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BOBBY KITCHENS, INC. v. MISSISSIPPI INSURANCE GUARANTY ASSOCIATION

OCTOBER 04, 1989

BOBBY KITCHENS, INC.
v.
MISSISSIPPI INSURANCE GUARANTY ASSOCIATION



BEFORE HAWKINS, P.J., SULLIVAN AND PITTMAN, JJ.

PITTMAN, JUSTICE, FOR THE COURT:

On August 8, 1984, James W. Mulloy was killed as a result of an accident involving a vehicle owned by Bobby Kitchens, Inc. Mulloy had stopped his vehicle on Interstate 55 north of Jackson in Madison County to inspect a boat that he was pulling. A vehicle owned by Bobby Kitchens, Inc., and being operated by Kitchens Inc., employee Michael Mason struck and killed Mulloy. Thereafter the estate of Mulloy filed a wrongful death action against Kitchens, Inc., Michael Mason and John Mason, part-owner and manager of Kitchens, Inc., and father of Michael Mason, in the Circuit Court of Madison County. On April 11, 1985, the jury returned a verdict in favor of the estate of James Mulloy for $1,015,696.32.

The ensuing action between Kitchens, Inc. and Mississippi Insurance Guaranty Association resulted from the following circumstances. Kitchens, Inc. was insured by Commercial Union Insurance which, after suit was filed, offered to pay $500,000.00, its policy limits, in an effort to settle the case with the Mulloy estate. Mulloy's estate, through its attorney, Carey Varnado, refused the $500,000.00 settlement offer from Commercial Union Insurance and continued progress toward the trial of the case. Upon realizing that Commercial Union's $500,000.00 policy limits would not be sufficient to settle the claim of the Mulloy estate, Bill Waller, attorney for Bobby Kitchens, Inc., began to look for additional insurance to protect his corporate client. Kitchens, Inc. discovered that it was also insured by Excalibur Insurance, a Texas insurance company, and further learned that Excalibur had been declared insolvent as of September 5, 1984.

 On January 23, 1985, Attorney Waller notified the Mississippi Insurance Guaranty Association (hereinafter "MIGA") of the claim against Kitchens, Inc., of Excalibur's insolvency, and requested that MIGA defend and/or settle with the Mulloy estate as directed under Miss. Code Ann. 83-23-101 to -137 (1972 & Supp. 1988). After a plethora of letters and conversations and conferences, Carey Varnado offered to settle the estate's claim for $810,000.00, which would have included $500,000.00 to be paid by Commercial Insurance on behalf of their insured Kitchens, Inc., $300,000.00 to be paid by MIGA, the

 $300,000.00 being MIGA's statutory limit of liability as set out in Miss. Code Ann. 83-23-115 (1)(a), and $10,000 to be paid by State Farm Insurance, resulting from coverage on Michael Mason's personal automobile. Waller urged MIGA to pay the $300,000, which would have allowed the Mulloy claim to be settled, and in the alternative he requested that MIGA assume the defense of Kitchens, Inc. The MIGA Claims Committee, consisting of professional insurance claims persons, reviewed the Commercial Union file, consisting of pleadings, accident reports, and depositions, and concluded that MIGA should not pay $300,000.00 on behalf of Kitchens, Inc., the committee agreeing that the claim for wrongful death brought by Mulloy's estate should have a dollar value of less than Commercial Union's offer of $500,000.00. MIGA refused to participate in the settlement of the $810,000.00 demand. The claim of the estate of Mulloy was tried on April 10 and 11, 1985, in Madison County, and there was a jury verdict against Kitchens, Inc., in the amount of $1,015,696.32.

 Thereafter, Attorney Waller demanded that MIGA pay and satisfy the full judgment and called MIGA's attention to the serious financial jeopardy in which Kitchens, Inc., had been placed because of the judgment. Further, he called on MIGA to appeal the case from the Madison County Circuit Court if the judgment was not to be satisfied. The jury verdict of $1,015,696.32 was not appealed. Commercial Union Insurance paid their $500,000.00 policy limits, but did not appeal the jury verdict. MIGA paid in $300,000.00, but only after the Mulloy estate filed a writ of garnishment against MIGA on August 21, 1985. Thereafter, Kitchens, Inc., effected a payment plan so that Kitchens, Inc., could satisfy the judgment over and above the $810,000.00 paid by the insurance companies.

