First Financial Ins. Co. v. Tillery

Citation626 So.2d 1252
PartiesFIRST FINANCIAL INSURANCE COMPANY v. James R. TILLERY 1 . 1911681.
Decision Date25 June 1993
CourtSupreme Court of Alabama

Robert E. Cooper and Rhonda K. Pitts, Rives & Peterson, Birmingham, for appellant.

W. Cameron Parsons and David M. Anderson, Parsons, Hall, Sutton & Delchamps, Tuscaloosa, for appellee.

MADDOX, Justice.

James R. Tillery sued First Financial Insurance Company ("First Financial"), seeking damages for breach of contract and bad faith refusal to pay insurance benefits. The jury returned a verdict for Tillery and the trial court entered a judgment on that verdict. First Financial appeals.

Tillery alleged that First Financial had breached its insurance contract with him by refusing to pay his claims after his mobile home was destroyed by fire, and he claimed that First Financial's refusal was in bad faith. The jury awarded Tillery $64,750 in compensatory damages on the breach of contract claim and $75,000 in punitive damages on the bad faith claim.

The central issue raised in this appeal is whether the trial court erred in denying First Financial's motions for summary judgment and for judgment notwithstanding the verdict. Because we find substantial evidence on which the trial court could rest its decision to submit the issues to the jury, we affirm.

Facts

In July 1990, Tillery contacted Roger Downs, at Roger Downs Insurance Agency, about insuring his mobile home. Downs visited Tillery to complete an application for coverage. After the application was completed, Downs forwarded it to Strickland General Agency, Inc., First Financial's general agent, for processing and First Financial issued a policy on the mobile home. On April 29, 1991, Tillery's mobile home was destroyed by fire and Tillery reported the loss to Downs. During its investigation of the loss, Strickland and First Financial found that Tillery's application for insurance contained omissions and misrepresentations about prior losses and, in accordance with a statement on the application, First Financial voided the policy and refunded Tillery's premiums. Tillery sued Downs, the Downs Agency, the Strickland General Agency, and First Financial.

I. Jury Verdicts

First, we note that a strong presumption of correctness attaches to a jury verdict in Alabama, if the verdict passes the "sufficiency test" presented by motions for directed verdict and JNOV. Christiansen v. Hall, 567 So.2d 1338, 1341 (Ala.1990); Alpine Bay Resorts, Inc. v. Wyatt, 539 So.2d 160 (Ala.1988). This presumption of correctness is further strengthened by the trial court's denial of a motion for new trial. Christiansen, 567 So.2d at 1341. Denying these motions is within the sound discretion of the trial court. See, Jawad v. Granade, 497 So.2d 471, 477 (Ala.1986).

This Court will not reverse a judgment based on a jury verdict on a sufficiency of the evidence basis unless the evidence, when viewed in a light most favorable to the appellee, shows that the verdict was "plainly and palpably wrong and unjust." Christiansen, 567 So.2d at 1341. In its sound discretion, the trial court found genuine issues of material fact and allowed certain issues to go before the jury. The trial court denied First Financial's motions for directed verdict, JNOV, and new trial. Based on our review of the record, we cannot say that the verdict was plainly and palpably wrong or unjust.

II. Summary Judgment Motion

First Financial argues that the trial court erred in denying its motion for summary judgment. For a summary judgment to be proper, there must be no genuine issue of material fact and the movant must be entitled to a judgment as a matter of law. Ala.R.Civ.P. 56(c), Tripp v. Humana, Inc., 474 So.2d 88 (Ala.1985). Further, on review of a summary judgment we must view all the evidence in a light most favorable to the nonmovant and we must entertain all reasonable inferences from the evidence in favor of the nonmovant. Fincher v. Robinson Bros. Lincoln-Mercury, 583 So.2d 256 (Ala.1991). See, also, Hanners v. Balfour Guthrie, Inc., 564 So.2d 412 (Ala.1990).

