Courtney et al v. State Farm Fire and Casualty Company
MEMORANDUM OPINION AND ORDER denying 35 Motion for Summary Judgment. Signed by District Judge Debra M. Brown on 9/30/2014. (kdw)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
RICHARD COURTNEY, Special Needs
Trust for Adrianna Slaughter,
AND SHEILA IVY
STATE FARM FIRE AND CASUALTY COMPANY
MEMORANDUM OPINION AND ORDER
This lawsuit arises from an insurance coverage dispute involving a homeowner’s policy
issued by Defendant State Farm Fire and Casualty Company (“State Farm”) to Plaintiffs Richard
Courtney and Sheila Ivy. Plaintiffs reported a fire loss claim on the insured property, and State
Farm denied coverage based on the loss occurring after the policy was cancelled and after the
policy would have otherwise expired. Plaintiffs filed suit against State Farm for breach of the
policy in the Circuit Court of Lee County, Mississippi. State Farm removed the case to this
Court, and filed the instant motion for summary judgment on grounds that Plaintiffs cannot
prove the policy was effective at the time of the fire loss. Plaintiffs filed a counter motion for
partial summary judgment as to coverage owed to Courtney, and assert that coverage exists
because State Farm failed to properly cancel the policy. For the reasons below, the Court finds
that summary judgment is not proper at this time.
Factual Background and Procedural History
Richard Courtney is the sole trustee for the special needs trust for Sheila Ivy’s minor
child, Adrianna Slaughter. Courtney Dep. [35-4] at 2. On July 20, 2009, Plaintiffs obtained a
homeowner’s insurance policy from State Farm covering property located at 2601 Pemberton
Avenue, Tupelo, Mississippi (“Property”). The policy was effective from July 20, 2009, to July
20, 2010. Plaintiffs renewed the policy for one year, extending coverage through July 20, 2011.
Ivy is the insured on the policy, and Courtney is the loss payee. See Renewal Certificate [35-1]
at 1-4. Plaintiffs procured the homeowner’s policy through State Farm Agent Tillmon Calvert.
Doc. [35-2] at 8.
On February 4, 2011, five months before the policy’s expiration date, State Farm claims
it mailed separate letters to Plaintiffs notifying them that the policy would be cancelled on March
9, 2011. See Docs. [35-7][35-8]. It is undisputed that Courtney received the notice letter;
however, the parties dispute whether State Farm mailed a letter to Ivy because she claims to have
never received it. The letter allegedly sent to Ivy indicates that State Farm enclosed a check for
the amount of unearned insurance premium and explained that the policy was being cancelled
because the Property was “no longer owner occupied.” Doc. [35-8] at 1. No explanation was
provided in the letter sent to Courtney.
Leigh Leverette, a trust administrator in Courtney’s office, contacted Ivy to find out
whether she had received a notice from State Farm and whether she knew why the policy was
being cancelled. Docs. [35-6][35-7]. Ivy told Leverette she did not receive a letter and did not
know the reason for cancellation. Doc. [35-6]; Leverette Dep. [35-5] at 24-26. Leverette then
contacted Calvert’s office. After learning the reason for cancellation, Leverette advised State
Farm that the Property was not vacant. She believed State Farm would re-inspect the Property
and correct the cancellation. Plaintiffs did not follow-up on the cancellation notice, request
reinstatement or renewal of the policy, or make any payments for insurance coverage during
2011. Doc. [35-2] at 11-12.
On February 1, 2012, the Property was damaged by fire. Ivy tried to contact State Farm
Agent Calvert to report the claim but did not get a response. Ivy then contacted Courtney’s
office and advised that there was fire loss on the Property. A staff member in Courtney’s office
contacted State Farm to report the claim and was advised that there was no coverage on the
Property because the policy had been cancelled.
