Case Title: McLaughlin v. Alabama Farm Bureau Mut. Cas. Ins. Co.

Citation: 437 So. 2d 86

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1983-07-22T00:00:00Z

Document:
437 So. 2d 86 (1983)
Gary H. McLAUGHLIN d/b/a McLaughlin's IGA Foodliner
v.
ALABAMA FARM BUREAU MUTUAL CASUALTY INSURANCE COMPANY, a Corporation.
82-368.

Supreme Court of Alabama.
July 22, 1983.
Rehearing Denied September 2, 1983.
*87 Billy C. Bedsole of Stockman & Bedsole, Mobile, for appellant.
Bert S. Nettles and J. Harley McDonald, Jr., of Nettles, Barker & Janecky, Mobile, for appellee.
TORBERT, Chief Justice.
Appellant, Gary McLaughlin appeals from a partial summary judgment in favor of Alabama Farm Bureau Mutual Casualty Insurance Co., Inc. (Farm Bureau). This dispute arose because of the denial of coverage by Farm Bureau under a fire insurance policy on McLaughlin's business. The first claim was for breach of contract by Farm Bureau; the trial court denied summary judgment on this claim. The trial court granted summary judgment as to the second claim for intentional misrepresentation and the third claim for bad faith refusal to pay. Pursuant to A.R.Civ.P. 54(b) the trial court directed entry of final judgment as to these two claims which are now before us on this appeal.
McLaughlin owned and operated McLaughlin's I.G.A. Foodliner in Theodore, Alabama. On October 8, 1980, Farm Bureau issued a fire insurance policy on McLaughlin's grocery store. On November 18, 1980, at some time after 6:45 p.m., a fire at the store caused approximately $120,000.00 in damages to the building and its contents. On January 13, 1981, after investigating the fire, Farm Bureau denied payment on the policy. One of the bases for the denial was that McLaughlin had provided false information in the application to Farm Bureau for coverage. The policy has a provision stating:
Farm Bureau took this position because McLaughlin had answered "No" to a question on the application asking whether McLaughlin had ever been sued or sued anyone, when, in fact, he had been involved in litigation. McLaughlin stated in his deposition that he specifically told Terry Barnes, the agent for Farm Bureau who filled out the application, that he had been sued by a lady who fell in the store. He also testified that Barnes indicated he would not even bother putting it down and that Barnes proceeded to check "no" on the application.
In his original complaint, McLaughlin set forth the following allegations of misrepresentation by Farm Bureau:
The defendant, Farm Bureau, thereafter filed a motion for summary judgment. Before it was ruled upon by the court, the plaintiff amended his complaint "in its entirety" to read as follows:
Thereafter, the trial court denied Farm Bureau's motion for summary judgment. Farm Bureau then filed a motion for reconsideration of the denial. The motion for reconsideration was subsequently granted, and upon reconsidering the trial court granted the motion for summary judgment. The order granting summary judgment was later amended so that the motion for summary judgment on the breach of contract claim was denied, but the summary judgment on fraud or misrepresentation and bad faith was granted.
At the outset we must determine whether appellant's amended pleading was sufficient under A.R.Civ.P. 9(b). Farm Bureau maintains that the amended complaint, which superseded the prior complaint "in its entirety," Zeigler v. Baker, 344 So. 2d 761 (Ala.1977), failed to allege fraud with sufficient particularity. Farm Bureau states the complaint fails to set forth the time, place or circumstances of the fraud.
We need not reach this issue because we are of the opinion that if there was error, the defendant failed to preserve it for our review by calling the defect in the complaint to the attention of the trial court. The only motion which might arguably have raised this issue was the motion for summary judgment. That motion, however, was based upon the defendant's allegations that there was "no genuine issue as to any material fact." This court in Almon v. Byrd, 336 So. 2d 183 (Ala.1976), allowed a challenge under Rule 9(b) where the defendant had made a motion to dismiss under A.R.Civ.P. 12(b)(6) for failure to state a claim. In doing so, the Court commented:
336 So. 2d  at 185, n. 1. Wright and Miller suggest the use of F.R.Civ.P. 12(e) where the "allegation of fraud or mistake is in a pleading to which a responsive pleading is permitted." 5 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 1300 (1969). Wright and Miller refer to the "multiplicity of viewpoints as to the method of enforcing the particularity requirement" for a fraud action.
In the case before us, we are of the opinion that a motion for summary judgment, based merely upon allegations that there were no genuine issues of material fact, was insufficient to call to the trial court's attention a lack of particularity in the averments of fraud, especially in light of the fact that the motion was made before the complaint was amended, it being the amended complaint that defendant on appeal alleges was insufficient.
