September 20, 2021

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Understanding Mississippi Unfair Claims Practice and Bad Faith Cases Based on Delay

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Mississippi unfair claims practice law and bad faith actions are unique. Following Hurricane Katrina, I took the Mississippi Bar and represented hundreds of Mississippi businesses and residents with insurance disputes arising from Hurricane Katina. I was honored to represent the grandparents of my co-author in this blog post. As a kid, I lived for three years in Waveland, Mississippi. Merlin Law Group is still being retained on property insurance disputes in Mississippi. Since her interest in property insurance law started with our firm’s work in Mississippi, I look forward to working with Kathryn on those cases after she gets the results from her bar examination.

Interestingly, “Mississippi has not adopted the Model Unfair Claims Settlement Practices Act. Efforts are made every year to propose legislation to adopt this Act.”1 Indeed, Mississippi is the only state without any statutory or regulatory provisions governing fair claims handling.2 Mississippi policyholders need more consumer protection in regulation and statutes.

While there are no statutory or regulatory provisions on fair claims handling in Mississippi, courts in Mississippi have allowed “bad faith” cases when insurance claims are delayed:

Obviously, some delay in evaluating claims is inevitable, legitimate and socially useful. Insurers are entitled, and in fact legally obligated, to investigate fully the legitimacy of claims, and some skepticism in evaluating claims is appropriate. Since an insurer has an obligation under Mississippi law to investigate claims, discharging that duty is not bad faith. However, an inadequate investigation of a claim may create a jury question on the issue of bad faith.3

An unreasonable delay in resolving or adjusting an insurance claim can give rise to a recoverable bad faith cause of action.4

Although Mississippi courts are skeptical of such claims, they have permitted claimants to recover damages on bad faith claims when resolution of an insurance claim is merely delayed rather than ultimately denied. See, e.g., Travelers Indem. Co. v. Wetherbee, 368 So. 2d 829, 834–35 (Miss. 1979) (affirming jury award for punitive damages where insurer withheld payment for eight months); AmFed Cos., LLC v. Jordan, 34 So. 3d 1177, 1191 (Miss. App. 2009) (affirming trial judge’s decision to submit punitive damages issue to the jury in a delay-of-payment case); Pilate v. Am. Federated Ins. Co., 865 So. 2d 387, 400 (Miss. App. 2004) (‘[T]here may be cases where a delay [of payment for one month] could possibly be sufficient grounds for a bad faith claim.’); see also Essinger v. Liberty Mut. Fire Ins. Co., 529 F.3d 264, 271 n.1 (5th Cir. 2008) (‘Inordinate delays in processing claims and a failure to make a meaningful investigation have combined to create a jury question on bad faith.’); but see Tutor v. Ranger Ins. Co., 804 F.2d 1395, 1399 (5th Cir. 1986) (per curiam) (reversing jury’s punitive damage award where payment was delayed during an ongoing dispute between insured and insurer); Caldwell v. Alfa Ins. Co., 686 So.2d 1092, 1098 (Miss. 1996)(affirming grant of summary judgment where an insurance company delayed payment for three months in complex wrongful death claim, including a six-week delay after it completed its investigation).5

Mississippi courts have not defined what a “reasonable” delay is versus an “unreasonable” delay.

One case noted that for delay of payment to be the basis of  a bad faith lawsuit, the insurer’s conduct must be “egregious.”6 Further “[w]here 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.”7

In Bad Faith Possible for Carrier that Allegedly Harassed Insured, we noted:

Under Mississippi law, insurers have a duty ‘to perform a prompt and adequate investigation and make a reasonable, good faith decision based on that investigation’ and may be liable for punitive damages for denying a claim in bad faith…To recover punitive damages for bad faith denial of their insurance claim, the [insured] ‘must show that the insurer denied the claim (1) without an arguable or legitimate basis, either in fact or law, and (2) with malice or gross negligence in disregard of the insured’s rights’…[The insurer,] on the other hand, ‘need only show that it had reasonable justifications, either in fact or in law, to deny payment.’ The question of whether [the insurer] had an arguable basis for denying the … claim ‘is an issue of law for the court.’

Mississippi follows the line of cases allowing for an insurance company to be “reasonably” or “arguably” wrong when adjusting a claim to escape the consequences for its failure to act in good faith. However, some case law suggests that this reasonable or arguable basis is for a judge rather than a jury to decide.

Thought For The Day

Books were my pass to personal freedom. I learned to read at age three, and soon discovered there was a whole world to conquer that went beyond our farm in Mississippi.
—Oprah Winfrey
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1 Mississippi Insurance-Related Law – An A to Z Guide, Holcomb Dunbar Attorneys, https://www.holcombdunbar.com/mississippi-insurance-related-law-2020-update/ (May 29, 2020).
2 A Roadmap for 50 States: Navigating Differing State Laws for Fair Claims Handling, 1,3, Eagle Law, https://www.eagle-law.com/wp-content/uploads/Paper-S.Backus-LWoodrow-FairClaims-Handling.pdf (February 2017).
3 Pilate v. American Federated Ins. Co., 865 So. 2d 387 (Miss. App. 2004) (quoting Jeffrey Jackson, Mississippi Insurance Law § 12:5 (2001)).
4 AmFed Cos., LLC v. Jordan, 34 So. 3d 1177, 1183 (Miss. Ct. App. 2009) (citing Travelers Indem. Co. v. Wetherbee, 368 So. 2d 829, 835 (Miss. 1979).
5 Mississippi Insurance-Related Law – An A to Z Guide, Holcomb Dunbar Attorneys, https://www.holcombdunbar.com/mississippi-insurance-related-law-2020-update/ (May 29, 2020).
6 Caldwell v. Alfa Ins. Co., 686 So.2d 1092, 1098 (Miss. 1996).
7 Liberty Mut. Ins. Co. v. McKneely, 862 So. 2d 530, 533 (Miss. 2003) (citing Estate of Wesson, 517 So.2d at 528).

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