Life Ins. Co. of Georgia v. Johnson

Decision Date26 April 1996
Citation684 So.2d 685
CourtAlabama Supreme Court

Davis Carr and James W. Lampkin II of Pierce, Carr, Alford, Ledyard & Latta, P.C., Mobile, Theodore B. Olson and Theodore J. Boutrous, Jr. of Gibson, Dunn & Crutcher, Washington, DC, for Appellant.

Sidney W. Jackson III and Robert J. Hedge of Jackson, Taylor & Martino, P.C., Mobile, Wyman O. Gilmore, Jr. of Gilmore & Gilmore, Grove Hill, for Appellee.

J. Fred Wood, Jr. and Terry McElheny of Dominick, Fletcher, Yeilding, Wood & Lloyd, P.A., Birmingham, for Amicus Curiae Amerex Corp.

T. Thomas Cottingham, F.A. Flowers III and Eric D. Franz of Burr & Forman, Birmingham, for Amicus Curiae USX Corp.

Bert S. Nettles, Mark D. Hess and Laura E. Proctor of London & Yancey, Birmingham, for Amicus Curiae Blue Cross-Blue Shield of Alabama.

Larry W. Harper and W. Perry Webb of Porterfield, Harper & Mills, P.A., Birmingham, for Amicus Curiae Wausau Ins. Co.

Harry Cole and Terry A. Sides of Hill, Hill, Carter, Franco, Cole & Black, P.C., Montgomery, and Ken Wallis, Gordon T. Carter and H. Al Scott of Alfa Mutual Ins. Co., Montgomery, for Amici Curiae Alfa Mutual Ins. Co., Alfa Mutual Fire Ins. Co., Alfa Mutual General Ins. Co. and Alfa Life Ins. Corp.

Joseph B. Mays, Jr., Phillip J. Carroll III and Gregory B. Wormuth of Bradley, Arant, Rose & White, Birmingham, for Amicus Curiae Alabama Gas Corp.

J. Mark Hart of Olschner & Hart, P.C., Birmingham, and Ollie L. Blan, Jr. of Spain & Gillon, Birmingham, for Amicus Curiae Alabama Defense Lawyers Ass'n.

Jack Drake of Drake & Pierce, Tuscaloosa, for Amicus Curiae Alabama Trial Lawyers Ass'n.

Frederick T. Kuykendall III and Sam Heldman of Cooper, Mitch, Crawford, Kuykendall & Whatley, Birmingham, David Shelby of Shelby & Cartee, Birmingham, J. Cecil Gardner of Gardner, Middlebrooks & Fleming, Mobile, and David Denny of Baron & Budd, P.C., Dallas, Texas, for Amicus Curiae Mary Lambreth.

Robert D. Norman of Norman, Fitzpatrick, Wood & Kendrick, Birmingham, for Amicus Curiae University of Alabama Health Services Foundation, P.C.

C.C. Torbert, Jr. of Maynard, Cooper & Gale, P.C., Montgomery, Andrew L. Frey and Evan M. Tager of Mayer, Brown & Platt, Washington, DC, for Amici Curiae the Chamber of Commerce of the United States and the Product Liability Advisory Council, Inc.

Jeff Sessions, Atty. Gen., and William H. Pryor, Jr., Deputy Atty. Gen., for Amicus Curiae the State of Alabama.

On Applications for Rehearing

SHORES, Justice.

The opinion released November 17, 1995, is withdrawn and the following is substituted therefor. The Court wishes to express its appreciation to counsel for the parties and to counsel for amici curiae for the excellent briefs filed in support of the applications for rehearing. The Court has been aided and persuaded by the excellent and well-reasoned arguments advanced by both the parties and the amici curiae.

Daisey L. Johnson sued Life Insurance Company of Georgia ("Life of Georgia"), alleging that it had engaged in intentional and reckless fraud and fraudulent suppression by selling her a Medicare supplement insurance policy that was worthless to her because she was eligible for Medicaid. The jury returned a verdict in favor of Ms. Johnson, assessing compensatory damages at $250,000 and punitive damages at $15 million. Life of Georgia moved for a new trial or for a remittitur of damages. The trial judge held a hearing pursuant to Hammond v. City of Gadsden, 493 So.2d 1374 (Ala.1986), and Green Oil Co. v. Hornsby, 539 So.2d 218 (Ala.1989). Following the hearing, the trial judge reduced the punitive damages award to $12.5 million, pursuant to Ala.Code 1975, § 6-11-21, and this remittitur was accepted by the plaintiff. Life of Georgia appeals.

