Life Ins. Co. of Georgia v. Parker

• Decision Date: 07 November 1997
• Citation: Life Ins. Co. of Georgia v. Parker, 706 So.2d 1108 (Ala. 1997)
• Parties: LIFE INSURANCE COMPANY OF GEORGIA v. James PARKER and Rosie Parker. 1951583.
• Court: Alabama Supreme Court

Page 1108

706 So.2d 1108

LIFE INSURANCE COMPANY OF GEORGIA v. James PARKER and Rosie Parker.

1951583.

Supreme Court of Alabama.

Nov. 7, 1997.

Charles E. Vercelli, Jr., and David P. Stevens of Nix, Holtsford & Vercelli, P.C., Montgomery, for appellant.

Milton C. Davis, Tuskegee, for appellees.

BUTTS, Justice.

James Parker and his wife Rosie Parker sued Life Insurance Company of Georgia and James Mark Taunton in his capacity as an agent of the insurance company, alleging conversion, intentional misrepresentation, and fraudulent suppression of material facts in relation to the defendants' sale of life insurance policies to the Parkers. The trial court entered a summary judgment for Life of Georgia as to the conversion claim, but denied its summary judgment motion as to the fraud claims. At trial, the defendants moved for a directed verdict at the close of the plaintiffs' evidence and at the close of all evidence; the trial court denied those motions. The jury returned a verdict in favor of the Parkers, awarding them $4,276 in compensatory damages and $200,000 in punitive damages. Life of Georgia moved for a JNOV, challenging the sufficiency of the evidence and the amount of the punitive damages award; the trial court denied that motion and entered a judgment on the verdict on February 7, 1996. Life of Georgia appeals from the denial of its motions for a directed verdict and a JNOV. ¹

I.

"The standard of appellate review applicable to a motion for directed verdict is identical to the standard used by the trial court in granting or denying the motion initially. Thus, when reviewing the trial court's ruling on the motion, we determine whether there was sufficient evidence to produce a conflict warranting jury consideration." Ogle v. Long, 551 So.2d 914, 915 (Ala.1989). The standard of review for testing the sufficiency of the evidence when the sufficiency is challenged by either a motion for directed verdict or a motion for JNOV is the "substantial evidence rule." Id. 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. of Florida, 547 So.2d 870, 871 (Ala.1989). In considering the question of the sufficiency of the evidence, we are required, as was the trial court, to view the evidence in the light most favorable to the nonmovant. Bussey v. John Deere Co., 531 So.2d 860, 863 (Ala.1988).

Viewed in the light most favorable to the Parkers, the evidence suggests the following: In 1993, James Mark Taunton, after working as an agent for another insurer for over 20 years, began employment as an agent for Life of Georgia. He was assigned a debit route that he worked regularly, collecting premium payments from policyholders and soliciting new business. Taunton soon met the Parkers, who were Life of Georgia policyholders on his debit route. He learned that James and Rosie Parker were 68 years old and 70 years old, respectively, and that both of them were in poor health. He also learned that Rosie Parker was legally blind because of diabetes and that the Parkers' only income was a monthly Social Security check.

In December 1993, Taunton visited the Parkers to conduct a "policy review" and to determine if they could buy more insurance from Life of Georgia. He saw that they had purchased three life insurance policies from Life of Georgia in 1981. ² He noted that James Parker had a $1,000 policy and a $500 policy and that Rosie Parker had a $1,000 policy; all of these policies would pay the full face amount of benefits upon the Parkers' deaths. ³ Taunton was aware that the three policies would pay full benefits and that the Parkers could no longer qualify for whole-life policies, because of their age and health. Instead they could qualify only for a "graded-death-benefit" policy; with such a policy they would have to pay premiums for a minimum of three years before the policy would be worth its full face value upon their death.

Taunton pointed out to them that Rosie Parker had less insurance on her life than did her husband James, and he encouraged the Parkers to buy more insurance to "even out" their coverage. Taunton told them that he could "fix it" so that the Parkers could each have $2,000 in life insurance coverage. Taunton could not "even up" the Parkers' insurance by merely selling them another $500 policy, because Life of Georgia had stopped selling policies that small. Taunton therefore suggested that James Parker cash in his $500 policy and indicated that, if he did, the Parkers could receive "400 and something dollars" before Christmas, only a few weeks away. Taunton told them that they could purchase two new $1,000 policies, which he said he would add on to the two $1,000 policies they already had, combining the monthly premiums and giving them each $2,000 in coverage.

