Ex parte Caver

• Decision Date: 27 August 1999
• Citation: 742 So.2d 168
• Parties: Ex parte Elbert CAVER. (Re Elbert Caver v. Liberty National Life Insurance Company et al.).
• Court: Alabama Supreme Court

742 So.2d 168

Ex parte Elbert CAVER.

(Re Elbert Caver v. Liberty National Life Insurance Company et al.).

1981070.

Supreme Court of Alabama.

August 27, 1999.

Samuel E. Wiggins III, Birmingham, for petitioner.

William J. Baxley, William C. Barclift III, and Charles A. Dauphin of Baxley, Dillard, Dauphin & McKnight, Birmingham; and Michael R. Pennington, James W. Gewin, and Matthew H. Lembke of Bradley, Arant, Rose & White, L.L.P., Birmingham, for respondents.

HOUSTON, Justice.

Elbert Caver, the plaintiff in an action pending in the Marengo Circuit Court, petitions for a writ of mandamus directing the circuit court to set aside its order granting a motion to compel arbitration filed by the defendants Liberty National Life Insurance Company ("Liberty National") and one of its agents, Ernest Taylor.¹ The writ is denied.

Caver sued Liberty National and Taylor on March 3, 1998, seeking damages based on allegations of breach of contract, fraud, and bad-faith failure to pay an insurance claim. Caver's action arose out of Liberty National's refusal to pay life insurance benefits under two policies insuring the life of Caver's wife, Sarah, and naming Elbert Caver as the beneficiary. The record indicates that on or about January 11, 1994, Liberty National sold a life insurance policy to Elbert Caver; that policy, for the face amount of $5,934, named Sarah Caver as the insured. The effective date of that policy was March 1, 1994. Caver alleges that Taylor assisted the Cavers in preparing the application for that policy. Liberty National later sold two additional life insurance policies to Sarah Caver, each providing $5,000 in coverage on her life. Caver says Taylor assisted the Cavers in preparing the applications for those policies also. The first of those policies became effective April 1, 1996; the second became effective October 1, 1996. On July 23, 1997, Sarah Caver died of complications from bladder cancer.

Liberty National denied Elbert Caver's claim for life insurance benefits under the April 1, 1996, and October 1, 1996, policies; it took the position that Sarah Caver had misrepresented her medical history when applying for those policies. (Liberty National also argues that it issued the April 1, 1996, and October 1, 1996, policies in reliance on the information Sarah Caver had provided in her 1994 application.) Liberty National did pay the face amount of the March 1, 1994, policy ($5,934); that policy was outside the two-year contestability period provided for in that policy. It was Liberty National's refusal to pay under the April 1, 1996, and October 1, 1996, policies that formed the basis for Caver's complaint. Caver alleged that Taylor had knowingly misrepresented Sarah Caver's medical history on the applications and that when he did that he knew, contrary to what he told the Cavers, that those misrepresentations would void the policies.

Liberty National and Taylor moved to compel arbitration of Caver's claims and supported their motion with certain exhibits and two affidavits of Liberty National's president, Anthony McWhorter. Two of those exhibits were computer-generated reproductions of the April 1, 1996, and October 1, 1996, policies. Those policy reproductions contained arbitration provisions as endorsements to the policies.² Each of those policy reproductions contained the following "Notice of Policy Reproduction":

"Liberty National Life Insurance Company does not maintain copies of original policies that are issued to its customers. This policy is a reproduction of the original policy. The reproduced policy is a reasonable facsimile of the original; however, it may differ in certain respects. Liberty National Life Insurance Company does not in any way represent or certify that this is an exact duplication of the original policy that was issued."

McWhorter, in his second affidavit, explained the nature of this notice:

"I have been informed that [the] plaintiff has suggested that the `Notice of Policy Reproduction' shown in Exhibit A to Liberty National's Motion to Compel Arbitration, etc., somehow calls into question whether or not the arbitration clauses contained in said exhibit are identical to the arbitration clauses that were contained in the original policies issued to [the] plaintiff on or about April 1, 1996, and October 1, 1996, respectively. In fact, the `Notice of Policy Reproduction' was never intended to, and does not in any way, indicate any actual or potential variation in the arbitration clause shown in the reproduced policies and the arbitration clause contained in the original policies issued to [the] plaintiff. In fact, the arbitration endorsement shown in the reproduced policy attached as Exhibit A to Liberty National's Motion to Compel Arbitration, etc., in this action is identical to the arbitration endorsement that was in fact included in the original policies issued and delivered to [the] plaintiff.

