Title: Harold Jones and Pam Jones v. ALFA Mutual Insurance Company

State: alabama

Issuer: Alabama Supreme Court

Document:

Rel 06/13/2008
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, 2007-2008
_________________________
1060179
_________________________
Harold Jones and Pam Jones
v.
Alfa Mutual Insurance Company
Appeal from Coffee Circuit Court
(CV-98-315)
COBB, Chief Justice.
Harold Jones and Pam Jones, plaintiffs in a bad-faith and
breach-of-contract action in the Coffee Circuit Court, appeal
from a partial summary judgment entered in favor of Alfa
1060179
2
Mutual Insurance Company on the Joneses' bad-faith claims.  We
affirm in part, reverse in part, and remand.
I.  Factual Background and Procedural History
On October 4, 1995, Hurricane Opal made landfall along
the Florida Gulf Coast.  Much of south Alabama, including
Coffee County, sustained damage as a result of the storm,
which retained hurricane status as it arrived inland.  The
Joneses, who reside on their cattle farm in Coffee County,
awoke on October 5, 1995, to find that their house, garage,
and barn had suffered damage from the wind associated with
Hurricane Opal.  Specifically, the Joneses contend that there
were cracks in their interior drywall, the seams in the
drywall ceiling of their house were visible, cracks appeared
in the mortar of the exterior brick veneer of their house, and
there were loose bricks in the veneer.  The Joneses also
contend that a tree near their house was partially uprooted by
the wind and that the tree fell onto and damaged the roof of
their house.  They further contend that at least one of the
metal trusses in an addition to their barn was bent during the
hurricane.  The Joneses had a farm owner's policy with Alfa at
the time, and they submitted a claim to Alfa on October 6,
1060179
3
1995, for the damage to their property they say was caused by
Hurricane Opal.  At an unspecified date, two Alfa adjusters
came to the Joneses' residence to inspect the damage to the
house.  According to Harold Jones, the two adjusters noted the
damage to the roof of his house.  Harold Jones then showed the
two adjusters damage to the drywall ceiling and the walls in
his house.  The adjusters told Jones that that damage was
outside the realm of their expertise and that someone else
would inspect that damage.
According to Pam Jones, Alfa agent Wendell Sanders came
to the Joneses' house soon after Hurricane Opal, looked at the
house, and told the Joneses that they could proceed with
replacing their roof.  Sanders, however, testified that he did
not make any such representation to the Joneses nor would he
have had the authority to do so.
Alfa adjuster Gary Bradshaw also inspected the Joneses'
house.  Bradshaw inspected the roof, walked around the
exterior of the house, and noted cracks in the exterior brick
veneer and interior drywall that Harold Jones contended were
caused by Hurricane Opal.  Bradshaw was uncertain about Harold
Jones's contention that the cracking of the brick veneer and
1060179
4
drywall was the result of Hurricane Opal, and Bradshaw
consulted his supervisor Hilton Godwin, an Alfa district
claims manager, and the two determined that an engineer's
opinion was warranted.  Alfa then hired structural engineer
Ralph E. Jones to inspect the Joneses' house and to render an
opinion as to the causation of the cracks in the drywall and
the brick veneer.  
Ralph Jones inspected the Joneses' house on November 13,
1995.  Harold Jones and Bradshaw were both present during the
inspection, 
and 
Harold 
Jones 
showed Ralph Jones various 
cracks
in the exterior and interior of the house.  Ralph Jones also
inspected the crawl space under the house.  During his
inspection Ralph Jones never went into the attic or onto the
roof.  While he was inspecting the interior of the house,
Ralph Jones saw a crack in the fireplace surround.  Ralph
Jones stated that he asked Harold Jones about the crack and
that Harold Jones told him that the crack had been present for
an extended time.
According to Harold Jones, after Ralph Jones completed
his inspection, Ralph Jones told Harold Jones that if the
Joneses' house was located in Montgomery County he would say
1060179
5
the damage was most likely caused by soil settlement but that
the soil in Coffee County did not tend to cause settlement
problems in structures.  Harold alleges that Ralph Jones
continued by saying that it was his belief that wind had
become trapped in the carport of the house during Hurricane
Opal and that the trapped wind had lifted the roof and had
shifted the top of the house.  Harold Jones recalls that Pam
Jones and possibly Bradshaw were present when Ralph Jones made
this 
statement. 
