Knight et al v. Allstate Property and Casualty Insurance Company

Filing 51

MEMORANDUM OPINION re 50 Order on Motion for Partial Summary Judgment. Signed by Senior Judge Neal B. Biggers on 8/23/2019. (llw)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
OXFORD DIVISION
SHERRY KNIGHT AND
DARRYL KNIGHT

PLAINTIFFS

V.

CIVIL ACTION NO. 3:18-CV-115-NBB-JMV

ALLSTATE PROPERTY AND
CASUALTY INSURANCE COMPANY

DEFENDANT

MEMORANDUM OPINION
Presently before the court is the defendant Allstate Property and Casualty Insurance
Company’s motion for partial summary judgment. Upon due consideration of the motion,
response, exhibits, and applicable authority, the court is ready to rule.
Factual and Procedural Background
This diversity action against Allstate Property and Casualty Insurance Company for
contractual and bad faith claims arises as the result of an automobile accident occurring on May
25, 2017, in Tate County, Mississippi. Plaintiff Sherry Knight alleges she was exiting Interstate
55, traveling southbound on the exit ramp to merge onto East Main Street, when an automobile
driven by Ms. Betty Webb collided with her automobile. Following the accident, Plaintiff was
transported via medical helicopter to Regional One Health Center where she underwent
numerous diagnostic tests. She was discharged after approximately twelve hours and was not
admitted to the hospital.
Approximately five days after the accident, Plaintiff sought treatment at Campbell Clinic
Orthopaedics. She also sought physical therapy treatment. At the time the present motion was
filed, Plaintiff’s medical expenses totaled approximately $71,777.19.

Webb’s insurer, Farm Bureau Casualty Insurance, has paid to Plaintiff its liability limit of
$50,000.00 in this matter. Additionally, Defendant Allstate has paid its “MedPay” limit of
$1,000.00.
Plaintiffs initially demanded, via letter dated January 17, 2018, that Allstate pay
$300,000.00 to settle the underinsured motorist portion of the claim against Allstate. In response
to this demand, Allstate offered $30,000.00. Allstate alleges that Plaintiffs’ counsel counterdemanded $245,000.00 in response, but this counter-demand was apparently not reduced to
writing. Plaintiffs assert the counter-demand to the $30,000.00 offer was $275,000.00.
Regardless, Allstate counter-offered $35,000.00 on April 16, 2018, which represents the last
offer made prior to Plaintiffs’ filing this lawsuit.
Plaintiffs filed their complaint on May 17, 2018, asserting claims for breach of contract
and bad faith. Plaintiff Darryl Knight, Sherry Knight’s husband, also asserts a claim for loss of
consortium. Plaintiffs filed their first amended complaint on July 30, 2018, to assert additional
information regarding Defendant Allstate’s citizenship for the purposes of establishing diversity
jurisdiction. Allstate has now moved for partial summary judgment seeking dismissal of the bad
faith claim against it.
Standard of Review
“The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). On a motion for summary judgment, the movant has the initial burden of
showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
325 (1986). If the movant makes such a showing, the burden then shifts to the non-movant to
“go beyond the pleadings and . . . designate specific facts showing that there is a genuine issue

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for trial.” Id. at 324. Further, the non-movant “must do more than simply show that there is
some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986).
When deciding a motion for summary judgment, the court must view the underlying facts
in the “light most favorable to the party opposing the motion.” United States v. Diebold, Inc.,
369 U.S. 654, 655 (1962). As such, all reasonable inferences must be drawn in favor of the nonmovant. Id. Before finding that no genuine issue for trial exists, the court must first be satisfied
that no rational trier of fact could find for the non-movant. Matsushita, 475 U.S. at 587 (1986).
“Summary judgment, although a useful device, must be employed cautiously because it is a final
adjudication on the merits.” Jackson v. Cain, 864 F.2d 1235, 1241 (5th Cir. 1989).
Analysis
A bad faith claim is essentially a plaintiff’s request that punitive damages be assessed
against a defendant for certain types of especially egregious conduct. “Punitive damages should
be assessed with caution and within narrow limits as an example and warning.” Standard Life
Ins. Co. v. Veal, 354 So. 2d 239, 247 (Miss. 1977). A plaintiff carries a “heavy burden” when
pursuing punitive damages based on a bad faith claim. Jenkins v. Ohio Cas. Ins. Co., 794 So. 2d
228, 232 (Miss. 2001).
The Mississippi Supreme Court has set forth a two-step inquiry to be utilized when a
court is presented with determining whether a bad faith claim may proceed. “The issue of
punitive damages should not be submitted to the jury unless the trial court determines that there
are jury issues with regard to whether: 1. The insurer lacked an arguable or legitimate basis for
denying the claim, and 2. The insurer committed a willful or malicious wrong, or acted with
gross and reckless disregard for the insured’s rights.” State Farm Mut. Auto. Ins. Co. v. Grimes,

