Opinion
Civil Action No. 1:99CV101-P-A
August 8, 2000
MEMORANDUM OPINION
This cause comes before the Court on defendant's Motion for Summary Judgment. The
Court has duly considered the parties' memoranda and exhibits and is ready to rule.
FACTUAL BACKGROUND
Plaintiff, Western World Insurance Company (hereinafter "Western World") filed suit on April 5, 1999, seeking a declaratory judgment concerning the rights and responsibilities owed by plaintiff to its insured, Mink Oil Products, Inc., a/k/a Fernandez Labs, Inc. a/k/a Earnest Fernandez d/b/a Mink Oil Products, Inc. Pursuant to the rule announced by the Mississippi Supreme Court in Coleman v. Mississippi Farm Bureau Insurance Company, 708 So.2d 6 (Miss. 1998), the plaintiff has also joined as defendants Shadunica Banks and Andre Whitfield, the plaintiffs in the underlying wrongful death suit.
Banks filed her complaint seeking recovery for the death of her infant daughter on October 10, 1996 in an action styled Banks, et al v. Earnest Fernandez d/b/a Mink Oil Products, Inc., Civil Action No. 96-182(F)L, Circuit Court of Lee County, Mississippi. In that complaint, she alleged four counts of liability against Mink Oil Products, Inc. The return of service filed in the underlying cause of action reflected that a deputy sheriff of Lee County, Mississippi personally delivered the summons and complaint to Earnest Fernandez on October 23, 1996. Mink Oil Products failed to file a responsive pleadings, and on December 3, 1996, Banks moved for a default judgment. A default judgment was entered against Mink Oil on December 10, 1996, and, following a damages hearing on January 3, 1997, the Circuit Court entered a final judgment against Mink Oil Products, Inc. for the sum of $575,000 plus costs and post-judgment interest.
On September 4, 1997, the defendant, Earnest Fernandez, through his attorney with Mitchell, Voge, Beasley and Corban, filed a motion to set aside the default. At a hearing held February 12, 1999, Circuit Judge Barry Ford heard testimony concerning whether service of process had been properly effected on Fernandez. He concluded based on the testimony that the service of process was effective. At the same hearing, counsel for Fernandez alerted Circuit Judge Ford that Fernandez's insurance carrier had no yet been placed on notice of either the occurrence of the pending action. The circuit judge stayed his ruling on the motion for forty-five (45) days in order to afford Fernandez the opportunity to apprise his carrier of the suit.
By letter of February 28. 1999, Mink Oil Products gave its first notice of the Banks' claim to Western World. Western World agreed to provide legal counsel to Mink Oil Products in an effort to assist in having the default judgment set aside. However, Western World maintained a reservation of rights to deny coverage for the claim based on Mink Oil's failure to give timely notice of the underlying claim.
Western World seeks this Court's adjudication of both its duty to defend and to indemnify Fernandez and Mink Oil Products, Inc. based on its insured's failure to give timely notice of the lawsuit against it. The issues have been fully briefed and the Court is ready to rule.
STANDARD OF REVIEW
The Federal Rules of Civil Procedure, Rule 56(c), authorizes summary judgment where "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corporation v. Catrett, 477 U.S. 317, 322, 91 L.Ed.2d 265, 106 S.Ct. 2548 (1986). The existence of a material question of fact is itself a question of law that the district court is bound to consider before granting summary judgment. John v. State of La. (Bd. Of T. for State C. U., 757 F.2d 698, 712 (5th Cir. 1985).
A judge's function at the summary judgment stage is not himself to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial. There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L.Ed.2d 202, 106 S.Ct. 2505 (1986).
Although Rule 56 is peculiarly adapted to the disposition of legal questions, it is not limited to that role. Professional Managers, Inc. v. Fawer, Brian, Hardy Zatzkis, 799 F.2d 218, 222 (5th Cir. 1986). "The mere existence of a disputed factual issue, therefore, does not foreclose summary judgment. The dispute must be genuine, and the facts must be material." Id. "With regard to `materiality', only those disputes over facts that might affect the outcome of the lawsuit under the governing substantive law will preclude summary judgment. Phillips Oil Company, v. OKC Corporation, 812 F.2d 265, 272 95th Cir. 1987). Where "the summary judgment evidence establishes that one of the essential elements of the plaintiff's cause of action does not exist as a matter of law, . . . all other contested issues of fact are rendered immaterial. See Celotex, 477 U.S. at 323, 106 S.Ct. at 2552. Topalian v. Ehrman, 954 F.2d 1125, 1138 (5th Cir. 1992).
In making its determinations of fact on a motion for summary judgment, the Court must view the evidence submitted by the parties in a light most favorable to the non-moving party. McPherson v. Rankin, 736 F.2d 175, 178 (5th Cir. 1984).
The moving party has the duty to demonstrate the lack of a genuine issue of material fact and the appropriateness of judgment as a matter of law to prevail on his motion. Union Planters Nat. Leasing v. Woods, 687 F.2d 117 (5th Cir. 1982). The movant accomplishes this by informing the court of the basis of its motion, and by identifying portions of the record which highlight the absence of genuine factual issues. Topalian, 954 F.2d at 1131.
"Rule 56 contemplates a shifting burden: the nonmovant is under no obligation to respond unless the movant discharges [its] initial burden of demonstrating [entitlement to summary judgment]." John, 757 F.2d at 708. "Summary judgment cannot be supported solely on the ground that [plaintiff] failed to respond to defendants' motion for summary judgment," even in light of a Local Rule of the court mandating such for failure to respond to an opposed motion. Id. at 709.
