Allstate Ins. Co. v. Beavers

• Decision Date: 11 December 1992
• Citation: 611 So.2d 348
• Parties: ALLSTATE INSURANCE COMPANY v. Donald BEAVERS. 1910912.
• Court: Alabama Supreme Court

Page 348

611 So.2d 348

ALLSTATE INSURANCE COMPANY v. Donald BEAVERS.

1910912.

Supreme Court of Alabama.

Dec. 11, 1992.

Barbara F. Olschner and Alice W. Durkee of Olschner & Associates, P.C., Birmingham, for appellant.

Garve Ivey, Jr. of Wilson & King, Jasper, for appellee.

MADDOX, Justice.

This case presents a question of whether an insured, who was injured in an automobile accident, waived his right to receive underinsured motorist insurance benefits because he settled with the tort-feasor and the tort-feasor's liability insurance carrier and gave a full release without notifying his carrier of underinsured motorist insurance.

The facts are essentially undisputed. The insured, Donald Beavers, was injured in an automobile accident on March 9, 1990. He hired an attorney, Garve Ivey, who represented him in his claim against (1) John Kenneth Cochran, a minor, and (2) Ronald L. Cochran, the minor's father, who owned the other vehicle. Both Cochrans were insured by Alfa Insurance Company (Alfa), with liability limits of $25,000.

Beavers had an automobile liability policy with Allstate Insurance Company that included coverage for underinsured motorist benefits. It contained the following provisions:

"Part V--Uninsured Motorist Insurance (Coverage SS):

"Exclusions--What is not covered.

"This coverage does not apply to:

"(1) Any person insured who makes a settlement without our written consent.

"....

"Assistance and Cooperation.

"We may require the person insured to take appropriate action to preserve all rights to recover damages from anyone responsible for the bodily injury."

Beavers's attorney notified Allstate on April 17, 1990, of the accident and that it "could possibly be a case of uninsured coverage." On May 1, 1990, Allstate wrote to Beavers's attorney, requesting that he send Beavers's medical records. In the letter, Allstate also notified the attorney that it had subrogation rights under the policy and requested that the attorney notify Allstate before Beavers signed a release.

On May 9, 1990, Beavers's attorney wrote to a senior staff claim representative for Allstate, stating that "if it in fact develops that there is an uninsured motorist claim, I will look forward to working with you." On July 16, 1990, an agent of Allstate wrote to the attorney and asked for the status of the underinsured motorist claim. On July 24, 1990, the attorney wrote Allstate, stating that he had not settled with the tort-feasor's carrier, Alfa, and that as soon as he had "a handle" on the total medical bills, he would contact Allstate again. On July 30, 1990, Beavers's attorney wrote Allstate again, enclosing a copy of Beavers's medical bills and a copy of the demand letter to an Alfa adjuster.

Between July 30, 1990, and December 12, 1990, there was no communication between Allstate and Beavers or his attorney. Allstate received no information and made no investigation concerning the status of Beavers's possible underinsured motorist claim or the status of Beavers's claim against the tort-feasor. On December 13, 1990, Beavers settled his claim with the tort-feasor, accepted a settlement check, and executed a full and final release. On that same day, Beavers's attorney contacted Allstate by telephone and notified it that Alfa had paid its limits and that he wanted to conclude the case by year's end. Allstate requested evidence of Alfa's policy limits, evidence that Alfa had tendered those limits, and a list of medical expenses Beavers was claiming as a result of the accident. Beavers's attorney agreed to provide all of the requested information. On December 18, 1990, Allstate wrote Beavers's attorney and again asked for the information that had been requested by telephone on December 13, 1990. On January 7, 1991, without providing any of the information requested by Allstate on December 13 and December 18, 1990, Beavers's attorney wrote Allstate, demanding the policy limits of Beavers's underinsured motorist coverage.

On January 9, 1991, Allstate contacted Alfa and learned that a release had already been executed. Allstate requested a copy of the release from Alfa. On January 11, 1991, Allstate wrote Beavers's attorney to inform him that it had learned that a release had been executed and to ask for a copy of the release so that it could determine how to proceed. On January 18, 1991, Alfa sent Allstate, via telecopier, a copy of the release that Beavers had executed on December 13, 1990.

