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STATE FARM FIRE & CASUALTY CO. v. ROBERT C. SIMPSON AND GLORIA J. SIMPSON

AUGUST 14, 1985

STATE FARM FIRE & CASUALTY CO.
v.
ROBERT C. SIMPSON AND GLORIA J. SIMPSON



BEFORE PATTERSON, C.J., SULLIVAN & ANDERSON, JJ.

PATTERSON, CHIEF JUSTICE, FOR THE COURT:

This is an appeal by State Farm Fire & Casualty Insurance Co. from a judgment of the Circuit Court of Jackson County pursuant to a fire loss. There a jury verdict favored

Robert and Gloria Simpson in the sum of $22,876.25 as an award due under a policy of insurance issued to them by State Farm Fire & Casualty Co. (hereinafter State Farm). Additionally there was an award of $227,123.75 as compensatory damages and an award of punitive damages of $250,000.00. Following the verdict the trial court authorized a remittitur of $50,000.00 on the compensatory damage award and cancelled a mortgage of the Simpsons to Kimbrough Investment Company on the destroyed property.

 State Farm urges numerous assignments of error which will be mentioned as required throughout the opinion. The Simpsons have cross-appealed contending the remittitur offered by the trial judge was improper.

 BASIC FACTS

 On August 12, 1977, Rex Foster, a State Farm Agent, received Robert Simpson's application for homeowners insurance on his residence in Gautier, Mississippi. The ensuing policy of insurance provided for coverage of $28,000.00 on Simpson's dwelling, $14,000.00 on the contents, and $6,140.00 for additional living expense. Four days before the fire which occurred on Wednesday, August 16, 1978, the Simpsons received notice of an automatic increase in coverage to $30,700.00 for the dwelling and $15,350.00 for the contents with notice of increased premium.

 According to Simpson the fire was discovered when he and his family were returning at about 5:00 o'clock a.m. from a visit to the home of his sister, Mrs. Delores Freeman. A neighbor stated the firemen arrived at the scene approximately 13 minutes after their notification. At that time the structure was engulfed in flames and could not be saved. The house and contents were a total loss. Within two days following the fire State Farm advanced the Simpsons $1500.00 in additional living expenses and three days thereafter the Simpsons moved to Tuscaloosa, Alabama, to live in Robert Simpson, Sr.'s trailer park.

 THE FIRE SCENE INVESTIGATION

 Oren Haddock, a local State Farm Claims Representative, investigated the scene but could not determine the cause of the fire. Upon consulting with George Johnson, his supervisor, Haddock enlisted the aid of Systems Engineering Associates (hereinafter SEA) of Atlanta, Georgia, to investigate and determine the fire's origin.

 On September 6, 1978, State Farm was given the report

 of SEA prepared by Phil Hampton, the cause and origin expert of SEA. This report had been reviewed and approved by Chief Fire Investigator Donald Zwick, an experienced fire investigator who qualified as an expert in this field. At the time he was in the employment of SEA but is now an independent investigator. Their report was well illustrated with a number of photographs supporting their determinations. The report concluded:

 A flammable liquid burn pattern was uncovered in the dining room and was traced to the front door. A separate flammable liquid burn pattern was located on the kitchen floor in front of the appliances and originating from the built-in cabinet area. The blistering of the linoleum is a clear indication of an abnormally hot substance burned on top of the surface. The floor fire was so intense on the living room floor that the concrete spalled. There was no connection between the two floor burn patterns on the linoleum floor shared by the dining room and kitchen. The burning to the inner side of the front door indicated the liquid was spread to the front door and then ignited. Based on the observations and analysis contained herein Systems Engineering Associates is of the opinion that the August 16, 1978 fire at the residence of Mr. Robert C. Simpson, Gautier, Mississippi was an intentional incendiary act by a person unknown. It is further the opinion of Systems Engineering Associates that a flammable liquid was poured on the kitchen, dining room, and living room floors to accelerate the fire. All accidental causes were considered and eliminated.

 On September 12, 1978, State Farm received an accelerant identification chemical analysis report from the SEA laboratories. The conclusion stated in it follows in pertinent part:

 It is the opinion of the chemical laboratory of SEA Investigations Division, Inc., that no hydrocarbon accelerant was isolated from Exhibit One (1). The chemical residues of low volatility isolated from Exhibit One (1) and the comparison sample, Exhibit Two (2) were found to compare favorably with each other. Therefore the chemical residue isolated from Exhibit One (1) is not foreign.

