Shelter Mutual Insurance Company v. George Dale

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2004-CA-01023-SCT
SHELTER MUTUAL INSURANCE COMPANY
AND SHELTER GENERAL INSURANCE
COMPANY
v.
GEORGE DALE, COMMISSIONER OF
INSURANCE, STATE OF MISSISSIPPI, AND
MISSISSIPPI DEPARTMENT OF INSURANCE
DATE OF JUDGMENT: 04/19/2004
TRIAL JUDGE: HON. PATRICIA D. WISE
COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANTS: JOHN C. HENEGAN
KAREN LIVINGSTON-WILSON
PATRICK RYAN BECKETT
ATTORNEYS FOR APPELLEES: PETER W. CLEVELAND
MARY JO WOODS
NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION: REVERSED AND REMANDED - 10/27/2005
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE COBB, P.J., CARLSON AND DICKINSON, JJ.
DICKINSON, JUSTICE, FOR THE COURT:
¶1. This is a dispute over two proposed amendatory endorsements to automobile
insurance policies submitted by two insurance companies for approval by the State
Department of Insurance. The question presented is whether Mississippi law requires
automobile liability policies written in Mississippi to cover punitive damages awarded
against insureds.
FACTS AND BACKGROUND PROCEEDINGS
¶2. On April 12, 2002, Shelter Mutual Insurance Company and Shelter General Insurance
Company (hereinafter collectively referred to as “Shelter”) requested approval by the
Mississippi Department of Insurance (“DOI”) of amendatory endorsements to their
respective Mississippi automobile insurance private passenger policies. The purpose of the
amendments was to exclude “any liability under the policies for damages assessed against
an insured in the form of punitive damages.”
¶3. Although DOI Commissioner George Dale initially approved both amendatory
endorsements, he reversed his position and withdrew approval. In his March 21, 2003,
order, Commissioner Dale stated:
The Mississippi Supreme Court has ruled that an automobile liability policy
which provides the insurer will pay all sums which the insured becomes
legally obligated includes coverage for punitive damage awards. Anthony v.
Frith and State Farm Mutual Automobile Insurance Company, 394 So. 2d 867(Miss. 1981).
Based upon the interpretation of Anthony v. Frith of Mississippi’s standard
liability insurance statute, an Attorney General’s Opinion was issued
explicitly stating that Mississippi law does not provide for the exclusion of
punitive damages from insurance policies for automobile liability claims.
Dale, Oct. 5, 2001, A.G. Op. #01-0660.
It is the finding of the Commissioner that there is no statutory or legal basis
to allow an exclusion of punitive damages from a standard automobile liability
insurance policy. As there is no statutory or legal basis for such an exclusion,
the Shelter Mutual Filing and Shelter General Filing violate Miss Code Ann.
§ 83-2-11 (11)(a).
¶4. After requesting a hearing to appeal the withdrawal of approval, Shelter waived the
requirement of a hearing and unsuccessfully appealed to the Chancery Court of the First
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Judicial District of Hinds County. Affirming the Commissioner’s order in her April 19,
2004, order, Chancellor Patricia D. Wise held:
The Court finds that the Commissioner’s Order in this case, based upon the
Attorney General’s well reasoned Opinion and statutory analysis under
Mississippi Supreme Court case law, was supported by substantial evidence
and was neither arbitrary nor capricious.
...
[T]he Court concludes that the language of Miss. Code Ann. § 63-15-43(2)(b),
requiring coverage for “all sums the insured shall become legally obligated to
pay as damages arising out of the ownership, maintenance or use of such
motor vehicle,” is broad enough to be read as specifically including coverage
for punitive damages.
¶5. It is from this adverse chancery court ruling that Shelter now appeals to this Court.
ANALYSIS
¶6. While this Court gives deference to the decisions of an administrative agency, we will
not hesitate to reverse an agency’s decision found to be “(1) unsupported by substantial
evidence; (2) arbitrary or capricious; (3) beyond the power of the administrative agency to
make; or (4) in violation of some statutory or constitutional right of the complaining party.”
Am. Federated Life Ins. Co. v. Dale, 701 So. 2d 809, 811 (Miss. 1997) (citing Miss.
Comm'n on Envtl. Quality v. Chickasaw County Bd. of Supervisors, 621 So. 2d 1211, 1215
(Miss. 1993)).
