim
5 The original provision which was deleted stated, in part, “[i]f the Insured has other insurance against a Claim covered by this policy. . . .” (Emphasis in original.) The amended language clarifies that the additional insurance policy must also provide coverage for a specific claim that is covered under the policies to trigger the excess provision.
6 Reporting Period . . . this policy shall be excess over such other valid and collectible insurance and shall then apply only in the amount by which the applicable Limit of Liability of this policy exceeds the sum of the applicable Limit of Liability of all other insurance.
¶10. Finally, the policies did not allow an Extended Claim Reporting Period “[i]f the
Insured is issued the same or similar policy with this Insurer, or any other Insurer. . . .”
(Emphasis in original and added.)
Background
¶11. In late 1997, the Ex-Agents began to suspect that Gulley was embezzling funds from
clients. On December 22, 1997, the Ex-Agents informed Minnesota Life of their suspicions
and provided Minnesota Life with evidence of Gulley’s embezzlement. Upon receiving this
information, Minnesota Life took no immediate action.
¶12. On January 30, 1998, each Ex-Agent individually resigned from the Gulley Agency.
On February 1, 1998, the Ex-Agents founded Cornerstone Group, LLC, which is affiliated
with Linsco Private Ledger (“LPL”). On February 2, 1998, the Ex-Agents’ contracts with
Minnesota Life were terminated. Upon joining LPL, each Ex-Agent obtained separate errors
and omissions coverage (“AIG Policy”) issued by American International Speciality Lines
Insurance Company (“AIG”).
¶13. On March 16, 1998, the Mississippi Secretary of State’s office began investigating the
records of the Gulley Agency and, from that investigation, determined that Gulley had
7 misappropriated client funds. In July 1998, four cases6 were filed against Gulley, the Gulley
Agency, Minnesota Life, and the Ex-Agents. Each complaint alleged that the wrongful acts
occurred while the Ex-Agents were employed by Minnesota Life. Each complaint alleged
causes of action for breach of fiduciary duty, misrepresentation and concealment, breach of
implied covenant of good faith, continuing breach of contract, negligence, negligent
infliction of mental and emotional distress, misrepresentation, and malpractice. As to
Minnesota Life, each complaint specifically alleged that Minnesota Life participated in
and/or had knowledge of the intentional taking of monies. As to the Ex-Agents, the
complaints specifically alleged that they should have known that Minnesota Life and/or
Gulley were misappropriating funds. On July 17, 1998, after receiving notice of these claims
filed against them, the Ex-Agents met with and retained Clyde H. (Buddy) Gunn to defend
them.
¶14. Several days after retaining Gunn, the Ex-Agents notified Minnesota Life’s broker,
AON, and AIG’s broker, Barney & Barney, that they had been named as defendants in four
lawsuits related to Gulley’s embezzlement of funds. Included in the Ex-Agents’ notification
to AON was an Errors and Omissions Claim Report. The Claim Report asked that all other
Errors and Omissions policies be identified, and the Ex-Agents stated they presently had
policies issued by AIG. The form specifically required that notification of the claims be made
6 In one case, Garrett, the Ex-Agents were not named as defendants until the Second Amended Complaint.
8 to AON. AON then provided copies of the four complaints to Traub, Eglin, Lieberman &
Strauss (“TELS”), a law firm which provided advice to Columbia concerning any legal issues
that arose in regard to the claims under Minnesota Life’s agents’ policies. The notifications
provided TELS with copies of the complaints identifying the claims made against Minnesota
Life and the Ex-Agents. The notifications did not specifically request a defense on behalf of
Minnesota Life. In fact, the first letter to TELS from AON stated “[a]lthough intentional acts
are not covered, however, we felt an incident report should be filed.”
¶15. On August 10, 1998, TELS contacted AIG and AIG’s broker to inquire about AIG’s
position on coverage for the Ex-Agents. TELS was notified by AIG that AIG would provide
coverage for the Ex-Agents for claims made against them while they were employed by LPL.
TELS sent a written confirmation to AIG noting that AIG would provide coverage for the
Ex-Agents. On August 14, 1998, AIG contacted the Ex-Agents, acknowledging the claim
submitted to AIG and informing the Ex-Agents that James “Jimmy” Dukes of the law offices
of Clark, Dukes, Blakeslee, Ramsay & Hammond had been retained to defend them. AIG
reserved all rights under the policy and specifically informed the Ex-Agents that the policy
would not apply to any wrongful act which occurred while the Ex-Agents were not employed
by LPL. Additionally, AIG requested the dates the Ex-Agents became associated with LPL
and a detailed narrative explaining the roles of the Ex-Agents in the complained- of
transactions.
9 ¶16. On August 18, 1998, Dukes met with the Ex-Agents and their attorney Buddy Gunn.
At this meeting, it was decided that Gunn would represent the Ex-Agents, while Dukes
remained “on standby.” Gunn informed Dukes that there was a potential conflict in Dukes’s
representation of the Ex-Agents, as Dukes previously had represented Columbia.
¶17. On August 20, 1998, TELS sent written notification to each of the Ex-Agents stating
that, after reviewing the claims materials submitted on behalf of the Ex-Agents, Columbia
had concluded the Ex-Agents were not covered under their prior Columbia policies. The
notification stated that the decision to deny coverage was based on the following factors: (1)
the Ex-Agents’ contracts with Minnesota Life had been terminated, (2) the Ex-Agents
currently had “Professional Liability coverage through another carrier,” and (3) the Ex-
Agents’ current carrier had retained counsel to represent the Ex-Agents. Because Columbia
found the Ex-Agents to have “Professional Liability coverage in force” through another
carrier, Columbia opined the Ex-Agents were not eligible for coverage under the Extended
Claim Reporting Period of their previous terminated policy issued by Columbia. The
TERMINATED INSURED - ERP Endorsement7 states that:
In consideration of the premium charged, it is hereby understood and agreed that upon termination, during the Policy Term or any Renewal thereof, of a contract of an Agent who was an Insured under this policy, said Insured shall have an automatic Extended Claim Reporting Period to report Claims (as long as this policy or a renewal thereof is in force) but only for Wrongful Acts which occur prior to the termination of the Agent’s contract and only if
7 See Endorsement No. 5 in the 1997 Policy and Endorsement No. 4 in the 1998 Policy.
10 there is no other Life Insurance Agent’s Professional Liability coverage in force.
