Title: Ex Parte Finkbohner

State: alabama

Issuer: Alabama Supreme Court

Document:

682 So. 2d 409 (1996)
Ex parte George W. FINKBOHNER III and Sandra Finkbohner.
(In re George W. FINKBOHNER III and Sandra Finkbohner v. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, et al.).
1951363.

Supreme Court of Alabama.
September 6, 1996.
*410 C.S. Chiepalich and John R. Spencer of C.S. Chiepalich, P.C., Mobile, for Petitioners.
Lynn Etheridge Hare and Stephanie R. White of Hare, Hair & White, P.C., Birmingham, for Respondent.
HOUSTON, Justice.
The plaintiffs George W. Finkbohner III and Sandra Finkbohner petition this Court for a writ of mandamus directing the trial court to compel the defendant Principal Mutual Life Insurance Company ("Principal Mutual") to comply with a discovery request. The petition is granted in part and denied in part.
Sandra Finkbohner underwent a surgical procedure to repair a ventral hernia. It appears from the evidence presented that this procedure was determined by Ms. Finkbohner's personal physicians and her medical insurer, Principal Mutual, to be medically necessary to correct an abdominal problem that had arisen a few months before, during Ms. Finkbohner's pregnancy. It also appears that Ms. Finkbohner's physicians submitted a request for a "presurgery review" to Principal Mutual, specifically referencing a procedure assigned code number 49560the procedure to repair the hernia. Principal Mutual later paid all of the expenses associated with this procedure. At the same time they repaired Ms. Finkbohner's hernia, however, her physicians also performed an abdominoplasty, or, as it is commonly referred to, a "tummy tuck." Ms. Finkbohner's physicians had apparently not mentioned this procedure in their request for the presurgery review, and Principal Mutual had not authorized payment for it. Upon receiving a bill for both procedures (one coded 49560 and the other coded 15831), and after consulting a cosmetic surgeon, Principal Mutual denied the Finkbohners' claim for expenses associated with the abdominoplasty on the ground that such a procedure constituted "cosmetic surgery," which is defined in the Finkbohners' policy as follows:
(Emphasis added.)
The Finkbohners sued Principal Mutual, alleging breach of contract and bad faith denial of an insurance claim. Principal Mutual denied liability, based on the wording of its policy. The Finkbohners' bad faith claim is based in part on Principal Mutual's negative response to the following interrogatory:
The Finkbohners also rely on the certificate of insurance that was provided to them by Principal Mutual. This certificate, which summarizes the coverage provided under the policy, contains a different definition of "cosmetic surgery" than that contained in the policy. The certificate states:
(Emphasis added.) The Finkbohners' bad faith claim, as we understand it, can basically be summarized as follows: Although it may have had a legitimate reason (based on the cosmetic surgeon's opinion) for concluding that the abdominoplasty was "not needed to correct or improve a bodily function," Principal Mutual is nonetheless liable for bad faith failure to pay the claim 1) because it is estopped to rely on the definition of "cosmetic surgery" contained in the policy (on the ground that it is different from the definition contained in the certificate) and 2) because it has admitted (and, presumably, knew all along) that the surgery was not performed primarily for psychological purposes. According to the Finkbohners, Principal Mutual knew when it denied the claim that it could not satisfy the definition of "cosmetic surgery" contained in the certificate, which requires that the surgery be performed primarily for psychological purposes and that it not be needed to correct or improve a bodily function.
The following interrogatories and requests for production, which were objected to by Principal Mutual on the grounds that they were overly broad, unduly burdensome, and not likely to lead to the discovery of relevant information, form the basis for the Finkbohners' petition:
In Rowland, a fraud and breach of contract action arising out of the purchase of an automobile, the plaintiff purchaser petitioned for a writ of mandamus directing the trial court to permit him to discover any fraud actions that had been filed against the defendant dealer in the previous 10 years. Because the plaintiff's fraud claim was based on allegations that the defendant had misrepresented the size of the automobile's engine, the trial court had permitted discovery of only those previous fraud actions that may have been based on allegations of misrepresentations of engine size. The plaintiff argued that such a restriction was at odds with his broad right of discovery in a fraud action and that the trial court had abused its discretion. We agreed and granted the writ, stating:
669 So. 2d  at 127-28.
Unlike Rowland, the present action is not based on allegations of fraud. However, like the fraud claim in Rowland, intent is an element of the Finkbohners' bad faith claim. See Thomas v. Principal Financial Group, 566 So. 2d 735 (Ala.1990). For this reason, and because bad faith, like fraud, is particularly difficult to prove, Thomas, at 742-43, any bad faith actions filed against Principal Mutual since 1992 would be discoverable under the rationale of Rowland. Therefore, based on Rowland, we conclude that the trial court abused its discretion in denying the Finkbohners' motion to compel discovery of any previous bad faith actions filed against Principal Mutual.