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722 So. 2d 637 (Miss. 1998). Both questions must be answered in the affirmative for a
successful bad faith claim and the assessment of punitive damages. See Life & Cas. Ins. Co. of
Tennessee v. Bristow, 529 So. 2d 620, 622 (Miss. 1988).
Plaintiffs’ position is essentially that Allstate should be required to tender the amount of
its last offer ($35,000.00) made during negotiations to settle this matter prior to the lawsuit being
filed – an offer which Plaintiffs refused to accept as full settlement of the claim. Plaintiffs,
however, have cited no Mississippi case supporting the position that an insurer is required to
tender payment unconditionally for an offer that was unaccepted by its insured as a full
resolution of the case. According to Plaintiffs’ argument, Allstate must make this payment – an
amount which Plaintiffs assert represents the “undisputed” portion of the claim – despite
Plaintiffs’ refusal to accept the amount as full resolution of the case and release Allstate from
further responsibility – and then continue to negotiate the remaining amount of the claim, or
allow the fact finder to determine the value of the claim at trial. Further, Plaintiffs assert that
Allstate’s failure to tender this payment unconditionally amounts to bad faith. The court finds
this position to be unsupported by Mississippi law.
Based on the record before it, the court finds the foundational issue of this case to be a
legitimate “pocketbook dispute” as to the value of Plaintiff Sherry Knight’s insurance claim.
Mississippi law is clear that an insurer does not act in bad faith by refusing to tender payment
unconditionally when there is a genuine pocketbook dispute as to the value of the claim. See
Cossitt v. Alfa Ins. Corp., 726 So. 2d 132, 139 (Miss. 1998) (“[T]his case is nothing more than a
pocketbook dispute and does not rise to the heightened level of an independent tort.”); see also
State Farm Mut. Auto. Ins. Co. v. Roberts 379 So. 2d 321, 322 (Miss. 1980) (“[D]ifferences of

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opinion [over the value of the claim] [do] not rise to the level of wanton, gross or intentional
conduct in the nature of an independent tort.”).
“An arguable basis [for denying a claim] is nothing more than an expression indicating
the act or acts of the alleged tortfeasor do not rise to the heightened level of an independent tort.”
Ladner v. Geico Indemnity Co., 2017 WL 812693 (S.D. Miss. 2017) (citing Univ. Life Ins. Co. v.
Veasley, 610 So. 2d 290, 293 (Miss. 1992)). Allstate asserts that a reasonable reliance on
established principles of law must be an arguable basis for denying the claim. The court agrees
and finds, in accordance with the Cossitt and Roberts courts, that the legitimate pocketbook
dispute at issue in this case does not rise to the heightened level of an independent tort. The
court finds nothing in the record that would support a finding of bad faith or even a genuine issue
of material fact on the issue. Allstate is therefore entitled to partial summary judgment as to
Plaintiffs’ bad faith claim, and said claim will be dismissed.
Conclusion
For the foregoing reasons, the court finds that Defendant Allstate’s motion for partial
summary judgment is well taken and should be granted. A separate order in accordance with this
opinion shall issue this day.
This 23rd day of August, 2019.
/s/ Neal Biggers
NEAL B. BIGGERS, JR.
UNITED STATES DISTRICT JUDGE

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