Ms. Johnson, a resident of Grove Hill, Alabama, is an 84-year-old woman who went through the third grade in school and who spent her life as a domestic worker. Because Ms. Johnson had dealt with Life of Georgia for over 25 years, paying premiums on nine different policies, she trusted its agents. Sometime before January 8, 1990, a Life of Georgia agent, Barbara Holt, came to Ms. Johnson's home to collect the monthly premiums on her existing policies. Ms. Holt recommended that Ms. Johnson purchase a Medicare supplement policy. The next week Ms. Holt returned and again discussed the Medicare supplement policy with Ms. Johnson, who agreed to purchase the policy. Ms. Johnson testified that Ms. Holt told her that the Medicare supplement policy would protect her. She testified: "If I got in the hospital, you wouldn't have to worry about your doctor bill, you could stay in there because they would pay your doctor bill, and I got it." Ms. Holt filled out the application for Ms. Johnson.

At first, Barbara Holt testified that she asked Ms. Johnson for her Social Security card; later, she testified that she asked Ms. Johnson for her Medicaid card and that she asked the questions on the application, one of which was whether Ms. Johnson was on Medicaid. At trial, Ms. Johnson disputed Ms. Holt's testimony that she was asked whether she was on Medicaid. Ms. Johnson showed the jury how she gave her cards to Ms. Holt, by pulling a vinyl holder out of her purse. She testified that she always kept her cards in this vinyl holder, which contained her Medicaid, Medicare, and Social Security cards.

Despite the fact that Ms. Holt knew that it was illegal and against company policy to sell a Medicare supplement policy to Ms. Johnson, because she was on Medicaid, Ms. Holt completed the application and collected the premiums on the policy. Initially the premiums were $71 per month; by 1992, they had risen to $103--almost one-third of Ms. Johnson's fixed income. Over almost a three-year period from 1990 through 1992, Ms. Johnson paid a total of $3,132 in premiums on this policy.

Life of Georgia first argues that it was entitled to a directed verdict or to a judgment notwithstanding the verdict, with respect to the award of punitive damages because, it argues, the plaintiff failed to prove by clear and convincing evidence that the company "consciously or deliberately engaged in oppression, fraud, wantonness, or malice" as is required by § 6-11-20, Ala.Code 1975, for the award of punitive damages. The statute provides:

"s 6-11-20. Punitive damages not to be awarded other than where clear and convincing evidence proven; definitions.

"(a) Punitive damages may not be awarded in any civil action, except civil actions for wrongful death pursuant to Sections 6-5-391 and 6-5-410, other than in a tort action where it is proven by clear and convincing evidence that the defendant consciously or deliberately engaged in oppression, fraud, wantonness, or malice with regard to the plaintiff. Nothing contained in this article is to be construed as creating any claim for punitive damages which is not now present under the law of the State of Alabama.

"(b) As used in this article, the following definitions shall apply:

"(1) Fraud. An intentional misrepresentation, deceit, or concealment of a material fact the concealing party had a duty to disclose, which was gross, oppressive, or malicious and committed with the intention on the part of the defendant of thereby depriving a person or entity of property or legal rights or otherwise causing injury.

"(2) Malice. The intentional doing of a wrongful act without just cause or excuse, either:

"a. With an intent to injure the person or property of another person or entity, or

"b. Under such circumstances that the law will imply an evil intent.

"(3) Wantonness. Conduct which is carried on with a reckless or conscious disregard of the rights or safety of others.

"(4) Clear and convincing evidence. Evidence that, when weighed against evidence in opposition, will produce in the mind of the trier of fact a firm conviction as to each essential element of the claim and a high probability as to the correctness of the conclusion. Proof by clear and convincing evidence requires a level of proof greater than a preponderance of the evidence or the substantial weight of the evidence, but less than beyond a reasonable doubt.


The standard of review applicable to a directed verdict or to a denial of a motion for a directed verdict is whether the nonmoving party presented substantial evidence in support of his or her position. If not, then a directed verdict is proper. Bailey v. Avera, 560 So.2d 1038, 1039 (Ala.1990). A verdict is properly directed only where there is a complete absence of proof on a material issue or where there are no disputed questions of fact for the jury to determine. Woodruff v. Johnson, 560 So.2d 1040, 1041 (Ala.1990); K.S. v. Carr, 618 So.2d 707 713 (Ala.1993). Life of Georgia argues strenuously that the evidence was not sufficient to meet this clear and convincing standard; however, it admits that the evidence was in sharp conflict.

The trial judge denied Life of Georgia's motion for a directed verdict because he was satisfied that the plaintiff had presented a jury question with regard to the issue of punitive damages. He stated in his Hammond order:

"Clear and convincing evidence was presented at trial that Life of Georgia was aware of the fraudulent sale of these Medicare supplement policies.... Plaintiff further produced clear and convincing evidence through the testimony of three live pattern witnesses that Life of Georgia's conduct in selling these policies to elderly, uneducated, single black women was not an isolated event and had not ceased and these people were paying a very substantial portion of their fixed income for useless policies. Evidence was presented at trial that Life of Georgia was aware of the unfitness of its agent in selling this specialized type policy. Eric Peek testified that he trained Barbara Holt for Life of Georgia yet gave her no training relative to the Medicare Supplement policies because he himself did not...

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