 Ralph 
Jones, 
however, 
testified 
by 
deposition
that he did not recall making such a statement.
On December 4, 1995, Ralph Jones submitted a two-page
written report on the Joneses' house to Hilton Godwin.  In his
report, Ralph Jones wrote:
"It is my opinion that the brick cracks, caulk
separations, [S]heetrock cracks, and related damage
along the north and east sides of the carport are
due to settlement of the foundation in the vicinity
of the northeast corner of the carport, and that
this settlement and damage was not caused by wind
forces or otherwise related to Hurricane Opal."
According to Bradshaw, he had a telephone conversation with
Harold Jones the day after Bradshaw received Ralph Jones's
report.  Bradshaw contends that he told Harold Jones that
Ralph Jones's report had arrived and that the cracks in the
1060179
According to Harold Jones, "At that time Bruce [McLean]
1
was, I guess, advising or helping me with [the claims process]
to make sure that I wasn't –- that I didn't sign off on
anything, you know, that would leave Alfa ...."  Harold also
stated:
"As far as engaging, he was, I guess –- he did not
receive a retainer but he was –- I guess his doors
was [sic] open at any time that I needed to ask a
question or needed some advice.  And, of course this
was something I needed advice and needed questions
answered and I took it to him.  But now as far as
engaging him or hiring him as an attorney there had
not been any such thing as far as saying I want to
hire you to represent me in this matter."  
6
drywall and exterior brick veneer were not covered by the
insurance policy and that Alfa would pay benefits only for the
damage to the roof.  Harold Jones, however, denies that
Bradshaw ever told him that the claim would not be paid.
On December 29, 1995, Bradshaw wrote a letter to the
Joneses' attorney, Bruce McLean.   In this letter, Bradshaw
1
stated:
"I understand that you are representing our
above insured for a hurricane claim which was filed
with ALFA for the October 4 hurricane that occurred
in our area.  Enclosed is an estimate for the
replacement of the insured's shingle roof and a
draft representing payment less the deductible for
that roof.
"I also understand that you are in possession of
a copy of the engineer's report which indicates that
shifting and settlement of the insured house was not
1060179
7
related to the hurricane winds.  Should you have any
questions concerning that report or any aspect of
the insured's claim or policy please feel free to
give me a call.  Also if there is any other damage
that the insured has found as a result of the
hurricane that we have not already addressed please
have him to submit itemized estimates for those to
be considered.  I thank you for your help and
cooperation and look forward to hearing from you."
According to the Joneses, there were no cracks in their
exterior brick veneer and interior drywall before Hurricane
Opal.  They contend that Alfa knew that these cracks did not
exist before Hurricane Opal.  During the summer of 1995,
Sanders came to the Joneses' house to inspect the house for a
"rewrite" of their farm owner's policy.  During his
inspection, Sanders walked around the house and took
photographs of the house.  In his deposition, Sanders
testified that he did not see any damage to the Joneses'
property during his inspection of the house.
Bradshaw called McLean about the Joneses' claim on August
5, 1996.  Alfa's records state "[McLean] wasn't sure if
[Harold Jones] wanted to pursue this or not; [McLean] would
check with [Harold Jones] to see."  On August 8, 1996, Sanders
had a telephone conversation with Joy Richardson of Alfa's
underwriting department in which he stated that Bradshaw had
1060179
8
spoken with the Joneses' attorney and that the Joneses were
dissatisfied with Alfa's handling of their claim.  
Also on August 8, 1996, Bradshaw sent a memorandum to
Richardson asking that the Joneses' farm owner's policy be
canceled "based upon [the] engineer's report after the
hurricane that this house is suffering from settlement and
structural damage, none of which was related to the storm but
all attributed to the foundation."  Richardson responded to
Bradshaw on August 13, 1996, stating the Joneses' policy was
to renew on September 9, 1996, that she did not receive
Bradshaw's 
memorandum 
until 
August 
12, 
1996, 
that 
insufficient
time existed to give 30 days' notice of nonrenewal before the
renewal date, and thus that the policy would be renewed, but
it would be renewed for only 6 months.  On August 13, 1996,
Richardson also wrote a memorandum to Sanders directing him
not to rewrite the Joneses' policy because it was being
renewed "as is" and that underwriting would make a final
decision before the next renewal.
