Mueller v. Hartford Ins. Co. of Alabama

• Decision Date: 23 August 1985
• Citation: 475 So.2d 554
• Parties: W. Fritz D. MUELLER v. The HARTFORD INSURANCE COMPANY OF ALABAMA. 84-288.
• Court: Alabama Supreme Court

Page 554

475 So.2d 554

W. Fritz D. MUELLER v. The HARTFORD INSURANCE COMPANY OF ALABAMA.

84-288.

Supreme Court of Alabama.

Aug. 23, 1985.

Melvin M. Belli, Sr. and Richard E. Brown, San Francisco, Cal., and George J. Moore of Moore & Layden, Mobile, for appellant.

Donald F. Pierce, Edward S. Sledge, III, and David R. Quittmeyer of Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, for appellee.

SHORES, Justice.

W. Fritz D. Mueller filed this action against Hartford Insurance Company on May 28, 1982, in the Circuit Court of Mobile County, alleging breach of contract and bad faith refusal to pay an insurance claim. The trial court granted summary judgment on the bad faith claim and certified the judgment as final, pursuant to Rule 54(b), Alabama Rules of Civil Procedure. Plaintiff appeals from that final judgment. We affirm.

On December 4, 1980, a house in Baldwin County owned by Fritz and Helga Mueller was destroyed by fire. The house was insured by Hartford under a policy issued through Ebert Insurance Agency in Foley, Alabama. Fritz Mueller notified Ebert Insurance Agency of the loss on December 9, 1980. Ebert relayed the information to Gary Knight, the manager of Hartford's claims office in Mobile, and Knight notified W.T. Crowgey, Hartford's general claims adjuster in Atlanta.

Crowgey interviewed Mueller on December 10, 1980. He characterizes Mueller's account of the circumstances surrounding the fire as the most bizarre that he had heard in his years in the insurance claims business. Nonetheless, he decided to employ Brian T. Maphet of INS Investigations to investigate the fire, rather than advise denial of the claim. On December 10, 1980, Crowgey and Maphet examined the site of the fire for one and one half hours. Maphet returned to the site on the following morning, took photographs, and sketched a diagram of the scene. Later that day, he recorded an interview with Mueller.

Maphet in the course of his investigation made three written reports based upon his examination of the fire scene and his interviews with various witnesses. In the first report, dated December 29, 1980, Maphet concluded:

"All providential and accidental causes have been eliminated. This fire occurred as a result of a liquid accelerant being poured on the floor and ignited."

Maphet stated in the final report, dated February 20, 1981, however:

"It should be noted although my first report under the caption of Determination of Cause and Origin states accidental causes have been eliminated, this is an error, as I was referring to electrical or providential causes only. The insured clearly paints a picture of an accident occurring that I cannot at this time disprove from my fire scene examination performed."

Hartford denied Mueller's claim on May 29, 1981, "due to his apparent involvement in the origin of the fire." Hartford did, however, pay two claims arising from the fire: $18,642.00 to Helga Mueller, and $57,216.00 to the Federal Land Bank of New Orleans, which held a mortgage on the house.

Fritz Mueller and his wife Helga had moved to New Jersey from their home in Baldwin County in the spring of 1980. Before leaving, the Muellers had all utilities turned off, removed valuables from the house, and otherwise closed the house for an indefinite period. According to statements made by Fritz Mueller during the investigation of the fire, as well as statements made in deposition, the move to New Jersey was made so that he could be near a New York hospital where he planned to undergo eye surgery.

In his brief, Mueller states that he and Mrs. Mueller were having marital difficulties during 1979 and 1980 and separated sometime after the eye surgery. Mueller testified in deposition that he then traveled by bus to New Orleans to consult another eye specialist. Mueller maintains that he stayed in New Orleans for a few days; at the conclusion of his stay, he planned to return immediately to New York. When he discovered that the bus made a stop in Mobile, however, he decided to spend a few days at his Baldwin County home.

Mueller states that he arrived in Mobile on December 3, 1980. He rented a car and went shopping, purchasing, among other things, a few days' worth of groceries and some varnishing materials. Later, he had a couple of drinks on the beach and, at approximately 10:00 p.m., went to bed. He awoke sometime around 2:30 a.m. and decided to varnish an area of wooden floors in the house. He maintains that he had to work primarily by candlelight, since the utilities to the house had been disconnected. After varnishing for some time, Mueller went outdoors to smoke a cigarette. He said that when he attempted to light the cigarette, undried varnish on his hands ignited. He said he rushed inside, and the fire spread to the house. He states, however, that he was able to put the fire out in about three minutes.

Mueller claims that he decided to drive to a motel near his home in order to telephone the fire department. He explains that he decided to use the motel phone instead of a close neighbor's because he was not sure whether any of his neighbors were home and because the home of his closest neighbor was not easily accessible by foot. As Mueller was driving to the motel, his rented car ran off the road and into a ditch near the home of John Bemis. Bemis helped Mueller get the car back onto the road. Mueller failed, however, to tell Bemis that his house had been on fire or that he had sustained burns. In deposition, Mueller testified as follows:

"Q. Did you mention to Mr. Bemis the fact of a fire at your house?

"A. Well, there was no fire.

"Q. Did you mention to Mr. Bemis the fact of a prior fire at your house?

"A. No, I didn't see any reason.

"Q. Did you mention to him where you were going or what you were doing?

"A. No.

"Q. Did you know Mr. Bemis.

"A. Yes, I know him casually.

"Q. Did you make a conscious decision not to mention these things to him at the time?

"A. We were both busy and at a considerable span apart. In other words, we were giving each other instructions as to how to get that vehicle out. I wasn't going to stop and have conversation...."

Mueller states that as he was about to leave Bemis, a neighbor drove by and yelled to him, "Fritz, your house is on fire." Mueller says he drove back to the house and that, when he arrived, it was engulfed in flames. He was later taken to the hospital by ambulance and treated for the burns he sustained during the fire.

The plaintiff in a bad faith case has the burden of proving:

"(a) an insurance contract between the parties and a breach thereof by the defendant;

"(b) an intentional refusal to pay the insured's claim;

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

"(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, plaintiff 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 plaintiff must show that the insurance company had no legal or factual defense to the insurance claim.

"The 'debatable reason' under (c) above means an arguable reason, one that is open to dispute or question. Webster's Third New International Dictionary (1931) at 116. See Chavers [v. National Security Fire & Cas. Co., 405 So.2d 1] at 10; see also Embry, J., concurring on rehearing in Aspinwall v. Gowens, Ala., 405 So.2d 134 (1981)."

National Security Fire & Cas. Co. v. Bowen, 417 So.2d 179, 183 (Ala.1982). Accordingly, in National Savings Life Ins. Co. v. Dutton, 419 So.2d 1357, 1362 (Ala.1982), we explained:

"In the normal case in order for a plaintiff to make out a prima facie case of bad faith refusal to pay an insurance claim, the proof offered must show that the plaintiff is entitled to a directed verdict on the contract claim and, thus, entitled to recover on the contract claim as a matter of law. Ordinarily, if the evidence produced by...