Wolff v. Allstate Life Ins. Co.

• Decision Date: 22 March 1993
• Docket Number: No. 91-7809,91-7809
• Citation: 985 F.2d 1524
• Parties: Marija WOLFF, individually and/or as Executrix of the estate of C. Robert Wolff, Plaintiff-Appellee, v. ALLSTATE LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1524

985 F.2d 1524

Marija WOLFF, individually and/or as Executrix of the estate

of C. Robert Wolff, Plaintiff-Appellee, v. ALLSTATE LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 91-7809.

United States Court of Appeals, Eleventh Circuit.

March 22, 1993.

J. Mark Hart, Bert S. Nettles, Spain, Gillon, Grooms, Blan & Nettles, Birmingham, AL, for defendant-appellant.

Richard W. Whittaker, Joe S. Pittman, Pittman, Whittaker & Pittman, Enterprise, AL, for plaintiff-appellee.

Appeal from the United States District Court for the Middle District of Alabama.

Before BIRCH, Circuit Judge, JOHNSON, Senior Circuit Judge, and THOMAS ^*, Senior District Judge.

JOHNSON, Senior Circuit Judge:

This case arises on appeal following a jury verdict in favor of the plaintiff-appellee Marija Wolff on her claims of fraudulent suppression and breach of contract against the defendant-appellant Allstate Life Insurance Co. ("Allstate"). The claims involved Allstate's termination of and refusal to pay on an insurance policy issued on the life of Wolff's husband. The district court entered judgment in accordance with the jury verdict, and Allstate now appeals. On appeal, Allstate claims that it was entitled to judgment notwithstanding the verdict ("JNOV") on Wolff's fraudulent suppression claim, and to a new trial on Wolff's breach of contract claim. For the reasons that follow, we affirm the district court's denial of Allstate's motion for JNOV, but reverse the district court's entry of judgment and remand the case for a new trial on both the fraudulent suppression and breach of contract claims.

I. STATEMENT OF THE CASE

A. Factual Background

In December 1981, Marija Wolff and her husband, Dr. C. Robert Wolff, purchased a joint mortgage protection life insurance policy ("the 1981 policy") in the amount of $100,000 from Allstate. ¹ The 1981 policy provided for "decreasing term" coverage, under which the Wolffs would have life insurance coverage for fifteen years but the amount of coverage would decrease each year. At the end of the fifteenth year, the policy would terminate without value. To avoid this result, the policy also contained a limited right for either or both of the Wolffs to convert the insurance coverage into "whole life insurance." The exercise of this option would afford the converting party permanent coverage in the amount of the face value of the policy at the time of conversion.

In 1987, the Wolffs obtained a new mortgage in the amount of $180,000. Because of the increased mortgage debt, Dr. Wolff met with Allstate agent Frank Stinson to increase the couple's life insurance protection. In February 1988, the Wolffs submitted an application to Allstate for a new policy which would provide $100,000 in whole life insurance on each of them. The Wolffs' application instructed Allstate to terminate the 1981 policy if their application was accepted.

In March 1988, Allstate accepted Dr. Wolff's application for coverage and issued a $100,000 policy ("the 1988 policy") on his life. However, Allstate rejected Mrs. Wolff for coverage because of health problems discovered in her required medical examination. Stinson arranged for the Wolffs to amend their application to preserve the 1981 policy so that Mrs. Wolff would not be left without coverage.

On May 9, 1988, Stinson met with the Wolffs in their home to deliver Dr. Wolff's new policy, to have the Wolffs sign the amended application preserving the 1981 policy coverage, and to determine how the Wolffs wished to respond to Allstate's denial of Mrs. Wolff's application for coverage. For most of the meeting, Stinson and Dr. Wolff conferred alone, but Mrs. Wolff was called into the room as the meeting concluded. In the presence of Stinson, Dr. Wolff explained to Mrs. Wolff the steps he felt they should take to obtain the desired amount of coverage. In the course of their conversation, the Wolffs agreed that Mrs. Wolff should exercise her right to convert her coverage under the 1981 policy (with its current face value of $77,000) into whole life insurance. ² In addition, the Wolffs decided that they would continue Dr. Wolff's decreasing term coverage under the 1981 policy to supplement his coverage under the 1988 policy. Stinson then provided Mrs. Wolff with the paperwork to authorize the conversion of her coverage under the 1981 policy. ³

On May 15, 1988, Allstate approved the conversion of Mrs. Wolff's coverage under the 1981 policy into a $77,000 whole life insurance policy. Ten days later, an Allstate underwriter terminated the 1981 policy in its entirety effective May 9, 1988. ⁴ Although Allstate sent the Wolffs a premium refund check on the 1981 policy, it did not send them any written statement notifying them that the 1981 policy had been canceled. Allstate proceeded to collect its premiums on the remaining policies by bank draft on the Wolffs' joint bank account. ⁵

In December 1988, Dr. Wolff died. Mrs. Wolff filed claims with Allstate for benefits under both the 1981 and 1988 policies. Allstate paid $100,000 under the 1988 policy, but denied benefits under the 1981 policy claiming that the policy had been canceled. This lawsuit followed.

B. Procedural History

On May 4, 1989, Marija Wolff filed a complaint against Allstate in federal district court, invoking the court's diversity jurisdiction. See 28 U.S.C.A. § 1332 (West Supp.1992). On November 6-7, 1989, the district court conducted a jury trial on Wolff's breach of contract, fraudulent misrepresentation, and fraudulent suppression claims. ⁶ At the conclusion of trial, the jury returned a verdict in favor of Wolff on the breach of contract and fraudulent suppression claims, but in favor of Allstate on the fraudulent misrepresentation claim. The district court denied Allstate's post-trial motions for JNOV and for a new trial, and Allstate now appeals.

II. ANALYSIS

On appeal, Allstate challenges the district court's denial of its motion for JNOV on the fraudulent suppression claim. A motion for JNOV challenges the sufficiency of the evidence and raises a question of law subject to de novo review. See Braswell v. ConAgra, Inc., 936 F.2d 1169, 1172 (11th Cir.1991); Gregg v. U.S. Industries, Inc., 887 F.2d 1462, 1468 (11th Cir.1989). In evaluating the district court's denial of the motion:

[T]he Court should consider all of the evidence ... with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motion[ ] is proper. On the other hand, if there is substantial evidence opposed to the motion, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motion should be denied....

Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.1969) (en banc).

In addition, Allstate challenges the district court's denial of its motion for a new trial. In this motion, Allstate asserted that the jury's verdict, finding both a breach of contract and fraudulent suppression, was factually inconsistent and therefore legally unsupportable under Alabama law. The district court's denial of Allstate's motion for a new trial is reviewable for a clear abuse of discretion. See Hessen v. Jaguar Cars, Inc., 915 F.2d 641, 644-45 (11th Cir.1990).

A. The Fraudulent Suppression Claim

In her final amended complaint, Wolff alleged that Allstate fraudulently suppressed from her its intent to cancel her husband's coverage under the 1981 policy. The jury found Allstate liable to Wolff for the suppression and awarded Wolff $250,000 in damages. Allstate argues that it was entitled to JNOV on the claim because Wolff failed to establish the essential elements of a fraudulent suppression action under Alabama law.

Fraudulent suppression actions in Alabama are governed by statutory authority:

§ 6-5-102. Suppression of material facts.

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.

Ala.Code § 6-5-102 (1975). The Alabama Supreme Court has identified five essential elements of a fraudulent suppression claim: (1) a duty on the part of the defendant to disclose; (2) the defendant's suppression of material facts; (3) the defendant's knowledge of the facts and their materiality; (4) action by the plaintiff in reliance on the suppression; and (5) damages resulting from the reliance action. See Hardy v. Blue Cross and Blue Shield of Alabama, 585 So.2d 29, 32 (Ala.1991). Allstate argues that Wolff failed to establish three of these factors: (1) a duty on its part to disclose the termination of Dr. Wolff's insurance policy to Mrs. Wolff; (2) justifiable reliance by Mrs. Wolff on Allstate's silence; and (3) proof of damages proximately caused by Wolff's reliance on the suppression.

1. Allstate's Duty to Disclose

Under Alabama law, a duty to disclose exists only if there are "confidential relations" or "particular circumstances" which give rise to an obligation to communicate. Ala.Code § 6-5-102 (1975). The duty to speak depends upon "the relation of the parties, the value of the particular fact, the relative knowledge of the parties, and other circumstances." RNH, Inc. v. Beatty, 571 So.2d 1039, 1042 (Ala.1990); Jim Short Ford Sales, Inc. v. Washington, 384 So.2d 83, 86 (Ala.1980). "If a plaintiff offers evidence of special circumstances suggesting that the defendant should have disclosed certain material facts, then whether the defendant had a duty to communicate these facts is for the jury to determine." Interstate Truck Leasing, Inc. v. Bender, 608 So.2d 716, 720 (Ala.1992).

We agree with the district court that Wolff offered sufficient evidence of special...