Taunton did not disclose to the Parkers that because of their age and health he could not sell them full-benefit policies. He did not inform them that the policies he would obtain for them would be graded-death-benefit policies that would not pay full benefits until after three years. Taunton told the Parkers that, with the new policies added to their 1981 policies, they would each have $2,000 in coverage; however, Taunton knew that the Parkers would not have this amount of coverage until the new policies had matured for three years.

The Parkers agreed that they wanted to have $2,000 apiece in death benefits and, believing that they were buying whole-life policies, signed the applications for the new policies. At the top of the applications were these words: "Application for Graded Death Benefit Life Insurance"; at the signature line were the words "I understand fully that this policy has a limited death benefit for the first three years." The applications did not define the terms "graded death benefit" or "limited death benefit" or explain how the benefits would be limited for the first three years.

Although the Parkers agreed to cash in James Parker's $500 policy, Taunton did not at that time execute the necessary paperwork to cash in the $500 policy, and the Parkers did not receive a check for the cash value of the $500 policy before Christmas. Life of Georgia did, however, issue two $1,000 graded-death-benefit policies to the Parkers, and Taunton went to their house in January 1994 to begin collecting the premiums for the new policies. James Parker explained to Taunton that he could not afford to pay the premiums, and Taunton told him that when the Parkers received their check for the cash value of the $500 policy, they could use it to pay the premiums on their insurance.

Toward the end of January 1994, the Parkers passed Taunton on the street as they were driving and he signaled for them to stop. He went to their car and gave James Parker a document to sign to cash in the $500 policy. Soon thereafter, the Parkers received a check for $141.17, representing the cash value of the policy. Mrs. Parker, still expecting to receive the "400 and something dollars" that she believed was due on the policy, delayed cashing the check, waiting until Taunton's next monthly stop at her house, when she planned to inquire why the amount was so small.

Life of Georgia normally directs its agents to continue making monthly calls on insureds who miss premium payments and to give them several months to make the payments current so that the policies may remain in force. However, Taunton did not return to the Parkers' house again after they failed to pay the January 1994 premium on the policies, and Mrs. Parker ultimately cashed the check.

After the Parkers did not make the January 1994 premium payment, the new graded-death-benefit policies lapsed. Because the premiums for the two $1,000 policies the Parkers had bought in 1981 had been added with the premiums for the two new policies, the Parkers' nonpayment of the premiums also caused the 1981 policies to lapse. However, there were certain provisions within the 1981 policies that thereafter went into effect. James Parker's policy was converted to "extended term insurance"; this meant that Life of Georgia used the net cash value of the 1981 policy to purchase term insurance that would pay the full face value of $1,000 at the event of his death, but shortened the period of coverage. James Parker was left with $1,000 in benefits payable upon his death, but only until December 8, 1999. Rosie Parker's 1981 life insurance policy converted to "reduced paid-up" status; that is, the cash value of her policy was lessened, but the policy would remain in effect for the same period as the original policy. Rosie Parker was left with a full coverage period, but only $608 in benefits for her beneficiaries upon her death.

The Parkers argued at trial that they had agreed to cash in the $500 policy only because Taunton represented that they would receive "400 and something dollars," i.e., most of the policy's face amount, at a time when they had a pressing need for the money. They further argued that Taunton suppressed the fact that the new $1,000 policies he wanted them to buy were graded-death-benefit policies, not whole-life policies. The Parkers argued that they would not have bought the new policies if they had known that they were graded-death-benefit policies. The Parkers also pointed out that, because of the changes in their coverage that they made based upon Taunton's representations, they lost part of the benefit of their 1981 policies, which, after the new policies lapsed, were converted into policies with lesser coverage. They claimed damages based upon the lesser amount of cash value that they received for the $500 policy, as well as $4,000 for the loss of the amount of coverage that they had believed the change in their policies would immediately bring them. They further sought damages for the stress, anxiety, and mental anguish ...