Foremost Ins. Co. v. Parham
| Decision Date | 14 March 1997 |
| Citation | 693 So.2d 409 |
| Parties | FOREMOST INSURANCE COMPANY, GRAND RAPIDS, MICHIGAN; and Foremost Signature Insurance Company v. Reginald Eugene PARHAM, et al. FOREMOST INSURANCE COMPANY, GRAND RAPIDS, MICHIGAN; Foremost Signature Insurance Company v. Mary MASSEY. 1950507, 1951238. |
| Court | Alabama Supreme Court |
Rehearing Denied May 9, 1997.
Robert W. Bradford, Jr. of Hill, Hill, Carter, Franco, Cole & Black, P.C., Montgomery; and E. Elliott Barker of Pilcher & Pilcher, P.C., Selma, for appellants.
Jere L. Beasley, Frank M. Wilson, and P. Leigh O'Dell of Beasley, Wilson, Allen, Main & Crow, Montgomery; and Lynn W. Jinks III of Jinks, Smithart, Jackson & Daniels, Union Springs, for appellees.
The defendants, Foremost Insurance Company, Grand Rapids, Michigan, and Foremost Signature Insurance Company ("together hereinafter referred to as 'Foremost' "), appeal from a judgment entered in this fraud case on separate jury verdicts for the plaintiffs, Reginald and Patricia Parham ($3,500 in compensatory damages and $3,000,000 in punitive damages on their misrepresentation claim and $3,000 in compensatory damages and $4,500,000 in punitive damages on their suppression claim) and Mary Massey ($3,000 in compensatory damages and $3,000,000 in punitive damages on her misrepresentation claim and $3,000 in compensatory damages and $4,500,000 in punitive damages on her suppression claim). We affirm conditionally.
This fraud action arose from separate purchases of mobile homes by the Parhams and Massey. The evidence, viewed in the light most favorable to the plaintiffs, shows the following: The plaintiffs purchased their mobile homes from C & C Manufactured Homes, Inc. ("C & C"). The Parhams purchased their mobile home on July 24, 1989, and Massey purchased her mobile home on February 5, 1990. In addition to selling them their mobile homes, C & C, through its sales representative, Robert Banks, sold the Parhams a Foremost mobile home homeowner's insurance policy, and sold Massey a similar policy. The plaintiffs financed their mobile homes, and insurance was required under the terms of their financing agreements. Foremost offered this insurance through C & C at the time of the sale of the mobile homes, even though C & C and its employees were not licensed by the Alabama Department of Insurance to sell such insurance. Foremost had provided C & C with applications, rate charts, worksheets, and written instructions describing how to fill out the forms. Although Foremost also did business through a licensed insurance agency in Guntersville, the Manning Agency, Inc., that agency, which was shown on one of the plaintiffs' sales documents as the agency servicing the policies, generally had no contact with potential insureds. Instead, it performed the limited function of reviewing applications prepared by C & C and then forwarding them on to Foremost. C & C and Banks split a sales commission on the plaintiffs' policies with the Manning Agency. John Manning, the owner of the Manning Agency, testified that it was illegal for a licensed agent to split a sales commission with an unlicensed agent. Foremost's district manager, Douglas Carmichael, testified that he had recruited C & C to solicit applications for Foremost insurance policies. Carmichael also testified that no representative of C & C was licensed to sell insurance at the time the plaintiffs purchased their policies and that he was aware of that fact; that he suspected that sales commissions were being split with an unlicensed agent; and that C & C had sold Foremost insurance policies for at least six years before it finally obtained a license from the State.
Banks orally represented to the plaintiffs when they purchased their policies that their first year of coverage would not require the payment of a premium. However, the plaintiffs signed and were provided with various sales documents (e.g., a purchase agreement; a credit installment contract; an invoice and bill of sale; and a Foremost mobile home homeowner's worksheet), all of which indicated that premiums were charged for the first year's coverage--$499 with respect to the Parhams and $397 with respect to Massey 1--and that the amount of those premiums had been included in the total amount financed by the plaintiffs in connection with the purchase of their mobile homes. 2 The plaintiffs relied on Banks's representation and signed these documents without reading them. Patricia Parham had completed high school. At the time of the trial, she was a corrections officer with the Bullock County Correctional System and a student at Troy State University in Montgomery, studying to be a registered nurse. Mary Massey had completed the 10th grade and part of the 11th grade and had later earned her GED or high school equivalency certification. At the time of the trial, she had been employed for 15 years as a materials handler at Cooper Lighting Company. Reading is one of her hobbies.