 The fact that no hydrocarbon accelerant was isolated can be interpreted by one of two ways: (1) a hydrocarbon accelerant was never present in the debris or (2) a hydrocarbon accelerant was present in the fire debris, at one time, but due to the small amount used or the intense heat of the fire, it has all been consumed.

 State Deputy Fire Marshall Norman Cowart investigated the fire scene on September 18, 1978. His report largely confirms SEA's findings that the fire was started by use of a flammable liquid which seemed to have been poured in a trail from the front door to the dining room and hall area of the house. We observe the formal report was completed in early 1979, subsequent to State Farm's denial of the Simpsons' claim on November 21, 1978. However, there is some indication that State Farm had knowledge of the contents of the report before it denied the claim. The appellee disputes this and contends the contents of the report were unknown to the appellant until after the claim was denied. The record is uncertain on this point, leaving it in some doubt.

 THE SWORN STATEMENTS

 After receiving the SEA report State Farm concluded that sworn statements should be required as authorized by the policy. The statements of the Simpsons were taken on October 6, 1978, in Tuscaloosa, Alabama. Initially it need be noted there was no evidence in any of the reports of a break-in, and the Simpsons stated the doors to their residence were locked and no appliances were on when they left the house prior to the fire.

 Simpson stated that when he returned home from work on Tuesday evening before the fire, the family decided to attend a movie. Upon leaving the movie around 11:30 or 12:00 p.m., they went to the home of his sister, Mrs. Delores Freeman. When they arrived only his sister was at home and, instead of going dancing as suggested by Gloria Simpson, they remained with Delores until her husband, Larry, arrived from his shift at Ingalls Shipyard about 12:30 a.m. They drank a six pack of beer and visited until 3:00 a.m., when the Simpsons went to a restaurant for breakfast leaving their sleeping children with the Freemans. They returned around 4:30 a.m. when Mrs. Freeman was to arise for her day's work beginning at 5:30 a.m.

 Simpson also related that Glenn Reed, a real estate

 salesman, listed his house for sale in late 1978, and although Reed located a buyer Simpson decided not to sell because the sale was inconveniently close to the beginning of the new school year and would net only approximately $1500.00. Simpson denied he had ever told anyone that he was considering moving to Alabama and denied any of the contents of the house were removed before the fire.

 As to his finances, Simpson stated he had a truck loan payment of $106.00 per month, a personal loan with monthly payments of $97.00 per month and a house payment of $250.00 - $300.00 per month. At the time of the fire he acknowledged employment as a stock boy in a grocery store. He and his wife earned some income in their part-time employment as a musician and baby-sitter, respectively. Simpson emphatically denied an awareness of the cause of the fire.

 The statement of Gloria Simpson was retaken on October 24, 1978, after the court reporter lost the notes of her previous statement. Her account paralleled that of her husband's except she placed the time of return from the restaurant to the Freemans' home at slight variance from that of her husband. She also related that it took approximately 13 minutes for the firemen to arrive at their flaming home from the time the fire was discovered. She was positive that neither she nor her husband had discussed moving to Alabama with anyone prior to their removal. As to finances, she stated that part of the personal loan made by her husband was to bring current three past due house payments.

 UNSWORN STATEMENTS

 Oren Haddock of State Farm obtained an unsworn transcribed statement from Mrs. Delores Freeman, Robert Simpson's sister, on October 6, 1978. She stated that the Simpsons came by her home about 10:30 or 11:00 p.m. and asked her to keep their children while they went dancing. She agreed and the Simpsons left, returned about 4:30 in the morning for the children and immediately departed. After the Simpsons left to go dancing Mrs. Freeman awaited her husband's return from work, and they retired about 1:00 a.m. *fn1

 On October 2, 1978, there was a telephone conversation, later transcribed, between Ms. Laurie Cantonwine and State Farm Attorney Harry Allen. The substance of the conversation follows: a friend of Simpson's called" Gurley "told Ms. Cantonwine that Simpson said he burned the house by pouring

 cooking oil on the stove and kitchen floor. She also stated that" Gurley "told her that Simpson had to restart the fire several times before it began burning well and that he had nearly suffocated in the house because he stayed inside too long. This statement was repeated in a deposition on January 29, 1980.

 Oren Haddock of State Farm took a statement of Glenn Reed, a real estate salesman, on October 12, 1978. Reed related that Simpson told him the reason he wanted to sell the house was that he had secured a job in Alabama and desired to make a quick sale so he could move and enroll his children in their new school. Reed found a buyer for the house in July 1978, but a sale would have netted Simpson only $1,000.00 to $1,500.00. Because of this and that it came too late for convenient school enrollment, Simpson declined to accept the offer.

