Old Southern Life Ins. Co. v. Woodall

• Decision Date: 22 January 1976
• Parties: OLD SOUTHERN LIFE INSURANCE COMPANY v. Ocie T. WOODALL. SC 1248.
• Court: Alabama Supreme Court

Page 726

326 So.2d 726

295 Ala. 235

OLD SOUTHERN LIFE INSURANCE COMPANY v. Ocie T. WOODALL.

SC 1248.

Supreme Court of Alabama.

Jan. 22, 1976.

Jack G. Bonner, Montgomery, Phillips & Funderburk, Phenix City, for appellant.

C. Neal Pope, Phenix City, for appellee.

Spain, Gillon , Riley, Tate & Etheredge, Ollie L. Blan, Jr., Samuel H. Frazier, Birmingham, and Smith & Smith, Phenix City, for Liberty Nat. Life Ins. Co., Southern Life & Health Ins. Co. and Life Ins. Co. of Ala., amici curiae; Robert H. Neill, Birmingham, for Liberty Nat. Life Ins. Co., amici curiae.

SHORES, Justice.

In October, 1972, an agent of Old Southern Life Insurance Company went to the home of Mr. and Mrs. Ocie T. Woodall for the purpose of selling a hospital insurance policy to them. After some discussion, they agreed to buy the insurance offered by Old Southern and paid the first quarterly premium at that time. Thereafter, on November 1, 1972, the policy was issued covering both Mr. and Mrs. Woodall.

The policy contained the following limitations or exclusions from liability by Old Southern:

'SPECIFIED WAITING PERIODS

'Any loss resulting from tuberculosis, any disease or disorder of the heart or circulatory system, hernia, cancer, disease or disorder of the gall bladder, disease or disorder of the urinary system shall be covered only if such disease, disorder, or sickness originates (becomes manifest by the symptoms usually associated therewith) and begins after the effective date and loss occurs no less than six (6) months after the effective date of this policy.'

On the 27th day of May, 1973, Mrs. Woodall became ill and was ordered confined by her physician in Cobb Memorial Hospital in Phenix City, Alabama, for treatment. Mrs. Woodall's condition was diagnosed by her physician as pleural effusion; and she received treatment for said condition while confined in the said hospital. Mrs. Woodall's period of confinement and treatment for this condition extended from May 27 until June 16, 1973, at which time she was discharged. The charge for the services rendered by the hospital for the confinement was $1,157.95.

Subsequent to Mrs. Woodall's release from the hospital, Mr. Woodall filed a claim with Old Southern claiming all sums due under the terms of the contract. On July 26, 1973, Old Southern denied the claim of Mr. and Mrs. Woodall and stated the reason as follows:

"The policy which you carry with this company provides under the LIMITATIONS AND EXCLUSIONS that no Liability for certain conditions are covered unless the cause thereof originates at least six (6) months from the effective date of the policy. Since the condition that caused your hospital confinement is excluded for six (6) months, no liability could be accepted on this claim."

Subsequently, on the 30th day of June, 1973, Mrs. Woodall again became ill and was confined by her physician a second time in Cobb Memorial Hospital in Phenix City, Alabama, for treatment. Mrs. Woodall's condition was diagnosed on this occasion as pneumonia of the left lung; and she was treated for this condition during her hospital confinement. Her period of confinement and treatment on this occasion extended from June 30 until July 10, 1973, at which time she was discharged. The charge for the services rendered by the hospital for this confinement was $954.25.

Subsequent to Mrs. Woodall's release from the hospital on July 10, 1973, Mr. Woodall again filed a claim with Old Southern claiming all sums due under the terms of the contract for Mrs. Woodall's June 30th to July 10th confinement.

On September 11, 1973, Old Southern denied this claim and stated the reason as follows:

". . . no liability could be accepted on this claim since it is a continuation of her May 27 hospital confinement. The condition causing this confinement is not covered unless it develops at least six months after the effective date of the policy. Since this condition was present prior to the policy becoming six months old, our only alternative is to withhold liability . . ."

Mrs. Woodall died sometime after the second claim was denied. Thereafter, Mr. Woodall filed the lawsuit in this case claiming damages from Old Southern on three theories: (1) Fraud and deceit in inducing him to purchase the insurance policy; (2) false representations in inducing him to continue the contract in force and effect; and (3) willfully and corruptly denying its liability under the contract.

The case was submitted to the jury on all three claims; and it returned a general verdict in favor of the plaintiff in the amount of $45,000. This appeal is from the judgment rendered on this verdict.