All other terms, conditions and exclusions of this policy remain the same.
(Emphases in original and added.) Columbia also stated that the denial was based on the
information it currently possessed through its investigation, but if the Ex-Agents believed
Columbia had reached the conclusion in error, the Ex-Agents could request that the claim be
reevaluated. The Ex-Agents forwarded the denial letter to AIG.
¶18. On August 25, 1998, Dukes sent Gunn a letter memorializing Gunn’s concern with
potential conflicts of Dukes’s representation of the Ex-Agents and Gunn’s recent request that
neither Dukes nor AIG communicate with Columbia regarding these concerns.
¶19. On September 9, 1998, the Ex-Agents responded to AIG’s August 14, 1998,
correspondence which requested the dates the Ex-Agents had become associated with LPL.
The Ex-Agents provided their dates of employment and also stated that “[t]he investment
product, which is the subject of this dispute, is not authorized nor approved by LPL.” On the
same day, the Ex-Agents provided TELS with a copy of AIG’s August 14, 1998, reservation-
of-rights letter.
¶20. On September 25, 1998, Dukes again corresponded with Gunn, confirming that the
Ex-Agents did not wish Dukes to take any further action in the matter. Dukes advised Gunn
that AIG wanted to make sure all obligations to the Ex-Agents were met and was awaiting
further information from Gunn as to how to proceed on the matter.
11 ¶21. On October 14, 1998, the Ex-Agents filed cross-claims against Minnesota Life, a
Columbia insured and policyholder of the Ex-Agents’ Columbia policies, alleging, inter alia,
counts of breach of duty to defend, breach of contract, and damage to reputation. The Ex-
Agents did not allege any vicarious liability against Minnesota Life. Minnesota Life did not
forward the cross-claims to TELS, nor did it request Columbia to defend it on the cross-
claims.
¶22. On October 27, 1998, AIG contacted Gunn and informed him that AIG was
withdrawing its position that coverage was available to the Ex-Agents under the AIG Policy
because the alleged acts occurred while the Ex-Agents were not employed by LPL.
According to AIG’s notes regarding the conversation with Gunn, Gunn agreed with the
coverage evaluation and noted his concern about Dukes representing the Ex-Agents due to
his prior representation of Columbia. Gunn informed AIG that he believed Columbia had
improperly denied coverage to the Ex-Agents and that he would vigorously defend his
clients.
¶23. After learning that AIG had withdrawn its coverage, Columbia asserted that the Ex-
Agents did not communicate again with TELS or Columbia until November 10, 1999, more
than one year after AIG withdrew coverage, when the Ex-Agents first alerted TELS that AIG
was no longer providing them coverage or representation. The Ex-Agents stated they had
been required to hire legal representation at their own cost to defend against the numerous
lawsuits. The Ex-Agents then informed TELS that they had been sued in five additional
12 lawsuits and forwarded copies of those summonses and the first page of each new complaint
to TELS. The Ex-Agents requested that Columbia reconsider its coverage position in light
of AIG’s denial of coverage. On November 22, 1999, TELS requested that the Ex-Agents
provide it with complete copies of the five new complaints and a copy of AIG’s denial letter.
TELS sent a followup letter on December 3, 1999, again requesting copies of the newly filed
complaints and the AIG denial letter. On December 15, 1999, the Ex-Agents finally complied
with TELS’s request, providing the requested documentation.
¶24. Based on this new information, Columbia reviewed the Ex-Agents’ claim for
coverage. In a January 11, 2000, pre-claims committee meeting, Columbia discussed the Ex-
Agents’ position that the ERP applied when other E&O insurance did not apply to a specific
claim. However, Columbia maintained the position that its policy language specifically stated
“in force” and did not make a provision for the policy “in force” to apply to a particular
claim. Columbia acknowledged that AIG had withdrawn coverage, but Columbia also
acknowledged that the AIG policy was not rescinded, and the Ex-Agents still had an AIG
policy “in force.” Therefore, Columbia once again opined that the Ex-Agents were not
entitled to either defense or indemnity coverage. Columbia informed the Ex-Agents that,
because their Columbia policy had terminated on February 2, 1998, and because they
currently had professional liability coverage through another carrier, coverage was not
available to the Ex-Agents. Columbia, citing the ERP, stated that “terminated Minnesota
Mutual Agents are provided with an Extended Reporting Period if there is no other
13 ‘Professional Liability coverage in force.’” TELS again informed the Ex-Agents that if they
believed Columbia’s denial of their coverage was incorrect, the Ex-Agents were to provide
any additional documents and/or information, and Columbia would reevaluate its claim.
¶25. On March 27, 2000, TELS learned that the Ex-Agents had filed cross-claims against
Minnesota Life because Minnesota Life had denied tender of their defense. Minnesota Life
and its broker, AON, disagreed with Columbia’s denial of the Ex-Agents’ claims of
coverage, stating that Columbia should be providing the Ex-Agents with a defense due to the
terms of their policies, especially after AIG withdrew coverage and representation.
Minnesota Life also informed Columbia that it believed the Ex-Agents would sue Columbia
based on coverage being available pursuant to the ERP.
