National Sec. Fire & Cas. Co. v. Vintson

• Decision Date: 06 July 1984
• Citation: 454 So.2d 942
• Parties: NATIONAL SECURITY FIRE & CASUALTY COMPANY and William Feazell v. James VINTSON, Emma Vintson, and Cavalier Insurance Company. 82-586.
• Court: Alabama Supreme Court

Page 942

454 So.2d 942

NATIONAL SECURITY FIRE & CASUALTY COMPANY and William Feazell v. James VINTSON, Emma Vintson, and Cavalier Insurance Company.

82-586.

Supreme Court of Alabama.

July 6, 1984.

Martha Williams of Williams & Williams, Cullman and Gary W. Lackey, Scottsboro, for appellants.

Ronald L. Allen and Jake B. Mathews, Jr. of Merrill, Merrill, Mathews & Allen, Anniston, Betty C. Love, Talladega, Henry Agee and M. Douglas Ghee, James S. Hubbard, Anniston, for appellee Emma Vintson.

Robert Dillon of Merrill, Porch, Doster & Dillon, Anniston, for appellee Cavalier Ins. Co.

BEATTY, Justice.

Appeal by defendants, National Security Fire & Casualty Company (National Security) and William Feazell, from an adverse judgment entered on a jury verdict. The action involved coverage under a fire insurance policy and was brought by plaintiffs, James Vintson, Emma Vintson, and Cavalier Insurance Company (Cavalier). We reverse and remand.

Plaintiff James Vintson originally filed suit in the Circuit Court of Calhoun County on July 17, 1980. Vintson's complaint, as finally amended, contained three counts: (1) breach of an oral contract for fire insurance; (2) fraud and misrepresentation; and (3) bad faith refusal to pay a direct claim. The case was tried to a jury, and judgment was entered on a jury verdict of $35,000 in favor of Vintson. On appeal, that judgment was reversed and the case remanded for a new trial. National Security Fire & Casualty Co. v. Vintson, 414 So.2d 49 (Ala.1982).

Upon remand, plaintiff's ex-wife, Emma Vintson, and Cavalier were added as parties plaintiff. Cavalier had coverage on the insured risk, which was still in effect at the time of the fire in this case, and would be entitled to a pro rata refund in the event of recovery from National Security.

The facts shown on the second trial are basically the same as those shown on the first trial, as set out by Justice Shores, speaking for the Court in Vintson, supra. On June 10, 1980, Feazell, a debit agent of National Security, visited James Vintson and discussed the purchase of a burial policy. Feazell returned to the Vintson residence on June 18, 1980, at which time he sold Vintson a policy of fire insurance on his mobile home. The application for the insurance was filled out by Feazell. James Vintson signed the application, paid the initial premium, and received a receipt. After completing the application, Feazell forwarded it to National Security to be processed. The mobile home, which was the subject of the application, burned on June 22, 1980.

James Vintson contacted National Security's Anniston office manager, Mary Morton, on June 23, 1980, and advised her of the loss of his mobile home. He was told that National Security probably would not provide coverage, because no policy had been issued. Vintson subsequently received a letter from National Security dated June 24, 1980, denying liability and refunding his premium. The reason given for the denial was that no policy had been issued and that the application for insurance clearly stated that the policy was to be effective as of the date of delivery.

Beginning September 20, 1982, the case was tried a second time before a jury. At the close of the plaintiffs' presentation of evidence, the trial court took under advisement, and subsequently denied, defendants' motion for directed verdict, which complied with the requirements of Aspinwall v. Gowens, 405 So.2d 134 (Ala.1983), infra, as to each count of the complaint. All counts were submitted to the jury, and the jury returned a general verdict in favor of plaintiffs. Judgment was entered on the verdict in the amount of $150,000.00. The defendants filed a motion for judgment notwithstanding the verdict or, in the alternative, for a new trial or a remittitur. The motion was denied January 17, 1983.

The defendants, National Security and Feazell, raise the following issues on appeal:

(1) Whether the trial court erred in denying defendants' motion for directed verdict as to Count II (fraud) and Count III (bad faith);

(2) Whether the general verdict based on self-contradictory theories of recovery is inconsistent as a matter of law;

(3) Whether there was evidence to support an award of punitive damages; and

(4) Whether defendants should have been granted a new trial based on improper closing arguments and a violation of a ruling on defendant's motion in limine by plaintiffs' counsel.

We first address the defendants' claim that the trial court erred in denying their motion for directed verdict with regard to Counts II (fraud) and III (bad faith refusal to pay).

A directed verdict is proper only where there is a complete absence of proof on a material issue or where there are no disputed questions of fact on which reasonable people could differ. Ritch v. Waldrop, 428 So.2d 1 (Ala.1982). When a motion for directed verdict is requested, the entire evidence must be viewed in a light most favorable to the opposing party. Ott v. Fox, 362 So.2d 836 (Ala.1978).

Before we consider whether the denial of the directed verdict was proper under the specific facts of the present case, we look first at the evolution of the tort of bad faith refusal to pay a direct insurance claim in this state. This Court stated in Chavers v. National Security Fire & Casualty Co., 405 So.2d 1, 7 (Ala.1981):

"[A]n actionable tort arises for an insurer's intentional refusal to settle a direct claim where there is either '(1) no lawful basis for the refusal coupled with actual knowledge of that fact or (2) intentional failure to determine whether or not there was any lawful basis for such refusal.' " (Emphasis added.)

Later, in National Security Fire & Casualty Co. v. Bowen, 417 So.2d 179, 183 (Ala.1982), we held:

"No lawful basis 'means that the insurer lacks a legitimate or arguable reason for failing to pay the claim.' Gulf Atlantic Life Ins. Co. v. Barnes, Ala., 405 So.2d 916 (1981). When a claim is 'fairly debatable,' the insurer is entitled to debate it, whether the debate concerns a matter of fact or law. Ibid.

"Under those authorities the plaintiff in a 'bad faith refusal' 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. [Emphasis in original.]

"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 at 10; see also Embry, J., concurring on rehearing in Aspinwall v. Gowens, Ala., 405 So.2d 134 (1981)."

More recently in National Savings Life Ins. Co. v. Dutton, 419 So.2d 1357 (Ala.1982), this Court emphasized the heavy burden that a plaintiff must bear in a bad faith case. Dutton, supra, held:

"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 either side creates a fact issue with regard to the validity of the claim and, thus, the legitimacy of the denial thereof, the tort claim must fail and should not be submitted to the jury." 419 So.2d at 1362.

Dutton also stated that "[w]hether an insurance company is justified in denying a claim under a policy must be judged by what was before...