The first argument advanced by appellant is that if a tort has been committed, the injured party is Mrs. Woodall and that such cause of action does not survive her death. It is not disputed that causes of action sounding in tort do not survive the death of the injured party. Title 7, § 150, Code of Alabama 1940. However, it is conceded in this case that Mr. Woodall paid the premiums for the coverage offered under the policy. He and his wife were coinsured thereunder. The record affirmatively establishes that Mr. Woodall contracted with Old Southern for coverage on his wife as well as himself. It was undisputed that he paid the initial premium, and all subsequent premiums. It was Mr. Woodall who paid premiums on the policy after the claims were denied. In fact, the letters from Old Southern denying the claims for Mrs. Woodall's hospital confinement were addressed to Mr. Woodall. There is every indication that the company dealt exclusively with Mr. Woodall as if he were the sole contracting party. If there was fraud involved on the part of Old Southern, we think it is clear that Mr. Woodall was a victim of that fraud.

Old Southern contends that no claim upon which relief may be granted sounding in tort has been stated. It argues that at most Mr. Woodall has an action for breach of contract. We will address our remarks on this argument to each claim separately.

The first claim asserted, that Old Southern fraudulently and falsely represented to Mr. Woodall that claims under the policy would be paid, knowing that such statements were false, constitutes, under our cases, a claim upon which relief may be granted. Undeniably, when one issues a policy of insurance, and accepts the premium therefor, there is an implied, if not express, promise to perform the act, i.e., honor valid claims made thereunder. If such promise is made with a present intent not to perform, this amounts to a fraudulent misrepresentation. In Walker v. Woodall, 288 Ala. 510, 513, 262 So.2d 756, 759 (1972), the following appears:

'In order for a promise to constitute a fraudulent representation it is necessary that it have been made with the intent not to perform the act. Birmingham Broadcasting Co. v. Bell, 259 Ala. 656, 68 So.2d 314; Nelson v. Darling Shop of Birmingham, Inc., 275 Ala. 598, 157 So.2d 23.

'Intent is an act or emotion of the mind seldom, if ever, capable of direct proof, but is determined by such just and reasonable deductions from the acts and facts presented as the guarded judgment of a reasonably prudent and cautious man would draw therefrom. Hagerty v. Hagerty, 186 Iowa 1329, 172 N.W. 259, 260. Intent is a matter peculiarly within the province of the trier of facts, in this case the jury.

'In Turner v. Biscoe, 141 Tex. 197, 171 S.W.2d 118, 119, the Texas court stated:

"The governing principles of law are familiar. A person's intention is a matter of fact. When a promise is made the promisor expressly or by necessary implication states that he then has a present intention to perform, and if such intention does not actually exist at that time, a false statement of fact has been made upon which fraud may be predicated. The gist of the fraud is deception as to an existing fact, namely, the state of the promisor's mind. That fact may be established by circumstantial evidence taken in connection with the breach, but cannot be established by the breach alone.'

'Of course, mere failure to perform is not of itself evidence of intent not to perform at the time the promise or contract was made. If it were, a mere breach of contract would be tantamount to fraud. See Brock v. Brock, 90 Ala. 86, 8 So. 11; McAdory v. Jones, 260 Ala. 547, 71 So.2d 526.'

We agree with appellant that the mere failure to perform is not itself evidence of an intention not to perform. Something more is required. In Walker, this court found that there was additional evidence introduced other than the failure to perform the promise from which the jury could have found that the promise (in that case to insure the plaintiff's truck) was made with no intent to procure such insurance.

We have carefully read the entire record of the evidence in this case, and find that no evidence was offered which would permit an inference that the policy was issued to the Woodalls without any intention to pay claims thereunder. The only evidence in the record to prove the allegations of the first claim was that the claims were not paid when submitted by Mr. Woodall. Absent some proof that there was something more than a failure to pay the claims, something upon which the jury could infer that at the time the policy was issued that the company had no intention to honor the claims, it was error to submit this claim to the jury.

We are not departing from our previous cases which recognize that generally intent can only be shown by circumstantial evidence. However, we simply find no such evidence in this record. Nor are we departing from the well-recognized rule of our cases that if some condition existed at the time of the issuance of the policy which would have presented the company's ability to perform, and that such condition was known to the company, that circumstance would impose a duty on the company to disclose such information to the applicant for insurance. If it fails to disclose these conditions, it leaves...