¶26. Subsequently, Columbia and TELS considered Minnesota Life’s request that
Columbia reconsider its position and Minnesota Life’s belief that the Ex-Agents would most
likely sue Columbia based on a denial of coverage. Following Minnesota Life’s request “that
[Columbia] reconsider its position on the policy’s ERP,” Columbia agreed to “rescind the
disclaimer” and to assume the defense of the Ex-Agents. Columbia decided to retain Ken
Adcock of Hickman, Goza and Gore to defend the Ex-Agents based on his knowledge of the
Gulley matter.
¶27. TELS notified both the Ex-Agents and Minnesota Life that Columbia had
reconsidered its previous position and would assume the defense of the Ex-Agents. In a
subsequent conversation, TELS informed the Ex-Agents that Columbia would not pay for
14 the Ex-Agents’ cross-claim filed against Minnesota Life because such claims were not
covered under the Columbia policies.
¶28. On May 17, 2000, the Ex-Agents sent a written acceptance of Columbia’s defense and
indemnification in the nine underlying lawsuits. The Ex-Agents requested that Columbia
reimburse the Ex-Agents for all fees incurred and owing to their attorney, Buddy Gunn, who
had been representing the Ex-Agents for two years. The Ex-Agents stated that they did not
agree to be represented by Adcock but, instead, chose to continue to retain Gunn. The Ex-
Agents claimed a conflict existed between Adcock and Minnesota Life in light of the Ex-
Agents’ current cross-claim against Minnesota Life, which the Ex-Agents stated they would
continue to pursue. The Ex-Agents believed Minnesota Life had a nondelegable duty to
defend and indemnify them in the nine lawsuits, and the Ex-Agents did not feel Columbia
should have to bear the entire expense associated with the litigation.
¶29. Columbia agreed to pay reasonable and necessary defense costs not paid by AIG and
requested statements for services rendered and fees incurred to be provided to Columbia for
review. Although Columbia did not agree that there was a conflict with Adcock representing
the Ex-Agents, Columbia stated it would pay the reasonable and necessary fees of mutually-
agreed-upon representation for the Ex-Agents. Columbia stated that it would not reimburse
the Ex-Agents for any fees associated with their cross-claims against Minnesota Life because
Columbia’s coverage allowed for reimbursement of fees only in suits brought against their
insureds, not in claims brought by the insureds. Columbia also requested that the Ex-Agents
15 consider dismissing their cross-claims against Minnesota Life so as to have a “unified
defense.” Columbia stated that it was relinquishing the ERP provision as a basis of its denial
of the Ex-Agents’ claims, and Columbia’s payment of defense costs would be subject to a
full reservation of rights.
¶30. In a July 6, 2000, conversation between TELS and Gunn, Gunn indicated that he
would not work for an insurance company and recommended that Al Hopkins of Hopkins,
Crawley, Bagwell & Upshaw be retained to defend the Ex-Agents. The Ex-Agents agreed
to being represented by Hopkins, and Columbia retained Hopkins to defend the Ex-Agents
on July 7, 2000. On August 7, 2000, TELS sent a letter to the Ex-Agents confirming
Columbia’s defense under a reservation of rights and agreement to the Ex-Agents’ choice of
counsel, Hopkins. The letter also confirmed that the nine claims would be treated as
interrelated wrongful acts and that a single limit would be shared by all Ex-Agents.8
8 Section III D of the policies stated that:
For the purposes of determining the Insurer’s Limit of Liability, all Claims against all Insureds caused by a series of continuous, repeated or interrelated Wrongful Acts shall be considered: 1. As caused by one Wrongful Act; and 2. Only one limit shall apply to all Insureds; and 3. Such limit shall be the limit in effect at the time the first Claim is made.
16 ¶31. On October 30, 2000, the Ex-Agents, through their attorney Gunn, filed a Third Party
Complaint against Columbia based on its denial of coverage. On January 3, 2001, Minnesota
Life filed a cross-claim against the Ex-Agents and against Columbia. Minnesota Life’s cross-
claim against the Ex-Agents alleged a breach of duty to advise Minnesota Life of Gulley’s
misappropriation of client funds and to disclose all evidence of Gulley’s wrongdoing.
Minnesota Life’s cross-claim against Columbia alleged that Columbia improperly denied
coverage to the Ex-Agents, which in turn led to the Ex-Agents’ suit against Minnesota Life.
The cross-claim did not allege that Columbia wrongfully denied providing a defense for
Minnesota Life.
¶32. On March 26, 2001, the Ex-Agents settled their claims with Minnesota Life for
$9,000,000. As part of their settlement, Minnesota Life assigned a portion9 of its interest in
its claims and causes of action against Columbia to the Ex-Agents.
¶33. Between March 2001 and May 2001, Minnesota Life settled all claims in the nine
underlying lawsuits. Minnesota Life never sought Columbia’s consent to settle any of the
claims, including those brought by the Ex-Agents, nor did Minnesota Life notify Columbia
of the settlements. The Ex-Agents did not contribute any money to settle the underlying
9 The record does not reflect how much of Minnesota Life’s interest was assigned to the Ex-Agents.
17 ¶34. On June 4, 2001, Minnesota Life, through its new counsel Buddy Gunn, filed an
amended cross-claim against Columbia, alleging for the first time that Minnesota Life, like
the Ex-Agents, was entitled to a defense and indemnity by Columbia as an insured for
covered conduct and/or incidents related to the nine lawsuits.
¶35. On June 11, 2001, Minnesota Life entered into a Consent Order with the Mississippi
Secretary of State, admitting that it “failed reasonably to supervise its agent in that there was
no adequate supervisory review of C. Douglas Gulley, Jr., for the period from 1989 through
1998” and that it “failed to establish or implement adequate supervisory procedures and such
failure allowed C. Douglas Gulley, Jr., to violate numerous laws and rules and commit fraud
and embezzlement of approximately 3.5 million dollars over a period of at least nine (9)
years without detection.” Minnesota Life agreed to pay $550,000 in penalties, costs, and
expenses.