On October 17, 1996, Bradshaw adjusted a claim at the
Joneses' 
residence resulting from peanuts 
that 
had 
boiled over
while cooking.  While Bradshaw was adjusting that claim,
1060179
9
Harold Jones reminded Bradshaw that Alfa had not yet paid for
numerous 
problems 
the 
Joneses alleged were 
caused by Hurricane
Opal.  According to Harold Jones, Bradshaw stated, "I'm out
here to take care of the peanut boil situation and that's it."
Harold Jones also testified that Bradshaw informed him that
Alfa had not ruled on the Joneses' hurricane claim, that Alfa
had not informed him how to handle the claim, and that as of
that date there had been no settlement of the claim.
On or around January 14, 1997, Richardson sent a
memorandum to Sanders instructing him to raise the Joneses'
deductible at the next renewal.  In response to the
memorandum, Sanders called Richardson and inquired if Alfa
could legally raise the deductible while a claim was pending.
Richardson told Sanders that she would inquire as to whether
Alfa could legally raise the deductible.  On January 19, 1997,
Alfa's underwriting department signed off on the August 13,
1996, recommendation not to renew the Joneses' farm owner's
policy.  On January 20, 1997, Alfa closed the Joneses'
Hurricane Opal claim file and issued a $350 check to the
Joneses for damage their barn sustained during the hurricane.
1060179
10
According to Sanders, he was unaware until March 1997
that the Joneses' claim had been denied.  Sanders stated that
he had been told that Alfa "was working on" the claim.  Pam
Jones stated that on numerous occasions Sanders told the
Joneses that he would take care of their claim and that there
was no need to worry.  According to both of the Joneses,
Sanders told them that he would go to Montgomery and try to
get their claim resolved.  Sanders, however, stated that he
never made any such offer.  The Joneses contend that Sanders
encouraged them not to pursue legal action on the claim, and
Sanders admits that he would have asked them not to get a
lawyer until an Alfa adjuster could talk to them.
On February 4, 1997, Alfa sent a letter to the Joneses
notifying them that their farm owner's policy was not being
renewed as the result of "substantial change in the risk due
to claims experience."  Harold Jones alleges that he had a
conversation with Sanders about the nonrenewal in which
Sanders stated that he would go to Alfa's headquarters in
Montgomery on his day off to help the Joneses become reinsured
and that Sanders said "Alfa doesn't stand a snowball['s]
chance in hell because your house was not in this condition
1060179
11
two months prior to me renewing your insurance."  According to
Sanders, he did not promise the Joneses he would go to
Montgomery on their behalf, but he did contact the Montgomery
headquarters about the nonrenewal by discussing the matter
with Jim Short, who was in charge of Alfa's underwriting
department.  Sanders also contends that he made no statement
to the Joneses about the likelihood of success or failure of
a legal claim by the Joneses against Alfa.
After their Alfa policy was not renewed, the Joneses
attempted to find insurance coverage, but to no avail.  Their
mortgagor force placed a policy with $35,000 limits on their
house.
In January and March 1997, the Joneses received
questionnaires from Alfa regarding their satisfaction with
Alfa's handling of their 1995 claim.  They also received a
telephone call from an Alfa representative seeking their
comments about the handling of their claim.  A few days after
the telephone call from the Alfa representative, Godwin
telephoned the Joneses and asked about their complaints with
the claims process.  According to the Joneses, Godwin did not
1060179
The Joneses continued to live in the basement of the
2
fire-damaged house.
12
tell them that the claims that had not yet been settled had
been denied.
On November 12, 1997, the Joneses built a fire in their
fireplace for the first time since Hurricane Opal.  That
evening, a fire caused by a crack in the chimney damaged the
Joneses' house.  The Joneses contend that the crack occurred
during Hurricane Opal.  The policy force placed by the
mortgagor provided insufficient coverage to repair the
Joneses' house.2
On November 17, 1997, Ralph Jones, Godwin, engineer Owen
Posey, and Alfa's attorney Merrill Shirley visited the
Joneses' house.  Pam Jones stated that the four visited the
residence unannounced and without their permission.  Alfa,
however, contends that it notified the Joneses' attorney
before visiting the premises.  According to Godwin, the
purpose of the visit was "to have another engineer [Posey]
come out to take a look at [the house] to see there again if
there was anything that we had missed."  