"The arbitration clause utilized by Liberty National in [the] plaintiff's policies was the same arbitration clause and endorsement utilized in all Liberty National policies issued beginning July, 1995. The arbitration endorsement required approval by the Alabama Department of Insurance. Attached hereto as Exhibit 1 is a copy of the only Liberty National arbitration endorsement approved by the Alabama Department of Insurance prior to issuance of plaintiff's policies. [Exhibit 1 is omitted from this opinion.] It is identical to the arbitration endorsement included in the reproduced policy attached as Exhibit A to Liberty National's Motion to Compel Arbitration in this action, and it is identical to the arbitration endorsement that was in fact included in the original policy issued and delivered to [the] plaintiff.

"The `Notice of Policy Reproduction' was not intended to indicate any actual or potential variation in the language of the arbitration endorsement. Instead, because reproduced policies are generated by computer, they may vary slightly in minor details such as printing format, premium mode, the name of the Liberty National officer signing the policies, and overall appearance from the original policy form. Therefore, out of an abundance of caution, the `Notice of Policy Reproduction' is included by Liberty National as a matter of course whenever a policy is reproduced for purposes of litigation. However, the `Notice of Policy Reproduction' does not refer to, and is not intended to refer to, any actual or potential variation in the language of the arbitration endorsement. There is no variation in the language of said endorsement."

Caver amended his complaint, to allege specifically that Liberty National, through Taylor, had fraudulently induced him to purchase policies that contained arbitration provisions. He sought damages for that alleged fraud; he also sought to rescind the arbitration provisions on that ground. Caver later filed an affidavit in response to McWhorter's second affidavit, and in it Caver suggested that he had never received any policy containing an arbitration provision:

"I have carefully examined Exhibit A of the defendant's April 9, 1998, Motion to Compel Arbitration, et al. [sic], and the Exhibit A of the defendant's February 16, 1999, Notice of filing of Supplemental Affidavit of Anthony McWhorter.

"I do not recognize the Exhibit A, of the April 9, 1998, Motion to Compel, as an accurate and true copy of the original policy that I received from the defendant. Further, I do not recognize the Exhibit A, of the February 16, 1999, Notice of Filing of Affidavit, as a copy [of] any endorsement that I may have received from the defendant.

"Also, I do not recall an endorsement containing an arbitration agreement, in the original policy that I received from the defendant.

"I cannot certify that the exhibits contained in the above-described motions are exact duplications of the original policies and/or endorsements issued to me."

After conducting a hearing, and after "[considering] the evidence submitted by the parties and [hearing] oral argument," the trial court granted the motion to compel arbitration. The court apparently found that the April 1, 1996, policy and the October 1, 1996, policy contained arbitration provisions. The trial court also stated, "Liberty National's motion to strike the jury demand is stayed pending a determination by the arbitrators as to the enforceability of the arbitration clause."

It is well settled that mandamus is an extraordinary remedy and requires, among other things, a clear legal right in the petitioner to the order sought and an imperative duty on the respondent to perform, accompanied by a refusal to do so. Ex parte Gates, 675 So.2d 371 (Ala.1996). Caver makes two alternative arguments in support of his request for mandamus relief: 1) that the trial court clearly erred in finding that the April 1, 1996, and October 1, 1996, policies contained arbitration provisions; and 2) that the trial court clearly erred in failing to find that he had been fraudulently induced to purchase policies that contained arbitration provisions.³

With respect to the first argument, we cannot conclude that the trial court clearly erred in finding that Caver's policies contained arbitration provisions. McWhorter explained in his second affidavit the nature of the policy reproductions; he stated that "[t]he arbitration clause utilized by Liberty National in [Caver's] policies was the same arbitration clause and endorsement utilized in all Liberty National policies issued beginning July, 1995." McWhorter also stated that the arbitration provision that had been approved by the Alabama Department of Insurance was identical to the arbitration provisions that had been shown as...