Koch v. State Farm Fire and Cas. Co.

Decision Date29 June 1990
PartiesDaniel L. KOCH and Roberta P. Koch v. STATE FARM FIRE AND CASUALTY COMPANY, a corporation; and James E. Robinson. 89-171.
CourtAlabama Supreme Court

Joseph C. Sullivan, Jr. and Richard E. Corrigan of Hamilton, Butler, Riddick, Tarlton & Sullivan, Mobile, for appellants.

Carl Robert Gottlieb, Jr. and William W. Watts III of Reams, Vollmer, Philips, Killion, Brooks & Schell, Mobile, for appellee.

HOUSTON, Justice.

Daniel L. Koch and Roberta P. Koch filed a multiple-count complaint against State Farm Fire and Casualty Company and its agent, James Robinson (both hereinafter referred to as "State Farm"), alleging breach of contract, 1 bad faith refusal to pay an insurance claim, and fraudulent concealment, 2 relating to damage to an exterior wall; 3 and breach of contract, bad faith refusal to pay an insurance claim, and misrepresentation, relating to damage to the kitchen floor. The trial court directed verdicts in favor of State Farm on all counts. The Koches appeal from the resulting judgment. We affirm.

The standard of review for a directed verdict and a summary judgment are essentially the same. Kizziah v. Golden Rule Ins. Co., 536 So.2d 943 (Ala.1989). This action was filed after June 11, 1987; therefore, the applicable standard of review is the "substantial evidence rule." Ala.Code 1975, § 12-21-12; Robichaux v. AFBIC Development Co., 551 So.2d 1017 (Ala.1989); Perry v. Hancock Fabrics, Inc., 541 So.2d 521 (Ala.1989). In actions filed after June 11, 1987, a directed verdict for the defendant would be proper when the plaintiff has failed to present "substantial evidence" as to each element of his cause of action. See Watters v. Lawrence County, 551 So.2d 1011 (Ala.1989); see, also, § 12-21-12(d).

For purposes of clarity, we will divide the Koches' claims into two categories: (1) causes of action involving claims based on damage to an exterior wall of the Koches' house and (2) causes of action involving an insurance claim based on damage to the kitchen floor of the Koches' house.

Claims For Damage To An Exterior Wall

In 1978, the Koches moved into their present house, retaining the homeowner's coverage with State Farm that they had obtained on their previous house. Following Hurricane Frederic in 1979, the north interior wall of their house suffered water damage, for which they filed a claim with, and were paid by, State Farm, less the deductible. In 1981, this wall again suffered damage from "windblown rain," evidenced by water stains on the inside of the wall. State Farm again paid the Koches' claim, less the deductible. In an effort to determine the source of the water damage to the interior of the house, State Farm retained Thompson Engineering Testing Company ("Thompson") to inspect the Koches' house "to determine if moisture intrusion which had stained several areas throughout the residence was caused by wind, natural causes or by construction or design deficiencies." Thompson visually inspected the Koches' house and rendered a report to State Farm, listing several "possibilities" for leaks (as shown in certain photographs) and made several recommendations for preventing water intrusion. Upon receiving a copy of the report from Thompson, the Koches hired a contractor to make the recommended repairs. No evidence was presented that State Farm authorized Thompson to send the Koches the report, nor was there any evidence that State Farm had any contact with the Koches concerning the report from Thompson.

In 1985, State Farm again received and paid a claim, less the deductible, filed by the Koches for damage to the interior wall caused by "windblown water" from Hurricane Elena.

In the spring of 1987, the Koches noticed that an exterior wall (away from the previously damaged interior wall) needed repair, and they retained Mike Owens, a contractor, to undertake the necessary repairs. Although not initially hired for the purpose, Owens discovered water intrusion on the inside of the interior north wall and, upon removing the redwood siding of the house, Owens found extensive moisture damage to the substructure of the interior north wall from the base of the wall almost to the roof; the wood was rotting or deteriorating. Thereafter, the Koches filed a claim under their homeowner's policy for water damage to the exterior wall of their house. State Farm denied coverage to the exterior wall but did pay, as it had before, for water stain to the interior north wall.

The Koches contend that the water that had been driven by hurricane-force winds through the exterior wall in 1979, 1981, and 1985, causing damage to the interior wall for which State Farm paid the claim, remained undetected, and, thus, remaining in the dark, unventilated space between the interior and the exterior wall, resulted in substantial damage to the exterior wall.

A. Breach of Contract

In their brief, the Koches argue that State Farm breached its contract by failing to pay damages allegedly caused by water driven through the exterior of the wall by hurricane-force winds. However, a thorough review of the record reveals that the last amended complaint filed by the Koches did not contain a claim for breach of contract relating to the wall damage; rather, Count I alleged bad faith and Count II alleged fraudulent concealment. The Koches' attorney admitted at trial that the amended complaint governed the lawsuit. Thus, State Farm argues that all of the evidence that it introduced without objection concerning the exterior wall damage claim was directly relevant to and admissible under the bad faith claim; that the introduction of such evidence did not relate exclusively to some unstated breach of contract claim, but was offered to rebut a necessary element of a bad faith claim; that the pleadings therefore cannot be deemed to have been amended by consent under Rule 15(b); and thus, that the issue of State Farm's contract liability was never tried by the implied consent of the parties.

