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Gum Tree Property Management, LLC v. Nowell Agency, Inc.

United States District Court, N.D. Mississippi, Aberdeen Division

March 24, 2014

GUM TREE PROPERTY MANAGEMENT, LLC; THE SOUTHERN GROUP OF MISSISSIPPI, INC.; and WILSON COLEMAN, Third-Party Plaintiffs,
v.
THE NOWELL AGENCY, INC.; and GREG BOST, Third-Party Defendants.

MEMORANDUM OPINION

SHARION AYCOCK, District Judge.

Third-Party Defendant, The Nowell Agency, Inc., and Greg Bost (the Nowell Defendants) filed this Motion for Summary Judgment [149] on the grounds that no genuine disputes of material fact exist as to the claims against them. The Court, in an opinion issued earlier this day, determined that pursuant to the insurance policies issued to Gum Tree Property Management, LLC, The Southern Group of Mississippi, Inc., and Wilson Coleman, Nationwide had no duty to defend or indemnify those entities in the underlying Kentucky litigation. See [217, 218]. Accordingly, the Nowell Defendants' Motion for Summary Judgment [149] is GRANTED.

Factual and Procedural Background

Greg Bost is the insurance agent for The Nowell Agency that sold Nationwide insurance policies to Gum Tree Property Management, LLC, The Southern Group of Mississippi, Inc., and Wilson Coleman (Third Party Plaintiffs). The parties' relationship spanned ten years and included three or four phone calls between Bost and Coleman a month. In his capacity as the Gum Tree Plaintiffs' insurance agent, Bost had in the past communicated claims notices to Nationwide.

Coleman contends that in the summer of 2011, during one of their monthly telephone conversations, he indicated to Bost that he had been sued, or was in the process of being sued in Kentucky. Bost recalls the conversation but claims that Coleman was only vaguely complaining about a problem, which later developed into the underlying Kentucky litigation. Coleman admits that he did not call Bost for the purpose of reporting a claim under the policies during that summer of 2011 telephone conversation.

Eight months later, Coleman, on advice of counsel, emailed Bost questioning whether he would have coverage for the Kentucky litigation under the Nationwide insurance policies. Nationwide formally denied The Southern Group coverage on July 12, 2012, and Gum Tree Property Management on July 17 asserting that the claims were not covered under the policy language, exclusions applied, and that the Third Party Plaintiffs had violated the cooperation clauses of the insurance policies as to notification of pending litigation and settlement. No one disputes that the Gum Tree parties attempted to mediate the Kentucky litigation and indeed, executed a handwritten "not finalized" settlement agreement in May of 2012. Wilson Coleman admitted to making payments to Lexington Relocation in accordance with the terms of that document.

Nationwide filed a declaratory judgment action on August 17, 2012, Gum Tree counterclaimed asserting coverage was due, and filed this third party suit against Greg Bost and the Nowell Agency. In particular, the Third Party Plaintiffs contend the Nowell Defendants breached their fiduciary duty to act in the best interest of the insured and the implied covenant of good faith and fair dealing by failing to recognize the potential for coverage under the policies and failing to notify the Gum Tree Plaintiffs of the potential for coverage, and failing to notify Nationwide of the Kentucky litigation. Third Party Plaintiffs additionally assert that the Nowell Defendants breached their duty to use reasonable diligence, good faith, and a level of skill reasonably expected of insurance agents to ensure that Nationwide was timely and fully placed on notice of the allegations raised in the Kentucky litigation. Further, the Third Party Plaintiffs assert that they were owed a duty to procure insurance policies for them providing adequate coverage for the risks arising out of the business conducted by the Gum Tree Plaintiffs.

The Nowell Defendants argue that summary judgment in their favor is warranted on these claims.

Summary Judgment Standard

Summary judgment is warranted under Rule 56(a) of the Federal Rules of Civil Procedure when the evidence reveals there is no genuine dispute regarding any material fact and that the moving party is entitled to judgment as a matter of law. The rule "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Conclusory allegations, speculation, unsubstantiated assertions, and legalistic arguments are not an adequate substitute for specific facts demonstrating a genuine issue for trial. TIG Ins. Co. v. Sedgwick James of Wash. , 276 F.3d 754, 759 (5th Cir. 2002). "A party asserting that a fact cannot be or is genuinely disputed must support the assertion by citing to particular parts of materials in the record... or showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." FED. R. CIV. P. 56(c)(1). The court is only obligated to consider cited materials but may consider other materials in the record. Id. at 56(c)(3). The court must resolve factual controversies in favor of the nonmovant "but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994). When such contradictory facts exist, the court may "not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).

Discussion and Analysis

The Nowell Defendants claim that no fiduciary duty arises in the insurance agent-insured situation and that the duties the Third Party Plaintiffs seek to have the Court enforce are unreasonable and against public policy.

A fiduciary duty must exist before a breach of the duty can occur. Mississippi law is clear that "the purchase of insurance is an arms-length transaction and no fiduciary duty arises between an insurance company or its agents and the purchaser of insurance." Grissom v. Liberty Mut., Fire Ins. Co. , 678 F.3d 397, 403 (5th Cir. 2012) (citing Taylor v. S. Farm Bureau Cas. Co. , 954 So.2d 1045, 1049 (Miss. Ct. App. 2007)). An insurance agent must "use that degree of diligence and care with reference thereto which a reasonably prudent [person] would exercise in the transaction of his own business." Mladineo v. Schmidt , 52 So.3d 1154, 1162 (Miss. 2010) (citing McKinnon v. Batte , 485 So.2d 295, 297 (Miss. 1986)). See also Taylor Machine Works, Inc. v. Great American Surplus Lines Ins. Co. , 635 So.2d 1357, 1362 (Miss. 1994); Security Ins. Agency, Inc. v. Cox , 299 So.2d 192, 194 (Miss. 1974); and First United Bank of Poplarville v. Reid , 612 So.2d 1131, 1137 (Miss. 1992). Further, the Mississippi Supreme Court has held that "we do not find that insurance agents in Mississippi have an ...


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