1060179
13
In December 1997, Godwin had two other engineers inspect
the Joneses' house again.  According to Godwin, "We had asked
to have another engineer come out to take a look at it to see
there again if there was anything that we had missed."
On December 3, 1998, the Joneses filed a 12-count
complaint against Alfa, Bradshaw, and Ralph Jones in the
Coffee Circuit Court.  The defendants moved for a dismissal
under Rule 12(b)(6), Ala. R. Civ. P., contending that the
statutory limitations period had expired before the Joneses
filed their action.  The trial court granted the motion to
dismiss only as to the Joneses' claims of bad faith and
negligent hiring and supervision against Alfa.  
After discovery was completed, the defendants moved for
a summary judgment on the remaining claims.  The trial court
entered a summary judgment for all defendants on all the
remaining claims.  The Joneses appealed the summary judgment
as well as the dismissal of their bad-faith claims to this
Court.  On September 5, 2003, this Court affirmed the summary
judgment as to all claims except the Joneses' breach-of-
contract claim against Alfa, reversed the trial court's
dismissal of the Joneses' bad-faith claims, and remanded the
1060179
14
case to the trial court for further proceedings.  Jones v.
Alfa Mut. Ins. Co., 875 So. 2d 1189 (Ala. 2003)("Jones I"). 
On November 17, 2004, Alfa moved for partial summary
judgment on the Joneses' bad-faith claims.  In its motion for
a partial summary judgment, Alfa argued that the Joneses had
failed to file their action within two years of learning of
facts that would have led to the discovery of an action for
bad-faith refusal to honor the insurance policy and that their
action was thus barred by the statute of limitations.  Alfa
alternatively argued that the Joneses had failed to state a
cognizable claim upon which relief could be granted because,
it said, Alfa had not acted in bad faith.  The trial court
entered a partial summary judgment in favor of Alfa on the
bad-faith claims on September 6, 2006, concluding "that there
is no genuine issue of material facts to [the Joneses'] bad
faith claim."  The Joneses then moved the trial court to enter
a Rule 54(b), Ala. R. Civ. P., order making its September 6,
2006, partial summary judgment final, which the trial court
did on September 25, 2006.  This appeal followed.
II.  Standard of Review
"This Court's review of a summary judgment is de
novo.  Williams v. State Farm Mut. Auto. Ins. Co.,
1060179
15
886 So. 2d 72, 74 (Ala. 2003).  We apply the same
standard of review as the trial court applied.
Specifically, we must determine whether the movant
has made a prima facie showing that no genuine issue
of material fact exists and that the movant is
entitled to a judgment as a matter of law.  Rule
56(c), Ala. R. Civ. P.; Blue Cross & Blue Shield of
Alabama v. Hodurski, 899 So. 2d 949, 952-53 (Ala.
2004).  In making such a determination, we must
review the evidence in the light most favorable to
the nonmovant.  Wilson v. Brown, 496 So. 2d 756, 758
(Ala. 1986).  Once the movant makes a prima facie
showing that there is no genuine issue of material
fact, the burden then shifts to the nonmovant to
produce 'substantial evidence' as to the existence
of a genuine issue of material fact.  Bass v.
SouthTrust Bank of Baldwin County, 538 So. 2d 794,
797-98 (Ala. 1989); Ala. Code 1975, § 12-21-12."
Dow v. Alabama Democratic Party, 897 So. 2d 1035, 1038-39
(Ala. 2004).
III.  Analysis
A.  Are the Joneses' bad-faith claims
barred by the statute of limitations?
On appeal, the Joneses argue that the trial court erred
in entering a summary judgment based on Alfa's statute-of-
limitations argument because, they claim, Alfa did not close
the file on their claim resulting from Hurricane Opal until
January 20, 1997, less than two years before they filed this
action, and because Alfa's actions following the issuance of
Ralph Jones's report were not in accordance with the denial of
1060179
16
the claim.  Alfa, however, argues that Ralph Jones's report,
as well as Bradshaw's letter of December 29, 1995,
sufficiently placed the Joneses on notice that their claim for
damage to their drywall and brick veneer following Hurricane
Opal was being denied.  