"When a party contends that an issue was tried by express or implied consent and the evidence on that issue is also relevant to the issue expressly litigated, there is nothing to indicate that a new issue was raised at trial, and the pleadings are not deemed amended under Rule 15(b)."

McCollum v. Reeves, 521 So.2d 13, 17 (Ala.1987) (quoting Wright & Miller, Federal Practice and Procedure: Civil, § 1493 (1971)). We agree. Therefore, the breach of contract claim is not at issue.

B. Bad Faith

Bad faith is the intentional failure by an insurer to perform the duty of good faith and fair dealing implied by law. In order to prevail on a cause of action for bad faith refusal to pay an insurance claim, the Koches had the burden of proving the following:

" '(a) an insurance contract between the parties and a breach thereof by [State Farm];

" '(b) an intentional refusal to pay [the Koches'] claim;

" '(c) the absence of a reasonably legitimate or arguable reason for that refusal (the absence of a debatable reason); 4

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

" '(e) if the intentional failure to determine the existence of a lawful basis is relied upon, the plaintiff must prove the insurer's intentional failure to determine whether there is a legitimate or arguable reason to refuse to pay the claim.

" 'In short, [the Koches] must go beyond a mere showing of nonpayment and prove a bad faith nonpayment, a nonpayment without any reasonable ground for dispute. Or, stated differently, [the Koches] must show that [State Farm] had no legal or factual defense to the insurance claim.' [Quoting National Security Fire & Cas. Co. v. Bowen, 417 So.2d 179, 183 (Ala.1979) (emphasis in Bowen ).]


" 'If any one of the reasons for denial of coverage is at least "arguable," this Court need not look any further.' McLaughlin v. Alabama Farm Bureau Mut. Cas. Ins. Co., 437 So.2d 86, 91 (Ala.1983)."

King v. National Foundation Life Ins. Co., 541 So.2d 502, 504-05 (Ala.1989); see, also, National Security Fire & Casualty Co. v. Bowen, 417 So.2d 179 (Ala.1982).

It is undisputed that the policy at issue was in full force and effect in 1987 when the damage to the exterior wall and to the interior wall was discovered and reported to State Farm. The pertinent portions of the insurance policy are as follows:



"We insure for accidental direct physical loss to the property described in Coverage A except as provided in SECTION I--LOSSES NOT INSURED.


"1. We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following:


"e. leakage or seepage of water or steam unless sudden or accidental from a:

"(1) heating or air conditioning or automatic fire protective sprinkler system;

"(2) household appliance; or

"(3) plumbing system, including from or around any shower stall or other shower bath installation, bathtub or other plumbing fixture;


"f. wear, tear, marring, deterioration, inherent vice, latent defect and mechanical breakdown;

"g. rust, mold, wet or dry rot;


"2. We do not insure under any coverage for loss (including collapse of an insured building or part of a building) which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: a) the cause of the excluded event; or b) other causes of the loss; or c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss:


"c. Water Damage, meaning:

"(1) ... whether or not driven by wind; ...

"3. We do not insure under any coverage for loss consisting of one or more of the items below:


b. defect, weakness, inadequacy, fault or unsoundness in:


"(2) design, specifications, workmanship, construction, grading, compaction;

"(3) materials...

To continue reading

Request your trial
53 cases
  • Alabama Plating Co. v. U.S. Fidelity and Guar. Co.
    • United States
    • Alabama Supreme Court
    • December 20, 1996
    ...accidental" exception to the pollution exclusion was not raised in that appeal. We also find no guidance from Koch v. State Farm Fire & Cas. Co., 565 So.2d 226, 231 (Ala.1990), where we interpreted the phrase "sudden and accidental" appearing in an exception to an exclusion in a homeowner's......
  • Joe Cooper & Associates, Inc. v. Central Life Assur. Co.
    • United States
    • Alabama Supreme Court
    • December 18, 1992
    ...to motions for directed verdict 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 ......
  • Ex parte Grimmett
    • United States
    • Alabama Supreme Court
    • January 14, 2022
    ...imply consent to trial of the unpleaded issue. Cf. McCollum v. Reeves, 521 So.2d 13, 17 (Ala. 1987); Koch v. State Farm Fire & Cas. Co., 565 So.2d 226, 229 (Ala. 1990). Jason does not assert this exception, so we have no occasion to address its applicability in this case. [7] Jason also con......
  • Allen v. State Farm Fire and Cas. Co., CA 98-1226-MJ-C.
    • United States
    • U.S. District Court — Southern District of Alabama
    • June 25, 1999
    ...(11th Cir.1990) (referring to deductible applicable to coverage for damage resulting from Hurricane Elena) and Koch v. State Farm Fire & Cas. Co., 565 So.2d 226, 228 (Ala.1990) (referring to application of deductible to coverage for water damage sustained from Hurricanes Frederic and Elena)......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT