Case Title: Morton v. Allstate Ins. Co.

Citation: 486 So. 2d 1263

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1986-02-07T00:00:00Z

Document:
486 So. 2d 1263 (1986)
Mary Ann MORTON
v.
ALLSTATE INSURANCE COMPANY.
84-368.

Supreme Court of Alabama.
February 7, 1986.
Rehearing Denied March 31, 1986.
*1264 Robert H. Turner of Chestnut, Sanders, Sanders, Turner & Williams, Selma, for appellant.
Benjamin R. Rice of Williams, Spurrier, Moore, Rice, Henderson & Grace, Huntsville, for appellee.
MADDOX, Justice.
This appeal concerns an insurance company's alleged bad faith delay in paying insurance benefits. The trial court granted summary judgment in favor of the insurance company on plaintiff's claim of bad faith. Plaintiff appeals. We affirm.
On June 18, 1982, Charles and Mary Morton's house burned. The Mortons were joint owners of a homeowner's insurance policy issued by defendant Allstate Insurance Company. After the fire, the Mortons submitted a proof of loss statement to Allstate, claiming damages of $36,697.52. Allstate conducted an investigation into the cause of the fire and concluded that "Charles H. Morton intentionally caused the fire, resulting in the damages claimed," but that "Mary Ann Morton was [not] a party to the intentional burning of the ... home."
Allstate filed a complaint for declaratory judgment in the Madison County Circuit Court, requesting the court to determine:
After a hearing, the court issued a pretrial order containing the following statement as to the issues to be tried in the case:
Pursuant to the agreement on the issue of bad faith, as set forth in the pretrial order, Ms. Morton filed the following counterclaim:
On the day of the trial, before the jury was struck, the following exchange occurred between the court and counsel:
After the trial and the return of a verdict, the court entered the following judgment:
After the court entered the judgment set out above, defendant Allstate moved for summary judgment on the issue of bad faith as to Ms. Morton:
Ms. Morton filed no response to Allstate's motion for summary judgment, and the court, without opinion, granted summary judgment on the bad faith issue.
Ms. Morton appeals to this Court from the entry of summary judgment for Allstate.
Ms. Morton argues, in essence, that Allstate acted in bad faith in filing the declaratory judgment action and thereby delaying the payment of her claim, because Allstate's own investigation had revealed no reason to delay payment.
The elements of a bad faith cause of action in Alabama are:
National Security Fire & Cas. Co. v. Bowen, 417 So. 2d 179, 183 (Ala.1982).
In order to affirm Allstate's summary judgment, we must find that there was no genuine issue of material fact regarding the allegation of bad faith, and that Allstate was entitled to judgment as a matter of law. Watts Construction Co. v. Cullman County, 382 So. 2d 520, 522 (Ala. 1980). In other words, "[i]f there exists "a mere gleam, glimmer, spark, the least bit, the smallest trace" of evidence or an inference therefrom that supports Ms. Morton's counterclaim based on bad faith, Allstate's summary judgment must be reversed. Fountain v. Phillips, 404 So. 2d 614, 618 (Ala.1981). Our review of the propriety of the trial court's grant of summary judgment includes "all evidence of record, as well as that evidence formally submitted in support of or in opposition to [Allstate's] motion." Id.
Allstate predicated its summary judgment motion on the fact that the trial court in the declaratory judgment action refused to direct a verdict for Ms. Morton and on the trial court's determination that "the evidence and proceedings in this cause" show that Allstate's "filing of a declaratory judgment action was entirely proper under the circumstances."
We have held that "[i]n the normal case in order for a plaintiff to make out a prima facie case of bad faith refusal to pay an insurance claim, the proof offered must show that the plaintiff is entitled to a directed verdict on the contract claim and thus entitled to recover as a matter of law." National Savings Life Insurance Co. v. Dutton, 419 So. 2d 1357, 1362 (Ala. 1982). Thus, a plaintiff in a bad faith action need only be entitled to a directed verdict on the underlying contract claim in order to make out a prima facie case of bad faiththe plaintiff need not actually have received a directed verdict. In other words, the actual failure of a plaintiff to receive a directed verdict on the contract claim does not necessarily preclude the establishment of a prima facie case of bad faith, and this is so even though, as here, the contract claim is fully litigated as a declaratory judgment action.
In Federated Guaranty Life Ins. Co. v. Bragg, 393 So. 2d 1386 (Ala.1981), this Court, speaking through Justice Shores, discussed the unique application of the Declaratory Judgment Act to insurance contracts, as follows:
"Borchard's Declaratory Judgments (2nd ed.1941), p. 634. Under the facts of this case, either party to the contract was entitled to bring an action for declaratory judgment. When Federated returned the premiums submitted to it by Bragg after its attempted rescission of the contract, Bragg was entitled to have the validity of the policies determined. Likewise, inasmuch as Federated took the position that the contracts had been legally cancelled and Bragg denied that they had, then Federated was likewise entitled to have that issue determined. As Professor Borchard states:
"Borchard's Declaratory Judgments, supra, p. 645.
Of course, the mere filing of a declaratory judgment action would not preclude the *1270 maintenance of a bad faith cause of action in a proper case. As the Court pointed out in Safeco Ins. Co. of America v. Sims, 435 So. 2d 1219 (Ala.1983):