¶36. In October 2000, Hopkins was paid for the first bills submitted by his firm to TELS.
Hopkins submitted another bill in February 2001. There was discussion between Hopkins and
TELS regarding expenses that Columbia would not pay and the date by which the approved
fees and expenses would be paid. Hopkins sent a third bill on April 25, 2001. The day before
he submitted his third bill to TELS, Hopkins contacted the Ex-Agents, stating he had two
outstanding bills and had yet to be paid by Columbia. He informed the Ex-Agents that, as his
clients, they would be responsible for paying his bills since TELS had not. On May 1, 2001,
each Ex-Agent paid Hopkins $25,000. The next day, the Ex-Agents secured a loan in the
18 amount of $100,000. On May 4, 2001, after learning that Hopkins had requested payment
from “his clients,” TELS immediately corresponded that Hopkins’s first bill had been paid
seven months prior, his second bill would be paid by May 11, per their earlier conversation,
and the third bill had just been received but likely would be paid by the end of the month.
TELS advised Hopkins that “his clients” were not responsible for his bills and he should
inform them so immediately. On May 7, 2001, Hopkins informed TELS that the Ex-Agents
already had paid him $100,000 but he would inform the Ex-Agents that they did not need to
pay his remaining balance. On May 9, 2001, TELS again instructed Hopkins to advise “his
clients” that they were not responsible for his bills. On June 5, 2001, after receiving payment
from Columbia for his bills, Hopkins reimbursed the Ex-Agents the $100,000 paid by them
for his bills. The Ex-Agents did not pay back the loan until July 2001.
¶37. On May 3, 2010, almost ten years after Columbia agreed to reimburse the Ex-Agents’
attorneys fees not paid by AIG, Gunn submitted to Columbia itemized statements of all fees
and costs his clients incurred in litigation from July 1998 until May 2001. On May 27, 2010,
Columbia paid Gunn the amount of his bills up until July 7, 2000, the day on which Hopkins
was hired to defend the Ex-Agents. Part of the bills paid included costs incurred in filing suit
against Minnesota Life, even though Columbia previously had stated it would not reimburse
Gunn for those expenses, as they were not recoverable under the policy.
¶38. On May 11, 2011, all parties filed motions for summary judgment. The Ex-Agents and
Minnesota Life argued (1) Columbia had breached its duty to defend the Ex-Agents by twice
19 refusing to defend the Ex-Agents under the policies and/or failing to resolve ambiguities in
the policies in favor of the Ex-Agents; (2) Columbia had breached its duty to defend the Ex-
Agents by twice refusing to defend the Ex-Agents under the excess insurance coverage
provision and/or by failing to advise the Ex-Agents of this provision; (3) Columbia had failed
to comply with its obligation to pay the fees and expenses incurred by the Ex-Agents’
Moeller10 counsel; (4) Columbia’s refusal to defend the Ex-Agents entitled them to recover
all foreseeable damages; and (5) Columbia’s conduct was of such an egregious nature that
punitive damages were warranted. Additionally, in its motion for partial summary judgment,
Minnesota Life argued (1) Columbia had a contractual duty to defend Minnesota Life and
the Ex-Agents; (2) Minnesota Life was an intended beneficiary of Columbia’s contractual
duty to defend the Ex-Agents; (3) Columbia had breached its duty of good faith and fair
dealing to Minnesota Life; and (4) Minnesota Life was entitled to punitive damages and/or
extra contractual damages.
¶39. As to the Ex-Agents, Columbia argued that (1) Columbia did not breach any
contractual obligations owed to the Ex-Agents; (2) no coverage was provided by the policies
because the Ex-Agents had other coverage in force through AIG; (3) the Ex-Agents were not
damaged as a result of any alleged breach; and (4) Columbia consistently had acted in good
faith. As to Minnesota Life, Columbia argued that (1) Minnesota Life was not an insured; (2)
Minnesota Life was an additional insured and was covered only in very limited
10 Moeller v. Am. Guar. & Liab. Ins. Co., 707 So. 2d 1062 (Miss. 1996).
20 circumstances; (3) Minnesota Life was not covered because claims of independent
negligence and bad faith were alleged against Minnesota Life; (4) Minnesota Life breached
conditions of the policies by never providing notice of the claims, requesting a defense from
Columbia, requesting Columbia’s consent to any settlement, or sending defense invoices to
Columbia and, therefore, forfeited any coverage; (5) Minnesota Life did not qualify as a
third-party beneficiary because it was named an additional insured in the policy; and (6)
Columbia consistently had acted in good faith.
¶40. Additionally, on June 3, 2011, the Ex-Agents and Minnesota Life filed a motion to
strike, moving the court to strike and/or disregard the affidavits and exhibits offered by
Columbia in support of its motions for summary judgment and in defense of the motions for
summary judgment filed by the Ex-Agents and Minnesota Life, as they were inadmissible,
immaterial and/or irrelevant.
¶41. On June 30, 2011, after hearing oral argument on the Ex-Agents’ and Minnesota
Life’s Motion to Strike, the court held that all exhibits and affidavits were properly before
the court. As such, the trial court denied the Ex-Agents’ and Minnesota Life’s Motion to
Strike.
¶42. At the same hearing, the trial court also heard argument on the parties’ motions for
summary judgment. After considering the parties’ arguments and the “thousands of pages of
documents exchanged between the parties,” the trial court granted Columbia’s motions for
summary judgment. The trial court determined that there was no evidence that Columbia had
21 breached the terms of the applicable policies as to the Ex-Agents or as to Minnesota Life.