The second issue in relation to the grant of summary judgment is whether the trial court erred in granting Farm Bureau's motion on the fraudulent misrepresentation claim. It is well settled law that summary judgment should not be granted, "if the evidence or any reasonable inference therefrom contains the merest gleam, glimmer, spark, the least particle or the smallest trace in support of the theory of the complaint." Ex parte Bagby Elevator & Electric Co., 383 So. 2d 173, 176 (Ala.1980).
We are of the opinion that the depositions and affidavits presented a genuine issue of material fact on this claim. There was testimony from McLaughlin and his son, who was present when the application was filled out, that Barnes intentionally falsified the application. That falsification was one of the reasons Farm Bureau later denied coverage under the policy.
In Village Toyota Co. v. Stewart, 433 So. 2d 1150 (Ala.1983), this Court stated:
433 So. 2d  at 1153. On reviewing the evidence in the case before us, we are of the opinion that there was at least a scintilla of evidence (1) that Farm Bureau had falsely represented that it would pay on the policy; (2) that it did so knowing that its agent had falsified the application; (3) that plaintiff signed the application in reliance on the agent's misrepresentation concerning the effect of the false answer; and (4) that plaintiff's claim was denied (thus producing a loss of $120,000.00) as a result of this misrepresentation. The facts of this case are strikingly similar to the fraud action maintained in National Security Insurance Co. v. Beasley, 406 So. 2d 923 (Ala.Civ.App. 1981), cert. denied, 406 So. 2d 926 (Ala.1981). Thus, we are of the opinion that the trial court erred in granting summary judgment on the claim.
The appellant also urges this Court to reverse the grant of summary judgment on the claim for bad faith refusal to pay with knowledge that there is no lawful basis for the refusal.
In Chavers v. National Security Fire & Casualty Co., 405 So. 2d 1 (Ala.1981), this Court initially set out the parameters of a first-party claim of bad faith refusal to pay. In that case we held that there was implied by law a duty of good faith and fair dealing in contractual relationships. Bad faith was defined as "the intentional failure by the insurer to perform this duty implied in law." 405 So. 2d  at 5. We also went on to state:
We have summarized the required showing in a bad faith case as follows:
417 So. 2d  at 183. Finally, in National Savings Life Insurance Co. v. Dutton, 419 So. 2d 1357, 1362 (Ala.1982), this Court held:
A review of the pleadings, depositions, affidavits, and interrogatories before the trial court convinces us that it was not erroneous to grant the motion for summary judgment on this claim.
There is no dispute as to the existence of an insurance contract between the parties on the date of the fire. It is also undisputed that Farm Bureau intentionally refused to pay the claim. Thus, we are left to determine whether there was a legitimate or arguable reason to refuse to pay the claim.
Hilton Godwin, the adjuster for Farm Bureau, stated in his deposition that coverage was denied for the following reasons: (1) accelerants were found in the store in the area of the fire; (2) certain items listed on McLaughlin's inventory of lost items had been returned for credit after the fire; (3) McLaughlin had misrepresented his financial position to Farm Bureau; and (4) McLaughlin stated on his application for insurance that he had not been involved in prior litigation and this statement was a misrepresentation. We have reviewed each of these reasons for denial and are of the opinion that Farm Bureau's reasons for its refusal to pay were at least "arguable" and therefore its actions do not fall within the parameters of "bad faith" refusal to pay.
Jack Kiser, the fire inspector for the City of Mobile, in a report dated January 8, 1981, stated the following:
If any one of the reasons for denial of coverage is at least "arguable," this Court need not look any further. We are of the opinion that the plaintiff was not entitled to a directed verdict on the contract claim, as required by National Savings Life Insurance Co. v. Dutton, supra, because there was conflicting information before the trial court on each of the reasons for denial of coverage. Specifically, there was conflicting information about the cause of the fire, the inventory listing submitted, and the misrepresentation in the application. For example, while McLaughlin and his son maintain that they told agent Terry Barnes about the prior lawsuit, Albert E. Hatfield, the state fire claims supervisor for Farm Bureau, indicated that Barnes had told him that the application was filled out in accordance with the responses given by McLaughlin. Thus, there was a genuine dispute about information on the application, and that dispute provided an arguable reason for denying coverage. The parties have argued both sides vehemently; however, we are in accord with the trial court in being unable to say there was no arguable reason for denial of coverage. The validity of the reasons will be tested in the breach of contract action still pending in this case.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
JONES, ALMON, SHORES and BEATTY, JJ., concur.