¶7. We begin our analysis by pointing out that the issue presented is not whether the
Legislature has the prerogative to require that automobile insurance policies written in
Mississippi cover awards of punitive damages, but rather whether it has actually done so.
3
Anthony v. Frith
¶8. Commissioner Dale based his denial of the amendatory endorsements on our holding
in Anthony v. Frith. In that case, State Farm Mutual Automobile Insurance Company
refused to pay a punitive damage award against its insured, despite very general language
in its policy which provided that State Farm would pay “all sums which the insured shall
become legally obligated to pay.” This Court held that, under such policy terms, it was not
against public policy to require State Farm to pay punitive damages. Specifically, this Court
stated:
As to there being any public policy in this state against allowing
recovery for punitive damages in a case as this under the terms of an insurance
contract as set forth herein, however, we disagree with the trial court and find
it was not against public policy to require the carrier to pay punitive damages.
Anthony v. Frith, 394 So. 2d 867, 868 (Miss. 1981). This Court did not hold that State
Farm was required by statute to cover punitive damages. Nor did it hold that an insurance
company is prohibited from excluding coverage for punitive damages. Indeed, then-Justice
Hawkins, the author of Anthony v. Frith, was later (as Chief Justice of the Court) to state:
In Anthony v. Frith we simply took the view that there is no public
policy against an insurance policy by its language covering punitive damages.
As the author of that opinion, I saw grave ethical problems which might
confront a lawyer during trial defending an insured in the absence of clear
language in the policy excluding punitive damages. Nothing in Anthony v.
Frith implied that a liability insurance carrier was required to cover punitive
damages along with compensatory damages, and in Old Sec. Cas. Ins. Co. v.
Clemmer, 455 So. 2d 781 (Miss. 1984), we clearly held the policy could
exclude punitive damages.
4
James W. Sessums Timber Co. v. McDaniel, 635 So. 2d 875, 883 (Miss. 1994) (Hawkins,
C.J., dissenting) (citation omitted). In Clemmer, cited by Chief Justice Hawkins, this Court
stated:
We reaffirm our holding in Frith that an insurance company’s liability “for all
damages arising from bodily injury” includes punitive damages. However,
the extent or limit of that liability for punitive damages is governed by the
agreement of the parties as reflected by the actual language in the policy of
insurance.
455 So. 2d at 783.
¶9. Clearly, this Court has not previously held that an insurance company is prohibited
from excluding coverage for punitive damages.
Miss. Code Ann. § 63-15-43(2)(b)
¶10. At the heart of the decision of the chancery court is the presumption that the language
of Miss. Code Ann. § 63-15-43(2)(b) requires coverage for punitive damages. The key
language of the statute provides:
(2) Such owner's policy of liability insurance:
***
(b) shall pay on behalf of the insured named therein and any other person, as
insured, using any such motor vehicle or motor vehicles with the express or
implied permission of such named insured, all sums which the insured shall
become legally obligated to pay as damages arising out of the ownership,
maintenance or use of such motor vehicle or motor vehicles within the United
States of America or the Dominion of Canada, subject to limits exclusive of
interest and costs, with respect to each such motor vehicle, as follows: ten
thousand dollars ($10,000.00) because of bodily injury to or death of one (1)
person in any one (1) accident and, subject to said limit for one (1) person,
twenty thousand dollars ($20,000.00) because of bodily injury to or death of
two (2) or more persons in any one (1) accident, and five thousand dollars
($5,000.00) because of injury to or destruction of property of others in any
one (1) accident.
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Miss. Code Ann. § 63-15-43(2)(b).1
¶11. Within the same sentence, the statute requires the insurer to pay “all sums which the
insured shall become legally obligated to pay as damages . . . subject to limits, . . . as
follows: ten thousand dollars ($10,000.00) because of bodily injury to or death of one (1)
person . . , twenty thousand dollars ($20,000.00) because of bodily injury to or death of two
(2) or more persons . . , and five thousand dollars ($5,000.00) because of injury to or
destruction of property. . . .” Other than those placed on bodily injury, death and property,
there are no monetary limitations found within the statute which could reasonably be said
to apply to punitive damages.2 Therefore, either:
(1) The statute mandates coverage for all kinds of damages (including punitive
damages), with a specific express limit or cap only for bodily injury, death and
property damage, and no limit or cap for punitive damages; or
(2) The statute mandates coverage for all sums (including punitive damages), with
a specific express limit or cap for bodily injury, death and property damage, and an
implied, unstated limit or cap for punitive damages; or
(3) The statute applies only to damages for bodily injury, death and property damage,
which are the only kinds of damages specifically mentioned in the statute, and has
no application to punitive damages.