The court held that Columbia did not act in bad faith in its denial of Ex-Agents’ claims,
because, at the time of the initial denial, the Ex-Agents were not employed by Minnesota
Life, claims against the Ex-Agents were made after the 1997 Policy was terminated, some
of the alleged conduct occurred after the Ex-Agents’ 1997 Policy was terminated, the Ex-
Agents had coverage in force through AIG,11 and the Ex-Agents were being defended under
the AIG policy. Likewise, the court held that Columbia did not act in bad faith in its denial
of coverage for Minnesota Life because Columbia’s duty to defend was never triggered as
to Minnesota Life. It held that, Minnesota Life was not an insured under the policy. The
limited coverage provided to Minnesota Life as an additional insured covered only claims
under the theory of vicarious liability, and the nine complaints clearly alleged individual
negligence on the part of Minnesota Life. Additionally, the trial court found that Minnesota
Life never had tendered the matter to Columbia to provide a defense.
ISSUES
¶43. On appeal, the Ex-Agents and Minnesota Life raise the following issues, restated:
I. Whether the trial court’s denial of the Ex-Agents’ and Minnesota Life’s Motion to Strike was an abuse of discretion.
II. Whether the trial court erred in denying the Ex-Agents’ Motion for Summary Judgment and/or in granting Columbia’s Motion for Summary Judgment as to the Ex-Agents’ claims.
11 As stated supra, this finding of the trial court is erroneous. This Court disturbs no other findings made by the trial court.
22 III. Whether the trial court erred in denying Minnesota Life’s Motion for Summary Judgment and/or in granting Columbia’s Motion for Summary Judgment as to Minnesota Life’s claims.
ANALYSIS
I. Motion to Strike
¶44. The Ex-Agents and Minnesota Life argue that the trial court erroneously denied their
motion to strike various affidavits and exhibits submitted by Columbia in support of its
motions for summary judgment and in defense of the Ex-Agents’ and Minnesota Life’s
motions for summary judgment.
¶45. A trial court’s denial of a motion to strike an affidavit is subject to an
abuse-of-discretion standard of review. Trustmark Nat’l Bank v. Meador, 81 So. 3d 1112,
1116 (Miss. 2012) (citing Schmidt v. Catholic Diocese of Biloxi, 18 So. 3d 814, 832 (Miss.
2009)). Pursuant to Mississippi Rule of Civil Procedure 56(e), “[s]upporting and opposing
affidavits shall be made on personal knowledge, shall set forth such facts as would be
admissible in evidence, and shall show affirmatively that the affiant is competent to testify
to the matter stated therein.” Miss. R. Civ. P. 56(e). “While most affidavits are hearsay, they
are nevertheless properly considered on summary judgment motions as long as they are based
on personal knowledge and set forth facts such as would be admissible in evidence.” Levens
v. Campbell, 733 So. 2d 753, 758 (Miss. 1999) (citations omitted).
¶46. After hearing arguments from the parties, the trial court overruled the motion to strike,
finding the affidavits and exhibits to be admissible. This Court finds that the affidavits
23 comply with the requirements of Rule 56(e). The affidavits were based on sufficient,
personal knowledge and provide relevant, admissible evidence which the trial court properly
considered in ruling on the motions for summary judgment. Therefore, this Court finds that
the trial court did not abuse its discretion in denying the Motion to Strike.
II. Summary Judgment as to the Ex-Agents’ Claims
¶47. “The interpretation of an insurance policy is a question of law, not one of fact.”
Noxubee County Sch. Dist. v. United Nat’l Ins. Co., 883 So. 2d 1159, 1165 (Miss. 2004)
(citing Lewis v. Allstate Ins. Co., 730 So. 2d 65, 68 (Miss. 1998)). “[W]hen a question of law
is raised, we apply a de novo standard of review.” Delashmit v. State, 991 So. 2d 1215, 1218
(Miss. 2008) (citation omitted).
¶48. Insurance policies are contracts and must be enforced according to their provisions.
Noxubee County, 883 So. 2d at 1166 (citing United States Fid. & Guar. Co. v. Knight, 882
So. 2d 85, 92 (Miss. 2004)). Contractual parties making mutual promises must be entitled to
the benefit of their bargain. Noxubee County, 883 So. 2d at 1166. “[I]n interpreting an
insurance policy, this Court should look at the policy as a whole, consider all relevant
portions together and, whenever possible, give operative effect to every provision in order
to reach a reasonable overall result.” J & W Foods Corp. v. State Farm Mut. Auto Ins. Co.,
723 So. 2d 550, 552 (Miss.1998) (citing Cont’l Cas. Co. v. Hester, 360 So. 2d 695, 697
(Miss. 1978)). “A court must effect a determination of the meaning of the language used, not
24 the ascertainment of some possible but unexpressed intent of the parties.” Cherry v.
Anthony, Gibbs, Sage, 501 So. 2d 416, 419 (Miss. 1987).
Generally, under Mississippi law, when the words of an insurance policy are plain and unambiguous, the court will afford them their plain, ordinary meaning and will apply them as written. Paul Revere Life Ins. Co. v. Prince, 375 So. 2d 417, 418 (Miss. 1979). Under Mississippi law, ambiguous and unclear policy language must be resolved in favor of the non-drafting party – the insured. Harrison v. Allstate Ins. Co., 662 So. 2d 1092, 1094 (Miss. 1995). Further, provisions that limit or exclude coverage are to be construed liberally in favor of the insured and most strongly against the insurer. Nationwide Mut. Ins. Co. v. Garriga, 636 So. 2d 658, 662 (Miss. 1994).
Noxubee County, 883 So. 2d at 1165.
A. Policy Language
¶49. There are two types of professional liability insurance policies: “occurrence” policies
and “claims-made” policies. Jones v. Baptist Mem’l Hosp.-Golden Triangle, Inc., 735 So.
