Mississippi Farm Bureau Casualty Insurance Company v. Amerisure Insurance Company
Filing
71
ORDER granting 32 and 36 Motion for Summary Judgment, and denying as moot 33 Motion to Exclude, 44 Motion to File Memorandum Brief, 58 Motion for Leave to File Supplemental Memorandum Brief, 65 Motion in Limine, and 66 Motion in Limine. Signed by District Judge Carlton W. Reeves on 01/24/2013. (JA)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
MISSISSIPPI FARM BUREAU
CASUALTY INSURANCE COMPANY,
INDIVIDUALLY AND AS EQUITABLE
SUBROGEE OF THE CONLAN COMPANY
V.
PLAINTIFF
CIVIL ACTION NO.: 3:11-CV-706-CWR-FKB
AMERISURE INSURANCE COMPANY
DEFENDANT
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Amerisure Insurance Company’s amended motion for
summary judgment [Docket No. 36]. The Court, after reviewing the motion, briefs of the parties,
and relevant law, finds that the motion must be GRANTED.
I. FACTUAL AND PROCEDURAL HISTORY
This action is a dispute regarding whether Plaintiff Mississippi Farm Bureau Casualty
Insurance Company (“Farm Bureau”) may recover costs from Amerisure Insurance Company
(“Amerisure”) for expenditures relating to Farm Bureau’s defense of the Conlan Company
(“Conlan”) in an Alabama state court lawsuit brought by Billy Joe and Patricia Whittington
(referred to as “the Whittington lawsuit”).
In the Whittington lawsuit, Billy Joe Whittington alleged that on November 14, 2008, he
stopped at a truck stop near a construction site in Mobile County, Alabama. See Docket No. 401. When he walked onto the construction site, he was confronted by Robert Watkins, who
worked for Conlan at the site. A verbal exchange between the two ensued, and Whittington
suffered injuries to his leg. He claims that Watkins drove towards him and “swiped” him with
Watkins’ truck. Id. at 4.
The Whittingtons filed suit against Watkins and Conlan in the Circuit Court of Mobile
County, Alabama, on November 12, 2010. See id. at 1. The complaint contains four counts.
The first count alleges “negligence and/or wantonness” against Watkins and Conlan resulting
from Watkins’ operation of his vehicle while in the course and scope of his employment with
Conlan. Id. at 4. The second count alleges negligent and wanton supervision, hiring, and
training against Conlan. Id. at 5. The third count is a loss of consortium claim against both
Watkins and Conlan asserted by Patricia Whittington, and the final count alleges “wantonness”
against both defendants. Id. at 6-7.
Farm Bureau insured Robert and Becky Watkins under a personal automobile policy.
That policy provides liability limits of $25,000 per person and $50,000 per accident. Conlan was
insured by Amerisure. After Amerisure hired the law firm of Bratton Rainey to defend Conlan
in the Whittington lawsuit, Amerisure and Conlan made demand on Farm Bureau to pay for
Conlan’s defense, asserting that Conlan qualified as an insured under the Farm Bureau policy.
Farm Bureau agreed to assume Conlan’s defense only as to counts one and three of the
complaint. Farm Bureau sent letters to Amerisure asserting Farm Bureau’s position that
Amerisure was responsible for the costs associated with defending Conlan against counts two
and four. However, Amerisure claims, based on statements by Rainey, that there was “no
reasonably accurate way to distinguish between or pro-rate the defense costs” of the claims that
were covered by the Farm Bureau policy and those which were not. Docket No. 37, at 2. Thus,
Amerisure refused to pay any portion of Conlan’s defense costs, and Farm Bureau ultimately
paid all costs associated with defending Conlan, including the cost of defending counts two and
four.
The Whittington lawsuit proceeded before a jury, and on March 18, 2011, the court
entered a final judgment in favor of Billy Joe Whittington and against Watkins in the sum of
2
$20,000; there was no verdict against Conlan. Docket No. 36-10, at 2. On May 31, 2011, the
court granted Whittington’s motion for a new trial as to Watkins due to the inadequacy of the
damage award, but denied Whittington’s motion for a new trial as to Conlan, finding that “there
was sufficient evidence for the jury to conclude that, at the time that Watkins inflicted the injury,
he was acting for reasons solely personal to himself and had abandoned” Conlan’s work. Docket
No. 36-10, at 3-4.
