Akpan v. Farmers Ins. Exchange, Inc.

• Decision Date: 12 January 2007
• Docket Number: 2050420.
• Citation: 961 So.2d 865
• Parties: Job J. AKPAN and Dalphne D. Akpan v. FARMERS INSURANCE EXCHANGE, INC., David M. Mangrum, GAB Robbins, Inc., and Matthew Jackson.
• Court: Alabama Court of Civil Appeals

961 So.2d 865

Job J. AKPAN and Dalphne D. Akpan v. FARMERS INSURANCE EXCHANGE, INC., David M. Mangrum, GAB Robbins, Inc., and Matthew Jackson.

2050420.

Court of Civil Appeals of Alabama.

January 12, 2007.

Barry W. Walker, Birmingham, for appellants.

Ruth Ann Hall of Spurrier, Rice & Hall, Huntsville, for appellees Farmers Insurance Exchange, Inc., and David M. Mangrum.

James S. Lloyd, W. Hill Sewell, and Karen D. Farley of Lloyd, Gray & Whitehead, P.C., Birmingham, for appellees GAB Robbins, Inc., and Matthew Jackson.

MURDOCK, Judge.

Job J. Akpan and Dalphne D. Akpan (collectively, "the Akpans") appeal from summary judgments entered in favor of Farmers Insurance Exchange, Inc. ("Farmers"), David M. Mangrum, GAB Robbins, Inc., and Matthew Jackson by the Madison Circuit Court. We affirm.

In 2001, the Akpans owned a convenience store. They obtained a policy of insurance from Farmers that insured, among other things, the real and personal property associated with their store against loss and damage. The coverage period began on March 13, 2001, and lasted until October 6, 2001.

The Akpans suffered losses because of burglary and vandalism at their store on three separate occasions: July 17, 2001; July 31, 2001; and August 1, 2001. The Akpans made claims for these losses under the insurance policy shortly after the losses occurred. At the time they made their claims, Farmers had not yet provided to the Akpans a copy of their insurance policy. Farmers did, however, provide to the Akpans a copy of their insurance policy in September 2001.¹

Farmers contracted with GAB Robbins, Inc. ("Robbins"), to investigate and adjust the Akpans' claims. Matthew Jackson was the Robbins employee assigned the task of conducting the investigation. Although Farmers contracted with Robbins to investigate and adjust the Akpans' claims, Farmers maintained the right to determine coverage under the policy.

The policy of insurance provided several conditions to the Akpans' recovery for their losses. One of those conditions was that the Akpans submit to an examination under oath if requested by Farmers. In this regard, the policy stated:

E. LOSS CONDITIONS

The following conditions apply in addition to the Common Policy Conditions and the Commercial Property Conditions.

". . . .

"3. Duties In The Event Of Loss Or Damage

". . . .

b. We may examine any insured under oath, while not in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim, including an insured's books and records. In the event of an examination, an insured's answers must be signed."

On five separate occasions in the latter half of 2002, Farmers, through an attorney, scheduled the Akpans to appear for examinations under oath.² The Akpans failed to appear for their examinations on any of these occasions, despite the fact that Farmers' attorney, at least initially, coordinated the dates for the examinations with the Akpans' attorney. The Akpans never submitted to an examination under oath as Farmers had requested.

The Akpans filed the present action on March 31, 2005, against Farmers, Mangrum (the Farmers insurance agent who sold the policy to the Akpans), Robbins, and Jackson (collectively, "the defendants"). The Akpans alleged that the defendants had breached the insurance contract, had acted in bad faith with regard to the handling and disposition of the Akpans' claims, had committed professional negligence in failing to obtain full and adequate insurance for the Akpans and in failing to properly investigate and resolve the Akpans' claims, and had committed fraud by failing to disclose material information to the Akpans.

On May 6, 2005, Farmers and Mangrum filed a motion to dismiss the action for failure to state a claim. They asserted that the Akpans were not entitled to recover under the insurance contract because the Akpans had failed to submit to the examinations under oath that Farmers had sought from them, thus violating a condition precedent to coverage under the policy. They supported their motion with an affidavit from the attorney who had attempted to schedule the Akpans' examinations under oath on Farmers's behalf and with a copy of the insurance policy. On the same day, Farmers and Mangrum filed a motion for a protective order allowing them to not respond to the discovery requests that the Akpans had served on them until the court ruled on the motion to dismiss.

