Mladineo v. Schmidt
2010 Miss. LEXIS 569
| Miss. | 2010Background
- insureds purchased a homeowner's policy after discussions about coverage with a Nationwide agent; policy explicitly excludes flood/water damage; insureds received the policy about six weeks post-closing and did not read it before Katrina; Katrina damaged the property and insureds claimed coverage for wind/water, including flood-type exposures; trial court granted summary judgment to defendants; Mississippi Supreme Court reverses in part, affirms in part, and remands for further proceedings.
- insureds alleged agent misrepresented flood coverage and failed to procure requested coverage; claims included negligence, negligent misrepresentation, and bad-faith theories; defendants asserted duty-to-read and imputed-knowledge doctrines as bar to claims; court had to determine whether these doctrines are affirmative defenses or substantive law; issues also included whether Nationwide could be held liable for agent’s apparent authority and whether a duty to investigate existed.
- there was extensive discovery; the trial court treated duty-to-read/imputed-knowledge as defenses; en banc majority held these doctrines are substantive law; the court remanded negligence-related issues for trial while dismissing others as barred by policy language; dissenting opinions disagree on the breadth of the duty-to-read and related theories.
- the court discusses whether the “duty to read” was waived; it discusses the imputed-knowledge doctrine and its interaction with insureds’ reliance; it addresses whether the doctrines automatically bar certain claims against the insurer; it analyzes the insurer’s investigation duty and public policy implications; it concludes with partial affirmance, partial reversal, and remand.
- the opinion also clarifies that Mississippi law imputes knowledge of policy terms to insureds regardless of reading the policy, and overrules a contrary view from Hollins v. Hollins in part; it clarifies that an insurer may be liable for agent conduct under apparent authority in some contexts; it preserves a remand for a negligence claim while affirming dismissal of other claims on summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of duty-to-read/imputed-knowledge defenses | Mladineos claim waiver due to late assertion and prolonged participation | Defendants asserted duty-to-read/imputed-knowledge as substantive law defenses | Waiver not found; doctrines are substantive law, not waived defenses |
| Doctrines auto-bar negligence, failure-to-procure, negligent misrepresentation | Duty-to-read precludes reliance and imputes knowledge to insureds | Knowledge imputed; misrepresentations contradicted by policy not actionable | Negligence and failure-to-procure claims partially remanded; negligent misrepresentation barred where contradicted by policy language |
| Nationwide's vicarious liability for agent/apparent authority | Nationwide bound by agent's alleged misrepresentations | Agent actions not binding under apparent authority in this context | No liability for apparent authority under the facts; claims against Nationwide not sustained on this theory |
| Public policy and duty-to-read | Applying duty-to-read could enable misrepresentation without liability | Public policy supports holding insureds to policy terms | Public policy not violated by duty-to-read/imputed-knowledge doctrines; no widespread policybarrier |
| Nationwide's duty to investigate Schmidt's E&O claim | Nationwide owed a duty to fairly investigate agent errors | No duty to investigate Schmidt's E&O claim against the insurer | No duty to investigate E&O claim; summary judgment affirmed on this issue |
Key Cases Cited
- Atlas Roofing Mfg. Co., Inc. v. Robinson & Julienne, Inc., 279 So.2d 625 (Miss. 1973) (knowledge of policy imputed to insureds; duty to read implied)
- Oaks v. Sellers, 953 So.2d 1077 (Miss. 2007) (knowledge of policy contents imputed)
- Stephens v. Equitable Life Assurance Soc'y of U.S., 850 So.2d 78 (Miss. 2003) (insureds bound by policy contents even if unread)
- Cherry v. Anthony, Gibbs, Sage, 501 So.2d 416 (Miss. 1987) (insureds bound by contract contents; oral representations may be barred)
- Zepponi v. Home Ins. Co., 248 Miss. 828, 161 So.2d 524 (Miss. 1964) (insured knowledge of terms by reliance context)
- Rosenstock v. Miss. Home Ins. Co., 82 Miss. 674, 35 So. 309 (Miss. 1903) (silent acceptance binds insured to policy terms)
- Hollins v. United States, 830 So.2d 1230 (Miss. 2002) (plurarity; reliance on agent prior to policy delivery; later contradicted by policy terms; overruled in part)
- Merrill, 978 So.2d 613 (Miss. 2007) (duty to read not applied retroactively to pre-policy delivery misrepresentations)
- Gulf Guar. Life Ins. Co. v. Kelley, 389 So.2d 920 (Miss. 1980) (insureds may not rely on agent’s misrepresentations that would be disclosed by reading policy)