On October 20, 2011, Farm Bureau filed the instant action against Amerisure in the
County Court of Rankin County, Mississippi, seeking to recover its costs in defending Conlan in
the Whittington lawsuit for claims that Farm Bureau alleges were not covered under its policy.
Amerisure removed the action to this Court on November 17, 2011, on the basis of diversity
jurisdiction. On September 4, 2012, Amerisure filed its motion for summary judgment [Docket
No. 32], which it amended on September 5, 2012 [Docket No. 36]. In its motion, Amerisure
argues that Farm Bureau was responsible for providing Conlan’s entire defense in the
Whittington lawsuit, and alternatively, even if Farm Bureau were not required to defend Conlan
against all claims, it cannot now receive reimbursement from Amerisure due to the doctrines of
volunteer payment, collateral estoppel, waiver, and/or judicial estoppel. See Docket No. 37, at 47.
II. LEGAL STANDARD
Summary judgment is appropriate when “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). A dispute is genuine “if the evidence supporting its resolution in favor of the
party opposing summary judgment, together with any inferences in such party’s favor that the
evidence allows, would be sufficient to support a verdict in favor of that party,” St. Amant v.
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Benoit, 806 F.2d 1294, 1297 (5th Cir. 1987) (citation omitted), and a fact is material if it is one
that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986).
A party seeking to avoid summary judgment must identify admissible evidence in the
record showing a fact dispute. Fed. R. Civ. P. 56(c)(1). When evaluating a motion for summary
judgment, a court refrains from making credibility determinations and does not weigh evidence
or draw from the facts legitimate inferences for the movant. Strong v. Dep’t of Army, 414 F.
Supp. 2d 625, 628 (S.D. Miss. 2005).
III. ANALYSIS
Amerisure’s motion for summary judgment presents four issues: (1) whether Farm
Bureau had a duty to defend Conlan, the employer of Farm Bureau’s named insured, against
counts two (“Negligent and Wanton Supervision, Hiring and Training”) and four
(“Wantonness”) of the underlying Whittington lawsuit; (2) whether Farm Bureau voluntarily
defended Conlan against counts two and four; (3) whether the doctrines of collateral estoppel,
waiver, and/or judicial estoppel prevent Farm Bureau from seeking reimbursement from
Amerisure for costs incurred while defending Conlan in the lawsuit; and (4) whether the costs for
Conlan’s defense could be reasonably apportioned between claims covered under the Farm
Bureau policy and noncovered claims.
Because this case is proceeding in diversity, the applicable substantive law is that of the
forum state, Mississippi. Capital City Ins. Co. v. Hurst, 632 F.3d 898, 902 (5th Cir. 2011). State
law is determined by looking to the decisions of the state’s highest court. St. Paul Fire &
Marine Ins. Co. v. Convalescent Servs., Inc., 193 F.3d 340, 342 (5th Cir. 1999).
As explained below, according to Mississippi law, Farm Bureau did not have a duty to
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defend Conlan against counts two and four of the Whittington complaint. Farm Bureau
voluntarily provided Conlan a defense on counts two and four, and, therefore, cannot recover any
portion of the defense costs from Amerisure. As such, the Court need not reach the remaining
issues.
A.
Duty to Defend
Under Mississippi law, Farm Bureau’s policy provided primary coverage for its insured,
Robert Watkins, who owned the vehicle that was involved in the incident giving rise to the
Whittington lawsuit. See Travelers Indem. Co. v. Chappell, 246 So. 2d 498, 505 (Miss. 1971)
(providing that the insurance policy issued to the owner of the vehicle involved in an accident is
the primary policy). The parties dispute whether, based on the terms of the policy, Farm Bureau
had a duty to defend Conlan, Watkins’ employer at the time of the incident, against the
Whittington lawsuit’s claims for “negligent and wanton supervision, hiring and training” and
“wantonness.”
