Allen v. Gulf Life Ins. Co.

• Citation: 617 So.2d 664
• Parties: Lillie ALLEN v. GULF LIFE INSURANCE COMPANY, et al. 1912007.
• Decision Date: 02 April 1993
• Court: Alabama Supreme Court

Page 664

617 So.2d 664

Lillie ALLEN v. GULF LIFE INSURANCE COMPANY, et al.

1912007.

Supreme Court of Alabama.

April 2, 1993.

Ronald O. Gaiser, Jr. and James P. O'Neal of Gaiser and O'Neal, Birmingham, and J.L. Chestnut, Jr. of Chestnut, Sanders, Sanders, Williams & Pettway, P.C., Selma, for appellant.

Charles D. Stewart, Betsy P. Collins and Edward M. Weed of Spain, Gillon, Grooms, Blan & Nettles, Birmingham, for Gulf Life Ins. Co. and American Gen. Corp.

Frank C. Wilson III of Gamble, Gamble, Calame & Wilson, Selma, for Frances Williamson.

MADDOX, Justice.

The issue presented by this appeal is whether an insured can have a cause of action against her insurer and its agent for fraud based on misstatements in the insurance application, even though the insurer never denied a claim under the policy and never sought to void the policy and the policy was incontestable at the time suit was filed. The trial court entered summary judgments in favor of the insurer and its agent on the insured's fraud claim, on the ground that the insured had suffered no damage. We affirm.

On December 2, 1989, Lillie Allen applied for a policy of hospital indemnity insurance with Gulf Life Insurance Company. In her affidavit, Allen alleged that in response to a general question about her health, she told Frances Williamson, an agent for Gulf Life, that she had high blood pressure. Allen also alleged that she was asked no other questions regarding her health, but that further questioning would have revealed that she also had a thyroid condition. The completed application did not mention either of these two preexisting conditions. Allen signed the application as the proposed insured. Williamson, in her affidavit, disputed Allen's claims and stated that she asked all of the health questions on the application and that she accurately reported Allen's responses. According to Williamson, Allen's responses did not include any information about high blood pressure or a thyroid condition.

Allen's complaint can be succinctly stated as follows: 1) that her policy was issued based on an application that contained the agent's misstatements regarding her high blood pressure and thyroid condition; 2) that the policy, therefore, provided no coverage for these conditions during the two-year period of contestability; ¹ and 3) that Allen was charged, and paid, a premium based on coverage she did not receive.

It is undisputed that Allen paid standard premiums for a person of her age and sex on a timely basis from the date of the issue, December 1, 1989, through the expiration of the contestability period, December 1, 1991. It is also undisputed that the relevant provisions of the policy are as follows:

"PRE-EXISTING CONDITION means a condition misrepresented or not revealed in the application and for which symptoms existed prior to the effective date of coverage that would cause an ordinarily prudent person to seek diagnosis, care or treatment within the two (2) year period prior to the date of his or her coverage.

"PRE-EXISTING CONDITION LIMITATIONS. We will not pay for loss commencing within 2 years that was caused by or connected with a pre-existing condition. If such injury or sickness was shown on the application and we did not exclude it from coverage, it will not be considered a pre-existing condition.

"INCONTESTABILITY. After the policy has been in force for a period of two years during your lifetime, it shall become incontestable as to the statements contained in the application.

"TIME LIMIT FOR CERTAIN DEFENSES. We will not deny or reduce a claim for a loss incurred after two years from the effective date of coverage under this policy on the ground that a disease or physical condition had existed prior to the effective date of coverage under this policy."

Allen made no claims during the contestability period and the insured denied no claims on the basis of the preexisting conditions. After the expiration of the contestability period, Gulf Life could not deny or contest a claim because of a preexisting disease or condition.

Allen, alleging fraud and suppression of material facts, filed this action against Gulf Life and Williamson on April 10, 1992, several months after the policy became incontestable.

Rule 56, A.R.Civ.P., sets forth a two-tiered standard for entering a summary judgment. To enter a summary judgment, the trial court must determine (1) that there is no genuine issue of material fact, and (2) that the moving party is entitled to a judgment as a matter of law. Rule 56(c); Berner v. Caldwell, 543 So.2d 686 (Ala.1989); Schoen v. Gulledge, 481 So.2d 1094 (Ala.1985). The standard of review applicable to a summary judgment is the same as the standard for granting the motion, that is, we must determine whether there was a genuine issue of material fact and, if not, whether the movant was entitled to a judgment as a matter of law. Our review is further subject to the caveat that this Court must review the record in a light most favorable to the nonmovant, Allen, and resolve all reasonable doubts against the movant, Gulf Life. ² Harrell v. Reynolds Metals Co., 495 So.2d 1381 (Ala.1986). See also Hanners v. Balfour Guthrie, Inc., 564 So.2d 412 (Ala.1990).

Thus, viewing the evidence in the light most favorable to the nonmovant, Allen, we must assume that (1) Williamson failed to properly record Allen's health conditions on the policy; (2) the policy was voidable or limited during the contestability period because of omissions in the application; and (3) during the first two years, the policy provided no coverage as to Allen's pre-existing high blood pressure and thyroid condition. However, the undisputed evidence shows that Allen made no claim under the policy during that period and that Gulf Life made no attempt to void, or in any way to impair, Allen's policy during that period.

Allen contends that she was damaged in two ways by Gulf Life. First, Allen argues that she was led to believe she had full insurance coverage when, in fact, she says, her coverage was arguably voidable or limited during the two-year period of contestability even though in fact she made no claim during this period. Second, Allen states that she paid full premiums for full coverage during a period when the policy was...