On May 17, 2005, the Akpans filed a response to Farmers's and Mangrum's motion to dismiss. The Akpans argued that, because they were not provided with a copy of their insurance policy before they made claims on the policy, "they had no idea what the duties and responsibilities were" under the policy. They asserted that Farmers failed to provide them with a copy of their policy in a timely manner in violation of Ala.Code 1975, § 27-14-19(a). That statute provides that "every policy shall be mailed or delivered to the insured or to the person entitled thereto within a reasonable period of time after its issuance. . . ."

The Akpans also filed on May 17, 2005, an opposition to the motion for protective order and a motion to compel discovery. They argued that Alabama law provides a permissive discovery standard with regard to fraud and bad-faith claims, and that they were in need of the claims file Farmers had generated regarding the Akpans' claims on the insurance policy.

On May 26, 2005, the Akpans submitted an affidavit, executed by Job Akpan, which stated in pertinent part:

"We had a policy of insurance with the Farmers Insurance Exchange from the period March 13, 2001 until October 6, 2001, which covered us from certain losses, including burglary and vandalism regarding convenience stores that we owned in Huntsville. We were relatively new to operating such businesses and carrying insurance on them. However we knew insurance was important to protect us in the case of a loss and therefore we procured our insurance and paid our premiums diligently.

"Unfortunately, we were never provided with a copy of the policy which we had in effect until after our claims were made regarding our losses suffered on July 17, 31, and August 1, 2001. Therefore, we had no idea what our rights and obligations were under the policy.

"Moreover, we were never told that if we did not submit to an examination under oath that our claims would be summarily denied by Farmers. Had we known of this possibility, we would have submitted to the examinations under oath even though we were gravely concerned about how Farmers had failed to make us aware of our rights so far."

On June 14, 2005, following oral argument on Farmers's and Mangrum's motion to dismiss, the Akpans filed a second response to that motion. They argued that before an insurer can avoid coverage because of its insured's failure to cooperate in the investigations of the insured's claims under the insurance policy, the failure to cooperate must be material and substantial, and the failure must result in prejudice to the insurer. The Akpans argued that Farmers had not shown that their refusal to submit to examinations under oath constituted material and substantial failures of cooperation, nor had it shown that it had been prejudiced by the Akpans' actions. The Akpans also contended that whether an insured has breached the duty to cooperate is usually a question of fact.

On September 27, 2005, the trial court granted Farmers's and Mangrum's motion and entered a judgment in their favor. The order granting the motion stated, in pertinent part:

"Because of the need for consideration of extraneous information outside of that contained in the pleadings, the Court has elected to treat the Motion to Dismiss as a Motion for Summary Judgment pursuant to Ala. R. Civ. P. 56.

"The Court has considered the evidence presented by the parties including a copy of the subject insurance policy provided. It has noted that said policy requires the insureds to submit to an examination under oath `as may be reasonably required.' It is further undisputed that the Plaintiffs in this action, Job Akpan and Dalphne Akpan, were requested on numerous occasions to submit to such examinations under oath but failed to comply.

"Pursuant to Nationwide Insurance Company v. Nilsen, 745 So.2d 264 (Ala. 1998), an insured's duty to submit to an examination under oath as required in an insurance policy is a condition precedent to his or her recovery under an insurance contract. Moreover, the Alabama Supreme Court determined that such an obligation was a `strict' condition precedent. The Plaintiffs in this case have provided no case law indicating that mistake, confusion or lack of knowledge of such a strict condition negated their obligation to comply. Moreover, they have failed to demonstrate that any additional discovery would materially affect the outcome of this case. Accordingly, this Court finds that no genuine issue of material fact exists in this case and that the Defendants, David Mangrum and Farmers Insurance Exchange, Inc. are entitled to a judgment as a matter of law."

The Akpans filed a motion to reconsider on October 5, 2005.

On October 11, 2005, Robbins and Jackson filed a motion for a summary judgment. They argued that they could not be held liable for breach of contract or bad faith, the first two counts in the Akpans' complaint, because they were not parties to the insurance contract between the Akpans and Farmers. As to the Akpans' fraud count, Robbins and Jackson argued that the Akpans "failed to meet any of the elements required to prevail on a fraud claim," which Robbins and Jackson correctly noted to be a false statement of a material fact upon which the plaintiff reasonably relied and was thereby damaged. Robbins and Jackson also argued that the Akpans had failed to plead their fraud count with the requisite specificity. As to the Akpans' professional-negligence count, Robbins...