Smith v. Equifax Services, Inc.

• Decision Date: 02 December 1988
• Citation: 537 So.2d 463
• Parties: Carrie J. SMITH, individually and as executrix of the Estate of Harry W. Smith, Jr., deceased, v. EQUIFAX SERVICES, INC., and Lillian Puckett. 87-895.
• Court: Alabama Supreme Court

Page 463

537 So.2d 463

Carrie J. SMITH, individually and as executrix of the Estate of Harry W. Smith, Jr., deceased, v. EQUIFAX SERVICES, INC., and Lillian Puckett.

87-895.

Supreme Court of Alabama.

Dec. 2, 1988.

E.J. Saad and Mark L. Redditt of Crosby, Saad & Beebe, and Jay A. York of Drinkard, Sherling & York, Mobile, for appellant.

Louis E. Braswell of Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, for appellees.

HOUSTON, Justice.

Carrie J. Smith, individually and as executrix of the estate of Harry W. Smith, Jr., deceased, filed this action against Mutual Benefit Life Insurance Company, Equifax Services, Inc., and Lillian Puckett, an employee of Equifax. Her claims arose from an insurance transaction between Mr. Smith and Mutual Benefit. Equifax and Puckett filed a motion to dismiss, which the trial court considered as a motion for summary judgment and granted. The action is still pending against Mutual Benefit. The summary judgment was made final in accordance with Rule 54(b), A.R.Civ.P.

There were three claims against Equifax and Ms. Puckett: (1) negligence in the collection, assembly, transmission, or handling of medical records and other information concerning Mr. Smith; (2) intentional misconduct in the collection, assembly, transmission, or handling of medical records and other information concerning Mr. Smith; and (3) breach of a contract between Mutual Benefit and Equifax as to which Mr. Smith and/or Ms. Smith was a third-party beneficiary.

Deceased Insured's Action for Negligence and Intentional Misconduct

This action was filed after Mr. Smith's death. A claim for negligence, for which no action has been filed, does not survive death in favor of the personal representative. Gillilan v. Federated Guaranty Life Insurance Co., 447 So.2d 668,674 (Ala.1985). A claim for intentional misconduct is ex delicto in nature; and, as such, it does not survive in favor of the personal representative of a deceased person under the provisions of Code 1975, § 6-5-462. Bates v. L & N Employees Credit Union, 374 So.2d 323, 324 (Ala.1979); Sanford v. Western Life Insurance Co., 368 So.2d 260, 263 (Ala.1979).

Beneficiary's Individual Action for Negligence

In the case of Royal Neighbors of America v. Fortenberry, 214 Ala. 387, 107 So. 846 (1926), the Court held:

"[T]he right of action for failure to promptly issue, or negligence in the due issue of the policy or certificate, pursuant to the application, is ... not in the beneficiary named in the application."

214 Ala. at 390, 107 So. at 849.

In Gillilan, supra, at 674, the Court wrote:

"Thus, Royal Neighbors of America is authority for the proposition that a beneficiary named in a pending insurance application does not have a right to maintain an action against an insurance company for negligently processing an insurance application."

If the beneficiary has no right against an insurance company for negligently processing an insurance application, the beneficiary would have no such right against a third party employed by the insurance company to obtain information necessary for evaluation before the issuance of a policy, for negligence in the collection, assembly, transmission, or handling of such information.

Beneficiary's Individual Action for Intentional Misconduct

Where fraudulent representations are made to a beneficiary of a life insurance policy at the time the application for the policy is made by the insured, the beneficiary may have standing to bring an action for fraud. North Carolina Mutual Life Insurance Co. v. Holley, 533 So.2d 497 (Ala.1987); see National States Insurance Co. v. Jones, 393 So.2d 1361 (Ala.1980), and Old Southern Life Insurance Co. v. Woodall, 295 Ala. 235, 326 So.2d 726 (1976). In each of these cases, the representations were made to and directed at the individual plaintiffs; and in National States and Old Southern the consideration for the contracts "was to and did flow from the plaintiffs." National States, at 1364. There is nothing in the record to show that any fraudulent representations were made to Ms. Smith or that the consideration for the insurance policy "was to and did flow from" Ms. Smith. Ms. Smith, individually, had no standing.

Likewise, there is not a scintilla of evidence that Equifax and Ms. Puckett engaged in "negligent ... or intentional misconduct which proximately caused delay in the collection, assembly and transmission or handling" (emphasis added) of Mr. Smith's medical records or information. The trial court did not err in granting summary judgment in favor of Equifax and Ms. Puckett on Ms. Smith's claims of negligence and intentional misconduct.

