McDonald v. Lemon-Mohler Ins. Agency, LLC

183 So.3d 118

Michael McDONALD and Sharon Crutchfield, Appellants

v.LEMON–MOHLER INSURANCE AGENCY, LLC, Appellee.

No. 2014–CA–00853–COA.

Court of Appeals of Mississippi.

Dec. 15, 2015.

Les W. Smith, Biloxi, attorney for appellants.

David A. Barfield, Jackson, Steven Lloyd Lacey, attorneys for appellee.

Before LEE, C.J., CARLTON and FAIR, JJ.

CARLTON, J., for the Court:

¶ 1. In January 2005, Danny Jalanovich entered into an agreement with Michael McDonald and Sharon Crutchfield (collectively, the McDonalds)¹ to complete construction of a home in Ocean Springs, Mississippi. The McDonalds agreed to satisfy the bank note on the property and to advance all funding necessary to finish the project. In exchange, Jalanovich conveyed the property to the McDonalds by warranty deed. The parties planned to sell the home for a profit, at which point the McDonalds would receive their financial investment back with interest.

¶ 2. Before construction on the project was finished, Hurricane Katrina completely destroyed the home. After their insurance claim was denied, the McDonalds filed the present action in Jackson County Circuit Court against Lemon–Mohler Insurance Agency LLC and various other defendants. The McDonalds' complaint asserted claims for intentional and negligent misrepresentation, negligence, and gross negligence.

¶ 3. After the McDonalds presented their case-in-chief, the circuit court granted Lemon–Mohler's motion for a directed verdict as to the claims for intentional misrepresentation and gross negligence. Following the parties' presentation of all their testimony and evidence, the jury returned a verdict in favor of Lemon–Mohler, finding that the McDonalds' negligence constituted the sole proximate cause of their loss. The McDonalds then filed an unsuccessful motion for a judgment notwithstanding the verdict (JNOV) or, in the alternative, a new trial.

¶ 4. On appeal, the McDonalds raise the following issues: (1) whether the circuit court erred by granting Lemon–Mohler's motion for a directed verdict as to the issue of gross negligence; (2) whether the circuit court erred by not granting the McDonalds' motion for a JNOV or, in the alternative, a new trial; (3) whether the circuit court's evidentiary rulings irreparably prejudiced the jury; and (4) whether the circuit court erred by limiting the McDonalds' proffer of compensatory damages to $440,000.

¶ 5. Finding no error, we affirm.

FACTS

¶ 6. In 2004, Jalanovich's company, Anchor Realty and Development Inc., bought waterfront property in Ocean Springs. Anchor planned to build a home on the property and then sell the home for a profit. To finance the home's construction, Anchor obtained a loan from Hancock Bank. In September 2004, Anchor obtained a windstorm policy on the property for $440,000 from Mississippi Wind Underwriters Association (MWUA).² MWUA issued the windstorm policy and directly billed Anchor for the premium payments. In addition to the windstorm policy, Anchor purchased a builder's risk policy on the property. Lemon–Mohler provided service to Anchor on both policies as the producing agent.

¶ 7. Anchor fully paid the premium on the builder's risk policy. However, Jalanovich arranged a four-part installment plan to pay the premium on the windstorm policy. Although Anchor paid the windstorm policy's initial installment in September 2004, Anchor failed to make any further payments. Thus, when the second installment on the windstorm policy became due in December 2004, Anchor failed to send MWUA any payment for the amount. Due to Anchor's failure to pay the amount owed, MWUA cancelled the windstorm policy effective January 27, 2005. As stated in the cancellation notice MWUA sent to Anchor, the amount due to continue coverage under the windstorm policy totaled $660.93.

¶ 8. MWUA sent Lemon–Mohler a copy of the pending policy cancellation. On January 3, 2005, Darlene Fountain, a Lemon–Mohler customer-service representative, prepared and mailed a courtesy letter to Anchor about the pending cancellation.

Fountain testified at trial that her courtesy letter would have been the fourth notice sent to Anchor. According to Fountain's testimony, Lemon–Mohler received copies of the bills MWUA sent Anchor on November 12, 2004, and again on December 17, 2004. The November letter informed Anchor that its second payment was due on December 9, 2004, and the second letter informed Anchor that its payment was overdue. MWUA then sent Anchor a third notice that the windstorm policy would be cancelled on January 27, 2005, due to nonpayment of the premium. Finally, on January 3, 2005, Fountain sent Anchor a fourth letter stating that Lemon–Mohler had received a copy of the notice from MWUA about the pending policy cancellation. As the record reflects, MWUA issued the windstorm policy to Anchor as the owner of the policy, but Jalanovich owned Anchor. Although Jalanovich admitted during cross-examination that the notices may have been mailed to his office at Anchor, he denied that he ever personally received or read any of the four notices about the windstorm policy's pending cancellation.

