Williamson v. Indianapolis Life Ins. Co.

Decision Date30 July 1999
PartiesJohn R. WILLIAMSON v. INDIANAPOLIS LIFE INSURANCE COMPANY et al.
CourtAlabama Supreme Court

W. Lee Pittman of Pittman, Hooks, Dutton & Hollis, P.C., Birmingham, for plaintiff.

Cathy S. Wright and Lorrie L. Hargrove of Maynard, Cooper & Gale, P.C., Birmingham; and George E. Purdy of Bose, McKinney & Evans, Indianapolis, Indiana, for defendant Indianapolis Life Insurance Company.

Steve Olen of Olen & Nicholas, P.C., Mobile; and David G. Wirtes, Jr., and George M. Dent III of Cunningham, Bounds, Yance, Crowder & Brown, Mobile, for amicus curiae Alabama Trial Lawyers Ass'n, in support of the plaintiff.

Joe R. Whatley of Cooper, Mitch, Crawford, Kuykendall & Whatley, Birmingham, for amicus curiae American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), in support of the plaintiff.

Kathy Smith Campbell of Chestnut, Sanders, Sanders & Pettaway, Selma, for amicus curiae Alabama New South Coalition, Inc., in support of the plaintiff.

James C. King of King, Ivey & Warren, Jasper, for amicus curiae United Mine Workers of America-District 20, in support of the plaintiff.

Corrie Haanschoten, Montgomery, for amicus curiae Alabama Education Ass'n, in support of the plaintiff.

Paul P. Bolus, Gary L. Howard, and Alycia K. Jastrebski of Burr & Forman, L.L.P., Birmingham; and Phillip E. Stano, American Council of Life Insurance, Washington, D.C., for amicus curiae American Council of Life Insurance, in support of the defendants.

Bert S. Nettles, Mark D. Hess, and A. David Fawall of London & Yancey, L.L.C., Birmingham, for amicus curiae State Farm Life Ins. Co., in support of the application for rehearing.

Forrest S. Latta of Pierce, Ledyard, Latta & Wasden, Mobile; Charles A. Stewart III of Sirote & Permutt, Montgomery; and Rhonda Pitts Chambers of Rives & Peterson, Birmingham, for amicus curiae Alabama Defense Lawyers Ass'n, in support of the application for rehearing. On Application for Rehearing

MADDOX, Justice.

The opinion of December 4, 1998, in which this Court answered two questions certified to it by a federal court pursuant to Rule 18, Ala. R.App. P., is withdrawn, and the following opinion is substituted therefor.

I. Discussion of the Question Whether Certified Questions Are Subject to Rehearing Applications

The plaintiff, John R. Williamson, relying on Burnham Shoes, Inc. v. West American Ins. Co., 504 So.2d 238 (Ala. 1987), argues that this Court should not grant the application for a rehearing filed by the defendant Indianapolis Life Insurance Company. Williamson argues that, under Burnham Shoes, this Court lacks the power to grant a rehearing in regard to a question certified to this Court pursuant to Rule 18, Ala. R.App. P.

We recognize that in Burnham Shoes, a majority of this Court did strike an application for rehearing directed toward this Court's answer to a certified question. We also recognize that Justice Jones, joined by three other Justices, vigorously dissented from the order striking that application for rehearing. In his dissent, Justice Jones stated:

"It is the office of an application for rehearing to afford the nonprevailing party an opportunity to seek reconsideration by the reviewing court, and to afford the reviewing court one final opportunity to correct any errors in its opinion.
"The federal court, in diversity cases, is interested only in being informed on state law issues, not in having certified questions answered in a particular manner. Only the parties have an interest in how the question is answered. Thus, it is only the parties and their counsel that have an interest in seeking rehearing, and not the court. Then, too, I find no wisdom in this Court's shielding itself from reconsideration of its own opinion. After all, the application for rehearing affords this Court its final opportunity to get it right.
"I find nothing in the certified question procedure that requires us to deviate from our traditional procedure in regard to applications for rehearing."

Burnham Shoes, 504 So.2d at 242 (Jones, J., joined by Torbert, C.J., and Maddox and Adams, JJ., dissenting as to the order striking the application for rehearing).