Whether an insurance company has a duty to defend depends on the language of the
insurance policy and the allegations of the complaint. E.E.O.C. v. S. Publ’g Co., 894 F.2d 785,
789 (5th Cir. 1990) (citation omitted) (“In determining an insurer’s duty to defend its insured,
Mississippi has adopted ‘the allegations of the complaint’ rule.”); Evanston Ins. Co. v. Neshoba
Cnty Fair Ass’n, Inc., 442 F. Supp. 2d 344, 346 (S.D. Miss. 2006) (citation omitted) (stating that
to determine whether an insurer has a duty to defend, “the court compares ‘the words of the
complaint with the words of the policy’”). “The duty to defend is broader than the duty to
indemnify,” and it arises if a “complaint alleges facts which are arguably within the policy’s
coverage.” Evanston, 442 F. Supp. 2d at 346 & n.1. Therefore, regardless of whether a
complaint’s allegations ultimately prove to be meritorious, an insurance carrier has a contractual
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duty to furnish a legal defense “whenever a lawsuit filed against an insured contains an
allegation or claim which is covered under the policy.” Moeller v. Am. Guarantee & Liab. Ins.
Co., 707 So. 2d 1062, 1069 (Miss. 1996) (citation omitted). However, an insurance company
“clearly has no duty to defend a claim outside the coverage of the policy.” Id.; see also S. Publ’g
Co., 894 F.2d at 790-92 (concluding that insurance company had duty to pay defense costs
relating to tort claims for which coverage was available under multi-peril insurance policy, but
not Title VII claims, for which no coverage was available). Therefore, to determine which
claims Farm Bureau had a duty to defend, the Court looks to the allegations of the complaint in
the underlying litigation and the terms of the insurance policy Farm Bureau issued to Watkins.
The relevant language of the Farm Bureau insurance policy states, under the “Liability
Coverage” section, that Farm Bureau “will pay damages for bodily injury or property damage for
which any insured becomes legally responsible because of an auto accident and arising out of the
ownership, maintenance or use of any covered auto” and “will settle or defend, as [it] consider[s]
appropriate, any claim or suit asking for these damages.” Docket No. 32-8, at 10 (emphasis
omitted). However, the policy states that Farm Bureau “ha[s] no duty to defend any suit or settle
any claim for bodily injury or property damage not covered under this policy.” Id. (emphasis
omitted). The policy specifies that the term “insured” includes
1. You or any family member for the ownership, maintenance or use of any auto or
trailer.
...
3. For any covered auto, any person or organization, but only with respect to legal
responsibility for acts or omissions of a person for whom coverage is afforded
under this Part.
Id. (emphasis omitted). The “Definitions” section of the policy defines “you” and “your” as the
“named insured shown in the Declarations” and the named insured’s spouse, if a resident of the
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same household. Id. at 6.
According to the policy’s third definition of “insured,” supra, Conlan is an insured under
Watkins’ policy due to the Whittingtons’ allegations that Conlan is liable for Watkins’ actions
based on the theory of respondeat superior. See id. at 10; Docket No. 40-1, at 5. However, the
limiting language of the third definition of “insured,” “but only with respect to legal
responsibility for acts or omissions of a person for whom coverage is afforded,” unambiguously
provides that a person or organization becomes an insured under this definition only if he or it is
vicariously liable for the conduct of an insured person under the policy. See Docket No. 32-8, at
10; Guidant Mut. Ins. Co. v. Indem. Ins. Co. of N. Am., 13 So. 3d 1270, 1281-82 (Miss. 2009)
(holding, in case involving similar definition of “insured,” that volunteer fire department was an
insured under an insurance policy where the theory of the underlying complaint was that the fire
department was legally responsible for the acts or omissions of a fireman who was working in
the course of his duties). Thus, Conlan is an insured under Watkins’ policy with respect to
Conlan’s liability arising from Watkins’ “acts or omissions,” but not with respect to Conlan’s
liability for its own acts or omissions. See Docket No. 32-8, at 10.
Several courts in other jurisdictions have interpreted similar provisions in this manner.
