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Netto v. Atlantic Specialty Insurance Co.

United States Court of Appeals, Fifth Circuit

July 2, 2019

GARY W. NETTO; DEJUANA L. NETTO, Plaintiffs - Appellees
v.
ATLANTIC SPECIALTY INSURANCE COMPANY, Defendant-Appellant

          Appeal from the United States District Court for the Southern District of Mississippi

          Before OWEN, SOUTHWICK and HIGGINSON, Circuit Judges.

          LESLIE H. SOUTHWICK, CIRCUIT JUDGE:

         This case presents a question of first impression under Mississippi insurance law: may an insurer rely on a consent-to-settle exclusion in an insurance policy to deny coverage of a claim made by an unnamed additional insured under that policy? We conclude that absent evidence that the unnamed insured knew or should have known of the exclusion, the insurer may not enforce its contractual right to deny coverage because it had not consented to the settlement.

         AFFIRMED.

         FACTUAL AND PROCEDURAL BACKGROUND

         Gary Netto was involved in an automobile accident while acting in the scope of his employment for Pearl River County, Mississippi. The automobile in which Netto was a passenger was owned by Pearl River County and insured by Atlantic Specialty Insurance. Netto was not a party to the policy between the county and Atlantic, but was an unnamed additional insured under its terms. The at-fault vehicle was allegedly uninsured.

         Nearly two years after the accident, Netto's attorney sent a letter to the Pearl River County Board of Supervisors advising the Board that she had been "retained to represent the interest of Gary Netto, involved in an automobile accident in Pearl River County, Mississippi on August 14, 2013." The letter requested that the Board "forward this correspondence to the insurance carrier in force at the time of [the] accident and request that they make contact with our office immediately." Atlantic received the forwarded letter on June 2, 2015 and assigned the case to claims adjuster Barbara McConnell that same day.

         McConnell's claim-file notes from June 3-4 confirm that Atlantic considered Netto's claim to be a possible uninsured motorist ("UM") claim. The notes indicate that Atlantic contacted a representative of Pearl River County to discuss Netto's potential claim. McConnell admitted in her deposition that no one from Atlantic gave Netto any information regarding the applicable policy.

         While Netto's counsel sought unsuccessfully to contact the county's insurer, she was negotiating a settlement with the at-fault driver and the Mississippi Workers' Compensation Trust. Netto reached a settlement with both, and the Mississippi Workers' Compensation Commission approved the settlement.

         Atlantic did not attempt to contact Netto until the day the Commission approved the settlement, when McConnell left a message with Netto's attorney requesting a return call. There is no evidence that Netto's counsel returned the call, or of any additional attempts by Atlantic to contact Netto.

         Nearly two months later, Netto's counsel, having learned that Atlantic was Pearl River County's insurer through an unrelated suit, sent a second letter directly to Atlantic through its website. That letter informed Atlantic of the settlement and raised a possible claim:

The policy limits have been collected from the at-fault driver, and we intend to make a UM claim. Currently there are two (2) possible UM policies at issue - the county's and Mr. Netto's GEICO policy. I believe the first step is to determine whether Mr. Netto is eligible to make a claim under the county UM policy, pending the policy language, since he was a passenger in a county owned truck and has a worker's compensation claim.
Considering the foregoing, I ask that you assign an adjuster to this claim and provide the relevant policy documents so that we can ...

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