Fifth Circuit Provides Road Map for Review and Trial of Bad Faith Claims in Mississippi
Mississippi essentially has three levels of claim when insurance is at issue: (1) mere breach of contract, allowing recovery of contract damages; (2) breach of contract + no arguable basis for breach, which entitles recovery of consequential damages; and (3) breach of contract + no arguable basis for breach + malice/gross disregard for the rights of the insured, which entitles the recovery of punitive damages. In Briggs v. State Farm Fire & Cas. Co., 2016 WL 7232136 (5th Cir. Dec. 16, 2016), the Fifth Circuit Court of Appeals approved the bifurcation of the trial of an insurance dispute by the district court. In so doing, the Fifth Circuit provided a road map for how such claims should be handled for trial.
The Underlying Dispute
In 2011 a tornado damaged the Briggses’ home. The Briggses made a claim with State Farm for property damage. A dispute arose between the Briggses and State Farm as to the value of the loss. The Briggses claimed that the damage to their home exceeded the $250,000 policy limit of the State Farm policy and that their home needed to be demolished and rebuilt. State Farm contended the home damage could be repaired and valued the loss at approximately $150,000. The Briggses filed suit against State Farm, claiming that State Farm breached the insurance policy by not paying the full value of their claim, that such a breach had no arguable basis and that they were entitled to compensatory and punitive damages.
At trial plaintiffs tried to submit evidence to the jury that State Farm inappropriately relied on Xactimate to value the loss, as well as failed to use proper pricing for materials and labor. The Briggses also claimed that State Farm used 15 different claims representatives and attempted to intimidate the Briggses. They also sought to introduce the Mississippi “Policyholder Bill of Rights” to show State Farm improperly adjusted their claim.
The trial court instead bifurcated the claims, and held that claims for extracontractual relief would be presented, if at all, only after a jury found the existence of a breach of contract. The trial court excluded evidence such as the “Policyholder Bill of Rights” from the breach of contract portion of the bifurcated trial. The jury returned a verdict, finding that the Briggses were entitled to an additional $75,000 in policy benefits, which was more than the State Farm adjustment, but less than the amount sought by the Briggses.
After the contract phase of the case, the trial court reviewed the Briggses’ evidence to determine whether they had sufficient evidence to proceed with the “bad faith” portion of the bifurcated trial. The trial court determined the evidence was insufficient to show that State Farm lacked an arguable basis for its actions and entered judgment for State Farm on the bad faith claims.
The Fifth Circuit Opinion
The Fifth Circuit affirmed. The Court of Appeals noted that the decision to bifurcate claims rested within the sound discretion of the trial court. Because the Briggses’ claims for extracontractual relief and punitive damages both required a showing that State Farm in fact had breached the policy, the Fifth Circuit held that bifurcation was appropriate. The Fifth Circuit confirmed that evidence such as the “Policyholder Bill of Rights” was excluded appropriately at the initial trial phase because such evidence did not relate to the Briggses’ claim for breach of contract. Finally, the Fifth Circuit noted that the case always focused on whether or not the Briggses’ home could be repaired. Thus, the jury verdict which “split the baby” between State Farm and the Briggses demonstrated that the claim was a mere “pocketbook dispute” over the extent of damage, making State Farm’s position at least arguable. As such, the Briggses possessed insufficient evidence to proceed with the second portion of the bifurcated trial.
The Fifth Circuit opinion in Briggs does not announce new law so much as draw together several strands of Mississippi insurance and bad faith law to provide a road map for how a trial court should handle bad faith claims. From the decision to bifurcate, to the types of evidence admitted, to a pre-second phase evidentiary exam, the Fifth Circuit held that the trial court in Briggs did everything right. Litigators should consider Briggs as guidance for how to prepare and present their claims for relief and how to approach evidentiary issues.