AND AFTER OTHER INSURANCE WAS FORCE-PLACED BY THE LENDER.
In what might be termed a 'comedy of damages' except for the great harm that was done, Mount Carmel Ministries purchased a property policy from GuideOne to cover a school which Mount Carmel ran. After a time, GuideOne attempted to cancel the policy, but a district court in Mississippi later held that the cancellation was void and that the policy was in place at the time of a tornado loss.
The district court awarded "$1,693,035 in damages, representing what would have been the cost to repair or replace the property roughly six weeks after the tornado, less depreciation." GuideOne Elite Ins. Co. v. Mount Carmel Ministries, ___ F. App'x ___, No. 15-60915, 2017 WL 344278, at * (5th Cir. January 23, 2017) (precedential value in at least some federal courts apparently limited by Fed. R. App. P. 32.1 and 5th Cir. Rules 28.7 and 47.5).
Parenthetically, Mount Carmel's lender, Seaway, placed insurance premiums on Mount Carmel by force for a replacement policy after Seaway learned of GuideOne's supposed "cancellation." In what we are definitely not going to call a 'comedy of damages' here, Seaway apparently forgot to keep the force-placed insurance policy in place.
That left the issue squarely presented of whether GuideOne had an arguable basis for denying coverage due to the assumed cancellation here; if it did not have an arguable basis for denying coverage in this case, then under Mississippi law, it would face the assessment of punitive damages for "bad faith" conduct. The district court held that GuideOne did not have to face a punitive damages assessment in this case, because here the district court found an arguable reason for GuideOne's coverage denial.
A three-judge panel of the Fifth Circuit affirmed the district court's holding that cancellation did not comply with the GuideOne policy requirements, and the district court's holding that GuideOne had an arguable basis for denying all coverage based on cancellation even though the cancellation was void.
Judge Owen concurred in affirming both invalid cancellation under the policy, and no punitive damages, but would have also reached the district court's holding that cancellation was invalid under a Mississippi statute as well as under the policy.
Coverage denied under a property policy that was not legally cancelled. Bad faith, punitive damages bullet dodged. Twin takeaways from this case.
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