The movant must make a prima facie showing that there are no genuine issues of material fact and that he is entitled to a judgment as a matter of law. Fincher, 583 So.2d at 257. If this showing is made, the burden then shifts to the nonmovant to rebut the movant's prima facie showing by "substantial evidence" to create a genuine issue of material fact. Section 12-21-12, Ala.Code 1975. The record showed disputed factual issues to be decided by the jury; therefore, First Financial was not entitled to a summary judgment.

First Financial cites Clark v. Alabama Farm Bureau Mutual Casualty Insurance Co., 465 So.2d 1135, 1140 (Ala.Civ.App.1984), for the proposition that misrepresentations by an insured need not be "intentional for an insurance company to void a policy, if the facts concealed were material and they increased the loss." First Financial argues that even if Downs made the misrepresentations regarding Tillery's former losses, and not Tillery himself, the misrepresentations were material to First Financial's acceptance of the risk and should permit First Financial to void Tillery's coverage. However, Tillery submitted substantial evidence raising factual issues about the origin of the misrepresentations 2 and about the materiality of the representations. There was also disputed evidence as to which underwriting standards were to apply to Tillery's application.

In Hyde v. Humana Insurance Co., 598 So.2d 876, 880-81 (Ala.1992), this Court stated that because it was impossible to answer the question from the language of an insurance policy "transplant rider," the question of "exactly what 'written criteria and procedures' would be used to deny or to provide coverage for a transplant" was one for a jury. In Hyde, "[i]n moving for a summary judgment, Humana had the burden of making a prima facie showing that there was no genuine issue of material fact and that it was entitled to a judgment as a matter of law" (citations omitted). First Financial likewise failed to meet the burden, and the trial court correctly submitted these issues to the jury.

First Financial argues that had it known the truth regarding Tillery's prior losses, it would not have issued a policy of insurance to cover Tillery's mobile home. However, insurers are not allowed to avoid coverage in every case of a misstatement by an insured, and the insurer cannot be allowed automatically to avoid coverage simply because its own employee testified that the company would not have undertaken the risk had it known the truth as to the particular fact. State Farm General Insurance Co. v. Oliver, 658 F.Supp. 1546 (N.D.Ala.1987), aff'd., 854 F.2d 416 (11th Cir.1988).

Finally, Tillery argues that it was Downs who made misrepresentations on the application and that Downs was an agent of First Financial. In order for an insurer to avoid coverage under § 27-14-7, Ala.Code 1975, "the representation or omission must have been 'material' to the acceptance of the risk. The question of whether a particular fact is or is not material is almost invariably a question for the jury, which is entitled to consider the factual context in which the determination is to be made." Oliver, 658 F.Supp. at 1552. The trial court properly submitted to the jury the questions of the existence and scope of the agency relationship between Downs and First Financial.

III. Motions for Directed Verdict and Judgment Notwithstanding the Verdict

A motion for a directed verdict is a procedural device by which one party tests the sufficiency of the other party's evidence. See, Rule 50(a), Ala.R.Civ.P.; Alabama Power Co. v. Williams, 570 So.2d 589 (Ala.1990); John R. Cowley & Bros., Inc. v. Brown, 569 So.2d 375, 376 (Ala.1990); J. Hoffman & S. Guin, Alabama Civil Procedure § 8.37 (1990). Similarly, a motion for JNOV simply "permits the trial court to revisit its earlier ruling denying the motion for directed verdict." Alabama Power Co. v. Williams, 570 So.2d at 591. The ultimate question, of course, as to either motion is whether the nonmovant has presented sufficient evidence to allow submission of the case or issue to the jury for a factual resolution. Hoffman & Guin, supra, at § 8.37.

For actions filed after June 11, 1987, the standard of review applicable to motions for directed verdict and JNOV is the "substantial evidence rule." See, § 12-21-12(a), Ala.Code 1975; Koch v. State Farm Fire & Cas. Co., 565 So.2d 226, 228 (Ala.1990). Thus, in an action filed after June 11, 1987, a nonmovant must present "substantial evidence" supporting each element of his cause of action or defense in order to withstand a motion for a...

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