2d 993, 999 (Miss. 1999). “A ‘claims made’ policy protects the holder only against claims
made during the life of the policy, while an ‘occurrence’ policy protects the policyholder
from liability for any act done while the policy is in effect.” St. Paul Fire & Marine Ins. Co.
v. Barry, 438 U.S. 531, 535 n.3, 98 S. Ct. 2923, 57 L. Ed. 2d 932 (1978). “Claims-made”
policies cover only those losses caused by “wrongful action taking place at any point in time
as long as the claim is made during the period the policy is in effect.” Jones, 735 So. 2d at
1000 (emphasis in original). Conversely, “occurrence” policies will cover all wrongful acts
which occurred during the term of the policy “even if a claim is made . . . after expiration of
25 the policy if the wrongful act took place while such policy was in effect.” Id. (emphasis in
original). See also 42 Am. Jur. 2d Insurance § 2 (1982).
¶50. The starting point for interpreting an insurance contract or policy is the language of
the policy itself. The policies at issue were “claims-made” policies. The 1997 Policy provides
coverage only for claims made prior to the termination of the policy. Based upon the specific
language of the policy, the policy applied to all claims made against the insured during the
policy period, March 1, 1997, through March 1, 1998, unless the Extended Claim Reporting
period applies. It is undisputed that no claims were made under this policy prior to its
termination. Therefore, there is no coverage unless the Extended Claim Reporting Period is
applicable. According to the policy language, the Extended Claim Reporting Period for the
terminated Ex-Agents shall apply as long as (1) the specific policy or a renewal of the policy
is in force, (2) the wrongful acts occur prior to the termination of the Ex-Agents’ contract,
and (3) there is no other “coverage in force.”
¶51. There is no doubt that Minnesota Life renewed the 1997 Policy for the term of March
1, 1998, through March 1, 1999. There is no doubt that the complained-of wrongful acts
alleged in the nine underlying complaints occurred prior to the termination of the Ex-Agents’
contracts with Minnesota Life. Therefore, this Court is left to determine if the Ex-Agents had
“coverage in force” through AIG.
¶52. Throughout this entire litigation, the Ex-Agents and Minnesota Life have contended
that the ERP provides coverage because the AIG policy did not provide coverage to the Ex-
26 Agents for alleged wrongful acts occurring while they were Minnesota Life agents. Because
coverage was denied by AIG, the Ex-Agents contend that Columbia should have concluded
that there was no coverage in force. Columbia, however, contends that “coverage” is
synonymous with “policy” and that it does not matter what type of “coverage” is provided
under that “policy,” as long as the Ex-Agents have a “policy in force.”
¶53. Reviewing the entire Columbia policy, there are numerous instances where the terms
“insurance,” “policy,” “claim,” “coverage,” and “in force” are used: “valid and collectible
insurance available,” “other insurance against a claim covered by this policy,” “same or
similar policy,” “claim arising out of a wrongful act,” “master policy remains in force,” “as
long as this policy . . . remains in force,” “coverage in force,” “insurance in force which
would apply to a claim also covered by this policy,” and “coverage will not extend to . . . any
claim.” While policy language clearly makes distinctions between these words, Columbia
argued that all were synonymous.
¶54. While “ambiguities in insurance policies should be construed in favor of the
insureds,” we are of the opinion the policy in question is unambiguous. “It is well settled that
the words of a contract are to be given their ordinary meanings.” Cont’l Cas. Co. v. Hester,
360 So. 2d 695, 697 (Miss. 1978) (citing Ferguson v. Provident Life & Accident Ins. Co.,
170 Miss. 504, 155 So. 168 (1934)). “It is axiomatic that all provisions of an insurance policy
must be so construed, if possible, to give effect to each.” Cont’l Cas. Co., 360 So. 2d at 697
(citing Southern Home Ins. Co. v. Wall, 156 Miss. 865, 127 So. 298, 299 (1930)).
27 ¶55. The key to the meaning of the phrase “coverage in force” is the word “coverage.”
“Coverage” can be defined as the “extent of protection afforded by an insurance policy.”
Webster’s II New College Dictionary 261 (2001). Insurance policies provide different types
of coverage depending on the particular policy. Coverage applies to losses, damages, or
claims afforded by an insurance policy. It is more than obtaining an insurance policy. One
must look to the actual policy obtained to determine what coverage is in force.
¶56. The Ex-Agents had coverage under the ERP endorsement for the underlying claims
as long as they had no other coverage in force for those same alleged wrongful acts. The AIG
policy did not provide coverage for wrongful acts that occurred while the Ex-Agents were
employed by Minnesota Life and covered by Columbia; it covered acts only while the Ex-
Agents were employed by LPL. The Ex-Agents were covered by the ERP endorsement of the
Columbia policies for the wrongful acts alleged in the underlying claims, because they had
no other “coverage in force” for those alleged wrongful acts which occurred before they were
employed by LPL.
B. Duty to Defend
¶57. Finding that the Ex-Agents were covered under the Columbia policies, this Court must
now determine if a duty to defend was triggered and, if so, if Columbia breached its duty. An
insurance company’s duty to defend its insureds
derives neither from common law nor statute, but rather from the provisions of its policy, that is, its insurance contract with its insured. It is a matter of contractual agreement. Absent a higher obligation created by statute, an insurance company’s duty to defend is neither greater nor broader than the
28 duty to comply with its other contractual obligations. That is not to say an insurance company can ignore its duty to defend where it has agreed to defend its insureds for covered claims, and the allegations of a complaint reasonably bring a claim within the coverage of its policy. The duty of good faith and fair dealing attends all contracts interpreted under Mississippi law. See Miss. Code Ann. § 75-1-203; University of Southern Mississippi v. Williams, 891 So. 2d 160, 170 (Miss. 2004).
