Welborn v. State Farm Mtl Auto , 480 F.3d 685 ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
February 6, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 06-60338
Summary Calendar
JEWEL WELBORN,
Plaintiff-Appellee,
versus
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Mississippi
(No. 2:04-CV-00323-KS-JMR)
Before DeMOSS, STEWART, and PRADO, Circuit Judges.
PER CURIAM:
State Farm Mutual Automobile Insurance Company(“State Farm”) appeals the district court’s
award of $10,000 to Jewel Welborn for damages arising from a car accident. State Farm argues that
only $5,000 of Uninsured Motor Vehicle (“UM”) coverage is owed because of a prior payment to
Welborn under her Medical Payment (“Med Pay”) coverage. For the following reasons, we reverse
the district court.
I. FACTUAL AND PROCEDURAL BACKGROUND
Welborn, a citizen of Mississippi, filed suit against Hilda Watkins, a citizen of Mississippi, in
Mississippi state court on September 16, 2002. Welborn later amended the complaint to include State
Farm, a corporate citizen of Illinois, as a defendant. Welborn settled her claims with Watkins,
receiving $10,000 from Watkins’s insurance company. State Farm also paid Welborn $5,000 under
her Med Pay coverage for her medical expenses. After Watkins’s dismissal from the suit, State Farm
removed the case to federal court. A jury determined that Welborn’s damages from the accident
totaled $20,000. The trial court entered a final judgment against State Farm, Welborn’s UM carrier,
in the amount of $10,000, declining to reduce the amount by the $5,000 that State Farm had
previously paid. State Farm appeals, contending that Welborn should only recover $5,000 in UM
payments.
II. DISCUSSION
Our review of the district court’s determination of Mississippi law is de novo. Am. Reliable
Ins. Co. v. Navratil, 445 F.3d 402, 404 (5th Cir. 2006). Because this is a diversity case, we resolve
this dispute according to the substantive law of Mississippi, Erie R.R. Co. v. Tompkins, 304 U.S. 64,
79-80 (1938), making an educated “Erie guess” of how the Mississippi Supreme Court would decide
this issue if it is not fully resolved by prior Mississippi case law. Primrose Operating Co. v. Nat’l Am.
Ins. Co., 382 F.3d 546, 565 (5th Cir. 2004). To the extent that a prior panel of this Circuit has ruled
on this issue and has not been superceded by either Mississippi case law or a change in statutory
authority, we are bound by the prior decisions of this Circuit as to the meaning of Mississippi law.
Lamar Adver. Co. v. Cont’l Cas. Co., 396 F.3d 654, 663 n.8 (5th Cir. 2005).
The question in this case is whether a provision that allows an insurance company to avoid
double payment of medical expenses under a UM policy is enforceable in Mississippi. The Mississippi
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Supreme Court has not directly addressed this question. In Tucker v. Aetna Cas. & Sur. Co., 801
F.2d 728 (5th Cir. 1986), this court, sitting in diversity, considered this issue. The insured sought
punitive damages because Aetna’s insurance policy contained a provision that the same benefits
would not be paid under both the Med Pay coverage and the UM coverage. The Fifth Circuit,
interpreting Mississippi law, held that the provision was not an attempt to reduce the minimum
amount of UM coverage because “the only effect of this clause is to allow [the insurer] to avoid
paying the insured’s medical expense twice: once under med-pay coverage and again under UM. . .
. [T]he total UM limit is owed if the insured’s total damages, exclusive of the medical expenses paid
under med-pay, exceeds the UM limit.” Id. at 731.
The State Farm provision at issue here operates the same way. Welborn’s State Farm policy
included up to $300,000 of stacked UM coverage and $5,000 of Med Pay coverage. If Welborn’s
damages had been assessed at $307,000, she would be entitled to recover the full limits of her UM
policy under the provision at issue in this case. Even once the $5,000 of expenses covered by the
Med Pay benefits were deducted, Welborn would still have $302,000 worth of damages, entitling her
under both the provision and Mississippi law to the full amount of her UM policy. Here, State Farm
merely argues that since Welborn is only entitled to $20,000 in damages, that is all she should get.
