Brewton v. Alabama Farm Bureau Mut. Cas. Ins. Co., Inc.

• Decision Date: 09 August 1985
• Citation: 474 So.2d 1120
• Parties: John K. BREWTON and Shirley C. Brewton v. ALABAMA FARM BUREAU MUTUAL CASUALTY INSURANCE COMPANY, INC. 84-195.
• Court: Alabama Supreme Court

Page 1120

474 So.2d 1120

52 A.L.R.4th 1263

John K. BREWTON and Shirley C. Brewton v. ALABAMA FARM BUREAU MUTUAL CASUALTY INSURANCE COMPANY, INC.

84-195.

Supreme Court of Alabama.

Aug. 9, 1985.

James E. Hart, Jr., Brewton, and W.E. Garrett, Atmore, for appellants.

Reggie Copeland, Jr. and Joe Carl Jordan of Nettles, Barker & Janecky, Mobile, for appellee.

BEATTY, Justice.

Appeal by defendants John and Shirley Brewton from a summary judgment in favor of the plaintiff, Alabama Farm Bureau Mutual Casualty Insurance Company (Farm Bureau), in Farm Bureau's action for a declaratory judgment and on the defendants' counterclaim for the policy's proceeds and for damages based upon fraudulent misrepresentation. We affirm in part, reverse in part, and remand.

Mrs. Angeline Browning owned a home, its contents, and one acre of land on which these were located, near Huxford in Escambia County. Mrs. Browning and Mrs. Brewton went to Farm Bureau's agent in Brewton, Escambia County, to obtain a fire insurance policy. The policy was issued on July 9, 1982, in the name of the Brewtons.

Mrs. Browning died intestate in December 1982, and was survived by five sisters who were her heirs.

The dwelling and its contents were destroyed by fire on January 27, 1983. The Brewtons made a claim under the policy and filed a proof of loss form which disclosed that at the time of loss those having an interest in the property were the "Heirs of Angeline Browning."

Farm Bureau filed this declaratory judgment action alleging five counts. Count one alleged that the Brewtons had made a false claim of an ownership interest in the property on their application for insurance. Count two alleged that subsequent to the application Mrs. Brewton had falsely represented that she and her husband had been granted the property by Mrs. Browning. Count three alleged that after the fire Mr. Brewton falsely represented that he and his wife owned the home and its contents. Count four alleged that the Brewtons had no insurable interest. Count five alleged that the Brewtons had breached material provisions of the policy as a result of their misrepresentations.

In their counterclaim against Farm Bureau, the Brewtons alleged that the correct ownership of the property was made known to the agent, who, with this knowledge, stated that he would issue the policy, and that in reliance on this representation they purchased the policy. Thus, the Brewtons assert that Farm Bureau waived the requirement of title or is estopped to assert their lack of title. Farm Bureau denied these allegations.

Farm Bureau moved for summary judgment "on the grounds that there is no genuine issue as to any material fact with regard to the fact that the defendants had no insurable interest in either the dwelling or the contents in question." This motion was based upon the pleadings on file and the depositions of the Brewtons. The Brewtons' response to Farm Bureau's motion included depositions of Robert M. Woodall, the Farm Bureau agent. The trial court determined that Farm Bureau was entitled to judgment as a matter of law and that no genuine issue of fact existed with regard to defendant's counterclaim; accordingly, the trial court granted Farm Bureau's motion for summary judgment. It is from this judgment that the Brewtons appeal.

Mrs. Brewton deposed that at the time she applied for the policy of insurance, Mrs. Browning owned the home and its contents. Mrs. Brewton testified that she informed the agent Mr. Woodall that she wanted insurance on the house and that Mrs. Browning told him that she owned the house and was "going to will the house over" to the Brewtons. According to Mrs. Brewton, she told Mr. Woodall that Mrs. Browning would be "living in the home long as she lived," but that they, the Brewtons, would be responsible for the insurance premiums "and [for the policy] to be put in our name." She did not remember conversing with Mr. Woodall again, but left a check for the premium with Mrs. Browning, which was picked up later at the house by Mr. Woodall.