 Mary Murphy, a neighbor of the Simpsons and a real estate broker, gave her statement to Oren Haddock on October 26, 1978. She related the reason Simpson wanted to sell his house was that he desired to return to Alabama. He asked Mrs. Murphy to list his house for sale.

 Robert Auth was one of the first firemen on the scene of the fire. When questioned by Haddock, he responded the fire was suspicious because the whole house was engulfed in flames, while a house ordinarily burned at one end or at a certain area and usually was not speedily and entirely covered in flames. He stated further that Simpson told him he was at home about an hour before the fire, that he had left to take his baby-sitter home and upon returning found the house was on fire.

 The statement of Clay Ellison, a neighbor, appears in a State Farm Claims Committee report dated November 7, 1978. It indicates he told a State Farm agent that he awakened at 5:00 o'clock the morning of the fire. When he went outside to watch the house burn, Simpson told him he barely had time to get his family out of the house after the smoke awakened him. Ellison thought this unusual because Simpson was fully dressed at the time.

 DENIAL OF CLAIM AND LITIGATION PRIOR TO THIS SUIT

 State Farm rejected the Simpsons' proof of loss and denied the proceeds of the policy on November 21, 1978. The next day State Farm filed suit for declaratory judgment in the United States District Court seeking a determination of its liability, if any, under the policy. In it State

 Farm alleged the fire was caused by an incendiary act on the part of the insured. This suit was dismissed without prejudice on May 14, 1979.

 On July 19, 1979, the Simpsons filed suit against State Farm in the Circuit Court of Jackson County alleging a breach of the insurance contract in an ex delicto action for bad faith. Other suits and their dismissals followed in both State and Federal Courts finally culminating in this suit which was filed in the Circuit Court of Jackson County on November 13, 1980. In it the plaintiffs designated State Farm Fire & Casualty Co., the defendant, as well as individuals Winston Hankins, General Counsel of State Farm with the responsibility of making final litigation decisions in punitive damage cases; Oren Haddock, George Johnson, and Rex Foster, all agents of State Farm. The Simpsons alleged the defendants were guilty of malicious prosecution, defamation, fraud, breach of fiduciary duty, and intentional infliction of emotional distress, for all of which they demanded redress by way of contractual, compensatory and punitive damages.

 State Farm filed a foreclosure proceeding in the state court which was later dismissed. Thereafter State Farm filed its answer denying the allegations of the complaint and asserting the following affirmative defenses:

 (1) The subject fire loss was intentionally caused or procured by the plaintiffs and therefore the policy was void ab initio; (2) The plaintiffs violated the policy provisions with respect to increasing the hazard of the subject property and therefore the policy is void; (3) The plaintiffs violated the insurance policy provisions with respect to willful concealments and misrepresentation of material facts and therefore the policy is void; (4) Plaintiffs violated the policy provision with respect to giving false statements under oath and therefore the policy is void; (5) State Farm paid $1500.00 to the plaintiffs for additional living expenses prior to its investigation regarding the facts of the fire and prior to its determination the coverage should be denied; (6) State Farm fullfilled all of its obligations under the policy by paying the mortgagee, Kimbrough Investment Company; (7) State Farm has an absolute privilege as to any pleadings filed in any court and cannot be liable for contents of any pleadings on the grounds of slander and libel.

 The counterclaim was filed by the defendant to recover the $1500.00 previously paid to the plaintiffs. With permission of the courts the defendant amended the answer by adding that the claim for punitive damages was barred by the statute of limitations.

 Thereafter an order was obtained allowing State Farm to raise the affirmative defense that the allegations of defamation set forth in the declaration were barred by the statute of limitations.

 An extensive trial followed, resulting in an appeal to this Court consisting of 23 volumes and more than 3000 pages of testimony, exhibits, instructions, motions, etc., a ponderous legal array indeed. Where possible this opinion will attempt to contain it within reasonable proportions.

 PUNITIVE DAMAGES - A BRIEF REVIEW

 State Farm contends by assignment of error No. 35 that the trial court erred in granting plaintiff's instruction P-1A on punitive damages. Although the instruction is brought to our attention along with many other assignments of error, it appears to be the core of this suit. However, before responding to it, we think it appropriate to review some of our cases on punitive damages so their decisions and some of the reasons therefor will be unfaded before us when we reach the decisive issues.

 Beginning with Hood v. Moffett, 109 Miss. 757, 69 So. 664 (1915), this Court announced the rule on ...


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