On January 10, 2013, Plaintiffs filed a complaint in the Circuit Court of Lee County,
Mississippi, against State Farm for breach of the insurance policy and for grossly negligent
conduct. State Court Compl. . Plaintiffs sought actual damages, punitive damages, extracontractual damages, attorneys’ fees, and costs. On February 20, 2013, State Farm removed the
action to this Court based on diversity of citizenship.1 On July 8, 2013, the parties filed a joint
motion to dismiss the claims for punitive damages, extra-contractual damages, and attorneys’
fees. Mot. . The joint motion was granted, and those claims were dismissed. Order .
On November 15, 2013, State Farm filed the instant motion for summary judgment. Plaintiffs
responded to the motion and included a counter motion for partial summary judgment in their
A. Standard of Review
Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment
should be granted if there is no genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law. See Coury v. Moss, 529 F.3d 579, 584 (5th Cir. 2008).
When evaluating whether summary judgment is appropriate, a court must construe the facts and
evidence in the light most favorable to the nonmoving party. Ford, Bacon & Davis, LLC v.
According to the Notice of Removal , State Farm is an Illinois corporation with its principal place of business in
Illinois; Plaintiffs are resident citizens of Mississippi; and the amount in controversy exceeds $75,000, exclusive of
interest and costs.
Travelers Ins. Co., 635 F.3d 734, 736 (5th Cir. 2011) (citing Holt v. State Farm Fire & Cas. Co.,
627 F.3d 188, 191 (5th Cir. 2010)). A material fact issue exists if a jury could reasonably find
for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). After the
party seeking summary judgment meets its burden, the nonmoving party must “come forward
with specific facts showing a genuine factual issue for trial.” Harris ex rel. Harris v. Pontotoc
Cnty. Sch. Dist., 635 F.3d 685, 690 (5th Cir. 2011). The nonmoving party cannot rely on
metaphysical doubt, conclusive allegations, or unsubstantiated assertions but rather must show
that there is an actual controversy warranting trial. Little v. Liquid Air Corp., 37 F.3d 1069, 1075
(5th Cir. 1994) (internal citations omitted).
Subject matter jurisdiction in this case is based on diversity of citizenship; therefore, the
Court will apply the substantive law of the forum state, Mississippi. Boyett v. Redland Ins. Co.,
741 F.3d 604, 607 (5th Cir. 2014) (citations omitted). “[T]o determine state law, federal courts
look to final decisions of the highest court of the state. When there is no ruling by the state’s
highest court, it is the duty of the federal court to determine … what the highest court of the state
would decide.” Transcon. Gas Pipe Line Corp. v. Trans. Ins. Co., 953 F.2d 985, 988 (5th Cir.
1992) (citations omitted). See James v. State Farm Mut. Auto. Ins. Co., 743 F.3d 65, 69 (5th Cir.
2014) (courts must look to decisions from state’s highest court to determine issues of state law
and, in absence of such rulings, make Erie guess based on rulings from intermediate appellate
State Farm argues that no coverage exists because the fire occurred on the Property after
the policy was cancelled and after the policy was set to expire had it not been cancelled. State
Farm alternatively argues that Courtney, as trustee, is liable for any loss on the Property because
he failed to take appropriate action to secure coverage and, therefore, breached his fiduciary duty
to Ivy’s daughter. Plaintiffs contend that State Farm must provide coverage because it failed to
properly cancel the policy and give notice of nonrenewal. In addition, Plaintiffs argue that State
Farm cannot deny coverage to Courtney because he complied with all conditions precedent as a
trustee to recover under the policy. For that reason, Plaintiffs request partial summary judgment
on the alleged coverage owed to Courtney, which request they included in their response to State
Farm’s summary judgment motion. However, the local rules of this Court require motions to be
docketed separately and not included in a party’s response.
See L.U. Civ. R. 7(b)(3)(C).
Because Plaintiffs failed to file their counter motion for partial summary judgment in accordance
with the local rules, the motion is denied.
