Smith v. Northern Insurance Company of New York
Filing
15
ORDER denying Defendant's 4 Motion for Summary Judgment. Signed by District Judge Keith Starrett on November 25, 2014 (dsl)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
WESTERN DIVISION
TERRY SMITH
PLAINTIFF
V.
CIVIL ACTION NO. 5:14-CV-56-KS-MTP
NORTHERN INSURANCE COMPANY
OF NEW YORK
DEFENDANT
MEMORANDUM OPINION AND ORDER
For the reasons below, the Court denies Defendant’s Motion for Summary
Judgment [4].
I. BACKGROUND
In August 2012, Plaintiff sustained a work-related injury. At the time of the
accident, his employer had a workers’ compensation policy issued by Defendant. In
January 2013, Plaintiff filed a Petition to Controvert with the Mississippi Workers’
Compensation Commission, seeking workers’ compensation benefits. On May 21, 2014,
he filed an Application for Approval of Compromise Settlement [4-1]. Therein, he
requested that the Commission:
. . . enter an order approving said compromise and settlement as set forth
above as a full and complete settlement, accord and satisfaction for all
disability of every kind and nature sustained by your claimant as a result
of the injury which occurred on or about August 12, 2012, and that said
payment, when made, shall fully acquit and discharge said employer and
carrier from any further liability because, arising out of, or in any way
connected with said accidental injury.
Defendant joined [4-2] the Application, and the Commission granted it [4-3].
After the Commission approved the settlement, Plaintiff deposited the funds [44]. However, Plaintiff declined to execute the release as drafted by Defendant. Before
signing the release, he altered some of its terms [4-5], refusing to release Defendant
from any claims except the claim for workers’ compensation benefits. A couple of weeks
later, he filed this lawsuit [1-1] and alleged that Defendant denied and/or delayed
payment of benefits in bad faith.
Defendant filed a Motion for Summary Judgment [4]. It argues that Plaintiff is
barred from bringing this suit by the express terms of the parties’ settlement. The
motion is ripe for review.
II. STANDARD OF REVIEW
Rule 56 provides that “[t]he 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); see also Sierra Club, Inc.
v. Sandy Creek Energy Assocs., L.P., 627 F.3d 134, 138 (5th Cir. 2010). “An issue is
material if its resolution could affect the outcome of the action.” Sierra Club, Inc., 627
F.3d at 138. “An issue is ‘genuine’ if the evidence is sufficient for a reasonable jury to
return a verdict for the nonmoving party.” Cuadra, 626 F.3d at 812.
The Court is not permitted to make credibility determinations or weigh the
evidence. Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir. 2009). When deciding
whether a genuine fact issue exists, “the court must view the facts and the inference
to be drawn therefrom in the light most favorable to the nonmoving party.” Sierra
Club, Inc., 627 F.3d at 138. However, “[c]onclusional allegations and denials,
speculation, improbable inferences, unsubstantiated assertions, and legalistic
argumentation do not adequately substitute for specific facts showing a genuine issue
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for trial.” Oliver v. Scott, 276 F.3d 736, 744 (5th Cir. 2002).
III. DISCUSSION
The question presented by Defendant’s Motion for Summary Judgment [4] is
whether the parties intended for the settlement to encompass Plaintiff’s potential bad
faith claims. “[T]he construction and enforcement of settlement agreements is governed
by principles of state law applicable to contracts generally.” Lee v. Hunt, 631 F.2d 1171,
1173-74 (5th Cir. 1980). “Parties to a settlement must have a meeting of the minds.”
Estate of Davis v. O’Neill, 42 So. 3d 520, 527 (Miss. 2010). Like other contracts, an
enforceable settlement agreement generally “consists of an offer, an acceptance of that
offer, and consideration.” Id. “Mississippi law requires that the party claiming benefit
from the settlement prove by a preponderance of the evidence that there was a meeting
of the minds.” Howard v. TotalFina E & P USA, Inc., 899 So. 2d 882, 889 (Miss. 2005).
The parties agree that there was a settlement, but they disagree as to its terms.
Mississippi courts employ “a three-tiered approach to contract interpretation.” Tupelo
Redevelopment Agency v. Abernathy, 913 So. 2d 278, 284 (Miss. 2005).
First, the “four corners” test is applied, wherein the reviewing court looks
to the language that the parties used in expressing their agreement.