Baker Donelson Bearman & Caldwell, P.C. v. Muirhead, 920 So. 2d 440, 450-51 (Miss.
2006). Under Mississippi law, the determination of whether an insurance company has a duty
to defend depends upon the language of the policy as compared to the allegations of the
complaint in the underlying action. See U.S. Fid. & Guar. Co. v. Omnibank, 812 So. 2d 196,
200 (Miss. 2002); Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So. 2d 400, 403 (Miss.
1997); State Farm Mut. Auto. Ins. Co. v. Taylor, 233 So. 2d 805, 808 (Miss. 1970). “An
insurance company’s duty to defend its insured is triggered when it becomes aware that a
complaint has been filed which contains reasonable, plausible allegations of conduct covered
by the policy. However, no duty to defend arises when the claims fall outside the policy’s
coverage.” Baker Donelson, 920 So. 2d at 451. See also Farmland Mut. Ins. Co. v. Scruggs,
886 So. 2d 714, 719 (Miss. 2004); Sennett, 757 So. 2d at 212; Delta Pride Catfish, 697 So.
2d at 403; and Moeller, 707 So. 2d at 1069.
¶58. Each of the nine underlying complaints alleged that the conduct complained of
occurred while the Ex-Agents were employed by Minnesota Life. Specifically, the
complaints alleged that the Ex-Agents should have known of the intentional taking of the
plaintiffs’ money and that the Ex-Agents should have notified the proper authorities about
29 the taking of the money. On the face of the complaints, which were provided to TELS and
Columbia, there are “reasonable, plausible allegations of conduct” which are covered under
the Columbia policies. Therefore, Columbia’s duty to defend the Ex-Agents was triggered
upon receipt of the complaints.
¶59. Because Columbia failed to defend the Ex-Agents upon receipt of the complaints,
Columbia breached its duty to defend. When an insurer, such as Columbia, makes the
decision to refuse to provide a defense to its insured, “it runs a substantial risk of a later
determination that a defense should have been provided. Such decisions, absent an arguable,
reasonable basis, can result in a finding of bad faith,” which would result in a jury question.
Baker Donelson, 920 So. 2d at 451, Indem. Ins. Co. of N. Am. v. Guidant Mut. Ins. Co.,
99 So. 3d 142, 153 (Miss. 2012).
¶60. The trial court granted summary judgment in favor of Columbia as to the Ex-Agents’
claims based on its acceptance of Columbia’s interpretation of the policy language. Columbia
proffered testimony that its interpretation was accepted in the industry. The Ex-Agents
presented an opposing view.12 Columbia’s interpretation was accepted by the trial court. We
find that the grant of summary judgment on the basis of the Ex-Agents having coverage in
12 The Ex-Agents cited no cases in which this Court, or any other court, has addressed the issue of the meaning of “coverage in force.” In this matter of first impression, the trial court, on remand, may consider that as a factor, if necessary, when determining whether Columbia acted in bad faith.
30 force through AIG was erroneous. Therefore, the summary judgment on that issue is reversed
and the case is remanded for further proceedings consistent with this opinion.
¶61. Because the trial court granted Columbia’s motion for judgment based on an
erroneous interpretation of the policy, the trial court did not address whether the Ex-Agents
had a compensable injury, and if so, whether Columbia acted in bad faith, such that an award
of punitive damages was warranted. A denial of a claim based upon an erroneous
interpretation of policy language does not automatically equate to bad faith, if there was an
arguable or legitimate basis for the denial or if Columbia had relied upon advice of counsel.
See Jenkins v. Ohio Cas. Ins. Co., 794 So. 2d 228, 232-33 (Miss. 2001).
¶62. On remand, the trial court should consider whether the Ex-Agents have proven a
compensable injury such that a jury could properly award damages above any amount the Ex-
Agents already have been paid.13 If the trial court determines that the Ex-Agents are entitled
to compensable damages, above what the Ex-Agents already have received, the trial court
must then determine whether Columbia additionally lacked an “arguable or legitimate basis”
13 The Ex-Agents cannot recover the same damages twice and can recover only if damages are proven in excess of the amounts they already have been paid. “It is well known that this state does not endorse double recovery. . . . Double recovery is a tort doctrine that prevents unjust enrichment by precluding a recovery of the same damages multiple times. . . .” R.K. v. J.K., 946 So. 2d 764, 777 (Miss. 2007) (citing Medlin v. Hazlehurst Emergency Physicians, 889 So. 2d 496, 499 (Miss. 2005)).
31 for initially denying the Ex-Agents’ claims, and/or whether Columbia acted in “gross and
reckless” disregard for the Ex-Agents’ rights.
The issue of punitive damages should not be submitted to the jury unless 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 claim, and 2. The insurer committed a wilful or malicious wrong, or acted with gross and reckless disregard for the insured’s rights.
Jenkins, 794 So. 2d at 232-33. If the trial court determines that Columbia’s actions rose to
this level, only then may the Ex-Agents present their bad-faith claim to a jury.
III. Summary Judgment as to Minnesota Life’s Claims
¶63. There is no question that Minnesota Life was the named policyholder, and thus an
insured, under both the 1997 and 1998 Policies. Minnesota Life’s coverage, however, was
limited to “vicarious liability coverage-defense costs only.” Under Coverage Agreement B,
which is the defense-cost provision, Columbia had the
right and duty to defend any Claim or suit against the Insured seeking sums payable under this Insurance, even if any of the allegations of the suit are groundless, false or fraudulent. The Insurer may make such investigation and with the written consent of the Insured, make settlement of any Claim as it deems expedient, but the Insurer shall not be obligated to pay any Claim or judgment or to defend any Claim or judgment or to defend any Claim or suit after the applicable limit of the Insurer’s liability has been exhausted by payment of judgments or settlements.