See Mid-Century Ins. Co. v. Heritage Drug, Ltd., 3 P.3d 461, 462-63 (Colo. App. 1999)
(rejecting parents’ contention that they had coverage as “persons or organizations” having “legal
liability” for the acts or omissions of their daughter under car insurance policy for which their
daughter was the only named insured, when “the claim of negligent entrustment brought against
[the parents] was not based on vicarious liability, but on their own alleged negligence”);
Lightning Rod Mut. Ins. Co. v. Cole, No. 3:10-CV-00428-WCL, 2012 WL 4355535, at *8 (N.D.
Ind. Sept. 21, 2012) (holding that defendant could not be considered an insured based on her
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“legal responsibility for acts or omissions” of her daughter because the plaintiffs’ negligent
supervision and negligent entrustment claims sought to hold defendant responsible for her own
negligence, not her daughter’s acts); State Farm Mut. Auto. Ins. Co. v. S. Trust Ins. Co., No.
M2011-02727-COA-R3-CV, 2012 WL 5240257, at *5-6 (Tenn. Ct. App. Oct. 23, 2012)
(concluding that because negligent entrustment claims against defendant were not based upon
acts or omissions of a person covered under the policy, but were based upon the defendant’s own
acts or omissions, the insurance policy at issue did not cover the negligent entrustment claims).
In an attempt to support its argument that Farm Bureau was required to defend all four
claims, Amerisure relies on Meyers v. Mississippi Insurance Guaranty Association, 883 So. 2d
10 (Miss. 2003), a case arising out of an automobile accident in which the Mississippi Supreme
Court analyzed whether a commercial general liability insurance policy’s exclusion for bodily
injury “arising out of the ownership, maintenance, use or entrustment to others of any . . . auto”
excluded from coverage a plaintiff’s negligent management and negligent hiring claims. Id. at
13-14 (quotation marks omitted). The court held that the automobile exclusion applied to bar
coverage for the negligent management and negligent hiring claims, noting that the “controlling
case law in Mississippi is clear: claims of negligent entrustment, negligent supervision, and
failure to train will not be recognized as independent acts of negligence sufficient to allow
coverage under insurance policies . . . with an auto-exclusion where the damages arise out of the
use of an automobile.” Id. at 16.
According to Amerisure, Meyers suggests that the negligent hiring and negligent
supervision claims in the Whittington lawsuit are inherently “related to the acts of . . . Watkins.”
Docket No. 37, at 5. Amerisure’s reliance on Meyers is misplaced because the language of the
automobile exclusion in Meyers is inapposite to the policy’s language at issue in the present case.
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The Farm Bureau policy does not make Conlan an insured for all claims “arising out of the
ownership, maintenance, use or entrustment” of an automobile, Meyers, 883 So. 2d at 14
(quotation marks omitted), but instead makes Conlan an insured “only with respect to legal
responsibility for acts or omissions of a person for whom coverage is afforded . . . .” Docket No.
32-8, at 10. The policy’s language is unambiguous, and therefore, it must be construed exactly
as written. See Centennial Ins. Co. v. Ryder Truck Rental, Inc., 149 F.3d 378, 382 (5th Cir.
1998).
Because Conlan is only an insured under the Farm Bureau policy for claims involving
Conlan’s vicarious liability for Watkins’ conduct, Farm Bureau had no duty to defend Conlan
against count two, which involved allegations of Conlan’s “negligence and/or wantonness in the
employment, supervision, hiring and training of Defendant Watkins.” Docket No. 40-1, at 5.
Farm Bureau also maintains that it did not have a duty to defend Conlan against count
four because the wantonness claim “contemplates intentional acts that are excluded under the
policy.” Docket No. 32-6, at 9. Under Alabama law, which applied to the Whittingtons’ claims
in the underlying lawsuit, “wantonness” is defined as “the conscious doing of some act or the
omission of some duty, while knowing of the existing conditions and being conscious that, from
doing or omitting to do an act, injury will likely or probably result.” Jordan ex rel. Jordan v.
Calloway, 7 So. 3d 310, 316-17 (Ala. 2008). The Alabama Supreme Court has held that
wantonness requires a showing of a conscious and intentional act or omission, although it is not
essential to prove that the defendant had intent to injure the plaintiff. See Galaxy Cable, Inc. v.
