Ex parte Insurance Co. of North America

• Decision Date: 18 March 1988
• Parties: Ex parte INSURANCE COMPANY OF NORTH AMERICA. (Re CITIZENSBANK OF THOMASVILLE v. INSURANCE COMPANY OF NORTH AMERICA). INSURANCE COMPANY OF NORTH AMERICA v. CITIZENSBANK OF THOMASVILLE. 86-1246, 86-1647.
• Court: Alabama Supreme Court

Page 1064

523 So.2d 1064

Ex parte INSURANCE COMPANY OF NORTH AMERICA.

(Re CITIZENSBANK OF THOMASVILLE v. INSURANCE COMPANY OF NORTH AMERICA).

INSURANCE COMPANY OF NORTH AMERICA v. CITIZENSBANK OF THOMASVILLE.

86-1246, 86-1647.

Supreme Court of Alabama.

March 18, 1988.

Robert L. Williams of Norman, Fitzpatrick, Wood, Wright & Williams, Birmingham, for appellant and petitioner.

Richard T. Dorman, James H. Frost, and W. Alexander Gray, Jr., of Johnstone, Adams, Bailey, Gordon & Harris, Mobile, and Wyman O. Gilmore, Grove Hill, for appellee and respondent.

HOUSTON, Justice.

Insurance Company of North America petitions this court for a writ of mandamus to order the Honorable J. Richmond Pearson, as Circuit Judge of Clarke County, to enter an order consistent with our opinion in Insurance Co. of North America v. Citizensbank of Thomasville, 491 So.2d 880 (Ala.1986). We grant the writ. The petitioner has, alternatively, filed an appeal attempting to raise the same issues; because we grant the writ, we consider the appeal moot.

The relevant facts of this case begin in 1975 when Insurance Company of North America (INA) issued a banker's blanket bond to Citizensbank. The bond insured Citizensbank from dishonest and fraudulent acts committed by its employees with the manifest intent to cause the bank a loss. In 1979, Citizensbank submitted nine proof of loss forms to INA, claiming losses due to dishonest and fraudulent acts of a former president. The losses sustained by Citizensbank stemmed from several fraudulent loans and from embezzlement of insurance commissions. In 1981 Citizensbank filed a complaint against INA, asking $606,000 on a contract claim and $2,000,000 on a bad faith claim. At trial, Citizensbank adduced evidence proving only a portion of the contract claim losses. In 1984, the jury returned a verdict in favor of Citizensbank for $290,431.77 on the contract claim and for $866,930.01 on the bad faith claim. The trial judge denied INA's motion for JNOV or, in the alternative, for a new trial, and entered judgment on the verdict. INA paid the amount awarded for breach of contract, but appealed from the bad faith portion of the judgment and from the denial of its motion for JNOV or new trial.

The issue presented on appeal was whether Citizensbank had adduced sufficient evidence to support a jury verdict finding that INA had refused an insurance claim in bad faith. This court, after reviewing the law of bad faith refusal to pay an insurance claim, ruled that "in order for the plaintiff to recover on a bad faith claim, the plaintiff must show that if the contract claim had been tried on the date of denial, the plaintiff would have been entitled to a directed verdict." 491 So.2d at 883. We determined that, on the date of the constructive denial, INA had a "debatable reason" for disputing the validity of Citizensbank's claims. For instance, we pointed out that the difference between the amounts claimed as losses on the proof of loss forms and the evidence at trial supported INA's argument that it had "good reason to question the validity of the claims." Id. at 884. We also stated that INA's uncertainty at the time of constructive denial as to whether the former president's actions in making the bad loans constituted "fraudulent and dishonest" conduct within the meaning of the insurance contract created a genuine fact question.

In view of the genuine dispute over the validity of Citizensbank's claim, we held that Citizensbank was not entitled to a directed verdict on the contract claim, and, then, concluded that the trial judge erred in submitting the bad faith count to the jury and that the defendant's motion for a directed verdict on this count should have been granted. Our holding read as follows:

"For the foregoing reasons, we conclude that the trial judge erred in submitting the bad faith count to the jury, and the defendant's motion for a directed verdict on this count should have been granted. We, therefore, reverse and remand.

"REVERSED AND REMANDED."

491 So.2d at 885.

In reaching that decision, we also held that, because the facts presented at trial did not warrant a conclusion that the plaintiff submitted several individual claims, one single set of claims served as the basis upon which this Court decided the bad faith issue. Pertinent parts of our opinion state as follows:

"We have carefully examined the lengthy record in order to determine if the claims could be separated into categories by this Court. We were unable to find any indication that a separation of claims occurred at any point in the development of this case."