1
During its 2005 regular session, the Legislature amended this chapter of the Mississippi
Code to increase the limits to $25,000 for death or injury to one person and $50,000 for death or
injury to two or more persons in one accident. 2005 Miss. Laws ch. 483.
2
The dissent states that, properly interpreted, Ҥ 63-15-43(2)(b) requires that Shelter cover
punitive damages in their automobile liability insurance policies.” The dissent further states, “The
statute specifically allows for the inclusion of punitive damages. . . .” We find no such provisions
within the statute. The dissent also says the Legislature’s “initial purpose” of its 2005 amendment
was “to increase the minimum coverage amounts for motor vehicle liability insurance.” However,
the portion of the quoted language omitted by the dissent clearly specifies that the coverage amounts
referred to are for bodily injury, death and property damage. The Legislature makes no reference
to punitive damages in the statute or in the title of House Bill 722, Laws of 2005.
6
¶12. The first interpretation would allow an insurance carrier to limit coverage to $10,000
for bodily injury or death, and $5,000 for property damage, but makes no allowance for
policy limits for other kinds of damages, including punitive damages. Thus, under this
interpretation, despite an insurance carrier’s $10,000 policy limit, the carrier would be
required to pay the full amount of any punitive damage award. For instance, if a jury
awarded $100,000 in actual damages (for bodily injury) and $500,000 in punitive damages,
an insurance carrier with a $10,000/20,000 limit policy would be required to pay its policy
limits of $10,000 in actual damages, together with the full award of $500,000 in punitive
damages. We do not find the language of the statute provides for such a result.
¶13. The second interpretation requires us to amend the statute to include a limit or cap
for punitive damages. This Court has no power to amend statutes.
¶14. The third interpretation is true to the wording of the statute and applies to the kinds
of damages specifically named in the statute without implying that other kinds of damages
should have been added to the list.
¶15. Significantly, the statute relied upon by the Chancery Court, the Insurance
Commissioner, and the Attorney General, has been in place since 1972. Thus, were we to
interpret the statute as the Commissioner and the Attorney General suggest, we would be
required to abandon the position taken by this Court in both McDaniel and Clemmer, since
both cases were decided long after the effective date of the statute.
¶16. The subject matter of the statute is bodily injury, death and destruction of property.
The statute requires an insurer to pay all sums for those losses, subject to specific limits set
7
by the Legislature, with no mention of “punitive damages” within those limits. Furthermore,
interpreting the language of Miss. Code Ann. § 63-15-43(2)(b) to include unspecified
damages (including punitive damages) would render Miss. Code Ann. § 63-15-43(7) a
nullity, insofar as it specifically allows an insurance company to provide additional coverage
which “shall not be subject to the provisions of this chapter.”
¶17. This Court has enunciated the now-familiar principle that “where a statute enumerates
and specifies the subject or things upon which it is to operate, it is to be construed as
excluding from its effect all those not expressly mentioned or under a general clause.”
Southwest Drug Co. v. Howard Bros. Pharmacy of Jackson, Inc., 320 So. 2d 776, 779
(Miss. 1975) (citing Akers v. Estate of Johnson, 236 So. 2d 437 (Miss. 1970)). Since the
statute at issue “enumerates and specifies the subject or things upon which it is to operate,”
that is, it specifically lists bodily injury, death and destruction of property, “it is to be
construed as excluding from its effect all those not expressly mentioned,” that is, punitive
damages.
¶18. Commissioner Dale asserts that the word “all” in Miss. Code Ann. § 63-15-43(2)(b)
contemplates and, indeed, requires coverage for every kind of damage awarded against an
insured, including punitive damages. The Commissioner’s argument, however, overlooks
the fact that within the same sentence within the statute, the Legislature set specific limits
for very specific kinds of damages.3
The Attorney General opinion
3
The statute specifically refers to damages for bodily injury, death and destruction of
property. It makes no mention of punitive damages. See Miss. Code Ann. § 63-15-43(2)(b).