On February 8, 1991, Allstate filed a complaint in the Circuit Court of Jefferson County, seeking a judgment declaring that Beavers was precluded from recovering under the uninsured/underinsured motorist coverage provisions of his automobile liability policy on the ground that he had executed a full and final release of the tort-feasor without notifying Allstate of his intent to do so. The declaratory judgment action was transferred to the Circuit Court of Walker County, pursuant to Rule 82(d)(1), Ala.R.Civ.P., based on the consent of the parties.

On the same day that Allstate filed its declaratory judgment complaint, Beavers filed a complaint against Allstate in the Circuit Court of Walker County, alleging breach of contract, fraud, and bad faith failure to pay the insurance claim. On August 2, 1991, the circuit court of Walker County consolidated the two actions.

Subsequently, Allstate moved for a summary judgment based upon Beavers's failure to give Allstate notice of his settlement with the tort-feasor before accepting the settlement and executing a release. The trial court denied Allstate's summary judgment motion. The trial court also denied Allstate's motion to correct certain statements in its summary judgment order that Allstate argued were incorrect or that were highly contested. Allstate then petitioned pursuant to Rule 5, Ala.R.App.P., for permission to appeal the court's interlocutory order denying its motion for summary judgment. This Court granted permission to appeal.

The rules governing summary judgments require that a trial court, in order to properly enter a summary judgment, 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, Ala.R.Civ.P.; Berner v. Caldwell, 543 So.2d 686, 688 (Ala.1989) (quoting Schoen v. Gulledge, 481 So.2d 1094 (Ala.1985)). On review, in determining whether a party was entitled to a summary judgment, 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, and, of course, we must review the record in a light most favorable to the nonmovant and must resolve all reasonable doubts against the movant. Wilson v. Brown, 496 So.2d 756, 758 (Ala.1986); Harrell v. Reynolds Metals Co., 495 So.2d 1381 (Ala.1986). See also Hanners v. Balfour Guthrie, Inc., 564 So.2d 412 (Ala.1990). ¹

Allstate, in its brief, succinctly states the issue:

"Must a plaintiff give his underinsured motorist carrier notice of a proposed settlement with the tort-feasor's carrier prior to executing a release of the tort-feasor to preserve his right to pursue underinsured motorist benefits?"

This Court has addressed the rights of an insured and his uninsured/underinsured motorist insurance carrier on several occasions, but we have not addressed the question in light of the facts in this record, which show that the insured, Beavers, although he notified Allstate of the possibility of a claim and of the fact that the tort-feasor had some insurance coverage, nevertheless, did not notify Allstate of his settlement with the alleged tort-feasor and the tort-feasor's carrier until after he had settled and executed a release.

In Lambert v. State Farm Mutual Insurance Co., 576 So.2d 160 (Ala.1991), this Court reviewed the history and the underlying purpose of consent-to-settle clauses in uninsured/underinsured motorist insurance contracts in view of the provisions of Ala.Code 1975, § 32-7-23. This Court, in Lambert, also reviewed the earlier decisions leading up to that case, ² where this Court established procedures to be followed in cases involving the rights of an insured and the underinsured motorist insurance carrier. Although each case presents different facts and circumstances that must be considered, the following general rules provide a guideline in deciding these cases:

"(1) The insured, or the insured's counsel, should give notice to the underinsured motorist insurance carrier of the claim under the policy for underinsurance benefits as soon as it appears the insured's damages may exceed the tort-feasor's limits of liability coverage.

"(2) If the tort-feasor's liability insurance carrier and the insured enter into negotiations that ultimately lead to a proposed compromise or settlement of the insured's claim against the tort-feasor, and if the settlement would release the tort-feasor from all liability, then the insured, before agreeing to the settlement, should immediately notify the underinsured motorist insurance carrier of the proposed settlement and the terms of any proposed release.

"(3) At the time the insured informs the underinsured motorist insurance carrier of the tort-feasor's intent to settle, the insured should also inform the carrier as to whether the insured will seek underinsured motorist benefits in addition to the benefits payable under the settlement proposal, so that the carrier can determine whether it will refuse to consent to the settlement, will waive its right of subrogation against the tort-feasor, or will deny any obligation to pay underinsured motorist benefits. If the insured gives the underinsured motorist insurance carrier notice of the claim for underinsured motorist benefits, as may be provided for in the policy, the carrier should immediately begin investigating the claim, should conclude such investigation within a reasonable time, and should notify its insured of the action it proposes with...