In Jones I, this Court summarized the law concerning the
statute of limitations of a bad-faith claim, stating:
"Bad faith is an intentional tort, Shelter
Mutual Insurance Co. v. Barton, 822 So. 2d 1149,
1154 (Ala. 2001), and a species of fraud.  Dumas v.
Southern Guaranty Ins. Co., 408 So. 2d 86, 89 (Ala.
1981).
"'The cause of action for bad faith
refusal 
to 
honor 
insurance 
benefits 
accrues
upon the event of the bad faith refusal, or
upon the knowledge of facts which would
reasonably lead the insured to a discovery
of the bad faith refusal.  The accrual of
the tort of bad faith is a question of fact
to be determined by the circumstances of
each case.'
"Safeco Ins. Co. of America v. Sims, 435 So. 2d
1219, 1222 (Ala. 1983) (citation omitted).  'The
statute of limitations for bad faith claims arising
on or after January 9, 1985, is for two years.'
ALFA Mut. Ins. Co. v. Smith, 540 So. 2d 691, 692
(Ala. 1988) (citations omitted)."
875 So. 2d at 1193.  Further, in regard to a statute of
limitations, the Court has held:
1060179
17
"When 
a 
claim 
accrues, 
for
statute-of-limitations purposes, is a question of
law if the facts are undisputed and the evidence
warrants but one conclusion.  See LeBlang Motors,
Ltd. v. Subaru of America, Inc., 148 F.3d 680 (7th
Cir. 1998); JN Exploration & Production v. Western
Gas Resources, Inc., 153 F.3d 906 (8th Cir. 1998);
DXS, Inc. v. Siemens Medical Systems, Inc., 100 F.3d
462 (6th Cir. 1996).  However, when a disputed issue
of fact is raised, the determination of the date of
accrual 
of 
a 
cause 
of 
action 
for
statute-of-limitations purposes is a question of
fact to be submitted to and decided by a jury. Id."
Kindred v. Burlington Northern R.R., 742 So. 2d 155, 157 (Ala.
1999).
Alfa argues that the December 29, 1995, letter from
Bradshaw to McLean, as well as Ralph Jones's December 4, 1995,
report, constituted a denial of the Joneses' claim seeking
proceeds for damage to the drywall and exterior brick veneer
of their house.  The Joneses aver that the facts are disputed
and thus that summary judgment was not warranted on the
statute-of-limitations issue.  In support of their argument,
the Joneses note that the December 29, 1995, letter from
Bradshaw to McLean does not explicitly state that the claim
was being denied and does not reference all the items the
Joneses claimed were damaged by the hurricane.  Likewise, the
Joneses 
note 
that, 
according 
to 
Godwin's 
deposition 
testimony,
1060179
18
Alfa's policy is to deny a claim orally whenever possible or,
in the alternative, to deny the claim in writing.  The Joneses
testified that they had several face-to-face conversations
with both Sanders and Bradshaw after Ralph Jones had completed
his report, yet Alfa never orally denied the Joneses' claim.
In fact, Harold Jones testified that while he was adjusting
the peanut-boil-over claim, Bradshaw informed him that Alfa
had not ruled on the Joneses' hurricane claim, that Alfa had
not informed him how to handle the claim, and that as of that
date there had been no settlement of the claim.
The Joneses argue that Alfa's actions after Ralph Jones
issued his report indicated that their claim had not been
denied.  They argue that after the report was issued Alfa
invited them 
to 
submit additional 
information 
to 
support their
claim and that Alfa continued to investigate the claim for
almost 
two 
years 
following 
Ralph 
Jones's 
report.
Specifically, they note that Alfa reinspected the Joneses'
house in November 1997 and again in December 1997.
The Joneses further argue that Alfa did not close the
file on their hurricane claim until January 20, 1997, and that
Alfa was making payments on the claim as late as that date,
1060179
19
thus indicating that the claim was still open.  Similarly they
note that Sanders did not know that the claim had purportedly
been denied and that he assured the Joneses on numerous
occasions that 
their 
hurricane claim would 
ultimately 
be 
paid.