8
¶19. Commissioner Dale reversed his initial decision based on an Attorney General
opinion which determined “Mississippi law does not provide that punitive damages can be
excluded from insurance policies for automobile liability claims.” Dale, Oct. 5, 2001, Miss.
A.G. Op.#01-0660, 2001 WL 1513775. The Attorney General based his opinion on State
Farm Mut. Auto. Ins. Co. v. Daughdrill, 474 So. 2d 1048 (Miss. 1985).
¶20. Even though “Attorney General opinions are not binding, they are certainly useful
in providing guidance to this Court.” In re Assessment of Ad Valorem Taxes on Leasehold
Interest Held by Reed Mfg., Inc. ex rel. Itawamba County Bd. of Sup'rs, 854 So. 2d 1066,
1071 (Miss. 2003) (citing City of Durant v. Laws Constr. Co., 721 So. 2d 598, 604 (Miss.
1998)).
¶21. We find that, although the Attorney General correctly interpreted the Daughdrill
decision, he incorrectly applied its holding to the issue presented to him. In Daughdrill, the
United States Court of Appeals for the Fifth Circuit certified to this Court the question of
whether Mississippi law mandated punitive damage coverage for uninsured motorists
policies. Answering in the negative, this Court carefully limited its decision to uninsured
motorists policies by concluding:
We hasten to state that the issue determined today has no relation to a charge
of bad faith refusal to pay such a claim by the insurer or to a claim for punitive
damages under liability coverage other than that of an uninsured motorist. We
address the narrow issues presented.
Daughdrill, 474 So. 2d at 1054. In answering the certified question, this Court analyzed
statutory and case law for uninsured motorists and the public policy behind punitive
damages. The Daughdrill Court distinguished Anthony, insofar as it held that public policy
9
does not prevent an insurance company’s liability for punitive damages for acts of its
insured. The determination by the Anthony Court that the statute does not prevent punitive
damages is far different from a determination that the statute requires coverage for punitive
damages.
¶22. We hold that the Attorney General erroneously interpreted this Court’s opinion in
Daughdrill as an indication that this Court would hold that punitive damages are required
by statutory law. However, the Daughdrill decision, by its very specific language,
addressed only the narrow question presented to it.
CONCLUSION
¶23. We hold that Mississippi law does not prevent Shelter from excluding coverage for
punitive damages by amendatory endorsement to its automobile liability policies. Both the
Commissioner and the chancellor erred in concluding otherwise. Accordingly, the
judgment of the Chancery Court of the First Judicial District of Hinds County is reversed,
and this case is remanded to the chancery court with instructions to vacate the Order of the
Commissioner and to remand this action to the State Department of Insurance for action
consistent with this opinion.
¶24. REVERSED AND REMANDED.
SMITH, C.J., WALLER AND COBB, P.JJ., CARLSON AND RANDOLPH, JJ.,
CONCUR. EASLEY, J., CONCURS IN PART AND DISSENTS IN PART WITHOUT
SEPARATE WRITTEN OPINION. GRAVES, J., DISSENTS WITH SEPARATE
WRITTEN OPINION, JOINED IN PART BY EASLEY, J. DIAZ, J., NOT
PARTICIPATING.
GRAVES, JUSTICE, DISSENTING:
10
¶25. The majority concludes that Mississippi law does not require automobile insurance
companies to cover punitive damages in their liability insurance policies. I respectfully
dissent from this holding.
¶26. The majority recognizes the Legislature’s power to require that automobile insurance
policies written in Mississippi cover awards of punitive damages. However, the majority
fails to properly analyze the intent of the Legislature when it adopted Miss. Code Ann. § 63-
15-43(2)(b). It is a truism that the legislative intent is the guide in statutory construction.
Bridges v. Barr, 245 Miss. 137, 146 So. 2d 544 (1962) (citing Quitman County v. Turner,
196 Miss. 746, 759, 18 So. 2d 122 (1944)). Whether the statute is ambiguous or not, the
ultimate goal of this Court in interpreting a statute is to discern and give effect to the
legislative intent. Allred v. Yarborough, 843 So. 2d 727, 729 (Miss. 2003) (citing City of
Natchez v. Sullivan, 612 So. 2d 1087, 1089 (Miss. 1992)). “It is a general rule in construing
statutes this Court will not only interpret the words used, but will consider the purpose and
policy which the legislature had in view of enacting the law.” State ex rel. Hood v. Madison
County ex rel. Madison County Board of Supervisors, 873 So. 2d 85, 88 (Miss. 2004)
(citing Aikerson v. State, 274 So. 2d 124, 127 (Miss. 1973)).
