Case Title: Ex parte John P. Morgan and Darlene K. Morgan. PETITION FOR WRIT OF CERTIORARI TO THE COURT OF CIVIL APPEALS (In re: John P. Morgan and Darlene K. Morgan v. Safeway Insurance Company of Alabama Affirmed.

Citation: 

Docket Number: 1061470

State: alabama

Court: Alabama Supreme Court

Date: 2009-01-30T00:00:00Z

Document:
REL: 01/30/2009 
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2008-2009
_________________________
1061470
_________________________
Ex parte John P. Morgan and Darlene K. Morgan
PETITION FOR WRIT OF CERTIORARI
TO THE COURT OF CIVIL APPEALS
(In re: John P. Morgan and Darlene K. Morgan 
v. 
Safeway Insurance Company of Alabama, Inc.)
(Mobile Circuit Court, CV-06-359;
Court of Civil Appeals, 2060138)
MURDOCK, Justice.
John P. Morgan and Darlene K. Morgan appealed from a
summary judgment in favor of Safeway Insurance Company of
Alabama, Inc. (Safeway"), denying the Morgans' underinsured-
1061470
2
motorist ("UIM") insurance claims against Safeway on the
ground that the Morgans failed to obtain Safeway's consent
before 
settling 
their action against the underinsured
motorist.  The Alabama Court of Civil Appeals affirmed the
trial court's judgment on the ground that the Morgans failed
to give Safeway reasonable notice of their intent to settle
the underlying action, Morgan v. Safeway Insurance Co. of
Alabama, [Ms. 2060138, June 29, 2007] ___ So. 2d ___ (Ala.
Civ. App. 2007).
In February 2004, the Morgans were injured when their
vehicle collided with a vehicle driven by Suzanne Sheffield.
The Morgans were insured under an insurance policy with
Safeway that included UIM coverage.  The Morgans sued
Sheffield seeking damages for the injuries they sustained in
the collision.  In May and June 2005, the Morgans' counsel
communicated with Safeway and its counsel concerning the
Morgans' claims; he advised Safeway's counsel that he
anticipated that the UIM coverage would be at issue.
On June 1, 2005, the Morgans' counsel forwarded to
Safeway's counsel copies of the pleadings in the action
against Sheffield.  On that same day, Safeway sent a letter to
its counsel stating that the Morgans' counsel "has a ways to
go before getting to us."  The Morgans did not join Safeway as
1061470
3
a party to their action against Sheffield, and Safeway did not
elect to join that action.  Following these initial
communications with Safeway, the Morgans began conducting
discovery in their action against Sheffield.
On October 17, 2005, the Morgans' counsel notified
Safeway's counsel by letter of the fact of a proposed
settlement.  The letter advised Safeway that Sheffield's
insurer had offered to pay its policy limits, $20,000 per
person; the letter did not state any other terms of the
proposed  settlement.  The letter made a demand on Safeway for
payment of unspecified additional sums under the UIM portion
of the policy.  Delivered to Safeway's counsel with the notice
were copies of the Morgans' medical records.  This was the
first time the Morgans provided Safeway these records, which
addressed unrelated preexisting conditions and ailments,
including, but not limited to, bipolar disorder, post-
traumatic stress syndrome, surgeries, and degenerative disk
disease.  The October 17 letter to Safeway did not set forth
a proposed date for executing the settlement with Sheffield,
a deadline or target date by which Safeway should respond to
the letter, or any suggestion that time was of the essence.
Safeway's counsel promptly informed Safeway that a
settlement had been proposed and forwarded to Safeway copies
1061470
4
of the Morgans' medical records.  By letter dated October 18,
2005, Safeway's counsel informed the Morgans' counsel that he
expected a response within "the next few days."  On
October 21, 2005, Safeway informed its counsel that it wanted
to take the depositions of some doctors referenced in the
Morgans' medical records; Safeway's counsel did not inform the
Morgans' counsel of this desire.  
On October 27, 2005, the Morgans accepted the settlement
offer and executed a general release.  There apparently was no
communication between Safeway (or its counsel) and the
Morgans' counsel between October 18, 2005, and October 27,
2005.  On November 2, 2005, the Morgans and Sheffield filed a
joint stipulation resulting in the dismissal of the action
against Sheffield.  Safeway learned about the completed
settlement in November 2005 by monitoring the filings in the
Baldwin Circuit clerk's office.
On January 11, 2006, Safeway denied the Morgans' UIM
claims, asserting that the Morgans had violated a policy
provision requiring Safeway's consent to any settlement of the
underlying claim against the underinsured motorist.  In
February 2006, the Morgans filed the present action against
Safeway, alleging breach of contract and bad-faith denial of
their UIM claims.  In March 2006, the Morgans filed a motion
1061470
5
