Boswell v. Liberty Nat. Life Ins. Co.

• Decision Date: 13 May 1994
• Citation: 643 So.2d 580
• Parties: Wilhelmena B. BOSWELL, et al. v. LIBERTY NATIONAL LIFE INSURANCE COMPANY, et al. 1930222.
• Court: Alabama Supreme Court

Page 580

643 So.2d 580

Wilhelmena B. BOSWELL, et al. v. LIBERTY NATIONAL LIFE INSURANCE COMPANY, et al.

1930222.

Supreme Court of Alabama.

May 13, 1994.

Rehearing Denied June 17, 1994.

Joseph J. Boswell of Joseph J. Boswell, P.C., Mobile, for appellants.

Joseph C. Sullivan, Jr. and James W. Tarlton III of Hamilton, Butler, Riddick, Tarlton & Sullivan, Mobile, James W. Gewin, Michael R. Pennington and Michael S. Denniston of Bradley, Arant, Rose & White, Birmingham, for appellees.

Norman E. Waldrop, Jr. and M. Kathleen Miller of Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, Mobile, for amicus curiae Edith N. McAllister.

HOUSTON, Justice.

The plaintiffs appeal from the dismissal of their cases for a failure to state a claim upon which relief can be granted. Rule 12(b)(6), Ala.R.Civ.P. The defendants, Liberty National Life Insurance Company and Torchmark Corporation, argue that the dismissal was proper because they say the plaintiffs cannot possibly demonstrate that they have suffered any injury. We disagree, and therefore, we reverse.

At the heart of this dispute is a certain "cancer" policy, sold to the plaintiffs, and written by Liberty National. This policy was intended to supplement the plaintiffs' regular medical insurance and would oblige the insurance company to pay various medical costs in the event an insured, i.e., one of the plaintiffs, developed cancer. The policy was guaranteed to be renewable during the lifetime of the insured, subject only to adjustments in the premium. During 1987 and 1988, Liberty National told the plaintiffs, through its agents, that there was a newer and better cancer policy available. Although it would cost more, the agents promised that it would provide additional benefits and more complete coverage than the old policy had provided.

The plaintiffs allege, however, that the new policy not only cost them more, but offered less coverage than did the old one. They further allege that Liberty National engaged in a fraudulent campaign to induce them to exchange the old policy for the new, by promising additional coverage and more benefits, but knowing that the new policy provided less extensive coverage and would cost the customers more. The defendants, however, contend that even if this allegation were true, it would be irrelevant, because, as the parties stipulated, none of the plaintiffs has ever filed a claim under either the old or the new policy. Based on this reasoning, the trial court held that the plaintiffs had failed to state a claim because, it held, they had suffered no injury that would entitle them to relief under any theory of law. Rule 12(b)(6), Ala.R.Civ.P. The question before this Court is whether the plaintiffs' allegation that they have suffered a cognizable injury merely from the exchange of the policies and the payment of greater premiums, even though none of them has ever filed a claim under either the old or the new policy, is sufficient to state a claim of fraud.

"In all averments of fraud ... the circumstances constituting fraud ... shall be stated with particularity." Rule 9(b), A.R.Civ.P. In regard to a fraud claim that has been dismissed pursuant to Rule 12(b)(6), once this Court determines that the plaintiff complied with Rule 9(b), then this Court applies the following standard of review:

" 'It is a well-established principle of law in this state that a complaint, like all other pleadings, should be liberally construed, Rule 8(f), Ala.R.Civ.P., and that a dismissal for failure to state a claim is properly granted only when it appears beyond a doubt that the plaintiff can prove no set of facts entitling him to relief. Winn-Dixie of Montgomery, Inc. v. Henderson, 371 So.2d 899 (Ala.1979). Stated another way, if under a provable set of facts, upon any cognizable theory of law, a complaint states a claim upon which relief could be granted, the complaint should not be dismissed. Childs v. Mississippi Valley Title Insurance Co., 359 So.2d 1146 (Ala.1978).

" 'Where a [Rule] 12(b)(6) motion has been granted and this Court is called upon to review the dismissal of the complaint, we must examine the allegations contained therein and construe them so as to resolve all doubts concerning the sufficiency of the complaint in favor of the plaintiff. First National Bank v. Gilbert Imported Hardwoods, Inc., 398 So.2d 258 (Ala.1981). In so doing, this Court does not consider whether the plaintiff will ultimately prevail, only whether he has stated a claim under which he may possibly prevail. Karagan v. City of Mobile, 420 So.2d 57 (Ala.1982).'

"Greene County Board of Education v. Bailey, 586 So.2d 893 (Ala.1991), quoting Fontenot v. Bramlett, 470 So.2d 669, 671 (Ala.1985)."

Grant v. Butler, 590 So.2d 254, 255 (Ala.1991) (emphasis added in Grant ).

