Liberty Mut. Ins. Co. v. McKneely
| Docket Number: | 1999-CT-01857-SCT Linked Case(s): 1999-CA-01857-COA ; 1999-CT-01857-SCT |
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| Supreme Court: | Opinion Link Opinion Date: 11-20-2003 Opinion Author: Pittman, C.J. Holding: Reversed and Rendered |
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| Additional Case Information: |
Topic: Insurance - Bad faith claim - Investigation of claim - Adequate remedy - Section 71-3-17(b) Judge(s) Concurring: Smith, P.J., Waller, Cobb and Carlson, JJ. Non Participating Judge(s): Diaz, J. Dissenting Author : McRae, P.J. Dissent Joined By : Easley, J. Procedural History: Bench Trial Nature of the Case: CIVIL - INSURANCE |
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| Trial Court: |
Date of Trial Judgment: 08-31-1999 Appealed from: Warren County Circuit Court Judge: Frank G. Vollor Disposition: APPELLEE AWARDED $150,000 COMPENSATORY DAMAGES AND $200,000 PUNITIVE DAMAGES Case Number: 96-0152 |
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| Note: | The Supreme Court held that the findings of the trial court were clearly erroneous, and it reversed both the Court of Appeals and the trial court. The Court of Appeals opinion can be found at http://courts.ms.gov/Images/Opinions/Conv10301.pdf . | |
| Party Name: | Attorney Name: | |||
| Appellant: | Liberty Mutual Insurance Company |
LAWRENCE D. WADE |
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| Appellee: | James McKneely | PAUL KELLY LOYACONO |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Insurance - Bad faith claim - Investigation of claim - Adequate remedy - Section 71-3-17(b) |
| Summary of the Facts: | James McKneely injured his back while working for Anderson Tully. Anderson Tully and Liberty Mutual Insurance Company, its workers’ compensation insurer, paid temporary total disability benefits for approximately six months. After receiving a report from McKneely's treating physician who stated that McKneely had reached maximum medical recovery, Liberty Mutual terminated the workers’ compensation benefits. McKneely eventually prevailed in his workers compensation claim and was awarded temporary total disability benefits through 1998. McKneely filed a bad faith lawsuit against Liberty Mutual alleging that there was no arguable basis for Liberty Mutual's decision to terminate benefits and to continue to deny payment until ordered to do so by the Mississippi Workers’ Compensation Commission. The court found for McKneely and awarded $150,000 in actual damages and $200,000 in punitive damages. The Court of Appeals affirmed. The Supreme Court granted certiorari. |
| Summary of Opinion Analysis: | Liberty Mutual argues that the judge erred in finding that it acted in bad faith in terminating McKneely's temporary disability payments, because the decision to terminate payments was supported by the available medical evidence and based on the advice of its attorney. In order to prevail in a bad faith claim against an insurer, the plaintiff must show that the insurer lacked an arguable or legitimate basis for denying the claim, or that the insurer committed a wilful or malicious wrong, or acted with gross and reckless disregard for the insured's rights. Where an insurance carrier denies or delays payment of a valid claim, punitive damages will not lie if the carrier has a reasonable cause for such denial or delay. When faced with a claim, an insurer is required to perform a prompt and adequate investigation of the circumstances surrounding the claim. Liberty Mutual did investigate this claim. It hired a registered nurse and rehabilitation consultant to investigate the claim and to compile the medical records. The nurse wrote the two physicians who had treated McKneely and asked each doctor to state in writing McKneely's current diagnosis and whether McKneely's current problems related to his workplace injury. One doctor stated that he saw no relationship between fibromyalgia and the workplace injury and that McKneely had reached maximum medical improvement. The other doctor did not directly respond to the inquiry but only referred to his previous correspondence in which he stated that his diagnosis was that McKneely had a "florid case of fibromyalgia." Liberty Mutual's investigation was adequate and that there was an arguable basis for discontinuing benefits. In addition, the absence of any consensus among the medical authorities, at least at the time of the denial of the claim, that fibromyalgia could be caused by a traumatic event weighs against a finding of bad faith. Generally, a client's reliance upon advice of his attorney prevents a finding of bad faith and the imposition of punitive damages. Liberty Mutual was entitled to rely on the attorney's reasonable interpretation of the doctor’s statement that McKneely's fibromyalgia was not related to his workplace injury. Liberty Mutual also argues that McKneely's action for bad faith refusal to pay insurance benefits should fail because he had an adequate remedy under section 71-3-17(b). Although McKneely could have sought to mitigate his financial problems by seeking an immediate hearing under that statute, the failure to pursue an immediate remedy under the statute does not bar a subsequent bad faith claim. |
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