It is suggested that these were not the reasons expressed by the trial court in granting the motion for summary judgment, and that we should not consider these reasons in reviewing the trial court's action.

An appellee can defend the trial court's ruling with an argument not raised below, for this Court "will affirm the judgment appealed from if supported on any valid legal ground." Tucker v. Nichols, 431 So.2d 1263, 1265 (Ala.1983). There is a rather obvious fundamental difference in upholding the trial court's judgment and reversing it; this Court will not reverse the trial court's judgment on a ground raised for the first time on appeal, Costarides v. Miller, 374 So.2d 1335 (Ala.1979), even though it affirms judgments on bases not asserted in the trial court, Bank of the Southeast v. Koslin, 380 So.2d 826 (Ala.1980). This difference is predicated on the "long-standing, well-established rule that [in order to secure a reversal] the appellant has an affirmative duty of showing error upon the record." Tucker v. Nichols, supra, at 1264.

We do not mean to imply that the reasons given by the trial court for granting the summary judgment on the negligence and intentional misconduct claims were wrong or insufficient, but merely that we do not need to address those reasons, because we can uphold the trial court's judgment on principles of survival, lack of standing, and inadequate allegation of intentional misconduct, without reaching the reasons specifically assigned by the trial court for granting summary judgment to these defendants.

Deceased Insured's and Beneficiary's Action as Third-Party Beneficiaries for Breach of Contract

We next address the issue of breach of contract. Ms. Smith's amended complaint asserts that Mr. and Ms. Smith were direct or intended beneficiaries under the contract between Mutual Benefit and Equifax, and that Equifax's breach of this contract proximately injured Ms. Smith in her personal and representative capacity.

Mr. Smith had presented an application for a policy of insurance on his life to Mutual Benefit on April 17, 1986. On that day he was examined by a physician authorized by Mutual Benefit to perform the physical examination. Mr. Smith paid Mutual Benefit $2,000 as a prepayment of insurance premiums; that money was deposited and retained by Mutual Benefit until after Mr. Smith's death. Mutual Benefit provided the following "conditional insurance" to Mr. Smith on April 17, 1986:

"We [Mutual Benefit] will issue, as of the effective date, a policy as applied for if: (a) we receive both Part 1 and Part 2 of the application; and (b) we could have issued such a policy on the effective date under our underwriting standards. * * * * If the proposed insured dies before the termination date, we will deduct from the proceeds the amount if any, needed to make up the initial premium.

"If we could not have issued a policy as applied for, we will issue, as of the effective date, a policy based on the application amended to provide for a rating class or the elimination or reduction of any portion or feature of the risk, or both, if: (a) we receive both Part 1 and Part 2 of the application; and (b) we could have issued such a policy on the effective date under our underwriting standards. The required amendments must be signed and any extra initial premium paid immediately upon notice; otherwise, there will be no insurance, and we will refund the amount paid. If the proposed insured dies before receipt of such notice, the amendments will be considered signed, and we will deduct any unpaid extra initial premium from the proceeds."

Mutual Benefit was contractually obligated to issue the policy, either standard or rated, if such a policy could be issued under its underwriting standards.

Moreover, under the terms of Mutual Benefit's conditional insurance, the insurability of Mr. Smith was to be determined based only on those facts that were known as of the date of the application, April 17, 1986.

The application was received by Mutual Benefit's home office on April 21, 1986. On April 22, 1986, Mr. Smith was diagnosed by Dr. Gordon Spafford as having a "mediastinal mass."

On May 12, 1986, Mutual Benefit was advised that Mr. Smith had been diagnosed as having "giant cell carcinoma."

On May 27, 1986, Mutual Benefit contracted with Equifax for the collection of certain medical information concerning Mr. Smith.

Mutual Benefit's physician specified many points of desired medical information in a four-page, single-spaced internal memorandum that asked for specific information concerning Mr. Smith's medical history. Equifax was hired by Mutual Benefit merely to collect and transmit this medical information to Mutual Benefit. The information was not to go to or to be considered or utilized by Mr. or Ms. Smith. Mutual Benefit paid Equifax. No written contract existed between Mutual Benefit and Equifax. Mutual Benefit had previously used Equifax to collect and forward medical records. Equifax made a partial report on June 12, and a final report on June 18. The June 18 report included the report from Dr. Spafford (dated June 17) that contained much of the requested information. The undisputed evidence is that Equifax contacted Dr. Spafford every day from the day Dr. Spafford had a medical release from Mr. Smith until the report was...