Second, if the court is unable to translate a clear understanding of the
parties’ intent, the court should apply the discretionary “canons” of
contract construction. Finally, if the contract continues to evade clarity
as to the parties’ intent, the court should consider extrinsic or parol
evidence. It is only when the review of a contract reaches this point that
prior negotiations, agreements and conversations might be considered in
determining the parties’ intentions in the construction of the contract.
Id. (citations omitted).
The Mississippi Supreme Court does not, however, require strict adherence to
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this step-by-step approach in all circumstances. Pursue Energey Corp. v. Perkins, 558
So. 2d 349, 351 n. 6 (Miss. 1990). The Court need not go through all three steps when
addressing a summary judgment motion. Epperson v. SOUTHBank, 93 So. 3d 10, 17
(Miss. 2012). “Questions of contract construction and ambiguity are questions of law
that are committed to the court . . . ,” but “[i]f the reviewing Court finds the terms of
the contract to be ambiguous or subject to more than one interpretation, the case must
be submitted to the trier of fact, and summary judgment is not appropriate.” Id.
(citations and punctuation omitted).
A.
The Application [4-1] Is Ambiguous
Defendant argues that the language of Plaintiff’s Application for Approval of
Compromise Settlement [4-1], Defendant’s Joinder [4-2], and the Commission’s
subsequent Order [4-3] provide a clear understanding of the parties’ intent.1 When
interpreting a contract, the Court must “read the contract as a whole, so as to give
effect to all of its clauses.” Facilities, Inc. v. Rogers-Usry Chevrolet, Inc., 908 So. 2d 107,
111 (Miss. 2005) (citation omitted). A contract is ambiguous “if a careful reading of the
instrument reveals it to be less than clear, definite, explicit, harmonious in all its
provisions, and free from ambiguity throughout . . . .” Barnett v. Getty Oil Co., 266 So.
1
Typically, the release is the focus of cases like this. See, e.g. Ward v. Royal
Ins. Co. of Am., 662 F. Supp. 1079 (S.D. Miss. 1986); Brady v. Travelers Indem. Co.,
No. 2:12-CV-245-KS-MTP, 2014 U.S. Dist. LEXIS 23703 (S.D. Miss. Feb. 25, 2014).
The Court questions whether the Application [4-1], Joinder [4-2], and Order [4-3]
constitute a written settlement agreement among the parties, and Defendant has
not cited any authority to that effect. Nevertheless, in addressing the present
motion, the Court will assume that they constitute the complete written agreement
of the parties.
4
2d 581, 586 (Miss. 1972). “[C]ontractual provisions are ambiguous where they are
susceptible of two or more reasonable interpretations, or where one provision is in
direct conflict with another provision, or where terms are unclear or of doubtful
meaning.” Reece v. State Farm Fire & Cas. Co., 684 F. Supp. 140, 143 (N.D. Miss.
1987).
Examining the Application [4-1] as a whole, the Court finds that it is ambiguous
as to the scope of the settlement. For example, the third page of the Application [4-1]
provides, in relevant part: “In order to compromise and finally settle the disagreement
as to the extent of disability suffered by [Plaintiff], [Defendant] offered to pay
[Plaintiff] the sum of $45,000.00, . . . in complete settlement of all claims of every kind
and nature arising out of or in any way related to this claim or those injuries or
conditions alleged herein.” This provision is ambiguous because it is unclear whether
Defendant made a settlement offer “to compromise and finally settle the disagreement
as to the extent of disability suffered by” Plaintiff, or to settle “all claims of every kind
and nature arising out of or in any way related to this claim or those injuries or
conditions alleged herein.”
On the fourth page [4-1] of the Application, the parties provided that “it would
be to the best interest of [Plaintiff] for the Commission to allow [Defendant] to settle
and compromise said differences herein . . . and to allow said payment to be made in
full discharge of all responsibility of [Defendant] under the terms of the Mississippi
Workers’ Compensation Act, or otherwise.” The only “differences” addressed within the
Application [4-1] pertain to the amount of workers’ compensation benefits owed to
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Plaintiff. This provision is ambiguous because it is unclear whether the parties
intended the settlement to address that issue alone, or to “discharge . . . all
responsibility of” Defendant.
