State Farm Mut. Auto. Ins. Co. v. Ling

• Decision Date: 22 July 1977
• Citation: 348 So.2d 472
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE CO. v. Clyde Joseph LING. SC 1970.
• Court: Alabama Supreme Court

Page 472

348 So.2d 472

STATE FARM MUTUAL AUTOMOBILE INSURANCE CO. v. Clyde Joseph LING.

SC 1970.

Supreme Court of Alabama.

July 22, 1977.

James H. Porter, Huntsville, for appellant.

Daniel B. Banks, Jr. of Banks & Cartron, Huntsville, for appellee.

EMBRY, Justice.

The outcome of this appeal turns on whether State Farm Mutual Automobile Insurance Company had a duty to its insured, Clyde Joseph Ling, to disclose that his personal injury claim against Crescent Transit Company, another of State Farm's insureds, was subject to the one year statute of limitations or, with intent to deceive him, did not disclose that fact.

Ling filed this action against State Farm claiming damages for fraud, deceit, misrepresentation and breach of fiduciary and confidential relationship. The action was tried on the theory that State Farm suppressed a material fact (that Ling's claim was subject to the one year statute of limitations) which it had an obligation to communicate to him arising from the confidential relations between them or from the particular circumstances of the case as contemplated by Code of Ala., Tit. 7, § 109.

This appeal is from a judgment entered upon return of verdict in favor of Ling in the amount of $20,000. We affirm.

There are two issues presented for review:

1. Whether under the facts of this case, State Farm, the insurer of both Ling and Crescent Transit, had a duty to disclose to Ling that a one year statute of limitations was applicable to his claim.

2. Whether, under the evidence, fraud was perpetrated grossly, maliciously, oppressively, and with intent to deceive and thus justified the award of punitive damages.

Ling and Crescent Transit were involved in an automobile accident on 27 November 1973, on the occasion of which both had automobile insurance with State Farm. The allowable conclusions and inferences to be drawn from the evidence in this case are sharply disputed, however, the jury was authorized to conclude from that evidence the following:

Ling promptly reported the accident to State Farm and was told everything would be taken care of but that he should call the claims office and report it, which was done. At this time State Farm had already determined that Crescent Transit was the party at fault in the accident. In the course of subsequent dealings, the evidence establishes, as Ling contends, that State Farm informed Ling it insured both him and Crescent Transit and it had assumed all responsibility for the accident. He was repeatedly assured by State Farm that he had nothing to worry about, the accident was entirely the fault of Crescent Transit and his expenses would be paid; State Farm would settle his claim. A relationship of natural trust and confidence in State Farm grew out of Ling's dealings with it by State Farm's friendly and reassuring words and actions from a position of superior knowledge of the subject of their dealings with Ling: insurance claims. Ling was lulled into a sense of security by, and relied upon, the words and acts of State Farm. With knowledge of the running of the statute of limitations, and without informing Ling, State Farm advised Ling shortly before the statute ran that it would require a doctor's report as a condition to settling the claim, however, it did not inform him that if the statute ran before receipt of the doctor's report it would not settle. It contacted him last on 21 November 1974 (the statute ran on 28 November, 12:01 a. m.). The claims adjuster reported to his superintendent on 3 December 1974 that no suit had been filed and requested advice "as to what my next move should be." In response, the adjuster was advised. "The statute has run. If you receive contact from the claimant, deny the claim." Actual losses suffered by Ling as medical expenses alone were $3,383.87.

In February 1975, Ling filed an action against Crescent Transit for damages for personal injuries and Crescent was granted summary judgment in that action on the basis of the one year statute of limitations.

The main thrust of Ling's action is fraud based upon Code of Ala., Tit. 7, § 109:

"Suppression of the truth. Suppression of a material fact, which the party is under an obligation to communicate, constitutes fraud. The obligation to communicate may arise from the confidential relations of the parties, or from the particular circumstances of the case."

He would also be entitled to recover if the proof satisfied the jury that State Farm failed to disclose material facts to him with an intent that he be deceived. A clear statement of the applicable rules of law governing this case is found in Chapman v. Rivers Construction Co., Inc., 284 Ala. 633, 227 So.2d 403 (1969):

" § 109 is declaratory of the common law. In dealings between persons standing in confidential relations, the law imposes an obligation on one party to safeguard the interests of the other party with the same fidelity with which he safeguards his own. Withholding facts, material to be known, is a breach of such legal duty, regardless of intent to deceive, and is a legal fraud. When the circumstances of the particular case impose a like duty, the same rule obtains. So reads the statute. In the absence of confidential relations, or special circumstances imposing a like duty, the rule seems settled that nondisclosure of facts to be fraudulent must be for purposes of deceit. * * * "

The record contains ample evidence that supports the jury's conclusion that a relationship of trust and confidence in State Farm by Ling was engendered through the actions and words of the agents of State Farm who dealt with him over the period of four days short of the one year period of limitations, of which they were well aware. This being true, it was the duty of State Farm to disclose to him that vitally material fact of the limited period of time...