Davis, 58 So. 3d 93, 101 (Ala. 2010); Alfa Mut. Ins. Co. v. Roush, 723 So. 2d 1250, 1256 (Ala.
1998).
The fourteenth exclusion of the Farm Bureau policy states that Farm Bureau will not pay
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for “[l]oss resulting from the intentional acts by you or any act carried out at your direction. The
expected and unexpected results of this action or direction is not covered.” Docket No. 32-8, at
22. Therefore, the Whittingtons’ wantonness claim was excluded from coverage under Farm
Bureau’s policy because it alleges that Conlan consciously and intentionally committed an act or
omitted a duty. Consequently, Farm Bureau had no duty to defend Conlan against count four.
See Moeller, 707 So. 2d at 1070-71 (noting that insurance company owed insured a legal defense
for defamation claim only, but not claims that were outside the coverage of the policy).1
B.
Voluntary Payment
Amerisure argues that even if Farm Bureau had no duty to defend Conlan against counts
two and four of the Whittington complaint, Farm Bureau is not entitled to reimbursement for the
cost of defending Conlan against those claims because Farm Bureau voluntarily defended all of
the claims. Under Mississippi’s voluntary payment doctrine, “a voluntary payment can not be
recovered back, and a voluntary payment within the meaning of this rule is a payment made
without compulsion, fraud, mistake of fact, or agreement to repay a demand which the payor
does not owe, and which is not enforceable against him, instead of invoking the remedy or
defense which the law affords against such demand.” McDaniel Bros. Constr. Co. v. BurkHallman Co., 175 So. 2d 603, 605 (Miss. 1965) (quoted in Genesis Ins. Co. v. Wausau Ins. Cos.,
343 F.3d 733, 736 (5th Cir. 2003)). An insurer that makes a payment under “protest” or after
1
Both Amerisure and Farm Bureau cite E.E.O.C. v. Southern Publishing Co., 894 F.2d 785 (5th Cir. 1990),
in concluding that the feasibility of apportioning the defense costs is determinative of Farm Bureau’s duty to defend.
However, the Southern Publishing court analyzed only the “allegations of the complaint” in determining the
insurance company’s duty to defend. See id. at 789-91. The court considered proration of costs on the issue of
damages, and only to address the insured’s argument that because the insurer had “wrongfully denied coverage, it
was obligated for the full cost” of the insured’s defense. See S. Publ’g Co., 894 F.2d at 788, 791 n.3 (“Normally,
our conclusion that Southern Guaranty owed a duty to defend the slander claim would pretermit our consideration of
the proration issue until the district court had determined whether to award Southern Publishing the costs of
defending the slander claim and, if so, the amount of such costs. However, because . . . the final judgment already
includes an award for the cost of defending the slander claim, we will address the proration issue.”).
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providing “a unilateral reservation of rights will not escape the application of the volunteer
doctrine.” Genesis, 343 F.3d at 736. However, “[p]ayments that are made by virtue of legal
obligation or by accident or mistake are inherently involuntary.” Id. at 738.
Farm Bureau does not allege that it defended Conlan against claims outside of the
policy’s coverage because of fraud, mistake of fact, or the existence of an agreement regarding
repayment of defense costs. However, it suggests that it should not be considered a volunteer
payor because “at the time that the payments were made, Farm Bureau possibly had an
obligation to pay the defense costs.” Docket No. 41, at 11. Farm Bureau’s uncertainty about
whether it was required to pay for Conlan’s entire defense arose from its lack of clarity about
whether the defense costs could be apportioned between the claims covered under the Farm
Bureau policy, and those not covered under the policy. See id. Farm Bureau asserts that if the
costs could not be readily apportioned, it was responsible for bearing the entire cost of defense.
See Docket No. 41, at 7-8.
Additionally, Farm Bureau argues that “since Amerisure was refusing to provide a
defense for Conlan, Farm Bureau was left in a position where it would have severely prejudiced
the defense of Conlan Company if Farm Bureau had also refused to pay defense costs for the
claims not covered under the Farm Bureau policy.” Docket No. 41, at 11. Therefore, by
defending Conlan against all claims, Farm Bureau asserts that it “protected the interest of the
common insured and reserved the right to later seek reimbursement from Amerisure.” Id.