We note, however, that the Finkbohners seek to discover not only previous bad faith actions filed against Principal Mutual, but also all "bad faith claims" that have not resulted in the filing of an action. The Finkbohners' discovery request does not define or delineate exactly what constitutes a "bad faith claim." The term "bad faith" is a legal term corresponding to certain wrongful conduct on the part of an insurer in denying a claim for benefits. For this reason, we conclude that it would be unduly burdensome on Principal Mutual for it to have to sift through possibly hundreds, if not thousands, of letters or other items of correspondence complaining of or challenging its denial of particular claims and to have to decide whether any one of the complainants was charging it with a "bad faith" denial of the claim. We also question how many complaints or "claims" not resulting in legal action would be "reasonably calculated to lead to the discovery of admissible evidence." Rule 26(b)(1), Ala. R.Civ.P. For these reasons, we conclude that the trial court did not abuse its discretion in denying the Finkbohners' motion to compel the discovery of previous "bad faith claims."
With respect to their second discovery request (for information concerning all claims for benefits filed in Alabama over the past five years that were denied on the ground that they were related to procedures *414 deemed cosmetic in nature), the Finkbohners argue as follows:
The Finkbohners apparently seek to buttress their bad faith claim by presenting the testimony of other claimants who had claims denied based on the definition of "cosmetic surgery" contained in the policy. As we understand the Finkbohners' position, the information they seek would be relevant only if the definition of "cosmetic surgery" contained in their certificate of insurance, and not the one set out in the policy, controlled and if Principal Mutual's reliance on its policy language could form the basis for a bad faith claim, as opposed to a claim for breach of contract. In this regard, the policy provides:
Citing Ala.Code 1975, § 27-14-19, and Brown Machine Works & Supply Co. v. Insurance Co. of North America, 659 So. 2d 51 (Ala.1995), the Finkbohners contend that Principal Mutual is estopped from denying coverage under the policy by virtue of the discrepancy between the definition of "cosmetic surgery" contained in the policy and the one contained in the certificate. According to the Finkbohners, they can base a bad faith claim on this estoppel theory. Although we stated in Brown, at 58, that "when an insurer has not complied with § 27-14-19 and its failure to comply has prejudiced the insured, the insurer may be estopped from asserting an otherwise valid coverage exclusion," we did not address whether a bad faith claim could be maintained against an insurer that relied on the language of its policy, as opposed to conflicting language contained in a certificate provided to the insured. In the absence of fraud, the existence of an otherwise valid coverage exclusion in a policy would arguably provide the insurer with a legitimate or debatable reason for denying a claim. However, the Finkbohners do not allege fraud and the trial court has not ruled on this question. In fact, we are not even certain that this estoppel argument has even been made to the trial court. With the case in this posture, and without the benefit of having this issue fully briefed, we are not inclined to say that the information sought by the Finkbohners is relevant to their bad faith claim; therefore, we cannot hold that the trial court abused its discretion in denying their motion to compel its disclosure.
PETITION GRANTED IN PART AND DENIED IN PART.
HOOPER, C.J., and MADDOX, SHORES, KENNEDY, and COOK, JJ., concur.
INGRAM and BUTTS, JJ., concur in part and dissent in part.
BUTTS, Justice (concurring in part and dissenting in part).
I agree with the majority that the trial court correctly denied the Finkbohners' motion to compel the disclosure of all bad faith "claims," which the plaintiffs describe merely as claims not involving legal action, made against the defendants since 1992. Likewise, I agree that the trial court erred in denying the Finkbohners' motion to compel discovery of any bad faith actions failed against the insurer since 1992. I must, however, dissent from the majority's holding that the trial court correctly denied the plaintiffs' motion to compel discovery of all claims for benefits denied over the past five years on the ground that they were related to procedures that were "cosmetic" in nature and were thus excluded under the policy.
As the majority states, the Court has not previously addressed whether a bad faith claim may be maintained against an insurer that relied on the language of a policy that it drafted, as opposed to conflicting language *415 contained in a certificate of insurance that it also drafted and provided to the insured. The plaintiffs expect to litigate that issue at trial, and I believe the discovery they seek as to other claims for benefits that the insurer has denied because the procedure was cosmetic is relevant to this issue, and that it would not be unduly burdensome for the insurer to provide. I would therefore direct trial court to vacate its denial of the Finkbohners' motion to compel this discovery.
INGRAM, J., concurs.