The primary issue in State Farm’s summary judgment motion is whether the policy was
effective at the time of the fire loss on the Property. To resolve this issue, the Court must
determine whether the policy was properly cancelled and, if not cancelled, whether it
automatically renewed when State Farm failed to give notice of nonrenewal. If the policy was
cancelled or lapsed without renewal, coverage is not afforded and State Farm is entitled to
judgment as a matter of law. If, however, the policy was not cancelled but automatically
renewed, coverage may extend to Plaintiffs’ claim.
Cancellation of Policy
“Absent a statutory requirement or policy provision, an insurer has no duty to provide
notice of the termination of a policy.” Lowery v. Guar. Bank & Trust Co., 592 So. 2d 79, 83
(Miss. 1991). Both Mississippi statute and the homeowner’s policy in this case require State
Farm to provide notice of cancellation.
Section 83-5-28(1) of the Mississippi Code provides in relevant part:
A cancellation, reduction in coverage or nonrenewal of liability insurance
coverage, fire insurance coverage or single premium multiperil insurance
coverage is not effective as to any coverage issued or renewed after June 30,
1989, unless notice is mailed or delivered to the insured and to any named
creditor loss payee by the insurer not less than thirty (30) days prior to the
effective date of such cancellation, reduction or nonrenewal.
MISS. CODE ANN. § 83-5-28(1) (emphasis added). The Fifth Circuit has reasoned that the
purpose of § 83-5-28 “is to allow the insured [an opportunity] to obtain insurance elsewhere”
when there is a change in coverage. Great Am. Ins. Co. of New York v. Lowry Dev., LLC, 576
F.3d 251, 255-56 (5th Cir. 2009) (“The purpose of notice statutes such as this is to allow the
insured to obtain insurance elsewhere when there is a reduction of coverage.”) (citation omitted).
The relevant policy provision concerning notice is in “Section II – Conditions” of the
policy. It states that in the event of cancellation, State Farm:
will notify you in writing of the date cancellation takes effect. This cancellation
notice may be delivered to you, or mailed to you at your mailing address shown in
the Declarations. Proof of mailing shall be sufficient proof of notice:
When this policy has been in effect for 60 days or more, or at any time if it
is a renewal with us, we may cancel:
if there has been a material misrepresentation of fact which, if
known to us, would have caused us not to issue this policy; or
if the risk has changed substantially since the policy was issued.
We may cancel this policy by notifying you at least 30 days before the
date cancellation takes effect.
Homeowner’s Policy [35-9] at 21-22.
State Farm claims that it mailed separate letters to Courtney and Ivy on February 4, 2011,
notifying them that the homeowners’ policy would be cancelled effective March 9, 2011. A
copy of the letters is included in the record. Ivy’s letter was addressed to the insured Property at
2601 Pemberton Avenue, Tupelo, Mississippi. Doc. [35-8]. Courtney’s letter was addressed to
his office. Though Courtney received his letter, Ivy claims she did not.
“Under Mississippi law, an insurance company does not have to prove actual notice by
its insured in order to prevail on the issue of cancellation.” Carter v. Allstate Indem. Co., 592 So.
2d 66, 70 (Miss. 1991). A certificate of mailing, although not conclusive proof, creates a
rebuttable presumption that the insured received notice of cancellation.
Id. at 75.
presumption may be rebutted by the insured, but denial alone “is insufficient to create a triable
issue of fact.” Id. Proof of mailing a cancellation notice is sufficient “absent countervailing
evidence of sufficient weight to rebut the presumption that it was received.” Id. (citation
omitted; emphasis in original).
State Farm did not submit a certificate of mailing for the letter it claims to have sent Ivy
regarding cancellation of the policy. Nor did State Farm submit proof that the check for
unearned premium allegedly sent with the letter was cashed. Ivy testified during her deposition
that she did not remember ever receiving any mail from State Farm regarding her homeowner’s
insurance, and that Courtney’s office handled all issues regarding home insurance on the
Property. Ivy Dep. [35-3] at 6, 10-11. Plaintiffs admit that a letter was “purportedly mailed” to
Ivy, but claim Ivy did not receive it. Doc. [35-2] at 12.
