Sexton v. Liberty Nat. Life Ins. Co.

• Decision Date: 02 October 1981
• Parties: Warren P. SEXTON and Barbara Sexton v. LIBERTY NATIONAL LIFE INSURANCE CO. and Guy V. Johnson. 80-251.
• Court: Alabama Supreme Court

Page 18

405 So.2d 18

Warren P. SEXTON and Barbara Sexton v. LIBERTY NATIONAL LIFE INSURANCE CO. and Guy V. Johnson.

80-251.

Supreme Court of Alabama.

Oct. 2, 1981.

G. Stephen Wiggins of Roberts & Davidson, Tuscaloosa, for appellants.

William J. Donald and Herschel T. Hamner, Jr. of Zeanah, Donald & Hust, Tuscaloosa, for appellees.

ADAMS, Justice.

This is an appeal from an order of the Circuit Court of Tuscaloosa County granting summary judgment in favor of Liberty National Life Insurance Company and Guy V. Johnson. The circuit court entered judgment on less than all of plaintiffs' claims, and pursuant to Rule 54(b), A.R.C.P., determined that there was no just cause for delay, thereby properly posturing this case for our consideration.

Mrs. Barbara Sexton (Mrs. Sexton) and her son Warren P. Sexton (Warren), filed a five-count complaint as amended on September 5, 1979, against Liberty National Life Insurance Company and Guy V. Johnson. Count I alleged that the defendants fraudulently obtained premiums from Mrs. Sexton by making false representations regarding the actual benefits under the policy. Mrs. Sexton contends that Guy Johnson represented to her that he could sell her "a policy that would cover about 80% of any hospitalization expense and that the policy he was offering was Liberty National's best policy."

In actuality, the policies sold by Guy Johnson (Johnson) provided for a fixed daily rate of benefits instead of a percentage of the hospital expenses. Although she admits reading the policy, Mrs. Sexton claims that because she had no particular expertise or education in insurance, she was not aware that the policy was different from the policy explained by Johnson.

In July 1974, Johnson, in his capacity as an agent of Liberty National Life Insurance Company (Liberty National), sold a medical expense policy to Mrs. Sexton for the benefit of her minor son Warren. On January 1, 1977, Johnson sold a second Liberty National policy to Mrs. Sexton for the benefit of her son Warren. Then, in July 1975, the first policy paid $15.00 on a $25.00 surgical charge incurred by Warren. In June 1977, both policies paid a total of $448.00 on surgical and hospital expenses totalling $746.14. The payment in 1975 represented approximately 60% of the charge. Payment made in 1977 represented about 60% of the expenses incurred. Both of these payments were substantially less than 80% of the medical expenses, but Mrs. Sexton made no inquiry or complaint regarding the insufficient payment of these claims.

However, on July 25, 1978, Warren was seriously injured and hospitalized, incurring $11,280.12 in expenses for which Liberty National issued drafts to the attending hospital in the amount of $1,570.00. These drafts were issued on October 17, 1978, and a few days later Mrs. Sexton contacted agent Johnson, claiming that the policies had not paid enough. She claims that she was not put on suspicion of the differences in the prior payments by Liberty National and the 80% promised by Johnson until after Warren's large medical expense because the discrepancies under the two prior claims were too small to put her on notice.

Count II attempted to allege the tort of outrage. Count III claimed breach of a written contract. Plaintiffs claim Count IV averred a breach of an oral contract and Count V alleged bad faith refusal to pay an insurance policy. Summary judgment was granted as to Counts I, II, IV, and V, leaving pending in circuit court Count III for breach of a written contract.

The sole issue presented for our review is: Did the trial court err in granting summary judgment in favor of Liberty National and Johnson on Counts I, II, IV and V of plaintiffs' bill of complaint? We agree with the trial court's resolution of the summary judgment issue and we affirm.