(Emphasis in original.) Coverage B comes into play only when Minnesota Life “is named as
a co-defendant in a Claim against the Insured due to a Wrongful Act attributable solely to
an Insured/Agent and not due to an independent negligence or bad faith of Minnesota
Mutual Life Insurance Company. . . .” (Emphases in original and added.)
32 ¶64. It is uncontested that the underlying complaints each contained allegations of
independent negligence on the part of Minnesota Life. Minnesota Life argues that, because
the complaints also contain claims in which negligence is attributable solely to the Ex-
Agents, the vicarious liability coverage is applicable. Minnesota Life bases its argument on
the Policy provision’s language of “a claim,” which it contends relates to any claim in the
complaint; i.e., if any claim in the complaint solely attributes negligence to the Ex-Agents,
then Minnesota Life is covered under the policy–regardless of whether a claim of
independent negligence is alleged on the part of Minnesota Life. Columbia counters that the
“attributable solely” language indicates that all of the allegations in the complaints must be
based on the Ex-Agents’ independent negligence with no allegations of any negligence
attributable to Minnesota Life.
¶65. A clear reading of the policy language, giving words their ordinary meaning, indicates
that Minnesota Life is covered only if the underlying complaints attribute no independent
negligence to Minnesota Life. It is uncontested that the nine underlying complaints allege
independent negligence and bad faith on the part of Minnesota Life. Therefore, based on the
allegations in the complaint as compared with the language of the policy, Columbia’s duty
to defend Minnesota Life was never triggered because the allegations in the complaints fell
outside the policy. No “reasonable, plausible allegation of conduct” was covered by the
policy.
33 ¶66. Even if Minnesota Life was able to prevail as to its argument that it was covered under
the policies, Minnesota Life failed to comply with the requirements of the policies. The
Assistance and Cooperation Condition of the policies specifically states that “[t]he Insured
shall not, except at their own cost, voluntarily make any payment, assume any obligation or
incur any expense.” (Emphases in original and added.) On its own, without consultation with
or consent from Columbia, Minnesota Life settled the nine underlying claims, paid settlement
monies to the Ex-Agents, paid fines to the Secretary of State, and incurred attorneys’ fees and
costs from three separate law firms. Minnesota Life is now arguing that Columbia is
responsible not only for its defense costs, but all costs incurred by Minnesota Life. Minnesota
Life argues that if Columbia breached its duty to defend under the policies, Columbia cannot
now claim protection under the policies.
¶67. In the same vein, if Minnesota Life failed to comply with the requirements of the
policies, it cannot claim protection either. The policies strictly forbid voluntary payment of
any kind.
In Southwest Mississippi Electric Power Association v. Harragill, 254 Miss. 460, 468, 182 So. 2d 220, 223 (1966), this Court held that to recover indemnity the indemnitee must allege and prove that he was legally liable to the person injured and, consequently, paid under compulsion; otherwise, the payment was in law a voluntary one for which there could be no recovery in an indemnity action. Bush v. City of Laurel, 215 So. 2d 256, 260 (Miss. 1968), proceeds on the same premise, holding that a payment made after liability has been established is one made under compulsion. Hopton Building Maintenance, Inc. v. United Parcel Service, Inc., 559 So. 2d 1012, 1014 (Miss. 1990), is to like effect. Maryland Casualty Co. v. R.H. Lake Agency, Inc., 331 F. Supp. 574 (N.D. Miss. 1971), perceptively applies Mississippi law to the point.
34 Keys v. Rehab. Centers, Inc., 574 So. 2d 579, 584 (Miss. 1990). Our general rule is that “an
indemnitee must prove payment under compulsion and reasonableness in amount before he
may recover.” Id. at 585 (citing Hopton Bldg. Maint., Inc., 559 So. 2d at 1014).
¶68. Minnesota Life cannot show that any payments, fines, or settlements paid were
compulsory or that the exorbitant amount paid was reasonable. Minnesota Life voluntary paid
money without ever consulting Columbia. Minnesota Life cannot now claim foul on
Columbia’s part and obtain contribution. As such, we find that the grant of summary
judgment in favor of Columbia was proper.
CONCLUSION
¶69. “Coverage” is not broadly defined as a mere policy but instead applies to protection
afforded by an insurance policy. The Ex-Agents did not have coverage under the AIG policy
for the wrongful acts alleged in the underlying complaints, thus triggering the Extended
Claim Reporting Period of the Columbia policies. Columbia’s duty to defend the Ex-Agents
under the policy was triggered upon receipt of the complaints in the nine underlying cases.
Summary judgment was improperly granted in favor of Columbia as to the Ex-Agents’
claims on the basis of the erroneous policy interpretation.
¶70. Minnesota Life does not fare as well. It is clear from the underlying claims that
independent wrongdoing on the part of Minnesota Life was alleged, negating its vicarious
liability coverage. Columbia did not breach its duty to defend Minnesota Life, as no duty to
defend ever was triggered. Additionally, the policy strictly prohibits voluntary payments. On
35 its own, Minnesota Life chose voluntarily to settle all of the claims against it by the
underlying claims and the Ex-Agents without the consent of Columbia. Columbia is not
liable for those voluntary payments. As such, the trial court properly granted summary
judgment in favor of Columbia as to Minnesota Life’s claims.
¶71. We affirm the trial court’s order denying the motion to strike and its order granting
summary judgment in favor of Columbia as to Minnesota Life’s claim; however, we reverse
the trial court’s order granting summary judgment in favor of Columbia as to the Ex-Agents’
claims and remand for proceedings consistent with this opinion.
¶72. AFFIRMED IN PART; REVERSED IN PART AND REMANDED.
WALLER, C.J., DICKINSON, P.J., LAMAR, KITCHENS, CHANDLER, PIERCE, KING AND COLEMAN, JJ., CONCUR.