Although Ivy may not have received written notification, she may be deemed to have
received constructive notice when Leverette informed her that a cancellation letter had been
mailed to Courtney’s office and asked whether she received one as well. Leverette asked Ivy if
she knew any reason there might be to cancel the policy, and whether the Property was vacant.
Based on these conversations, Ivy was advised of State Farm’s intent to cancel the policy, and
Plaintiffs cannot reasonably argue that Ivy did not have any notice of cancellation. Nevertheless,
State Farm was required by statute to give actual notice and required by the homeowner’s policy
to give written notice of cancellation to the insured. See Strickland v. Motors Ins. Corp. (MIC),
970 F.2d 132, 137 (5th Cir. 1992) (while insured may have received constructive notice of policy
expiration, such notice was insufficient to relieve insurer of statutory duty to give actual notice).
The evidence in the record does not raise a presumption that Ivy received written notice
of cancellation. State Farm alleges that it mailed a notice of cancellation to Ivy and asks that the
Court consider the totality of circumstances to determine whether sufficient notice was given to
the insured. Def.’s Mem.  at 5. The Court acknowledges that a certificate of mailing is not
the only form of proof an insurer can offer to show notice has been delivered. However, if
Mississippi law does not allow an insured to rebut a presumption of receipt by “mere denial,”
certainly it does not allow an insurer to raise the presumption by mere allegations. See Carter,
592 So. 2d at 75 (insured’s “mere denial” is insufficient to rebut the presumption of receipt).
As to its totality of circumstances argument, State Farm submits internal records
indicating that the letter was mailed, and deposition testimony from Plaintiffs and Leverette
indicating that Ivy received constructive notice of cancellation. The record also contains renewal
statements addressed and presumably mailed to Ivy at the insured Property. However, this
evidence is insufficient to raise the presumption of receipt. See Auto. Ins. Co. of Hartford v.
Lipscomb, 75 So. 3d 557, 562 (Miss. 2011) (“This Court has never recognized that the testimony
of the insurer’s employee, coupled with the insurance company’s own internal document …
creates a presumption of delivery …”). Mississippi case law is clear that a certificate of mailing
from an insurance company constitutes sufficient proof of notice to an insured absent
countervailing evidence rebutting the presumption of receipt. Fid. Fin. Servs., Inc. v. Stewart,
608 So. 2d 1111, 1113 (Miss. 1992) (citing Carter, 592 So. 2d at 75). Because no certificate of
mailing or other sufficient proof of notice is in the record, State Farm has not shown it properly
cancelled the policy. As such, a material issue of fact remains regarding whether Ivy received
the notice letter from State Farm.
Renewal of Policy
Since there is an inadequate showing of policy cancellation, the Court next considers
whether the policy automatically renewed after the coverage period expired based on State
Farm’s failure to give notice of nonrenewal.2 Under § 83-5-28 of the Mississippi Code, an
insurer’s nonrenewal is ineffective unless proper notice is given to the insured and loss payee at
least 30 days before nonrenewal takes effect. However, when nonrenewal is based on a failure to
pay the insurance premium, § 83-5-28 does not apply unless a loss payee is named in the policy.
When a loss payee is named, an insurer is only required to give 10 days’ notice. See MISS. CODE
ANN. § 83-5-28(1) (“This section shall not apply to nonpayment of premium unless there is a
named creditor loss payee, in which case at least ten (10) days’ notice is required.”).
On the issue of nonrenewal, the policy in this case provides:
We may elect not to renew this policy. If we elect not to renew, a written notice
will be delivered to you, or mailed to you at your mailing address shown in the
Declarations. The notice will be mailed or delivered at least 30 days before the
expiration date of this policy. Proof of mailing shall be sufficient proof of notice.
Homeowner’s Policy [35-9] at 22.