However, once a properly supported motion for summary judgment is presented, the nonmoving party must rebut with "significant probative" evidence. Ferguson v. National Broadcasting Co., Inc., 584 F.2d 111, 114 (5th Cir. 1978). In other words, "the nonmoving litigant is required to bring forward `significant probative evidence' demonstrating the existence of a triable issue of fact." In Re Municipal Bond Reporting Antitrust Lit., 672 F.2d 436, 440 (5th Cir. 1982). To defend against a proper summary judgment motion, one may not rely on mere denial of material facts nor on unsworn allegations in the pleadings or arguments and assertions in briefs or legal memoranda. The nonmoving party's response, by affidavit or otherwise, must set forth specific facts showing that there is a genuine issue for trial. Rule 56(e), Fed.R.Civ.P. See also Union Planters Nat. Leasing v. Woods, 687 F.2d at 119.
While generally "[t]he burden to discover a genuine issue of fact is not on [the] court, (Topalian, 954 F.2d at 1137), "Rule 56 does not distinguish between documents merely filed and those singled out by counsel for special attention — the court must consider both before granting a summary judgment." John, 757 F.2d at 712, quoting Keiser v. Coliseum Properties, Inc., 614 F.2d 406, 410 (5th Cir. 1980).
LEGAL ANALYSIS
A. Duty of Defense
While Western World seeks a summary adjudication that it has no obligation to pay for defense costs incurred by Fernandez and/or his business prior to its receipt of notification concerning the underlying tort action, as well as a declaration relieving it of any further duty to defend, the Court declines to so rule. The motion for summary judgment was served on the judgment creditor only. The judgment creditor has no arguable interest in the insured's right to reimbursement for legal costs incurred in attempting to have the default judgment set aside. Nor does the judgment creditor have any interest in whether Western World is under a continuing obligation to provide Fernandez with a defense under the circumstances. The sole interest of the judgment creditor is in its ability to collect the judgment in the underlying action from Western World as the insured tortfeasor's insurance carrier. Accordingly, the instant decision deals only with the interest pressed by the judgment creditor.
The rights and obligations of Western World and its insured will be determined by way of a Motion for Default Judgment presently pending before the Court.
B. Duty to Indemnify/Pay Judgment
The policy issued by Western World to Earnest Fernandez is a general business liability policy, which is, by industry standards, incredibly concise. The policy is unique for its lack of language expressly setting forth the duty of the insured to give notice — of either a loss or a claim falling under the policy provisions. Nor does the policy expressly impose a duty to forward suit papers or to cooperate in the defense and/or settlement of claims against the insured. Despite the contract's dearth of protections running in favor of the insurer, the policy did incorporate the following language:
The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of
A. bodily injury or
B. property damage
to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage. . . .
Where a policy fails to include an express provision requiring notice of occurrence or suit, general rules regarding the interpretation of contracts and particularly, insurance policies, require that such an omission be construed in favor of the policy holder. This is true especially since it is in effect impossible for an insured to present a claim for payment without affording notice to the insurer. See 13 Couch on Insurance § 186:10 (3d Ed. 1999). That being true, it is only required that the insured provide notice within a reasonable time. See 13 Couch on Insurance § 190:5. Mississippi law, in particular, also requires attention be ascribed to the degree of prejudice which inures to the insurer in a case of late notice. Commercial Union Insurance Co. v. Dairyland Insurance Co., 584 So.2d 405 (Miss. 1991); St. Paul Mercury Insurance Co. v. Ford, 585 F.2d 760 (5th Cir. 1978). In the absence of prejudice, the insurer will be absolved of neither the duty to defend nor the duty of indemnification.
Couch's also notes: "It would be a rare modern insurance contract, indeed, that failed to impose a specific notice requirement." Id. The foregoing observation by the authors of the treatise acknowledges that the instant case is an anomaly.
However, those are not the circumstances presented by the instant case. Given the Circuit Court's formal adjudication that Earnest Fernandez was personally served with process and its Order dated March 30, 1999 denying the defendant's Motion to Set Aside Default, it is without doubt that Western World, as Fernandez's insurer, suffered prejudice as a result of Fernandez's inexcusable failure to provide notice of the pending litigation. Western World was completely divested of its right under the policy to defend against the claims brought against its insured.
Notwithstanding defendants' contention that there is a disputed issue of material fact regarding Fernandez' knowledge of the underlying action, the Court finds otherwise. The record of proceedings before Circuit Judge Barry Ford and his subsequent order of April 1999 conclusively set forth his finding that Earnest Fernandez was properly served with process. Accordingly, the state court's findings are res judicata as to this issue and defendants are estopped from raising an argument to the contrary in this action.
Under the foregoing circumstances as described above, the Court finds that Earnest Fernandez, individually and in his capacity as a representative of Mink Oil Products, Inc., failed to give notice of the pendency of the Banks litigation within a reasonable time. His failure to do so was not excused; nor was it waived by the insurer. And, as set out above, said failure inured to the prejudice of Western World. Inasmuch as a judgment creditor can assert no greater rights than those of the insured, Western World is under no obligation to pay the final judgment entered on January 3, 1997. Coleman v. Mississippi Farm Bureau Insurance Co., 708 So.2d 6 (Miss. 1998) (citing Jones v. Southern Marine Aviation Underwriters, Inc., 739 F. Supp. 315, 318 (S.D.Miss. 1988), aff'd., 888 F.2d 358 (5th Cir. 1989)).
CONCLUSION
For the above and foregoing reasons, the Court finds that the plaintiff's Motion for Summary Judgment is well-taken insofar as the interests of judgment creditors Shadunica Banks and Andre Whitfield are concerned. Western World is under no duty to pay the judgment entered in the underlying action styled Banks, et al v. Earnest Fernandez d/b/a Mink Oil Products, Inc., Civil Action No. 96-182(F)L, Circuit Court of Lee County, Mississippi.
An order will issue accordingly.