491 So.2d at 884.

"We believe that this Court should decide this case in the posture in which it was presented to us. The parties did not try this lawsuit on the basis of categories of claims, and this Court will not completely revise the posture of this case on appeal. If the record in this case revealed that the claims arose from separate causes which were discovered at separate times, and that the claims had been filed separately and then pleaded separately, then this Court might have found a bad faith failure to pay as to individual claims. However, these are not the facts of the present case. Therefore, we have considered the issue of bad faith as it applies to one single set of claims and not to each individual claim."

491 So.2d at 885.

Our decision in Citizensbank was released on April 25, 1986. On May 7, 1986, INA filed a motion asking the trial court to enter an order consistent with our opinion. On June 16, 1986, the plaintiff filed a motion to amend its complaint, an amended complaint, and a motion for a directed verdict on the amended complaint. On June 19, 1986, the plaintiff filed a motion to redesignate exhibits. On June 23, 1986, INA filed a motion to strike the amendment, and on June 25, 1987, filed an objection to the motion to redesignate exhibits. On August 4, 1987, Judge Pearson entered an order granting Citizensbank's "Motion for Leave to Amend the Complaint" and "Motion to Redesignate Exhibits" and denying Citizensbank's motion for directed verdict. Judge Pearson also granted a judgment on August 4, 1987, for Citizensbank and against INA for $866,930.01. Judge Pearson's order states:

"This matter having been remanded without directions by the Supreme Court of Alabama, Insurance Company of North America v. Citizensbank of Thomasville, 491 So.2d 880 (Ala.1986), and this matter having come before the Court on Plaintiff's Motion for Leave to Amend Complaint, Motion to Redesignate Exhibits, and Motion for Directed Verdict, filed subsequent to the remand of this case to this Court; and the Court deeming it appropriate, not having received directions, and in the exercise of sound judicial discretion, justice, and equity, to consider said motions; and the Court having carefully considered the opinion of the Supreme Court of Alabama in Insurance Company of North America v. Citizensbank of Thomasville, 491 So.2d 880 (Ala.1986), and having further considered the trial of this case, the record of this case, the oral argument and briefs of parties with respect to the above described motions, and the Court having considered the equities of this case, the Court has determined that the Plaintiff's Motion for Leave to Amend the Complaint and Motion to Redesignate Exhibits are due to be granted, and the Plaintiff's Motion for Directed Verdict is due to be denied, for the following reasons:

"1. The thrust of the Supreme Court's opinion in the above cited case was that only one claim was presented by plaintiff which was indivisible for the purposes of determining INA's liability for bad faith.

"2. The basis on which this case was conducted and tried by Plaintiff and Defendant was that each loan constituted a separate claim under the INA banker's blanket bonds. At no time was it contended by Defendant that they were not separate claims, although Defendant did causally remark in arguing its Motion for Directed Verdict that all of the loans constituted one claim. At no time was the Court or the jury presented with the argument that the multiple claims were one claim. The issue was not before the Court.

"3. This Court instructed the jury that it needed to find separately on each individual claim made by Plaintiff under the proofs of loss.

"4. Plaintiff's claims under the INA bonds were discovered separately and constituted separate items on the proof of loss filings. The evidence presented by both Plaintiff and Defendant at trial detailed each alleged loss separately and severally since they were filed as separate claims by Plaintiff, and each claim was based upon a distinct factual basis for recovery.

"5. Plaintiff was entitled to a directed verdict on certain of its claims under the INA bonds, specifically those claims based on Tom Branch's embezzlement of life insurance commissions and Branch's personal loan to himself in violation of state law, although Plaintiff did not request a directed verdict on these specific claims. This Court lacks jurisdiction now to consider a directed verdict on the contract claims, and the Motion for Directed Verdict is due to be denied.

"6. Based upon the entire record in this case--the discovery, the trial, the Court's instructions to the jury--the only thing Plaintiff could have done differently with respect to its claims would have been to amend the claim and redesignate the exhibits, which they have requested in the above described motions to conform to the evidence as it was presented to the jury.

"7. In the exercise of sound judicial discretion, justice, and equity, Plaintiff is entitled to amend its complaint to redesignate the exhibits to make clear the divisibility of the contract claims made by Plaintiff, and Plaintiff is entitled to its judgment by the jury in its favor against INA on the bad faith cause of action.

Therefore, it is hereby ORDERED, ADJUDGED and DECREED that Plaintiff's Motion to Amend the...