State Farm argues that it did not have an obligation to give notice of nonrenewal because
the policy was cancelled before its expiration date and because Plaintiffs failed to pay the
premium. State Farm further contends that payment of premium is a condition precedent to
renewal and Plaintiffs’ failure to pay caused the policy to lapse. In response, Plaintiffs assert that
Nonrenewal occurs when an insurance company decides not to renew a policy. See Homeowner’s Policy [35-9] at
cancellation was ineffective and the policy renewed on its own terms when State Farm failed to
provide notice of nonrenewal.
The Mississippi Supreme Court has held that failure to pay a renewal premium may result
in a lapse of coverage for homeowners but not loss payees unless the loss payee is given proper
notice. See Nat’l Sec. Fire & Cas. Co. v. Mid-State Homes, Inc., 370 So. 2d 1351, 1354 (Miss.
1979) (“Under the terms of the quoted provision the policy is automatically cancelled for
nonpayment of each annual premium; however, the provision conflicts with the ten day notice
requirement of the statute and is ineffective to a mortgagee, but is effective to a mortgagor or
owner of the property.”); Bankers & Shippers Ins. Co. of New York v. Meridian Naval Fed.
Credit Union, 431 So. 2d 1123, 1125 (Miss. 1983) (“The insurance company in Mid-State
Homes had no more right against a home owner for nonpayment of premiums than in this case.
Under either policy, as to the home owner, the policy lapsed upon the nonpayment of the renewal
premium.”) (emphasis in original). Based on this holding, the policy may have lapsed as to Ivy
(assuming the cancellation was not effective) when she failed to pay the renewal premium.
However, the extent to which nonpayment of premium may preclude coverage for Ivy, it does
not preclude coverage for Courtney because he was not given proper notice of nonrenewal as
required by § 83-5-28(1). See Highlands Ins. Co. v. Allstate Ins. Co., 688 F.2d 398, 403 (5th Cir.
1982) (“Without ten days’ notice to Tri-State, as loss payee under the Allstate renewal policy,
the nonpayment of the premium on renewal policy could not terminate Tri-State’s coverage.”)
State Farm cites Willis v. Mississippi Farm Bureau Mutual Insurance Company to
support its argument that the policy lapsed when Plaintiffs failed to make premium payments.
See 481 So. 2d 256, 259 (Miss. 1985). In Willis, the defendant insurance company sent a
premium due notice to the insured before the automobile insurance policy expired, and the
insured did not timely remit payment. Id. at 257. Following an automobile accident, the insured
tendered payment of the premium but his claim was denied because the policy lapsed. Id. The
insured argued that the insurance company was required to give express notice of cancellation
before coverage could be terminated. Id. at 258. The Mississippi Supreme Court found that the
premium notice gave the insured sufficient notice of termination and his failure to timely remit
payment caused a lapse in coverage. Id. at 259-60.
The case before this Court differs from Willis since State Farm did not give Plaintiffs
notice of nonrenewal.
Such notice would have given Plaintiffs an opportunity to pay the
premium or secure coverage through another insurer. See Lowry Dev., LLC, 576 F.3d at 255-56.
Based on the undisputed proof that Plaintiffs were never given notice, § 83-5-28(1) renders the
nonrenewal ineffective. Thus, the policy did not lapse due to nonpayment of premium.
State Farm alternatively argues that Courtney breached his fiduciary duty by failing to
secure a replacement homeowner’s policy and, as such, equity dictates that he is responsible for
any loss to Ivy and her daughter due to lack of coverage. The Court declines to address this
argument for two reasons. First, as discussed earlier in this opinion, it is unclear that the
homeowner’s policy lapsed. Second, breach of fiduciary duty is not an issue in this case. The
party to whom Courtney owes a fiduciary duty should raise any claims for breach of that duty,
not State Farm.
In light of the above analysis, the Court finds that summary judgment cannot be granted
because material fact issues exist regarding whether the homeowner’s policy was effectively
cancelled. Accordingly, State Farm’s motion for summary judgment is denied. Plaintiffs’
counter motion for partial summary judgment is also denied because it does not comply with the
local rules of this Court.
SO ORDERED, this the 30th day of September 2014.
/s/Debra M. Brown
UNITED STATES DISTRICT JUDGE
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