Implicit in the trial court's resolution of the summary judgment issue is the application of certain principles of law. Summary judgment is appropriate if after the court considers the pleadings, depositions, answers to interrogatories, admissions, and affidavits, there is no genuine issue as to any material fact. First National Bank of Birmingham v. Culberson, 342 So.2d 347, 351 (Ala.1977); Rule 56, A.R.C.P. The scintilla evidence rule also applies to summary judgment motions. If there is the slightest gleam, glimmer, or spark of evidence that would support a party's contention, summary judgment should be denied. In this connection we have said that all reasonable inferences from the facts are to be viewed most favorably to the non-movant. Harold Brown Builders, Inc. v. Jordan Company, 401 So.2d 36 (Ala.1981); Campbell v. Alabama Power Co., 378 So.2d 718 (Ala.1979); Tolbert v. Gulsby, 333 So.2d 129 (Ala.1976); Donald v. City National Bank of Dothan, 295 Ala. 320, 329 So.2d 92 (1976). Plaintiffs contend that they certainly presented a genuine issue of material fact, as well as a scintilla, and, therefore, summary judgment was inappropriate.

On the other hand, the defendants contend that plaintiffs have only alleged fraud in several of its many aspects. Count I, they say, is a claim that plaintiffs were defrauded because Johnson, as agent for Liberty National, represented falsely that he would provide Liberty National's best policy that would pay 80% of Warren's hospital expenses and failed to deliver such a policy and failed to pay the amount promised. The tort of outrage contention, they say is merely a statement that defendants sold policies to plaintiffs with no intention of paying them. The fraud of the bad faith failure to pay an insurance claim addresses the action of the defendants in failing to pay claims without a justifiable legal basis.

As to each species of fraud, the defendants claim that the bar of the statute of limitations applies. Code 1975, § 6-2-39; Code 1975, § 6-2-3. Code 1975, § 6-2-39 provides that claims such as that mentioned above must be commenced within one year. Code 1975, § 6-2-3, attempts to provide against the harshness of such a rule by providing the following exception:

In actions seeking relief on the ground of fraud where the statute has created a bar, the claim must not be considered as having accrued until the discovery by the aggrieved party of the fact constituting the fraud, after which he must have one year within which to prosecute his action.

The crucial issue under Code 1975, § 6-2-3, is: When did plaintiffs discover the fraud they allege against the defendants? Additionally, we must decide whether the discovery of fraud issue in this case is one that must be submitted to a jury.

In State Security Life Insurance Co. v. Henson, 288 Ala. 497, 504, 262 So.2d 745, 751 (1972), this court stated:

Whether, within one year prior to filing suit, plaintiff had knowledge of such facts, or knowledge of facts which would lead a reasonable man to make diligent inquiry which would have enabled plaintiff to discover the fraud alleged in Count IV was a question for determination by the jury.

But this court has decided also that under certain circumstances the time of discovery of fraud can be determined as a matter of law. In Seybold v. Magnolia Land Company, 376 So.2d 1083 (Ala.1979), this court upheld a directed verdict for the defendant on the ground that the fraud alleged in the complaint was barred by the applicable statute of limitations. Speaking through Mr. Justice Jones, the court analyzed the issue as follows:

It is well settled that an action based upon fraudulent misrepresentation must be brought within one year of the discovery thereof, or within one year of the time when it should have been discovered. Cities Serv. Oil Co. v. Griffin, 357 So.2d 333 (Ala.1978); Johnson v. Shenandoah Life Insurance Co., 291 Ala. 389, 281 So.2d 636 (1973); State Security Life Insurance Co. v. Henson, 288 Ala. 497, 262 So.2d 745 (1972).

Fraud is deemed to have been discovered when it ought to have been discovered. It is sufficient to begin the running of the statute of limitations that claimant knew of facts which would put a reasonable mind on notice of the possible existence of fraud. Jefferson County Truck Growers Ass'n. v. Tanner, 341 So.2d 485 (Ala.1977).

The evidence in this case shows without conflict that more than one year prior to filing of suit Plaintiff had knowledge of facts sufficient to put a prudent...