Gillion v. Alabama Forestry Ass'n

• Decision Date: 31 January 1992
• Citation: 597 So.2d 1315
• Parties: Marguerite C. GILLION v. ALABAMA FORESTRY ASSOCIATION, et al. 1900620.
• Court: Alabama Supreme Court

Page 1315

597 So.2d 1315

Marguerite C. GILLION v. ALABAMA FORESTRY ASSOCIATION, et al.

1900620.

Supreme Court of Alabama.

Jan. 31, 1992.

Rehearing Denied April 24, 1992.

Donald C. McCabe, Daleville, for appellant.

J. Doyle Fuller, Montgomery, for appellees Alabama Forestry Ass'n and John McMillan.

C. Winston Sheehan, Jr. and Gerald C. Swann, Jr. of Ball, Ball, Matthews & Novak, P.A., Montgomery, for appellee Safeco Life Ins. Co.

MADDOX, Justice.

The issue in this case is whether the trial court erred in entering a summary judgment for the defendants on the plaintiff's claims alleging breach of contract, fraud, and bad faith. The plaintiff claims that she showed a genuine issue of material fact as to whether she was entitled to recover under her deceased husband's life insurance policy, thereby defeating the defendants' motion for summary judgment.

The evidence before the trial court tended to show the following. Before his death in December 1987, Joseph Horace Gillion had owned and managed timberland in Coffee and Crenshaw Counties, Alabama, and had been a member of the Alabama Forestry Association ("AFA") ¹ since 1971. ² As one of the benefits to its members, the AFA provided a group life insurance program through Liberty National Life Insurance Company ("Liberty National"). ³ Gillion obtained life insurance through this program in the amount of $25,000 on November 4, 1972.

Two years after Mr. Gillion became a member of the AFA, he was admitted to the Veterans' Administration hospital in Birmingham with a diagnosis of alcoholism. ⁴ Sometime prior to 1987, the V.A. hospital had declared him unemployable because he had been unable to function in a normal capacity due to his alcoholism.

In the summer of 1987, Liberty National advised AFA that it would no longer be writing group insurance, and on October 1, 1987, SAFECO Life Insurance Company became the group life insurer for the AFA. The participation agreement between SAFECO and AFA specified that "all active full-time employees of the policyholder [AFA] working a minimum of 20 hours per week" were eligible to participate in the SAFECO program.

During 1987, Mr. Gillion continued to deteriorate both mentally and physically as a result of alcohol abuse, and he even began to hallucinate. On October 27, 1987, he enrolled in SAFECO's supplemental life plan, selecting $25,000 in coverage for life insurance, designating his job title as "owner." The enrollment form included the following language:

"I hereby apply for Insurance to which I am entitled or to which I may become entitled under the terms of the group policy or policies issued to the policyholder by SAFECO Life Insurance Company."

Mr. Gillion remained in the V.A. hospital system most of the time from April 1976 until his death on December 18, 1987, in Biloxi, Mississippi. ⁵

On April 12, 1988, Mrs. Marguerite Gillion submitted a claim form to SAFECO as beneficiary under her deceased husband's life insurance policy. Upon examination of the claim form, drafted by Mrs. Gillion herself, the SAFECO claims examiner noted that Mr. Gillion had last worked on June 5, 1987, and denied the claim because Mr. Gillion had ceased work prior to the effective date of the plan in October 1987.

Mrs. Gillion responded by letter, stating that her husband had continued to manage her farmland and timberland up until his death. She then contacted her agent, Earl W. Soloman, who mailed a letter to SAFECO, along with a letter from a doctor advising SAFECO that Mr. Gillion had been working up until the time of his death and therefore that Mrs. Gillion's claim should be covered under the SAFECO policy. On June 27, 1988, SAFECO again denied the claim. The letter from the SAFECO life and disability examiner stated in pertinent part as follows:

"As we stated in our letter of April 19, 1988, this policy states each employee shall become insured on the date he becomes eligible for insurance. However, if he is not actively at work on the day he is scheduled to become insured, he shall become insured on the day he returns to active work.

"The Group Policy became effective October 1, 1987. According to the information in our file, the last date Mr. Gillion worked was June 5, 1987. Because he was not actively at work nor did he return to work after the effective date of the policy, there were no benefits payable for the death occurring December 18, 1987.