Essentially, Farm Bureau alleges that it was compelled to defend Conlan against the claims that
were not covered by the Farm Bureau policy.
The Fifth Circuit, however, has noted, while interpreting Mississippi law, that “[n]ot all
pressure for payment amounts to compulsion.” Genesis, 343 F.3d at 739.
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[W]here a person pays an illegal demand, with full knowledge of all the facts
which render the demand illegal, without an immediate and urgent necessity to
pay, unless it is to release his or her person or property from detention or to
prevent an immediate seizure of his or her person or property, the payment is
voluntary. It is only when, in an emergency for which a person is not responsible,
the person is compelled to meet an illegal exaction to protect his or her business
interest that he or she may recover the payment, but if, with knowledge of the
facts, that person voluntarily takes the risk of encountering the emergency, the
payment is voluntary and may not be recovered.
Id. (quoting 66 Am. Jur. 2d § 109 (emphasis added)).
In Genesis Insurance Co. v. Wausau Insurance Cos., President Casino and its
comprehensive general liability insurer, Genesis, argued that they were compelled to settle a
state court lawsuit brought against the casino by a patron who was struck by a casino shuttle bus
because, less than two months before trial, the business automobile insurer that had been
defending the lawsuit, Wausau, notified President of its intention to deny coverage on a premises
liability claim, thereby leaving President and Genesis little time to mount an adequate defense.
Id. at 738. Before contributing to the settlement of the patron’s case, President and Genesis filed
an action in the United States District Court for the Southern District of Mississippi, seeking a
declaration that the Wausau policy covered the entire state court litigation, including the
premises liability claim, with the Genesis policy providing only excess insurance over and above
the $1,000,000 primary coverage afforded by the Wausau policy. See id. at 734. After
settlement of the patron’s lawsuit, Wausau asserted that President and Genesis could not seek
reimbursement for their contribution to the settlement because their contribution was voluntary,
not compelled. See id. at 735. The Fifth Circuit agreed that President’s and Genesis’
contribution to the settlement was not compelled, noting that President and Genesis were faced
with one of two options after Wausau expressed an intention to deny coverage on the premises
liability claim:
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(1) contributing $200,000 immediately to a settlement; or (2) allowing the
[state] case to go to trial, and waiting for a ruling in the declaratory judgment
action, at which point they would be held responsible for a certain percentage
(estimated from 0%-50%) of the damages (that Genesis feared could reach $1
million) as determined by a jury for whom they had little time to prepare.
Id. at 739.
This dilemma, the court, concluded, lacked “the sense of immediacy often accompanied
by compelled payments.” Id. The court also concluded that what was at stake if President and
Genesis refused to participate in the settlement was “of an insufficiently dire magnitude to justify
finding that their settlement contributions were compelled.” Id. at 739-40 (stating that a
“payment is considered coerced only where it is made to avoid the loss of a necessity, or to
prevent an injury to a person, business or property which is different and disproportionately
greater than the unlawful demand,” and citing Dreyfus v. Ameritech Mobile Comm., Inc., 700
N.E.2d 162, 165-66 (Ill. App. Ct. 1998), and Alcoa Steamship Co. v. Velez, 285 F. Supp. 123,
125 (D. Puerto Rico 1968 ) (holding that employer’s payment of workmen’s compensation
insurance premium, when faced with alternative of losing all coverage in respect to all
operations, was compelled)). The court reasoned that “[s]urely, the prospect of paying a
maximum, as estimated by President and Genesis, of $1,000,000 between them after the jury
returned its verdict, and all appeals (of both the state case and [the declaratory judgment] action)
had been exhausted, did not threaten to have such ‘a disastrous effect to business’ that President
and Genesis, two national corporations, one of whose business was to insure against precisely
these kinds of judgments, felt compelled to contribute to the . . . settlement.” Id. at 740. In
concluding that President’s and Genesis’ contribution to the state court settlement was not
compelled, the court declined to carve an exception to the Mississippi volunteer doctrine based
on the “inadequacy of the legal remedy,” the declaratory judgment action filed by President and
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Genesis. Id. (“We therefore decline to make a predictive statement on Mississippi’s behalf
approving of and applying an exception for those who pursue their available legal remedies and
yet in good faith make what is alleged to be an unjustly demanded payment in their best
interest.”).