¶27. In House Bill 722 adopted at its 2005 Regular Session, the Legislature has amended
§ 63-15-43. 2005 Miss. Laws ch. 483, § 4. The title to that act states:
AN ACT TO AMEND SECTIONS 63-15-3, 63-15-11, 63-15-31, AND 63-
15-43. MISSISSIPPI CODE OF 1972, TO INCREASE THE STATUTORY
MINIMUM FOR MOTOR VEHICLE LIABILITY INSURANCE
COVERAGE IN ANY ONE ACCIDENT FROM $10,000.00 TO $25,000.00
FOR BODILY INJURY TO OR DEATH OF ONE PERSON, FROM
$20,000.00 TO $50,000.00 FOR BODILY INJURY TO OR DEATH OF
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TWO OR MORE PERSONS AND FROM $5,000.00 TO $25,000.00 FOR
INJURY TO OR DESTRUCTION OF PROPERTY OF OTHERS; TO
AMEND SECTION MISSISSIPPI CODE OF 1972, TO PROVIDE THAT A
PORTION OF THE FINES LEVIED IN MUNICIPAL COURT OR ANY OF
THE COURTS OF THE COUNTY ON PERSONS WHO DO NOT HAVE
PROOF OF AUTO LIABILITY INSURANCE SHALL BE DEPOSITED IN
THE GENERAL FUND OF THE MUNICIPALITY OR THE COUNTY;
AND FOR RELATED PURPOSES.
(Emphasis added). The Legislature immediately identifies its initial purpose in amending
the named statutes - “to increase the minimum coverage amounts for motor vehicle liability
insurance.” However, in its second interpretation of § 63-15-43(2)(b), the majority
misconstrues the statute in such a way as to give the impression that the Legislature
ambiguously drafted the statute as to allow an implied, unstated limit or cap for punitive
damages. In its third attempt to interpret the meaning of the statute, the majority concludes
that the statute applies only to damages for bodily injury, death and property damage, which
are the only kinds of damages specifically mentioned in the statute, disallowing punitive
damages. Both interpretations are inherently incorrect. The statute specifically provides for
the inclusion of punitive damages at defined maximum numerical limits, and the intent of
the Legislature was not to create a definitive listing as to the types of damages encompassed
by the statute, but to specify and enumerate monetary limits associated with various losses.
¶28. I recognize the principle as stated in Southwest Drug Co. v. Howard Bros.
Pharmacy of Jackson, Inc., 320 So. 2d 776, 779 (Miss. 1975) (citing Akers v. Estate of
Johnson, 236 So. 2d 437 (Miss. 1970)), that “where a statute enumerates and specifies the
subject or things upon which it is to operate, it is to be construed as excluding from its effect
all those not expressly mentioned or under a general clause.” However, the subject matter
12
of § 63-15-43(2)(b) is not bodily injury, death, and destruction of property. The subject
matter of the statute is the (newly increased) numerical limits as applied to the general and
broad term “damages.” The prepositional phrase “subject to limits”4 refers to the monetary
amounts enumerated and specified in the list and not bodily injury, death, or destruction of
property; it effectively modifies and quantifies the words “all sums” and “damages” not to
affect their general meaning, but to provide a clear indication of numerical liability on behalf
of the insurer. Therefore, all sums for damages (including punitive damages), which an
automobile liability insurer is legally obligated to pay, are limited to the amounts specified
in the statute.
¶29. Using proper statutory construction and recognizing the intent of the Legislature, I
conclude that, correctly interpreted, § 63-15-43(2)(b) requires that Shelter cover punitive
damages in their automobile liability insurance policies. Therefore, I would affirm the
chancellor’s judgment.
EASLEY, J., JOINS THIS OPINION IN PART.
4
In this phrase, the object of the preposition is the word “limits.” Here, “limits” functions
as a noun, meaning a prescribed maximum or minimum amount, quantity, or number. It does not
mean something that is bound, restrained, or confined. This conclusion is reached by examining the
phrase as a whole, “subject to limits exclusive of interests and costs.” (Emphasis added).
13