Consequently, we must look past the court's denial of Ms. Morton's directed verdict motion and to the "evidence and proceedings in this cause" to determine if Ms. Morton has made out a prima facie case of bad faith.
We were able to glean the following facts from the transcript of the proceedings in the declaratory judgment action: Upon investigating the Mortons' insurance claim, Allstate discovered evidence to the effect that the house had been burglarized immediately preceding the fire, and thus, much of the property the Mortons listed in their proof of loss may not have been in the house at the time the fire occurred. Furthermore, even had there been no evidence of burglary, Allstate could not determine what amount to pay Ms. Morton because the Mortons had filed a joint proof of loss and it was not ascertainable what property listed was Ms. Morton's. When testifying as to what her loss from the fire was, Ms. Morton herself said that her testimony was "still a guesstimate."
The foregoing evidence convinces us that Allstate had a debatable reason,i.e., one open to dispute or question, for delaying payment of Ms. Morton's insurance claim because the amount of Ms. Morton's loss could not be determined; therefore, based on the evidence before us, Ms. Morton failed to prove one of the elements of a bad faith cause of action and did not establish a prima facie case of bad faith.
Although Ms. Morton filed no response to Allstate's summary judgment motion, in her brief on appeal she points to the summary judgment rendered in her favor at the beginning of the declaratory judgment action and argues that it provides a scintilla of evidence of bad faith so that she "is entitled to a jury trial on the issue of bad faith," and that Allstate's summary judgment was improperly granted. Her argument, however, is misplaced.
The summary judgment granted Ms. Morton does not evidence that she is entitled to recover from Allstate as a matter of law, because it was only a partial summary judgment. The summary judgment was granted only on the issue of Ms. Morton's entitlement to coverage under the policy. Even if she was entitled to coverage, without proof of loss Ms. Morton was not entitled to recover anything from Allstate; she could not recover until the amount of her loss could be determined, i.e., until the issue of the amount of her loss was tried and submitted to a jury. The jury ultimately determined the loss to *1271 be $10,263.45. Thus, Ms. Morton's partial summary judgment in the declaratory judgment action does not provide a scintilla of evidence of any bad faith on the part of Allstate that would require reversal of Allstate's summary judgment. Moreover, even if Ms. Morton had received a "full" summary judgment or a directed verdict on the contract claim, then, as we have already discussed, based on the evidence of record, she still would not have been entitled to one, because the evidence shows that Allstate had a debatable reason for delaying payment of her claim, namely, uncertainty as to the amount of Allstate's liability.
We find that there is no genuine issue of material fact regarding Allstate's alleged bad faith and that Allstate is entitled to a judgment as a matter of law. The summary judgment appealed from is due to be, and it hereby is, affirmed.
AFFIRMED.
TORBERT, C.J., and FAULKNER, SHORES, BEATTY and HOUSTON, JJ., concur.
JONES and ADAMS, JJ., concur specially.
JONES, Justice (concurring specially).
I write separately to caution the reader not to interpret this Court's opinion as failing to take into account the context in which the separate claims were presented (the damages claim for breach of contract in the first phase of the trial and the bad faith claim in the second phase).
The essential elements of Ms. Morton's bad faith claim, in theory, are not defeated by the insurer's merely asserting that it had never denied her claim and by electing to leave the assessment of her damages to the determination of a jury. Indeed, this attitude, under all the attendant circumstances, could constitute the tort of bad faith. The failure of the insurer to discharge its legally imposed duty to exercise a good faith effort to adjust Ms. Morton's claim (the amount of the claim being the only dispute) either occurred before the insurer initiated the declaratory judgment litigation or it did not occur.
The focus here is not on the insurer's asserted contest of Ms. Morton's claim at trial, but upon its affirmative conduct in response to the filing of her proof-of-loss statement. Even though it had a legitimate defense of noncoverage as to Mr. Morton's claim, the insurer could not discharge, as a matter of law, its obligation of good faith to Ms. Morton simply by joining both insureds as defendants in a declaratory judgment suit and casting on her the burden of proving her damages. This leaves unanswered the crucial question of the insurer's course of conduct before it filed the declaratory judgment suit.
Notwithstanding these established principles governing the insurer's duty of good faith, I agree that the trial court correctly granted the insurer's motion for summary judgment; and this for the reason that Ms. Morton contested the motion on the single ground that she had obtained a partial summary judgment (on the issue of coverage). The insurer's evidence in support of its motion was not affirmatively responded to by way of a counter affidavit setting forth Ms. Morton's version of the facts respecting settlement negotiations (or the lack of them); i.e., she never placed the insurer's factual averments in issue. To be sure, the issue of damages may be a legitimate basis for denial of a claim; and the insurer's motion for summary judgment, with supporting evidence, raised this defense. Because it was met with silence on the part of the insured, no genuine issue of material fact existed; thus, the trial court had no choice but to grant the motion.
ADAMS, J., concurs.