for a partial summary judgment on the issue of Safeway's
contractual liability.  In response, Safeway filed a motion
for a summary judgment in its favor as to all the Morgans'
claims, asserting that the Morgans had waived their right to
recover UIM benefits because (1) they failed to obtain
Safeway's consent to the settlement, (2) they failed to
provide adequate information as to the terms of the
settlement, and (3) they failed to give Safeway a reasonable
opportunity to respond to the proposed settlement. 
On June 7, 2006, the trial court entered an order denying
the Morgans' motion for a summary judgment and granting
Safeway's motion for a summary judgment.  The trial court
determined that the Morgans were not entitled to recover UIM
benefits from Safeway because their notice of the proposed
settlement did not satisfy the requirements set forth in
Lambert v. State Farm Mutual Automobile Insurance Co., 576
So. 2d 160 (Ala. 1991).  Specifically, the trial court
concluded
"that while [the Morgans] provided notice of claim
to Safeway, there is no evidence of consent.  The
documents provided by [the Morgans] to Safeway did
not include the proposed release; disclose the terms
of the release; request Safeway's consent; or offer
Safeway an opportunity to review or participate in
the settlement."
1061470
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The trial court did not specifically address the issue
whether 10 days' notice was sufficient under the facts of this
case.   The Morgans appealed to this Court, which transferred
the case to the Alabama Court of Civil Appeals pursuant to
Ala. Code 1975, § 12-2-7(6). 
The Court of Civil Appeals affirmed the judgment.  That
court concluded that the Morgans failed to comply with the
"reasonable time" standard established in Lambert because they
settled their claims against the alleged tortfeasor after
giving Safeway "no more than 10 days['] ... notice of a
potential settlement and UIM claim."  Morgan, ___ So. 2d at
___.  The court also stated that, absent "compelling
circumstances," 30 days was a reasonable time for a response
by a UIM carrier.  ___ So. 2d at ___.  
In Lowe v. Nationwide Insurance Co., 521 So. 2d 1309,
1310 (Ala. 1988), this Court established a process for
balancing the rights of the UIM insurer and its insured by
(1) requiring that the UIM insurer be notified of, or joined
as a party in, the action against the alleged tortfeasor and
(2) allowing the UIM carrier to elect whether to participate
in that action.  Regardless of whether it elects to
participate,  the UIM insurer would be bound by the
determination of the fact-finder as to liability and damages.
1061470
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Lowe did not address any issues regarding a proposed
settlement between the UIM insured and the alleged tortfeasor.
Settlements and the UIM carrier's subrogation rights were
addressed by this Court in Lambert, which provided a "road
map" governing settlements of the underlying action between
the insured and the alleged tortfeasor in cases involving a
UIM carrier.  Lambert requires that, where benefits are
contractually conditioned upon the insurer's consent to a
settlement between the insured and the alleged tortfeasor, the
settlement should not take place until the UIM carrier has
been given notice of the settlement and has had a reasonable
time to investigate and to act on an insured's UIM claim.  The
Lambert Court noted that the purpose of the guidelines that it
articulated 
"is to protect the underinsured motorist insurance
carrier's 
subrogation 
rights 
against 
the
tort-feasor, as well as to protect the carrier
against the possibility of collusion between its
insured and the tortfeasor's liability insurer at
the carrier's expense."
576 So. 2d at 167. 
The Lambert guidelines are as follows:
"(1) The insured, or the insured's counsel,
should give notice to the underinsured motorist
insurance carrier of the claim under the policy for
underinsurance benefits as soon as it appears that
the insured's damages may exceed the tortfeasor's
limits of liability coverage.
1061470
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"(2) ... [I]f the settlement would release the
tort-feasor from all liability, then the insured ...
should immediately notify the underinsured motorist
insurance carrier of the proposed settlement and the
terms of any proposed release.
"(3) ...  If the insured gives the underinsured
motorist insurance carrier notice of the claim for
underinsured motorist benefits, ... the carrier
should immediately begin investigating the claim,
[and] should conclude such investigation within a
reasonable time ....
"(4) The insured should not settle with the
tort-feasor without first allowing the underinsured
motorist insurance carrier a reasonable time within
which to investigate the insured's claim and to
notify its insured of its proposed action.
