LeFevre v. Westberry

• Decision Date: 26 July 1991
• Citation: 590 So.2d 154
• Court: Alabama Supreme Court
• Parties: James LeFEVRE v. Lamar WESTBERRY and State Farm Mutual Automobile Insurance Company. 1900057.

Page 154

590 So.2d 154

James LeFEVRE v. Lamar WESTBERRY and State Farm Mutual Automobile Insurance Company.

1900057.

Supreme Court of Alabama.

July 26, 1991.

Rehearing Denied Nov. 15, 1991.

John F. Dillon IV of Dillon, Kelley & Brown and Larry W. Morris of Radney & Morris, Alexander City, for appellant.

Edgar M. Elliott III and Deborah Alley Smith of Rives & Peterson, Birmingham, and Ralph Bland of Bland, Bland & Harris, Cullman, for appellees.

MADDOX, Justice.

This is an uninsured motorist case. The insured, James LeFevre, presents three issues on appeal to this Court: (1) whether he is entitled to recover damages for the alleged bad faith of State Farm Mutual Automobile Insurance Company ("State Farm"); (2) whether he is entitled to recover advance payments under his policy providing uninsured motorist benefits pending a final determination of the extent of his loss, and (3) whether he is entitled to recover interest on the tendered policy limits.

FACTS

In July 1988 LeFevre was injured in an automobile accident with an uninsured motorist. At that time, he was covered under a policy of automobile insurance issued by State Farm that provided uninsured motorist coverage with liability limits of $50,000.

On July 6, the day following the accident, LeFevre's wife reported the accident to State Farm. State Farm opened a claim file and assigned the file to Lamar Westberry, its claims representative. After Westberry contacted both LeFevre and the uninsured motorist, he submitted a report to his supervisor, Richard Hardy, in which Westberry stated that "[LeFevre] was hit head-on by [the] adverse [party] on [the] wrong side [of the road]." ¹

Over the course of the next 15 months, Westberry received various reports from the Decatur Orthopaedic Clinic regarding LeFevre's physical injuries. The first report from the clinic indicated that his injuries consisted of a nondisplaced fracture of the right tibial plateau and a soft tissue injury to his right foot. In December, the reports indicated that LeFevre had to have further surgery on his ankle. In response to this progress report, Hardy suggested that Westberry obtain a statement from the witness to the accident, and "reserve U[ninsured motorist benefits] up to $10,000."

After he contacted the witness, Westberry relayed to Hardy that the witness stated that the uninsured motorist was speeding, crossed over the center line, and collided head-on with LeFevre's automobile. At that point, Hardy recommended an increase in the uninsured motorist reserve to $30,000.

When LeFevre returned to the clinic in March, the doctor reported that he "seemed to be doing fairly well" and that the foot "is a lot better than it was before surgery but these deformities will persist."

Approximately four months later, the orthopaedic clinic report indicated that LeFevre had a 50% loss of function of the foot and that he continued to have complications that possibly would require a "BK" (below the knee) amputation.

In August 1989, Westberry reported to Hardy that State Farm had paid over $14,000 for LeFevre's medical expenses under the first-party medical payments provisions of the policy and suggested that State Farm should pay the $50,000 limit on the uninsured motorist claim. Hardy extended the authority to expend $50,000 to settle the claim, but suggested that Westberry first offer to settle for $40,000.

Westberry offered $45,000 to Ed McCormick, LeFevre's son-in-law, to settle the claim. Ultimately, in October 1989, Westberry offered the policy limits to settle the claim, and requested that LeFevre sign a release. Upon tender of the policy limits, LeFevre's attorney requested that State Farm pay interest on the uninsured motorist benefits. State Farm refused to pay interest on the benefits, and informed LeFevre that he could not receive his benefits unless he agreed to execute the release.

In November 1989, LeFevre sued State Farm, seeking damages for breach of contract, bad faith refusal to pay a direct claim, and intentional infliction of emotional distress. The trial court entered a summary judgment in favor of State Farm. LeFevre appeals. Although the complaint claims damages for breach of contract, intentional infliction of emotional distress, and bad faith, the issues raised on appeal concern only State Farm's alleged bad faith failure to pay the claim. Accordingly, all other issues have been waived. See Boyle v. Scheer, 512 So.2d 1336 (Ala.1987).