Similar to Genesis, Farm Bureau’s predicament when it decided to pay for Conlan’s
defense on all four claims lacked the sense of urgency necessary to suggest that Farm Bureau
was compelled to defend Conlan against claims outside the scope of the policy. Farm Bureau
could have demanded that Conlan’s counsel provide invoices that apportioned costs between the
covered and noncovered claims, and paid only the portion of Conlan’s legal bill that was
attributable to counts one and three. Alternatively, Farm Bureau could have hired a different
attorney who was willing to apportion the time between covered and noncovered claims if
Rainey would not do so. In addition, when the dispute arose regarding the extent of Farm
Bureau’s duty to defend, Farm Bureau could have sought an opinion from separate counsel on
this issue. See Baker Donelson Bearman & Caldwell, P.C. v. Muirhead, 920 So. 2d 440, 447
(Miss. 2006). Furthermore, it could have filed a declaratory judgment action seeking a
determination that Farm Bureau was not required to defend Conlan for counts two and four.
Such an action may have resolved any uncertainties Farm Bureau had about whether reasonable
apportionment of costs was possible. By exercising none of these options, Farm Bureau failed to
utilize the legal means available to it to resist Amerisure’s and Conlan’s demands for Conlan’s
full defense. See McLean v. Love, 157 So. 361, 362 (Miss. 1934) (relied upon by Hensarling v.
Regions Bank, No. 3:11CV149TSL-MTP, 2012 WL 2839687, at *2-3 (S.D. Miss. July 10,
2012)) (“[W]here an unjust demand has been made upon a party, a demand for a debt which he
does not owe, or for more than he owes, he must, when he knows or ought to know the facts,
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avail of the means which the law affords him to resist the demand, and if he do[es] not, and
make[s] the payment demanded, he has not taken due care.”). Thus, Farm Bureau neglected to
take due care of its interests, and cannot now avoid the application of the voluntary payment
doctrine, despite its good faith effort to protect Conlan’s interests. See id.; Mobile Telecomm.
Techs. Corp. v. Aetna Cas. & Sur. Co., 962 F. Supp. 952, 956 (S.D. Miss. 1997) (“There was a
legal remedy available to Aetna in the form of a declaratory judgment action by which it might
have sought an adjudication of the proper amount of reasonable legal fees and costs.”).
Instead of litigating the issue of the scope of its duty to defend, Farm Bureau chose to pay
for Conlan’s entire defense while continuing to send letters to Amerisure protesting payment of
costs for defending counts two and four. However, payment under protest does not permit Farm
Bureau to escape the volunteer payment doctrine. In order to avoid the volunteer doctrine, Farm
Bureau was required to enter into an agreement with Amerisure to litigate, at a future date, their
respective obligations to defend Conlan, with any excess payments to be reimbursed by the other
insurer. See Genesis, 343 F.3d at 736-38 (concluding that issue of fact existed regarding whether
the parties had agreed to litigate coverage issues following settlement); Liberty Mut. Fire Ins.
Co. v. Fireman’s Fund Ins. Co., 235 F. App’x 213, 221 (5th Cir. 2007) (unpublished) (finding
that there was insufficient evidence of a mutual agreement to litigate coverage issues subsequent
to settlement, and therefore, claims were barred by voluntary payment doctrine). Farm Bureau
does not present any evidence that it made such an agreement.