The evidence also indicates that of the several coverages provided by the plaintiffs' policies (e.g., mobile home, personal effects, personal liability, etc.) one was for damage to "adjacent structures." The policy states:
Banks quoted a single premium to the Parhams and a single premium to Massey, and sold each of the policies as a mobile home homeowner's "package policy," i.e., a policy containing multiple coverages (mobile home, adjacent structures, personal effects, personal liability, and medical payments) sold for a single premium. However, Foremost allocated a separate premium amount for each of the coverages, including the adjacent structures coverage. Banks did not ask the plaintiffs whether they had a need for any of the multiple coverages, including adjacent structures coverage, and he did not tell them that the coverage for adjacent structures could be dropped with permission from Foremost's underwriting department, with a corresponding reduction in the premiums (about $40 with respect to each policy), if they did not want or need that coverage. 3 When the Parhams later received their policy, the declarations page showed that "INCL" had been typed on the line under "Adjacent Structures $3,000," indicating that coverage for damage to adjacent structures up to $3,000 was included. The declarations page of Massey's policy showed that "INCL" had been typed on the line under "Comprehensive Adjacent Structures $2,700," indicating that coverage for damage to adjacent structures up to $2,700 was included. The plaintiffs did not read their policies. When they purchased their mobile homes, the plaintiffs did not want adjacent structures coverage; however, while Massey's policy was in force, she did acquire a satellite dish that was protected by this coverage. A marketing survey that Foremost had prepared indicated that a significant percentage of mobile home purchasers in Alabama in 1987 and 1990, possibly in excess of 50%, 4 did not have certain adjacent structures and that many mobile home purchasers might not want or really need such coverage.
The plaintiffs filed this action on May 13, 1994, alleging misrepresentation (no premium for the first year's coverage) and suppression (failure to disclose that coverage for "adjacent structures, personal liability, medical payments, or damage to property of others" was included in the policy and that a specific portion of the total premium was allocated for each of those coverages) and seeking both compensatory and punitive damages. The thrust of the suppression claim that was actually submitted to the jury, as we understand it, was that the plaintiffs were not given sufficient information to enable them to make a decision as to whether they wanted to purchase adjacent structures coverage. The plaintiffs' allegations concerning the nondisclosure of coverages for personal liability, medical payments, and damage to property of others were withdrawn and were not submitted to the jury as a basis for finding liability on the suppression claims. The defendants filed motions for a directed verdict as to the misrepresentation claims and the suppression claims, which the trial court denied. The jury returned its verdict on June 8, 1995, awarding the Parhams $3,500 in compensatory damages and $3,000,000 in punitive damages on their misrepresentation claim and $3,000 in compensatory damages and $4,500,000 in punitive damages on their suppression claim. The jury awarded Massey $3,000 in compensatory damages and $3,000,000 in punitive damages on her misrepresentation claim and $3,000 in compensatory damages and $4,500,000 in punitive damages on her suppression claim. On July 7, 1995, Foremost moved for a judgment notwithstanding the verdict or, in the alternative, for a new trial or a remittitur. On August 22, 1995, the trial court scheduled a hearing on the remittitur issue for October 19, 1995. On September 26, 1995, the parties agreed to extend the time for ruling on the post-judgment motions until November 1, 1995. The trial court conducted a hearing on the remittitur issue on October 19, 1995. On October 26, 1995, the parties agreed to extend the time for ruling on the post-judgment motions until November 14, 1995. On November 14, 1995, the trial court denied Foremost's motion for a judgment notwithstanding the verdict and its motion for a new trial. However, the trial court did not rule on the remittitur motion. Foremost filed its notice of appeal to this Court on December 14, 1995. The trial court purported to enter a remittitur order on March 18, 1996, five months after the October 19, 1995, remittitur hearing and more than four months after it had lost jurisdiction over that post-judgment motion...
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