Country Side Roofing and Sheet Metal, Inc. v. Mutual Ben. Life Ins. Co.

• Decision Date: 13 September 1991
• Citation: 587 So.2d 987
• Parties: COUNTRY SIDE ROOFING AND SHEET METAL, INC., et al. v. The MUTUAL BENEFIT LIFE INSURANCE COMPANY and Carter Smith. 1900278.
• Court: Alabama Supreme Court

Page 987

587 So.2d 987

COUNTRY SIDE ROOFING AND SHEET METAL, INC., et al. v. The MUTUAL BENEFIT LIFE INSURANCE COMPANY and Carter Smith.

1900278.

Supreme Court of Alabama.

Sept. 13, 1991.

Jimmy Alexander and Linda B. Lloyd of Alexander, Corder & Plunk, P.C., Athens, for appellants.

James A. Bradford and Daniel M. Wilson of Balch & Bingham, Birmingham, for appellee Mut. Benefit Life Ins. Co.

H.L. Ferguson, Jr., Terry McElheny and Jane Emily Crosswhite of Dominick, Fletcher, Yeilding, Wood & Lloyd, Birmingham, for appellee Carter Smith.

MADDOX, Justice.

Country Side Roofing and Sheet Metal, Inc.; Marjorie I. Lewis, as executrix of the estate of Donald L. Lewis; and Marjorie I. Lewis, individually (collectively referred to as "Country Side"), appeal from a summary judgment entered in favor of the defendants, Mutual Benefit Life Insurance Company ("Mutual Benefit") and Carter Smith. Country Side filed an action seeking $50,000 on a life insurance policy issued by Mutual Benefit to Donald L. Lewis. The action was filed two days after Mutual Benefit had issued, and one day after it had mailed, its check in the amount of $52,023.55 in payment of the claim on the policy. Country Side sought a recovery against the defendants on six theories: 1) an alleged fraud on the part of both defendants in representing that the Mutual Benefit policy "was a lot better" than a $50,000 policy on Lewis's life that had been issued by another company; 2) an alleged fraud on the part of both defendants in suppressing material facts, "including all relevant facts as to the disadvantages of replacing the then existing $50,000 life insurance policy"; 3) a contract claim by the beneficiary, Country Side, for insurance proceeds; 4) an alleged bad faith refusal to pay the claim; 5) alleged negligence on the part of both defendants in causing or allowing "the [earlier] policy of insurance with Midland National on the life of Donald L. Lewis to lapse"; and 6) alleged wantonness arising out of the same facts as the negligence claim. ¹

FACTS

In November 1987, Donald L. Lewis applied for a life insurance policy with Mutual Benefit. The application listed Donald L. Lewis as the proposed insured and Country Side as the owner of the policy. Lewis was president of Country Side. The application listed the initial premium as $2,604, payable in monthly installments of $217.

At the time Lewis filed the application, he also executed a document entitled "Important Notice Regarding Replacement of Life Insurance." That document is attached to this opinion as an Appendix. That document contains the following language:

"Our agent is recommending to you that you purchase a life insurance policy from us. In connection with this purchase, you have indicated either as a result of his recommendation or at your own initiative, that you may terminate or change your existing policy issued by another insurance company or that you may obtain a loan from that company against your policy to pay premiums on the proposed policy. Any of these actions is a replacement of life insurance. This notice must be given to you. Please read it carefully.

"....

"You should also recognize that a policy which has been in existence for a period of time may have certain advantages to you over a new policy. If the policy coverages are basically similar, the premiums for a new policy may be higher because rates increase as your age increases. Under your existing policy, the period of time during which the issuing company could contest the policy because of a material misstatement or omission on your application, or deny coverage for death caused by suicide, may have expired or may expire earlier than it will under the proposed policy. Your existing policy may have options which are not available under the policy being proposed to you or may not come into effect under the proposed policy until a later time during your life."

(Emphasis added.)

On January 18, 1988, Mutual Benefit issued an "Adjustable Life Policy" to Lewis. The policy was on the life of Lewis, with Country Side being named as the beneficiary.