Farm Bureau’s assertion that it did not know if a court would require it to pay for
Conlan’s entire defense due to the possibility that the costs might not be readily apportioned
between the covered and noncovered claims also does not present a situation of compulsion. If
Farm Bureau had chosen to defend only counts one and three, and a court later determined that
15
Farm Bureau should have paid for the defense of all four counts, the worst case scenario is that
Farm Bureau would have been required to reimburse Conlan and/or Amerisure for the cost of
defending the remaining two counts, perhaps with interest and fees, and Farm Bureau may have
been subjected to a bad faith claim. See Muirhead, 920 So. 2d at 451 (“[W]here an insurer
makes the decision not to provide a defense to its insured, it runs a substantial risk of a later
determination that a defense should have been provided. Such decisions, absent an arguable,
reasonable basis, can result in a finding of bad faith.”). The financial risk Farm Bureau would
have undertaken is analogous to the estimated $1,000,000 potential payout that the Fifth Circuit
suggested in Genesis was not enough “to have such ‘a disastrous effect to business’” that the
casino and insurance company should have felt compelled to contribute to settling the claims
against the casino. See Genesis, 343 F.3d at 740. Therefore, Farm Bureau’s circumstances did
not compel it to defend Conlan’s noncovered claims; Farm Bureau volunteered to do so without
properly reserving its right to later seek reimbursement from Amerisure.
In its attempt to support its position that it did not volunteer to defend Conlan against
counts two and four, Farm Bureau relies on State Farm Mutual Automobile Insurance Co. v.
Allstate Insurance Co., 255 So. 2d 667 (Miss. 1971). In State Farm, the Mississippi Supreme
Court analyzed whether the volunteer payment doctrine applied when both State Farm and
Allstate were contractually obligated under their respective policies with the insured to defend,
negotiate, and settle claims against the insured, and when State Farm was forced to settle a claim
against the insured without Allstate’s participation because Allstate refused to contribute. See id.
at 668-69. The court concluded that State Farm was not a volunteer because it was not a
“stranger or intermeddler who ha[d] no interest to protect and [was] under no legal or moral
obligation to pay.” Id. at 669. Rather, based on the policy it issued to the insured, State Farm
16
was a co-primary insurer that “was under a solemn obligation to defend its insured” and to
negotiate and settle claims made against the insured. Id. Therefore, the court refused to
“reward” Allstate for “breaching its contract with its insured by refusing to defend him in any
manner,” and concluded that the volunteer payment doctrine was inapplicable. Id. Accordingly,
State Farm was not precluded from recovering from Allstate half of all sums paid in settlement
of claims against the insured. See id. at 668-69.
State Farm is distinguishable from Farm Bureau’s facts because, unlike the insurer in
State Farm, Farm Bureau had no contractual obligation to provide Conlan a defense for counts
two and four. Therefore, Farm Bureau qualifies a voluntary payor. Farm Bureau’s lack of a
contractual obligation to defend Conlan against counts two and four also distinguishes this case
from those in which a secondary or excess insurance carrier steps in to provide a defense to an
insured when the primary insurer refuses to do so. See, e.g., Guidant Mut. Ins. Co. v. Indem. Ins.
Co. of N. America, 13 So. 3d 1270, 1280-82 (Miss. 2009); State Farm Mut. Auto. Ins. Co. v.
Universal Underwriters Ins. Co., 601 F. Supp. 286, 287-91 (S.D. Miss. 1984); State Farm Mut.
Auto. Ins. Co. v. Commercial Union Ins. Co., 394 So. 2d 890, 891-95 (Miss. 1981). In such
cases, when the secondary or excess insurer, by the terms of its policy, is contractually obligated
to defend the insured, it is not considered a voluntary payor when it takes on the role that the
primary insurer wrongfully refuses. See Universal, 601 F. Supp. at 287-91 (discussing
Commercial Union, 394 So. 2d at 891-95).
Because Farm Bureau had no contractual obligation to defend Conlan against counts two
and four, but chose to do so without exercising the legal remedies available to it to resist
Conlan’s and Amerisure’s demands for Conlan’s full defense, Mississippi’s volunteer payment
doctrine bars Farm Bureau from recovering costs from Amerisure in this action.
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IV. CONCLUSION
For the foregoing reasons, the Defendant’s motion for summary judgment is
GRANTED.2
SO ORDERED, this the 24th day of January, 2013.
s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE
2
As a result of this ruling, all other outstanding motions [Docket Nos. 33, 44, 58, 65, 66] shall be denied as
moot.
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