HISTORY OF UNINSURED MOTORIST COVERAGE

In 1966, the Alabama Legislature joined a growing number of states in enacting legislation mandating that insurers offer uninsured motorist coverage to persons insured under automobile liability policies issued by the insurer. 1965 Ala.Acts 866 (codified at Ala.Code 1975, § 32-7-23). The policy of compensation underlying the statute was "to provide financial recompense to innocent persons who are injured and to dependents of those who are killed because of the wrongful conduct of uninsured motorists." State Farm Auto. Ins. Co. v. Reaves, 292 Ala. 218, 284, 292 So.2d 95, 100 (1974) (quoting Gulf Am. Fire & Cas. Co. v. Gowan, 283 Ala. 480, 483, 218 So.2d 688, 691 (1969).

The uninsured motorist statute, as amended, requires that, to be entitled to uninsured motorist benefits, the insured be "legally entitled to recover" damages from the owner or operator of the uninsured automobile:

"(a) No automobile liability or motor vehicle policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; provided, that the named insured shall have the right to reject such coverage...."

Ala.Code 1975, § 32-7-23.

The policy sued upon in this case incorporates substantially the language of the statute emphasized above and requires that the insured prove he is "legally entitled" to recover damages:

"We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle.

"....

"Deciding Fault and Amount

"Two questions must be decided by agreement between the insured and us:

"1. Is the insured legally entitled to collect damages from the owner or driver of the uninsured motor vehicle, and

"2. If so, in what amount?

"If there is no agreement, these questions shall be decided by arbitration if requested in writing by the insured." (Emphasis added.)

Before we can determine whether the insured has stated a claim against State Farm for bad faith failure to pay, we must first determine if LeFevre has proven that he is "legally entitled to collect"; that language of the policy is consistent with the statutory language. What do the words "legally entitled to collect" mean?

In Quick v. State Farm Mut. Auto. Ins. Co., 429 So.2d 1033 (Ala.1983), the Court noted that "legally entitled to recover as damages" has been interpreted to mean that "the insured must be able to establish fault on the part of the uninsured motorist, which gives rise to damages and must be able to prove the extent of those damages." Id. at 1035 (quoting State Farm Mut. Auto. Ins. Co. v. Griffin, 51 Ala.App. 426, 431, 286 So.2d 302, 306 (1973)) (emphasis added in Quick ). See State Farm Auto. Ins. Co. v. Baldwin, 470 So.2d 1230 (Ala.1985) (citing Winner v. Ratzlaff, 211 Kan. 59, 505 P.2d 606 (1973); Application of Travelers Indemnity Co., 226 N.Y.S.2d 16 (N.Y.Sup.1962); Cox, Uninsured Motorist Coverage, 34 Mo.L.Rev. 1, 34 (1969)).

In Quick, State Farm acknowledged that the Quicks were "entitled to some payment under the uninsured motorist coverage and that the only matter to be resolved is the amount of payment." The Quicks alleged that they were entitled to punitive damages against State Farm based upon an alleged bad faith refusal to pay their claim. The Court affirmed a summary judgment for State Farm on the basis that it was undisputed that there was a debatable issue as to the amount due under the uninsured motorist coverage. The facts of Quick are substantially like those presented here.

Clearly, the insured, LeFevre, was entitled to some payment under the uninsured motorist coverage of the State Farm policy, but the total amount of that entitlement was not capable of being fully ascertained as of the date State Farm received notice of the claim. In other words, as of that date LeFevre had failed to "prove the extent of those damages" in order to become "legally entitled to collect damages from the owner or driver of the uninsured motor vehicle." Our research reveals that several other jurisdictions have adopted a similar uninsured motorist coverage statute and have dealt with policy provisions in regard to uninsured motorist coverage either identical to or similar to that contained in our statute. See Widiss, Uninsured Motorist Coverage § 7.2 (1990); Hughes v. State Farm Mut. Auto. Ins. Co., 604 F.2d 573, 575-76 (8th Cir.1979); see also Allstate Ins. Co. v. Elkins, 63 Ill.App.3d 62, 66, 21 Ill.Dec. 66, 69, 381 N.E.2d 1, 4 (1978) (concluding that the words "legally entitled to recover" mean that "the plaintiff must be able to establish fault on the part of the uninsured motorist which gives rise to damages" and not that "the insurer stands in the shoes of the uninsured motorist who is the tortfeasor"); Allied Fidelity Ins. Co. v. Lamb, 361 N.E.2d 174, 180 (Ind.App.1977) (the words " 'legally entitled to recover' simply mean that the insured may recover from an insurer ... only after establishing that the uninsured...