Alfa notes that this Court has previously held that
"'fraud is discoverable as a matter of law for purposes of the
statute of limitations when one receives documents that would
put one on such notice that the fraud reasonably should be
discovered.'"  Kelly v. Connecticut Mut. Life Ins. Co., 628
So. 2d 454, 458 (Ala. 1993) (quoting Hickox v. Stover, 551 So.
2d 259, 262 (Ala. 1989), overruled on other grounds, Foremost
Ins. Co. v. Parham, 693 So. 2d 409 (Ala. 1997)).  The sentence
immediately preceding the above-quoted sentence from Kelly,
however, states:  "'The question of when a plaintiff should
have discovered fraud should be taken away from the jury and
decided as a matter of law only in cases where the plaintiff
actually knew of facts that would have put a reasonable person
on notice of fraud.'" 628 So. 2d at 458 (quoting Hicks v.
Globe Life & Acc. Ins. Co., 584 So. 2d 458, 463 (Ala. 1991),
overruled on other grounds, Foremost Ins. Co., supra); see
also Gilmore v. M & B Realty Co., 895 So. 2d 200, 210 (Ala.
1060179
20
2004) ("'"[t]he question of when a party discovered or should
have discovered the fraud is generally one for the jury"'"
(quoting Ex parte Seabol, 782 So. 2d 212, 216 (Ala. 2000),
quoting in turn Liberty Nat'l Life Ins. Co. v. Parker, 703 So.
2d 307, 308 (Ala. 1997))).  Bradshaw's December 29, 1995, two-
paragraph letter to McLean does not quote applicable policy
language or explicitly state whether Alfa agreed with Ralph
Jones's report.  Nor does it explicitly state that the claim
has been denied as claim-denial letters typically do. 
There is also evidence that Alfa took actions subsequent
to writing the letter that could have led the Joneses to doubt
whether their claim had been denied.  Among other things, this
includes Alfa's continuing to investigate the cracks in the
walls of the house, Bradshaw's stating in October 1996 that
Alfa had not instructed him as how to handle the Joneses'
claim and that it had not ruled on their claim, and the fact
that Sanders, the Joneses' insurance agent, was unaware until
March 1997 that the claim had been denied.  This Court cannot
conclude as a matter of law that Alfa put the Joneses "on such
notice that the fraud reasonably should [have been]
discovered."  Kelly, 628 So. 2d at 458.  
1060179
21
A review of the evidence in a light most favorable to the
nonmovant, the Joneses, indicates that genuine issues of
material fact exist as to when Alfa actually denied the
Joneses' claim and as to when the Joneses would have or should
have known of facts that would reasonably lead them to
discover the denial.  Thus, the partial summary judgment on
the Joneses' bad-faith claims is not barred by the statute of
limitations.
B.  Does a genuine issue of material fact exist
as to the basis for the Joneses' bad-faith claims?
In their complaint, the Joneses alleged both a "normal"
bad-faith claim and an "abnormal" bad-faith claim.  This Court
has defined "normal" and "abnormal" bad faith in the following
manner:
"In the 'normal' bad-faith case, the plaintiff must
show the absence of any reasonably legitimate or
arguable reason for denial of a claim. [State Farm
Fire & Cas. Co. v.] Slade, 747 So. 2d [293] at 306
[(Ala. 1999)].  In the 'abnormal' case, bad faith
can consist of:  1) intentional or reckless failure
to investigate a claim,  2) intentional or reckless
failure to properly subject a claim to a cognitive
evaluation or review,  3) the manufacture of a
debatable reason to deny a claim, or  4) reliance on
an ambiguous portion of a policy as a lawful basis
for denying a claim.  747 So. 2d at 306-07. ...
"'"Bad faith ... is not simply bad judgment or
negligence.  It imports a dishonest purpose and
1060179
22
means a breach of a known duty, i.e., good faith and
fair dealing, through some motive of self-interest
or ill will."'  Slade, 747 So. 2d at 303-04 (quoting
Gulf Atlantic Life Ins. Co. v. Barnes, 405 So. 2d
916, 924 (Ala. 1981))."