To establish a prima facie case of fraudulent misrepresentation, a plaintiff must show: (1) that the representation was false, (2) that it concerned a material fact, (3) that the plaintiff relied on the false representation, and (4) that actual injury resulted from that reliance. § 6-5-101, Ala.Code 1975; Crowder v. Memory Hill Gardens, Inc., 516 So.2d 602 (Ala.1987); International Resorts, Inc. v. Lambert, 350 So.2d 391 (Ala.1977).

To support a claim alleging suppression of a material fact, a plaintiff must show: (1) that the defendant suppressed a material fact, (2) that the defendant had a duty to communicate that material fact, either because of a confidential relationship between the parties, or because of the particular circumstances of the case, and (3) that the plaintiff suffered actual injury as a result of the suppression. § 6-5-102, Ala.Code 1975; Crowder, supra; Chapman v. Rivers Construction Co., 284 Ala. 633, 227 So.2d 403 (1969).

This appeal involves only the element of actual injury.

" '... [F]raud, without damage, or damage, without fraud, gives no cause of action; but, where these two do occur, there an action lieth.' Einstein, Hirsch & Co. v. Marshall & Conley, 58 Ala. 153, 160 [1877]; Wall v. Graham, 192 Ala. 396, 399, 68 So. 298, 299 [1915].

" '... Deceit and injury must concur.... Damage is of the essence of the action of deceit; an essential element to the right of action, and not merely a consequence flowing from it.' Wall v. Graham, supra."

Pihakis v. Cottrell, 286 Ala. 579, 583, 243 So.2d 685, 688 (1971).

Although the parties stipulated that none of the plaintiffs has ever filed a claim under either cancer policy, we now hold that if their allegations are true (and when reviewing a Rule 12(b)(6) dismissal we must assume that the plaintiff's allegations are true), then the payment of additional premiums on the unnecessary new policy was an injury--damage--to the plaintiffs, and therefore, could entitle them to compensation under a cognizable theory of law. The plaintiffs say they paid additional premiums on the new policy in the expectation that the benefits of the new policy, should they ever need them, would be greater, although the new policy, they say, had fewer benefits.

The exchange of the policies is the fraudulent act complained of, but it is not, in and of itself, the injury or damage. The injury or damage alleged is that the plaintiffs were persuaded, through the fraudulent acts of the defendants, to pay for something they did not receive. In other words, the alleged injury or damage was the payment of greater premiums that were unnecessary because the plaintiffs received no additional coverage in return for the greater premiums and lost benefits they already enjoyed under the old policy.

It is easy to understand the predicament the trial court faced in this case: the standard by which to judge whether a plaintiff has suffered damage or injury from an insurer's actions, when no claim has been filed, is nebulous at best, because there are two distinct lines of cases in this state. In the first line, the one on which the trial judge relied, claims were disallowed; although there was a period during which the plaintiffs did not receive the coverage for which they had paid, and even though the plaintiffs claimed that this was the result of the defendants' allegedly fraudulent acts, that period had passed without the plaintiffs' having filed a claim. See, Moore v. Liberty National Life Ins. Co., 581 So.2d 833 (Ala.1991); Allen v. Gulf Life Insurance Co., 617 So.2d 664 (Ala.1993); and Applin v. Consumers Life Insurance Co., 623 So.2d 1094 (Ala.1993). The second line of cases has declared the fraud complete, and actionable, at the time the allegedly fraudulent transaction occurred, viewing the injury or damage as the payment of unnecessary premiums. See, e.g., Willingham v. United Ins. Co. of America, 628 So.2d 328 (Ala.1993); Liberty National Life Insurance Co. v. Waite, 551 So.2d 1003 (Ala.1989); Guinn v. American Integrity Ins. Co., 568 So.2d 760 (Ala.1990); Brewton v. Alabama Farm Bureau Mut. Cas. Ins. Co., 474 So.2d 1120 (Ala.1985); Old Southern Life Ins. Co. v. Woodall, 348 So.2d 1377 (Ala.1977). We now believe that the better law is in this second line of cases. Therefore, to the extent that the holdings in Moore v. Liberty National Life Ins. Co., 581 So.2d 833 (Ala.1991), Allen v. Gulf Life Insurance Co., 617 So.2d 664 (Ala.1993), and Applin v. Consumers Life Insurance Co., 623 So.2d 1094 (Ala.1993), are inconsistent with cases declaring that the injury or damage from the fraudulent transaction is the payment of unnecessary premiums, these cases are overruled.

When a person, such as Wilhelmena Boswell in this case, buys cancer insurance, she hopes that she will never have to "use" it. That does not mean that she cannot be injured by the loss of, or a reduction in, those benefits that could be claimed, should that very event against which she sought to be insured ever occur and she was forced to "use" the policy. An insurer has already weighed the risk that that event will occur and has contractually expressed its willingness to take that risk for a...