This Court's action in striking the rehearing application in Burnham Shoes has been taken as establishing a rule that this Court will not or cannot entertain an application for rehearing after it has answered a certified question pursuant to Rule 18, Ala. R.App. P. See, e.g., Roe v. Mobile County Appointment Board, 676 So.2d 1206, 1263-65 (Ala.1995); and Hogan v. State Farm Mutual Automobile Insurance Co., 730 So.2d 1157 (Ala.1998). We find Justice Jones's analysis in Burnham Shoes compelling, and we now adopt it. That rule established by the action in Burnham Shoes is today abrogated, and any cases declaring such a rule are, to that extent, overruled.

We grant Indianapolis Life's application for rehearing of the two certified questions. We note that after this Court issued its opinion on December 4, 1998, answering the two questions, the federal court again certified to this Court the same two questions. That recertification has not been docketed as a separate case in this Court, but as a part of this case no. 1970998. Aside from the question of what effect that recertification otherwise might have had, we consider it moot because of our decision to rehear the two questions.

II. Discussion of the Certified Questions

Judge Robert B. Propst, of the United States District Court for the Northern District of Alabama, certified to this Court in March 1998 two questions, pursuant to Rule 18, Ala. R.App. P., relating to a dispute between an insured and his insurer over a so-called "vanishing-premium" insurance policy:

"(1) Whether, in light of the fact that any fraud-based cause of action will not survive his death, John Williamson is presently precluded from pursuing fraud-based causes of action because he will not be required to make any out-of-pocket premium payments after 2002 if he dies before [any] 2003 out-of-pocket premium is due.
"(2) Whether John Williamson is presently precluded from pursuing any causes of action against Indianapolis Life on the ground that no damage has occurred because, despite a current projection showing that he will have to make the $92,000 annual out-of-pocket premium payments through 2006, there remains the possibility that no out-of-pocket premium payments will be required after 2002 if he dies before a 2003 out-of-pocket premium payment is due or if Indianapolis Life's dividend scale increases in the next few years and does not decrease after 2002."

The legal issue presented by these questions is whether an insured who purchased a "vanishing-premium" insurance policy is precluded from pursuing fraud-based causes of action, on the basis that if he is required to make out-of-pocket premium payments, he will not be required to do so until some future date and, therefore, has presently suffered no damage.

In 1992, John R. Williamson purchased two whole-life interest-sensitive insurance policies called "Quick Pay Life" policies, from Byrne Abele, an agent of Indianapolis Life Insurance Company. The face amount of the policies totalled $5.5 million.

Williamson sued Indianapolis Life in the United States District Court for the Northern District of Alabama. He alleges that before he purchased the policies, Abele told him that if he made premium payments of approximately $92,000 per year for 10 years, the policies would go into "auto pilot" and the premiums would "vanish" in the year 2002. Technically, however, the premiums on such policies never vanish. The underlying theory of such policies is that the cash value of the policies will generate enough income through dividends and interest to pay the premiums on the policies and the policies will thereby sustain themselves. The ability of such policies to sustain themselves depends on mortality rates, expenses, dividends, and interest rates.

Williamson sued after realizing that he probably would have to pay additional premiums after the 10-year period expires in 2002. Williamson presented evidence indicating that Indianapolis Life knew in 1992, when it sold the policies to him, that the concept of "vanishing premiums" was not viable. Indianapolis Life moved for a summary judgment, arguing that Williamson had sustained no damage and, therefore, could not presently pursue a cause of action based solely on projections suggesting that the policies would not perform as promised. Specifically, Indianapolis Life argued that Williamson cannot sue unless and until he is actually asked to make an out-of-pocket premium payment after the expiration of the 10-year period. Williamson alleges that Indianapolis Life represented that he would not have to pay premiums beyond the year 2002. Although there are projections suggesting that the agent's alleged representation was false, there is absolutely no way to know whether this representation was true or was false, until the end of the year 2002. For example, we must assume that if Williamson dies before the end of 2002, the insurer will pay the benefits called for by the policies and Williamson will have received the full benefit of what he claims to have bargained for. There is no way to prove that he will live beyond the year 2002. The projections Williamson offered as proof of his fraud claims are merely that—projections—and we consider them to be speculative. Williamson cannot show, with that degree of specificity the law requires, that the policies will not perform as he alleges he was told they would.

This Court, in addressing a variety of causes of action, has consistently held that if the plaintiff has suffered no harm, loss, injury, or damage, then the plaintiff has no claim to be adjudicated. See Ford Motor Co. v. Rice, 726 So.2d 626 (Ala.1998)

(holding that the owner of a sport-utility vehicle could not maintain an action alleging fraudulent suppression based solely on...

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