 On April 19, 1985, Kitchens, Inc., filed suit against MIGA, alleging tortious breach of contract and breach of fiduciary duty and asking for actual and punitive damages. Thereafter, Kitchens, Inc., moved to amend its complaint against MIGA in order to allege additional causes of action in tort and to add certain members of MIGA's Board of Directors and MIGA's Executive Director as parties to the suit. The trial court allowed amendment of the complaint, but denied the request to add individual employees of MIGA as defendants. The Amended Complaint added allegations of breach of statutory duty to assume the obligations of an insolvent insurance company and the breach of statutory duty of good faith against MIGA, further alleging misrepresentation, deceit, gross negligence, failure to admit coverage and pay the claim and intentional inflection of mental distress.

 On November 13, 1986, MIGA moved for summary judgment on all

 claims, or partial summary judgment on the issue of punitive damages. On December 30, 1986, Kitchens, Inc., moved for summary judgment on the issues of bad faith breach of contract, breach of statutory duties, and on the issues of MIGA's immunity from bad faith, liability for damages beyond its statutory limit, and punitive damages. The trial court, recognizing this matter as a case of first impression, granted summary judgment against MIGA as to the $300,000 coverage, denied summary judgment on the issue of whether MIGA had any other liability, denied Kitchens Inc.'s motion to find MIGA liable for bad faith, denied MIGA's motion that it could not be liable in any case beyond $300,000, and granted MIGA's motion that it could not be liable for punitive damages.

 The case sub judice was tried on February 24 - 26, 1987. There was substantial testimony as to how MIGA had arrived at its decision in regard to its refusal to join in the potential settlement immediately prior to trial. Attorney Waller testified in detail as to his dealings with Excalibur and MIGA, and his efforts in attempting to find additional insurance. Waller further offered his testimony and letters to MIGA requesting and then demanding that MIGA defend Kitchens, Inc., or pay the $300,000 into the settlement effort. Cary Bufkin, the attorney for Commercial Union, testified as to his strategy in defending the Mulloy claim and his recommendation to Commercial Union that the Mulloy claim was worth the $500,000 policy limits, and further testified that Attorney Waller would have been welcome to participate in the defense of the Mulloy claim. Carey Varnado, the attorney for the estate of Mulloy, testified that it was his opinion prior to trial that there was potential for a big verdict. The jury found in favor of MIGA. Kitchens, Inc., moved for a new trial and a judgment notwithstanding the verdict. Both motions were denied by the trial court. Kitchens, Inc., has appealed to this Court.

 MIGA is an involuntary unincorporated association of insurers created by Miss. Code Ann. 83-23-101 to -137 (1972 & Supp. 1988). Funds to support MIGA are collected by assessment of solvent insurance companies, and all insurance companies doing business in Mississippi are required to belong to the Association. MIGA is statutorily prohibited from paying anything other than covered claims, and the statutes further require that all other sources of insurance must be exhausted before MIGA can be called upon to make any payment.

 I. THE VERDICT OF THE JURY IS AGAINST THE OVERWHELMING WEIGHT OF THE EVIDENCE.

 This Court will not set aside a jury verdict unless it is against the overwhelming weight of the evidence and credible

 testimony. Adams v. Green, 474 So. 2d 577, 581 (Miss. 1985). The jury is the judge of the weight of the evidence and the credibility of the witnesses. Jackson v. Griffin, 390 So. 2d 287, 289 (Miss. 1980). Because of the jury verdict in favor of the appellee, this Court resolves all conflicts in the evidence in his favor. This Court also draws in the appellee's favor all reasonable inferences which flow from the testimony given. City of Jackson v. Locklar, 431 So. 2d 475, 477 (Miss. 1983). This court must assume that the jury drew every permissible inference from the evidence offered in favor of the appellee. Burnham v. Tabb, 508 So. 2d 1072, 1077 (Miss. 1987).

 MIGA put on substantial evidence to the effect that its agents at all times acted in good faith and in compliance with their statutory duties. Witnesses called by Kitchens, Inc., attempted to contradict this motion. MIGA was also able to point to other sources of possible fault concerning Kitchens, Inc.'s plight, such as the handling of the Mulloy trial and possible errors by attorneys for Kitchens, Inc. (late notice to MIGA, failure to participate personally in the Mulloy trial, filing suit against MIGA immediately after the Mulloy trial and before the garnishment proceeding had had a chance to run its course). MIGA was also able to show that Carey Varnado stood to gain financially for his testimony, and that the $205,000 that Kitchens, Inc., had claimed to owe had been reduced by agreement with the Mulloy estate. It also appears that the largely undefined ...


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