¶ 9. In addition to Anchor's failure to pay the windstorm policy's premium, Anchor also fell behind on its payments to Hancock Bank. Anchor's owner, Jalanovich, contacted Pat Coffee, who knew Michael McDonald. The three men worked out an agreement as to the funding and completion of the project, and on January 12, 2005, the McDonalds executed an agreement with Anchor. The McDonalds agreed to satisfy the property's bank note and advance all necessary construction funding for the project. In exchange, Anchor agreed to convey the property to the McDonalds by warranty deed as security for their investment. The agreement also provided that the McDonalds would receive all their money back, with interest, once the property was sold. In addition, the parties agreed that Anchor would continue to oversee construction of the house. According to the testimony elicited at trial, construction on the house was forty percent to fifty percent complete at the time Anchor and the McDonalds executed their agreement.

¶ 10. On January 27, 2005, MWUA cancelled Anchor's windstorm policy due to Anchor's failure to pay the policy premium. The following day, on January 28, 2005, Anchor conveyed the property to the McDonalds by warranty deed. Prior to finalizing their agreement, the McDonalds asked Jalanovich whether the property was insured, and Jalanovich responded affirmatively. However, the McDonalds never personally contacted Lemon–Mohler to confirm that their new property had insurance coverage, and they required no proof of insurance from Jalanovich. The McDonalds also obtained no other insurance of their own on the property. Instead, in March 2005, the McDonalds asked Coffee and Jalanovich to double check that the property was covered for hurricane damage and to ensure that all project participants were included on Anchor's existing policies.

¶ 11. According to the testimony and evidence presented at trial, Lemon–Mohler maintained activity logs on its clients' accounts. Lemon–Mohler's activity log for Anchor's account showed all the activity and communications entered into Lemon–Mohler's computer about Anchor's insurance policies. The activity log reflected that, on March 23, 2005, Fountain spoke to Jalanovich about Anchor's policies. During the conversation, Jalanovich specifically authorized Fountain to also speak to Coffee later that day about Anchor's policies.

¶ 12. Fountain testified that Coffee inquired about making certain changes to Anchor's builder's risk and windstorm policies. As reflected in the activity log, in response to Coffee's questions, Fountain told Coffee that she could change the mortgagee named on both the builder's risk policy and the windstorm policy. The activity log further showed that, approximately ten minutes after speaking to Coffee, Fountain changed the mortgagee on the builder's risk policy to reflect Michael's name³ and added Coffee as an additional insured on the builder's risk policy.⁴ Although these changes to the builder's risk policy could be made easily online, Fountain testified that Anchor had to complete a change-request form for MWUA before she could make the requested change to the windstorm policy. To process the request to add Michael as the new mortgagee on the windstorm policy, Fountain prepared a change-request form for Anchor to pick up and complete. The paperwork instructed Jalanovich to return the completed form to either Lemon–Mohler or MWUA so the requested change to the windstorm policy could be processed. As the record reflects, however, Jalanovich never returned the change-request form to either Lemon–Mohler or MWUA.

¶ 13. Fountain testified at trial that she possessed no knowledge of the windstorm policy's cancellation when she spoke to Jalanovich and Coffee on March 23, 2005. Fountain stated that the two men only asked her about adding an insured to the policy and changing the policy's mortgagee. The testimony in the record reflects that, to view any billing or payment information on Anchor's policies, Fountain would have had to open a completely separate screen. Because neither Jalanovich nor Coffee inquired about billing or payment, Fountain testified she had no reason to check this information. Therefore, she never opened the separate screen. Fountain further testified that, had Jalanovich sent back the change-request form for the windstorm policy as directed, then she would have mailed the form to MWUA, and the cancelled policy would have been discovered by Lemon–Mohler much sooner. Fountain testified that MWUA would have informed Lemon–Mohler of the cancelled windstorm policy, and then Lemon–Mohler could have contacted Anchor about the need for new insurance coverage.

¶ 14. As the record reflects, Jalanovich never completed and returned to Lemon–Mohler the change-request form for the windstorm policy. In addition, Fountain testified that no one ever contacted...