Spriggs v. Compass Bank

• Decision Date: 05 December 1997
• Citation: 742 So.2d 178
• Parties: Willetha Renee SPRIGGS v. COMPASS BANK and Alfa Insurance Company.
• Court: Alabama Court of Civil Appeals

742 So.2d 178

Willetha Renee SPRIGGS v. COMPASS BANK and Alfa Insurance Company.

2960787.

Court of Civil Appeals of Alabama.

December 5, 1997.

Rehearing Denied January 23, 1998.

M. Clay Alspaugh and Benjamin E. Baker, Jr., of Hogan, Smith & Alspaugh, P.C., Birmingham, for appellant.

Michael L. Edwards and Gregory C. Cook of Balch & Bingham, L.L.P., Birmingham, for appellee Compass Bank.

Connie Ray Stockham and Stephanie Zohar of Stockham & Stockham, P.C., Birmingham, for appellee Alfa General Insurance Company.

YATES, Judge.

Willetha Renee Spriggs sued Compass Bank and Alfa Insurance Company, alleging negligence, a breach of contract, and fraud. Compass Bank and Alfa moved for summary judgments. The trial court granted the motions and entered judgments in favor of Compass Bank and Alfa. Spriggs appealed. The case was transferred to this court, pursuant to § 12-2-7(6), Ala.Code 1975.

A motion for summary judgment is to be granted if there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Hinkle v. Burgreen Contracting Co., 678 So.2d 797 (Ala.Civ.App.1996). If the moving party makes a prima facie showing that no genuine issue of material fact exists and that it is entitled to a judgment as a matter of law, the burden shifts to the nonmovant to present substantial evidence creating a genuine issue of material fact. "[S]ubstantial evidence is evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989).

Viewed in a light most favorable to Spriggs, see Hinkle, supra, the evidence in the record suggests the following facts: In February 1994, Spriggs bought a home, borrowing funds from Compass Bank. Before the loan closing, Compass Bank instructed Spriggs that the mortgage would require her to obtain insurance on the home. Spriggs went to Alfa to obtain insurance. Alfa issued to Spriggs an "Evidence of Insurance Form", which she presented at the February 18, 1994, closing. A check was written by the closing attorney to Alfa for $350—the insurance premium for one year.

Spriggs moved into her new home on March 3, 1994; the house was destroyed by fire on April 30, 1994. On May 2, 1994, Spriggs went to the Alfa office to make a claim. Spriggs was informed that her application had been rejected and that there was no policy on her home. Alfa claimed that on February 24, 1994, it had written a letter to Spriggs and Compass Bank canceling the policy effective March 7, 1994. Both Spriggs and Compass Bank claimed never to have received the February 24, 1994 letter providing notice of the cancellation.

I. Alfa's Summary Judgment

Spriggs argues that the court erred in entering the summary judgment in favor of Alfa because, she says, a genuine issue of material fact existed as to whether she received the notice of cancellation from Alfa.

Section 27-23-25, Ala.Code 1975, provides: "Proof of mailing of notice of cancellation ... to the named insured at the address shown in the policy shall be sufficient proof of notice." Where an insurer claims cancellation as a defense on a policy, it must prove by clear and convincing evidence that the notice of cancellation was mailed to the insured. Hilliar v. State Farm Mutual Automobile Ins. Co., 451 So.2d 287 (Ala.1984), and Harrell v. Alabama Farm Bureau Mutual Casualty Ins. Co., 287 Ala. 259, 251 So.2d 220 (1971). "Proof of actual receipt of the notice by the insured is not required, and where the insured insists ... that the notice was never received, it becomes a question of fact as to whether the cancellation notice was properly mailed." Hilliar, supra, at 288-89.

Alfa contends that it complied with the statute and that it met its burden of proof as to the proper mailing of the notice of cancellation.

Kim Lolley, a senior mail clerk at Alfa, testified by deposition and in affidavit about Alfa's standard operating procedure in handling letters of rejection and cancellation. She stated that all such letters are prepared with an original and one copy, and that they are placed in a designated basket. The typed letters are then removed from the basket by either the supervisor of mail operations or a senior mail clerk and the original and the copy are examined to verify that both have the same address and date. The original is then placed in an envelope addressed to the address found on the applicant's declaration page. The letter is then placed through a postal machine, which seals the envelope and places postage on it, and the letter is then placed in a tray supplied by the United States Postal Service. The letter is then placed on the loading dock and is picked up by the United States Postal Service. The copy of the letter is initialed to verify that the proper procedure was followed, and the copy is placed in a "drawer type assembly." When the drawer becomes full, the copies are taken to the basement and filed by date; the copies are retained for seven years. The copy of the cancellation letter to Spriggs was stamped with Lolley's name and was date-stamped "February 24, 1994"—it was offered as an exhibit to Lolley's affidavit.

John Young, the other Alfa senior mail clerk, mailed the cancellation letter to Compass Bank. He testified to the procedure he used in mailing the letter. The procedure was the same procedure used by Lolley.

Spriggs denied receiving the cancellation letter. Her assertion, standing alone, would not be sufficient to defeat Alfa's motion for a summary judgment. Hilliar, supra.

However, Compass Bank says that it too did not receive the notice of cancellation. This additional evidence presents a question of fact as to whether the notice of cancellation was properly mailed.

The summary judgment in favor of Alfa is reversed, and the case is remanded for further proceedings.

II. Compass Bank's Summary Judgment

Spriggs asserts that the court erred in entering a summary judgment in favor of Compass Bank, because, she says, a question of fact remained as to whether Compass Bank had breached its internal policy, which called for it to notify Spriggs of the cancellation of her insurance policy.

The mortgage agreement between Spriggs and Compass Bank provided that Spriggs would maintain insurance coverage on the mortgaged property. The mortgage agreement contained no requirement that the Bank notify Spriggs that the insurance she was required to obtain had been canceled. Compass Bank, however, maintained an internal policy of sending demand letters to its borrowers once it had received notice that the borrower's insurance had been canceled. The demand letter provides:

"The insurance policy on the above mentioned real estate loan has been canceled, and we have not received a new policy.

"Your contract with Compass Bank requires you to maintain insurance on the property securing the loan, that Compass Bank be named as lienholder on the policy, and that you provide the bank with evidence of your insurance coverage."

Spriggs relies on the ...