Plaintiff finally requested that the Commission:
. . . enter an order approving said compromise and settlement as set forth
above as a full and complete settlement, accord and satisfaction for all
disability of every kind and nature sustained by [Plaintiff] as a result of
the injury which occurred on or about August 12, 2012, and that said
payment, when made, shall fully acquit and discharge [Defendant] from
any further liability because of, arising out of, or in any way connected
with said accidental injury.
In briefing, Defendant emphasized the latter portion of this sentence, arguing that its
payment discharges “any further liability because of, arising out of, or in any way
connected with said accidental injury.” However, Defendant failed to address the
beginning of the sentence, in which Plaintiff asks the Commission to approve a
settlement “for all disability of every kind and nature sustained by your claimant as
a result of the injury with occurred on or about August 12, 2012 . . . .” While Plaintiff’s
bad faith claims are arguably “connected with” his work-related injury, they are not
the “result of the injury . . . .” See Williams v. Liberty Mut. Ins. Co., 741 F.3d 617, 622
(5th Cir. 2014) (claim of bad faith denial of benefits does not arise out of work-related
injury or the Workers’ Compensation Act).
The sections of the Application [4-1] quoted above contain inconsistencies that
create ambiguity as to the intended scope of the parties’ settlement. Barnett, 266 So.
2d at 586 (contract must be harmonious in all provisions); Reece, 684 F. Supp. at 143
(contract is ambiguous where one provision conflicts with another). Accordingly, the
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Court finds that the Application [4-1] is ambiguous, and “the case must be submitted
to the trier of fact . . . .” Epperson, 93 So. 3d at 17; see also Bogy v. Ford Motor Co., 824
F. Supp. 2d 733, 739 (S.D. Miss. 2011); Royer Homes of Miss., Inc. v. Chandeleur
Homes, Inc., 857 So. 2d 748, 752 (Miss. 2003).2
B.
Accord and Satisfaction
Defendant also argues that the affirmative defense of accord and satisfaction
applies.
With respect to accord and satisfaction, Mississippi law sets forth four
elements: (1) something of value offered in full satisfaction of a demand;
(2) accompanied by acts and declarations as amount to a condition that
if the thing is accepted, it is accepted in satisfaction; (3) the party offered
the thing of value is bound to understand that if he takes it, he takes
subject to conditions; and (4) the party actually does accept the item.
Waggoner v. Williamson, 8 So. 3d 147, 156 (Miss. 2009) (punctuation omitted). An
accord and satisfaction “must have all the essentials of a contract and may be express,
or implied from the circumstances.” Royer Homes, 857 So. 2d at 754. “As clearly
indicated by the first three elements of a valid accord and satisfaction, there must be
2
The Court also notes that, having found the purported contract to be
ambiguous, it may consider parol evidence. Abernathy, 913 So. 2d at 284. Plaintiff
provided evidence [8-4] that his counsel specified on April 23 and 28, 2014 – almost
a month before the Application [4-1] was filed – that Plaintiff sought a “9i
settlement,” which refers to Section 9i of the Mississippi Workers’ Compensation
Act. Section 9i provides the Commission with discretion to authorize compromise
payments “where it is not possible to determine the exact extent of liability” and
“when determined to be in the best interest of the injured worker or his dependents
. . . .” MISS. CODE ANN. § 71-3-29. Furthermore, the check stub [4-6] indicates that
Defendant’s payment was for “WC WAGE AND LOSS DISABILITY.” This parol
evidence casts doubt on Defendant’s argument that the parties intended to settle
Plaintiff’s bad faith claims.
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a meeting of the minds of the parties.” Id. “[A]n obligee may execute a valid accord and
satisfaction by cashing checks which were offered as full satisfaction of a demand.” Id.
It is undisputed that Plaintiff accepted and cashed a settlement check [4-4, 4-6]
in satisfaction of a demand. The question is whether Plaintiff demanded workers’
compensation benefits alone, or compensation for a broader range of injuries, including
potential bad faith claims. For the same reasons provided above, the Court finds that
there exists a genuine dispute of material fact as to whether there was a meeting of the
minds on this issue, as required for an accord and satisfaction. Id.
IV. CONCLUSION
For the reasons stated above, the Court denies Defendant’s Motion for
Summary Judgment [4].
SO ORDERED AND ADJUDGED this 25th day of November, 2014.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE
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