"(5) If the uninsured 
motorist 
insurance 
carrier
refuses to consent to a settlement by its insured
with the tortfeasor, or if the carrier denies the
claim 
of 
its 
insured 
without 
a 
good 
faith
investigation into its merits, or if the carrier
does not conduct its investigation in a reasonable
time, the carrier would, by any of those actions,
waive 
any 
right 
to 
subrogation 
against 
the
tort-feasor or the tortfeasor's insurer.
"(6) If the underinsured motorist insurance
carrier wants to protect its subrogation rights, it
must, within a reasonable time, and, in any event
before the tort-feasor is released by the carrier's
insured, advance to its insured an amount equal to
the tort-feasor's settlement offer."
576 So. 2d at 167 (emphasis added).
The only issue before us in the present case is whether
Safeway should be deemed to have waived its right to consent
to, or to object to, the proposed settlement between the
Morgans and Sheffield by not responding to the Morgans' claims
1061470
The Morgans did not argue to the trial court, and do not
1
argue to this Court, (1) that their failure to provide
reasonable notice to Safeway was excusable, or (2) that
Safeway did not show that it was prejudiced by that failure.
See Overstreet v. Safeway Ins. Co. of Alabama, 740 So. 2d
1053, 1060-61 (Ala. 1999) (Lyons, J., concurring in the
rationale in part and concurring in the result).  
9
for UIM benefits during the 10-day period from October 17,
2005, when that claim was made, to October 27, 2005, when the
settlement was consummated.   In Allstate Insurance Co. v.
1
Beavers, 611 So. 2d 348, 352 (Ala. 1992), this Court held
that, in the ordinary case, the relevant notice is not notice
of the action against the alleged tortfeasor, but notice of
the intent to settle that action and to pursue the UIM
coverage for additional damages.  The facts of the present
case do not present an exception to the principle set forth in
Beavers, and we therefore conclude that the notice period
began on October 17, 2005, when the Morgans' counsel notified
Safeway's counsel of the proposed settlement.
As noted in Lambert, the reasonableness of the notice to
the UIM insurer depends on the particular facts and
circumstances of each case.  Lambert, 576 So. 2d at 167 (a
notice 
"must 
take 
into 
consideration 
the 
facts 
and
circumstances of each individual case").  In their briefs to
this Court, the parties do not focus in particular on the
question whether, as a general rule, 30 days (or any other
1061470
10
period) should be established as a presumptively reasonable
time for an insurer to respond to a claim for UIM benefits.
Nor is it necessary for our decision today to address this
issue; we therefore decline for purposes of this case to adopt
the holding of the Court of Civil Appeals as to this issue.
The issue the parties do emphasize in their briefs, and the
one 
we 
do 
decide, 
is 
whether, 
under 
the 
particular
circumstances of this case, Safeway should be deemed to have
waived its right to object to the proposed settlement by
virtue of not doing so during the 10-day period between
October 17, when Safeway was notified that Sheffield had made
a settlement offer, and October 27, when the Morgans accepted
that offer.  We conclude that it should not.
We first note that the October 17 letter did not request
a response by any particular date.  Nothing in the record
suggests that there was any reason, such as an approaching
trial, that impelled the Morgans to consummate the settlement
or to remove a contingency such as the UIM insurer's approval,
by October 27, or by any other specific date.  Even if such a
reason had existed, it was not communicated to Safeway so that
it would know of the need to respond accordingly.  Second, the
Morgans knew that Safeway intended to make a decision "within
a few days," but they failed to follow up when they did not
1061470
11
receive a response.  Third, accompanying the October 17 claim
for UIM benefits, for the first time, were copies of various
medical records of the Morgans disclosing conditions and
ailments unrelated to the automobile collision that apparently
raised issues as to liability, the amount of damages, and
causation.
Based on the foregoing, and considering the principles
set forth in Lambert, we agree with the Court of Civil Appeals
that Safeway should not be deemed to have waived its rights
under its policy to consent to or object to the proposed
settlement.  Accordingly, as the Court of Civil Appeals
concluded, "the failure of the insureds to obtain Safeway's
consent barred their claim for UIM benefits, and the trial
court correctly entered the summary judgment in favor of
Safeway."  ___ So. 2d at ___.  Therefore, we affirm the
judgment of the Court of Civil Appeals. 
AFFIRMED.
Cobb, C.J., and Woodall, Stuart, Parker, and Shaw, JJ.,
concur. 
Lyons, Smith, and Bolin, JJ., concur in the result.