Mr. Robert M. Woodall, the Farm Bureau agent, testified by deposition that he filled out the application form according to Mrs. Brewton's information, and that Mrs. Brewton gave him a check for the premium. Mr. Woodall also testified that Mrs. Brewton represented to him that she and her husband were the sole owners of the property and that Mrs. Browning was a tenant. He related a telephone conversation he had with Mrs. Brewton following her visit to his office. According to Mr. Woodall, Mrs. Brewton verified that she and her husband were owners.

Both Mr. and Mrs. Brewton testified that Mrs. Browning left no will and that prior to her death she had not deeded the property to them. Mr. Brewton testified that neither he nor his wife had lived in the house after Mrs. Browning's death. The Brewtons apparently had not lived there prior thereto.

Plaintiffs argue that they had an insurable interest in the premises insured because, as Mrs. Brewton explained, Mrs. Browning, the owner, had raised Mr. Brewton and had told them that she would will the property to them, and thus Mr. Brewton had a "reasonable expectation" that he would receive title to the property. These facts, the plaintiffs maintain, together with the alleged fact that the insurer issued the policy knowing that the Brewtons did not hold the legal title at the time of issue, establish an "insurable interest" in the Brewtons.

Code of 1975, § 27-14-4, provides:

"(a) No contract of insurance of property or of any interest in property, or arising from property, shall be enforceable as to the insurance except for the benefit of persons having an insurable interest in the things insured as at the time of the loss.

"(b) 'Insurable Interest,' as used in this section, means any actual, lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction or pecuniary damage or impairment.

"(c) The measure of an insurable interest in property is the extent to which the insured might be damnified by loss, injury or impairment thereof."

These provisions are "[m]erely declaratory of those legal principles which have long governed the concept of insurable interest in this State." National Security Fire & Casualty Co. v. Hester, 292 Ala. 592, 596, 298 So.2d 236, 239 (1974).

The Brewtons rely upon Hester, supra, as authority for the claim that they had an insurable interest because of a "reasonable expectation" of receiving title to the Browning property. It must be pointed out that in Hester the insureds were vendees of real property who had taken actual possession of a house and land under a contract of sale, had made a partial payment of the sale price, and had made substantial improvements to the insured premises. Thus, and in spite of the argument of the insurer that the contract between the vendor and vendee placed the risk of loss upon the vendor, this Court held that the vendee had an insurable interest. Commenting upon the theories of waiver and estoppel as applied to the insurer, this Court stated:

"[T]hese theories only require that the insureds act in good faith and have some sort of pecuniary interest in the insured property at the time of the loss...." (Emphasis added.) 292 Ala. at 601, 298 So.2d at 244.

See also American Equitable Assurance Co. v. Powderly Coal & Lumber Co., 225 Ala. 208, 142 So. 37 (1932), holding that an estoppel must be supported by an insurable interest, thus invalidating the dictum contra expressed in American Ins. Co. v. Newberry, 215 Ala. 587, 112 So. 195 (1927). Indeed, as the Court of Civil Appeals observed in National Security Fire & Casualty Ins. Co. v. Brannon, 47 Ala.App. 319, 253 So.2d 777, cert. denied, 287 Ala. 737, 253 So.2d 782 (1971):

"It seems to be settled law everywhere that a policy of insurance is void ab initio, unless the insured has an insurable interest in the property, and the reason for the rule most commonly assigned is that if the insured has no insurable interest in the property insured, the insured is wagering that a loss or damage to the property will occur and the insurer is wagering that it will not, thereby supplying the insured with an incentive to injure or destroy the insured property, which is against public policy."

That opinion analyzed the "insurable interest" found in other cases, e.g., North British & Mercantile Ins. Co. v. Sciandra, 256 Ala. 409, 54 So.2d 764 (1951) (finding insurable interest in husband who operated store in building owned by husband and wife as tenants in common); and Howard F. Insurance Co. v. Chase, 72 U.S. [5 Wall.] 509, 18 L.Ed. 524 (1866) (one of five trustees of church indebted to church had insurable interest because he had...