Ballard v. Lee
| Decision Date | 22 September 1995 |
| Docket Number | No. 895-NAL01-118-90,895-NAL01-118-90 |
| Citation | 671 So.2d 1368 |
| Parties | Scottie BALLARD v. Alan Godfrey LEE, individually and as representative of those certain underwriters at Lloyd's signatory to Policy 1921295. |
| Court | Alabama Supreme Court |
Larry W. Morris and Clay Hornsby, Alexander City, Harry Green and Wyatt Howell, Hamilton, for Appellant.
David Leonard and Gilbert M. Malm, Atlanta, Georgia, Philip H. Butler, Montgomery, for Appellee.
Scottie Ballard appeals from a summary judgment entered in favor of Alan Godfrey Lee in Ballard's action against Lee and others seeking compensation for alleged insurance fraud.
In late August 1990, Scottie Ballard visited the office of the Sealy Insurance Agency ("Sealy") in Hamilton, Alabama, seeking property coverage on a restaurant that he had recently purchased. During that visit, Ballard and Sealy employees discussed the description and the value of the property and the consequent amount of coverage. Ballard requested coverage for the structure in the amount of $85,000 and coverage for its contents in the amount of $45,000, according to his estimations of their respective values. Sealy told him that it would begin searching for a company that would supply the requested coverage and that Sealy would notify him within a few days.
Sealy's initial attempts to locate an authorized insurance agency 1 that would supply the coverage were unsuccessful. Consequently, officials at Sealy contacted North Alabama Insurance, Inc. (hereinafter "NAI"), a "surplus lines insurance broker, to assist in the search." 2 Brief of Appellee, at 7. NAI contacted Frizzell International, Limited (hereinafter "Frizzell"), a London brokerage firm, which, in turn, solicited coverage from a number of independent "underwriting syndicates" doing business at Lloyd's, London. A "certain" syndicate (the "Syndicate") agreed to issue a policy after the receipt of an inspection report, an executed application form, and the installation of a specified fire protection system.
Frizzell notified NAI of the Syndicate's terms, and NAI informed Sealy. Subsequently, Sealy employee Travis Ray Carter relayed the information to Ballard, saying: Ballard assented to these conditions and paid the premium to Sealy, which subsequently forwarded the appropriate amount to the Syndicate.
On August 22, 1990, notice of Ballard's acceptance was relayed to NAI by Carter, who telephoned Alan Mitchell, an employee of NAI. Because Carter was unable to speak personally to Mitchell, he left a message, stating: "Bind." The same day, Mitchell sent the following facsimile message: The following day, Mitchell contacted Frizzell again by facsimile, asking: "WERE YOU ABLE TO GET BOUND EFF 8/22 PER MY FAX OF SAME DATE?" To that request, Frizzell immediately responded with a facsimile message to NAI, stating, in pertinent part: "Confirm Bound 100% Lloyds Effective 22nd Aug 90."
On August 24, 1990, NAI ordered a local engineering firm to inspect the property. The inspector viewed Ballard's property on August 30, 1990, and reported his findings and recommendations to NAI, which then forwarded the report to the Syndicate. That inspection, however, was accomplished after the restaurant had closed for the day. Consequently, Mitchell ordered that a second inspection be performed during business hours. On October 2, 1990, Frizzell asked Mitchell to confirm (1) that the restaurant was "fully operational," (2) that the fire protection system had been installed, (3) that the inspector's recommendations had been implemented, and (4) that a "reinspection report" would "be forthcoming within [the] next 30 days." On October 16, 1990, Mitchell sent a facsimile message to Frizzell, confirming the implementation of Frizzell's conditions.
On October 19, 1990, the Syndicate issued a policy containing the following pertinent provisions:
(Emphasis added.)
On December 28, 1990, Ballard's restaurant was entirely destroyed by fire. Subsequently, estimates of the cost to replace the property were submitted, and GAB Business Services, Inc. (hereinafter "GAB"), was engaged to adjust the claim. Based on the lowest cost estimate, GAB calculated the "actual cash value" of the building to be $52,870 and the "actual cash value" of the contents to be $27,475.33. These computations included deductions in the amounts of $32,130 for depreciation of the building and $24,862.51 for depreciation of the contents.
On March 12, 1991, Frizzell issued to Ballard checks in the amounts of $52,870 and $27,475.33 for the loss of the building and the contents, respectively. With these funds, Ballard retired a $65,000 mortgage on the property and paid off other, unrelated debts. Ballard did, however, protest the shortfall of $56,992.51 from the policy limits. The Syndicate defended its method of payment, contending that Ballard's right to recover the face amount of the policy was contingent upon his reconstruction of the building. Ballard's efforts to obtain a loan for reconstruction failed, partly because the Syndicate refused to serve as a surety on any obligation for that purpose. Ballard subsequently used the restaurant location as collateral for a $10,000 loan, the proceeds of which he also spent on nonrestaurant debts. Eventually, Ballard lost the property when he defaulted on his repayment of the $10,000 note and the mortgagee foreclosed.
On February 4, 1992, Ballard sued the Syndicate and NAI. Counts One and Two of his two-count complaint alleged breach of contract and bad faith, respectively. On April 28, 1992, Ballard amended his complaint to add as defendants Sealy, Carter, "and Alan Godfrey Lee, individually and as representative of those certain Underwriters at Lloyd's Signatory To Policy No. 895-NAL01-118-90" (likewise hereinafter referred to as the "Syndicate"). Also, the amended complaint contained a third count, basically alleging that the Syndicate had fraudulently suppressed the "actual cash value" method by which it limited the amount of benefits that Ballard could obtain under the policy.
The same day, the Syndicate moved the trial court to dismiss the counts contained in the original complaint. Ballard did not respond to that motion, and, on February 12, 1993, the trial court granted the Syndicate's motion with prejudice. On March 16, 1993, the Syndicate moved for a summary judgment on count three, as contained in the amended complaint. The parties argued this motion before the trial judge on April 9, 1993. On April 15, 1993, the trial court entered a summary judgment in favor of the Syndicate, and certified the judgment as a final judgment, pursuant to Ala.R.Civ.P. 54(b). From that judgment, Ballard appealed.
Ballard advances two theories as bases for his fraud claim. The first theory is based on allegations that Carter, as an agent of the Syndicate, misrepresented or suppressed material facts. The second theory is based on allegations that the policy, itself, fraudulently suppressed material facts.
Ballard contends that Carter was the agent of the Syndicate, or, at least, that he concurrently represented the Syndicate and Ballard. The Syndicate denies that Carter was an agent of the Syndicate, contending that he was merely a broker representing Ballard in Ballard's search for coverage.
The functions and characteristics of insurance "agents" and "brokers," respectively, are set forth in Ala.Code 1975, § 27-7-1(a). That section defines those two terms:
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