"We advised that there may be a possibility that Mr. Gillion would be eligible for the Waiver of Premium Benefit on the policy with the previous carrier. We suggested that Mr. [sic] Gillion contact them for the necessary forms to file a claim.

"Based on the information you have recently provided, we have not been able to determine that Mr. Gillion was in fact working after the effective date of the Group Policy on October 1, 1987. Information to this effect will need to be submitted to our office in order for us to further consider this claim for payment. We will be happy to review any additional information that you have regarding Mr. Gillion's work status after October 1, 1987."

The next month, Mrs. Gillion wrote to SAFECO, requesting reasons for the nonpayment of proceeds of her husband's life insurance policy and asking SAFECO to coordinate with Liberty National and AFA to reconsider its denial of payment of the $25,000 in coverage for his life insurance. SAFECO telephoned Mrs. Gillion and again denied payment.

Several days later, the SAFECO examiner sent an in-house message to Mary Hewitt at AFA, which stated that she (the SAFECO examiner) "had received letters from the agent (Soloman) stating that [Gillion] was definitely eligible and [that the SAFECO examiner] had a feeling that he may be right," but that "that is not what the contract says and that is what we [SAFECO] have to go by."

September 21, 1988, John M. McMillan, Jr., the executive vice president of AFA, submitted an application to SAFECO for death benefits to be paid to Mrs. Gillion, recommending payment of the claim and certifying that Mr. Gillion was a "full-time permanent, active employee who worked at least 20 hours per week (or less if in compliance with the minimum work requirements as provided in the policy provision)." This application stated that the last day that Mr. Gillion was actively employed was the day of his death.

On September 22, Mrs. Gillion filed the complaint in this action against AFA, Liberty National Life Insurance Company, and SAFECO, seeking damages for breach of contract and bad faith, alleging that on June 27, 1988, the "Defendants intentionally and without lawful justification breached [the] contract of insurance by refusing in writing to pay her claim under the policy."

After SAFECO received verification from the executive secretary of AFA that Mr. Gillion was employed up until the time of his death, the claim was approved by SAFECO for payment; on October 7, 1988, SAFECO issued a check to Mrs. Gillion in the amount of $25,000. On October 20, 1988, Mrs. Gillion returned the check to SAFECO, advising it to "answer the lawsuit in the time prescribed by law."

Eight months later, Mrs. Gillion amended the complaint to add a fraud cause of action against SAFECO:

"SAFECO knew or should have known that it had no intention of paying on the requested life insurance policy ... and its failure to so notify the plaintiff ... was for the specific purpose of causing the plaintiff ... to continue making premium payments on ... a worthless policy of insurance."

Mrs. Gillion added as defendants to the fraud action McMillan and Soloman, individually and as agents of AFA and SAFECO, respectively. The defendants moved for a summary judgment, arguing that there was no genuine issue as to any material fact and that they were entitled to a judgment as a matter of law.

The trial court dismissed without prejudice AFA and Liberty National ⁶ on the breach of contract and bad faith counts and entered a summary judgment in favor of all the defendants on the fraud count, except Soloman, who remains in the case on a single claim of fraud. Gillion appealed. ⁷

The standard used to determine the propriety of a summary judgment is found in Rule 56(c), A.R.Civ.P.:

"The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

The burden does not shift to the opposing party to establish a genuine issue of material fact until the moving party has made a prima facie showing that there is no genuine issue of material fact. Schoen v. Gulledge, 481 So.2d 1094, 1096-97 (Ala.1985).

Mrs. Gillion must prove her case by substantial evidence. Ala.Code 1975, § 12-21-12. "Substantial evidence" is "evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co., 547 So.2d 870, 871 (Ala.1989). Because a trial court's ruling on a summary judgment motion is a nondiscretionary ruling, no presumption of correctness attaches to that ruling, and our review of the evidence properly presented in the record is de novo. Hightower & Co. v. United States Fidelity & Guaranty Co., 527 So.2d 698 (Ala.1988).

We will first address Gillion's claims against SAFECO. She sued SAFECO on an alleged breach of contract, maintaining that SAFECO intentionally and without lawful justification refused to pay her claim under the policy. She argues that there was no requirement in the SAFECO policy for timber managers to work a specified number of hours to be eligible for coverage under the SAFECO policy.

SAFECO contends that the insurance policy clearly states that a condition precedent to the availability of coverage was that the applicant be actively at work a...