Under the district court’s judgment as it currently stands, Welborn recovers $25,000, a $5,000
windfall. We are bound by Tucker’s assessment of the law of Mississippi that State Farm’s provision
preventing this windfall is valid, absent any intervening Mississippi case law or statutory amendments.
There are three cases that arguably address issues of law similar enough to affect the outcome
of this case: Talbot v. State Farm Mut. Auto. Ins. Co., 291 So.2d 699 (Miss. 1974), Nationwide Mut.
Ins. Co. v. Garriga, 636 So.2d 658 (Miss. 1994), and Fidelity & Guar. Underwriters, Inc. v. Earnest,
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699 So.2d 585 (Miss. 1997). While the district court relied on Talbot to determine that State Farm’s
provision was unenforceable, this was an error. The district court is bound by this Circuit’s
interpretation of Talbot. In Tucker, this court decided that Talbot was inapposite to this question
because the provision in Talbot would have reduced the UM payment to the insured by the amount
paid out under the Med Pay provision even though the insured’s total damages, minus the Med Pay
payments, exceeded the UM limit. 801 F.2d at 730-31. What Talbot forbids is for State Farm to
argue that, if Welborn’s damages were $305,000, she would be owed only $295,000 under her UM
coverage because the company already paid $5,000 in Med Pay. See 291 So.2d at 703. Because this
is not the situation at issue here and because the Fifth Circuit distinguished Talbot in Tucker, we find
Talbot does not affect the resolution of the issue in this case.
The insured argues strongly that Garriga renders Tucker void, but we disagree. In Garriga,
the Mississippi Supreme Court held that a provision requiring offset of benefits received from
workers’ compensation was unenforceable under Mississippi law. 636 So.2d at 664-65. The
reduction clause at issue in Garriga would “always reduce the $50,000 policy limit if workers’
compensation has been paid, no matter the ultimate damages suffered. In fact, if Garriga had received
$50,000 in workers’ compensation, this clause would act to deny him any recovery, even the $10,000
statutory minimum.” Id. at 661. The court held that such a clause was unenforceable, even if it did
not reduce coverage below the statutorily required minimum, because it reduced “the coverage that
the insured [chose] up to that amount equal to the liability amount acquired.” Id. at 664. The court
also noted, however, that an insured is only entitled to recover “‘the amount of damages which may
be judicially determined.’” Id. at 662 (quoting Hartford Accident & Indemnity Co. v. Bridges, 350
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So.2d 1379, 1381 (Miss. 1977)). The clause in Garriga was unenforceable because it operated to
always reduce an insured’s recovery, even if the insured’s damages far exceeded the policy limits.
The clause at issue here does not operate the same way. The clause provides that “[n]o
person for whom medical expenses are payable under this coverage shall recover more than once for
the same medical expense under this or similar vehicle insurance.” (emphasis added). The purpose
of this clause is to limit the amount of an insured’s damages to the amount of damage that is actually
suffered. Here, Welborn was adjudged to have $20,000 worth of damages. She had already received
$15,000 from other sources, including $5,000 from State Farm for medical expenses. This clause
would not operate to deny Welborn the limits of her UM policy if her damages had been high enough;
instead, it only operates to prevent a double payment for exactly the same damages. This is unlike
the provision in Garriga which provided that workers’ compensation benefits would always be
dedeucted from the UM benefits regardless of the damages sustained by the insured. Therefore,
Garriga does not overturn Tucker for the provision at issue in this case.
Finally, the district court also relied on Earnest, which emphasized that the “use of offset
provisions to escape statutory minimum levels of UM coverage” is not allowed under Mississippi law.
699 So.2d at 589. The court also noted, however, that not all offsets of liability are impermissible,
noting explicitly that offsets of liability based on payments to the insured by the tortfeasor are
allowed. Id. at 589. The provision at issue here does not implicate the concern of Earnest that the
full amount of required coverage be provided to the insured. Here, Welborn will receive the full
amount of damages to which she is entitled, and the provision would not act to deprive an insured
who had damages greater than the UM limits of full coverage. Because no intervening Mississippi
case law effects the outcome of this case, we affirm the ruling in Tucker and reverse the district court.
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III. CONCLUSION
We reverse the district court and order that judgment be entered against State Farm in the
amount of $5,000.
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