Singleton v. State Farm Fire & Cas. Co., 928 So. 2d 280, 283
(Ala. 2005).  In order to recover on a "normal" bad-faith
claim, the plaintiff must prove: "(1) the existence of an
insurance contract; (2) an intentional refusal to pay the
claim; and (3) the absence of any lawful basis for refusal and
the insurer's knowledge of that fact or the insurer's
intentional failure to determine whether there is any lawful
basis for its refusal."  Acceptance Ins. Co. v. Brown, 832 So.
2d 1, 16 (Ala. 2001).  "For a 'normal' bad-faith claim to be
submitted to the jury, the underlying contract claim must be
so strong that the plaintiff would be entitled to a preverdict
judgment as a matter of law."  Shelter Mut. Ins. Co. v.
Barton, 822 So. 2d 1149, 1155 (Ala. 2001).  However, "'[t]he
rule in "abnormal" cases dispensed with the predicate of a
preverdict JML [judgment as a matter of law] for the plaintiff
on the contract claim if the insurer had recklessly or
intentionally failed to properly investigate a claim or to
subject the results of its investigation to a cognitive
1060179
23
evaluation.'"  White v. State Farm Fire & Cas. Co., 953 So. 2d
340, 348 (Ala. 2006) (quoting Employees' Benefit Ass'n v.
Grissett, 732 So. 2d 968, 976 (Ala. 1998)).
1.  "Normal" bad faith
As to their "normal" bad-faith claim, the Joneses contend
that there is no reasonable or justifiable ground for Alfa's
refusal to pay the disputed claim.  In support of their
argument, they note their own testimony that no cracks existed
in the brick veneer or the drywall of their house before
Hurricane Opal.  They further argue that this testimony is
supported by Sanders's testimony that he did not see or recall
seeing any damage or cracks to the exterior of the Joneses'
house when he inspected the house during the summer of 1995.
The Joneses contend that upon inspecting their house after
Hurricane Opal Ralph Jones informed them that he believed that
wind had become trapped under the carport during Hurricane
Opal, thus lifting and shifting the roof of the house, and
that the soil in Coffee County was not prone to cause
settlement.  Likewise, the Joneses contend that Sanders told
Harold Jones upon learning of the nonrenewal of the Joneses'
policy by Alfa that Alfa did not "stand a snowball['s] chance
1060179
24
in hell" of being successful if the claim was litigated
because the cracks and other damage were not present when he
inspected 
the house during the summer of 1995.  
The Joneses
also contend that their case is analogous to this Court's
recent decision of White v. State Farm Fire & Casualty Co.,
supra.  In White, a windstorm blew off portions of the roof of
a building that housed a business, and the interior of the
building suffered water damage.  The business received an
estimate for repair of the roof after the business's office
manager had a telephone conversation with an individual with
State Farm's claims office indicating that it should go ahead
and repair the roof and keep the receipts for the work because
it might be a week before a State Farm adjuster could visit
the building.   The business received an estimate to replace
the roof with a roof consisting of a single-ply rubber
membrane, although the damaged roof was a "built-up" roof.
Six days after the storm, an adjuster with State Farm's
national catastrophe team 
inspected 
the building and
authorized White, the managing partner for the owner of the
building, to proceed with the repairs.  The next day the
adjuster left a telephone message for White, stating that she
1060179
25
needed a signed copy of the roofing company's proposal and
needed to know whether the new roof was an upgrade.  White
attempted unsuccessfully to contact the adjuster and finally
the next day spoke with someone at State Farm who told him to
fax the signed proposal to State Farm, which White did.  White
also told the State Farm employee that the new roof was not an
upgrade.  White was unable to contact the adjuster, and
ultimately contacted the leader of the national catastrophe
team.  The team leader told White that State Farm's estimate
for the roof replacement was approximately $20,000 less than
the proposal from the roofing company.  State Farm arrived at
its estimate using a computerized estimating tool.  State Farm
then issued a check to the owner of the building for the
damage to the exterior and interior of the building, including
the amount of State Farm's estimate for replacing the roof.
Upon inquiry by White, the team leader maintained that the
repair of the roof had been authorized.  Only after White
retained counsel did State Farm decide to give him "the
benefit of the doubt" and offer to pay the difference between
State Farm's estimate and the roofing company's proposal.
White and his company rejected State Farm's offer.
1060179
26
White and his company sued State Farm, alleging bad-faith
failure to pay an insurance claim.  The trial court entered a
summary judgment in favor of State Farm, and White appealed.