On December 30, 1989, Lewis died as a result of a "gunshot wound to the head." ² Gayle Acton, an employee of Country Side, notified Smith within three or four days of Lewis's death, and on February 1, 1990, Country Side executed an "Individual Death Claim Form." Mutual Benefit received the death claim form on February 21, 1990. On March 16, 1990, Country Side provided Mutual Benefit with an authorization to obtain information. On April 27, 1990, Country Side contacted Mutual Benefit concerning any action that Country Side needed to perform in order to be able to obtain the insurance proceeds. On May 2, 1990, Mutual Benefit sent Country Side a letter in which it stated: "Since the insured died within the contestable period of the policy, we are conducting our customary investigation. Until this investigation is completed we will not be able to determine the extent of our liability...." Mutual Benefit also asked for a signed statement from Mrs. Marjorie I. Lewis, Lewis's wife, regarding the deceased's health history. Mutual Benefit again requested a signed statement from Ms. Lewis regarding the deceased's health history on June 1, 1990. On July 11, 1990, Country Side wrote Mutual Benefit and demanded to know why the insurance proceeds had not been paid.

On July 13, 1990, Country Side sued Mutual Benefit and Smith. On the day before, July 12, 1990, Mutual Benefit had informed Smith that it had completed its investigation of Country Side's claim, had approved payment of the proceeds, and was sending a check for the proceeds to Smith to give to Country Side. On July 19, 1990, Smith delivered a check for the insurance proceeds to Country Side.

On August 6, 1990, Country Side moved to dismiss the contract count of its complaint. Mutual Benefit filed a motion to dismiss the remaining claims, and, in the alternative, a motion for summary judgment, on August 10, 1990. Smith filed a motion to dismiss or, in the alternative, a motion for more definite statement, on August 17, 1990. The trial court granted Mutual Benefit's motion for summary judgment and Smith's motion to dismiss on October 31, 1990. Although the trial court specifically granted Smith's motion to dismiss, it is apparent from the record that the trial court treated the motion as one for summary judgment. The order states: "After consideration of the matters presented, this Court concludes that there is no genuine issue of material fact and that the defendants are entitled to a judgment as a matter of law on all claims." We shall likewise treat the motion to dismiss as a motion for summary judgment.

A summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c), Ala.R.Civ.P. All reasonable doubts concerning the existence of a genuine issue of fact must be resolved against the moving party. Roper v. Associates Financial Services, 533 So.2d 206 (Ala.1988), citing Fountain v. Phillips, 404 So.2d 614 (Ala.1981); Autrey v. Blue Cross & Blue Shield of Alabama, 481 So.2d 345 (Ala.1985). We now address Country Side's claims that the summary judgment was inappropriate.

FRAUD CLAIMS

Country Side asserted two fraud claims against Smith and Mutual Benefit in its original complaint. These counts alleged that Smith and Mutual Benefit committed fraud by 1) stating that the life insurance policy offered by Mutual Benefit was "better" than the policy that Lewis had with Midland National Insurance Company and 2) failing to inform Lewis of the disadvantages of replacing his then existing life insurance policy with a policy with Mutual Benefit. Country Side filed an additional fraud count against Smith and Mutual Benefit in an amended complaint. This count alleged that on the first payment Mutual Benefit and Smith had fraudulently failed to pay all of the proceeds due under the insurance policy; the count alleged that Mutual Benefit had represented that all the proceeds had been paid, but later sent a check for an additional sum representing unearned premiums. ³

The first fraud issue presented concerns whether Smith and Mutual Benefit's "better" statement concerning the life insurance policy is an actionable misrepresentation.

Ala.Code 1975, § 6-5-101, provides:

"Misrepresentations of a material fact made willfully to deceive, or recklessly without knowledge, and acted on by the opposite party, or if made by mistake and innocently and acted on by the opposite party, constitute legal fraud."

In order to come under the purview of this statute, four elements must be present: (1) There must be a false representation; (2) the false representation must concern a material existing fact; (3) the plaintiff must rely upon the false representation; and (4) the plaintiff must be damaged as a proximate result. Harmon v. Motors Ins. Corp., 493 So.2d 1370, 1373 (Ala.1986).

It is undisputed that any representation regarding the policy was made to the insured, Lewis, and that Lewis filed no action with regard to that claim; it is also undisputed that the representee, Lewis, and the plaintiff, Country Side, are not one and the same. The law considers "it fundamental that the representee who has relied on the defendant's alleged misstatements and the plaintiff who was injured must be one and the same." Hutchins v. State Farm Mut. Auto. Ins. Co., 436 So.2d 819 (Ala.1983). In Georgia Casualty & Surety Co. v. White, 582 So.2d 487 (Ala.1991), the executrix of the will of Mr. White sought to maintain an action based on representations concerning an "offer to settle" made to Mr. White prior to his death. The executrix alleged that that was a "bad faith" offer. In that case the insurer argued, and we held, that the "bad faith offer to settle" claim was a "cause of action," rather than an "action," and, therefore, that it did not survive the death of Mr. White. See ...