Federated Guaranty Life Ins. Co. v. Wilkins

• Decision Date: 01 July 1983
• Citation: 435 So.2d 10
• Parties: FEDERATED GUARANTY LIFE INSURANCE COMPANY v. Margie Nell WILKINS, individually, and Margie Nell Wilkins, Administratrix of the Estate of Oren Wilkins, deceased. 81-667.
• Court: Alabama Supreme Court

Page 10

435 So.2d 10

FEDERATED GUARANTY LIFE INSURANCE COMPANY v. Margie Nell WILKINS, individually, and Margie Nell Wilkins, Administratrix of the Estate of Oren Wilkins, deceased.

81-667.

Supreme Court of Alabama.

July 1, 1983.

Jerry W. Jackson, Haleyville, and Robert E. Parsons and Connie D. Ray of McDaniel, Hall, Parsons, Conerly, Scott & Lusk, Birmingham, for appellant.

Jack B. McNamee of Topazi, Morton & McNamee, Birmingham, for appellee.

SHORES, Justice.

This case grew out of the following facts:

In November 1978, Oren Wilkins and his wife, Margie Nell Wilkins, purchased a 1979 Ford pick-up truck and financed it through Federated Guaranty Financial Corporation (Financial). The couple also bought a credit life insurance policy on the life of Oren Wilkins through Financial's "sister" corporation, Federated Guaranty Life Insurance Company (Guaranty Life). This policy assured payment of any balance owed on the truck in the event of Oren Wilkins's death before the truck was fully paid for.

Oren Wilkins operated a small logging company near Addison, Alabama. On January 17, 1979, his son Tony found him dead at a remote work site. Tony had last seen his father at work that day around 1:00 p.m., when Tony left to move some logging equipment. When he returned, he found his father lying on the ground beside the pick-up truck; a 12-gauge shotgun, belonging to Oren Wilkins, was positioned near the body. Tony drove to Addison to notify the authorities.

Jerry Thorn, an investigator for the Winston County Sheriff's Department, investigated the death. Thorn observed a gunshot wound approximately two inches above Wilkins's heart, and the shotgun lying across the body. Based upon his observations at the scene, Thorn, in his incident report, listed Wilkins's death as a suicide.

J.R. Nichols, Winston County coroner, arrived at the scene a short time later and noted powder burns on Wilkins's outer clothing, inner clothing, and the skin of the chest.

A coroner's inquest was then convened to determine the cause of Wilkins's death. There were no witnesses to the shooting, and a heavy rain fell before investigators arrived on the scene. Nichols, in his coroner's report, listed the cause of death as "self-inflicted." The coroner's jury, however, unable to establish the exact cause of death, ruled Wilkins's cause of death as "undetermined." The original death certificate issued for Wilkins, therefore, showed the cause of death to be "undetermined." In February 1979, Nichols wrote the State Health Department, Division of Vital Statistics, stating that, upon further study of the toxicology report, he had "come to the conclusion that the cause of [Wilkins's] death was self-inflicted."

On August 24, 1979, Guaranty Life filed in Winston County Circuit Court a declaratory judgment action, Civil Action No. CV-79-63, against Margie Nell Wilkins, as administratrix, and Financial, requesting the trial court to specify the rights and obligations of Guaranty Life under the credit life policy; the insurer also sought a declaration as to the cause of Wilkins's death. Mrs. Wilkins counterclaimed, seeking recovery (1) on the credit life insurance policy, and (2) on Guaranty Life's alleged bad faith refusal to pay her claim. On motion of the insurer, the trial court dismissed Mrs. Wilkins's counterclaim.

On October 10, 1980, Mrs. Wilkins filed the present action, Civil Action No. CV-80-101, against Guaranty Life in Winston County Circuit Court. Her complaint, identical to the counterclaim she filed previously in the declaratory judgment action, again sought recovery under the policy and damages for Guaranty Life's alleged bad faith refusal to pay. The insurer's motion to dismiss the complaint, on the ground that the declaratory judgment action mooted plaintiff's cause of action, was denied by the trial court. In its answer, Guaranty Life denied all liability, based on its assertion that Oren Wilkins died as a result of a self-inflicted gunshot wound, and that the policy issued to Oren Wilkins specifically excluded coverage for death caused by suicide:

"EXCEPTIONS. The Disability Insurance issued under this policy does not apply when ... the injury is intentionally inflicted by the Insured....

"...

"SUICIDE--Self destruction within one year from the Date of Loan, whether the Insured be sane or insane, is not a risk assumed by the Company, but in such event the Company will return the premiums actually paid hereon."

The insurer requested and the court refused a directed verdict on the bad faith claim at the close of the plaintiff's case. Although Guaranty Life's lawyer asked for a summary judgment on the ground that the plaintiff had failed to prove the claim, it is clear from the record that the trial court treated the motion as one for directed verdict--and properly so.

The insurer put on its case and at the conclusion of all of the evidence, the court submitted both the contract claim and the tort claim to the jury. The jury returned a general verdict in favor of the plaintiff and against the insurer for $135,000. After its motion for JNOV was denied, Guaranty Life appealed. We affirm in part and reverse in part.

We agree with Guaranty Life's argument that the trial court erred in refusing its motion for directed verdict on the claim alleging the bad faith refusal to pay the insurance proceeds. As noted, the policy expressly excluded coverage if the death of the insured resulted from suicide. There was evidence from which it could be forcefully argued that the insured took his own life. The insurer had a right to have this issue determined and sought to do so by filing a declaratory judgment action. It also had a right to refuse payment of the claim, based upon the information it had, without subjecting itself to tort liability. The evidence put on by the plaintiff fell short of that required to make out a tort claim.

In National Savings Life Ins. Co. v. Dutton, 419 So.2d 1357 (Ala.1982), citing National Security Fire Ins. Co. v. Bowen, 417 So.2d 179 (Ala.1982), we said:

" 'An insurer is liable for its refusal to pay a direct claim when there is no lawful basis for the refusal coupled with actual knowledge of that fact. Chavers v. National Security Fire Ins. Co., Ala., 405 So.2d 1 (1981). No lawful basis "means that the insurer lacks a legitimate or arguable reason for failing to pay the claim." Gulf Atlantic Life Ins. Co. v. Barnes, Ala. 405 So.2d 916 (1981). When a claim is "fairly debatable," the insurer is entitled to debate it, whether the debate concerns a matter of fact or law. Ibid.

" 'Under those authorities the plaintiff in a "bad faith refusal" case has the burden of proving:

" '(a) an insurance contract between the parties and a breach thereof by the defendant;

" '(b) an intentional refusal to pay the insured's claim " '(c) the absence of any reasonably legitimate or arguable reason for that refusal (the absence of a debatable reason);

" '(d) the insurer's actual knowledge of the absence of any legitimate or arguable reason;

" '(e) if the intentional failure to determine the...