Reversing the summary judgment, this Court held:
"Based on the present state of the record in
this case, we conclude that material questions of
fact exist that make a summary judgment on the bad-
faith claim improper.  White and his office manager
... testified that two different State Farm agents
told them to repair the roof.  White insists that
[the adjustor] not only authorized him to proceed
with the repairs, but she also told him it would be
a day before State Farm had the check processed for
the claim.  White says no one at State Farm ever
told him that there was a question whether State
Farm would pay the claim.  John Hill, a State Farm
manager, testified that if State Farm authorized
repairs, then it should have paid the entire $43,395
proposed by Quality Roofing.  Other State Farm
employees testified, however, that if [the adjustor]
had indeed authorized White to proceed with the
repairs proposed by Quality Roofing, it would not
have been necessary for her to have prepared an
estimate, which she did."
953 So. 2d at 350.
The Joneses argue that the same thing that happened to
White happened to them.  They contend that Sanders told them
two days after Hurricane Opal to proceed with repairs to their
roof.  Likewise, the Joneses allege that Ralph Jones told them
that the cracks in the interior and exterior walls of their
house were not caused by settlement and that he believed that
1060179
27
wind had become trapped in their carport during Hurricane
Opal, thus lifting and shifting the roof of their house.  They
further allege 
that Sanders 
repeatedly 
assured them that 
their
claim would be paid.
Alfa, however, argues that White is distinguishable from
this case because it was never disputed in White that the
windstorm had caused the damage to the roof, whereas in this
case whether the cracks in the walls of the house were caused
by Hurricane Opal is disputed.  Instead, Alfa notes that in
White State Farm refused to pay the full cost to replace the
roof, arguing that the new roof was an upgrade. 
Alfa also argues that Adams v. Auto-Owners Insurance Co.,
655 So. 2d 969 (Ala. 1995), and Chastain v. Baldwin Mutual
Insurance Co., 495 So. 2d 684 (Ala. Civ. App. 1986), support
their 
contention that the 
summary 
judgment 
should be affirmed.
In Adams, an insured claimed roof damage caused by high winds
and a severe thunderstorm.  Both the insurer's adjuster and an
engineer hired by the insurer concluded that the vast majority
of roof damage was caused, not by high winds or a
thunderstorm, but by age and deterioration.  This Court
concluded 
that 
the 
investigations 
of 
the 
adjuster 
and 
engineer
1060179
28
provided reasonably arguable and legitimate reasons for
denying the insured's claim; thus the summary judgment in
favor of the insurer on the insured's bad-faith claim was due
to be affirmed.  Likewise, in Chastain, the insureds contended
the roof of their manufactured home was damaged by a storm,
but the 
insurer's 
adjuster 
who inspected the 
manufactured home
found no evidence of damage to the manufactured home.  In
affirming the summary judgment in favor of the insurer as to
the insureds' bad-faith claim, the Court of Civil Appeals held
that the insureds would not have been entitled to a directed
verdict (now a judgment as a matter of law) on their breach-
of-contract claim because a disputed question of fact existed
as to whether the roof damage was caused by wind.
This Court agrees with Alfa that the Joneses' claim is
distinguishable from those in White because in White there was
no question as to the cause of the roof damage.  As this Court
has previously held in regard to a judgment as a matter of
law, "'the ultimate question is whether the nonmovant has
presented sufficient evidence to allow the case or the issue
to be submitted to the jury for a factual resolution.'"  State
Farm Fire & Cas. Co. v. Williams, 926 So. 2d 1008, 1012 (Ala.
1060179
29
2005) (quoting Delchamps, Inc. v. Bryant, 738 So. 2d 824, 830
(Ala. 1999)).  In other words, the nonmovant must present
substantial evidence in order to withstand a judgment as a
matter of law.  We conclude that this matter is analogous to
Adams, supra, and Chastain, supra, because it is apparent that
Ralph Jones's report creates a question of material fact that
would preclude the Joneses from receiving a preverdict
judgment as a matter of law on the underlying breach-of-
contract claim.  Accordingly, we affirm the summary judgment
on the Joneses' "normal" bad-faith claim.
2.  "Abnormal" bad faith
The Joneses also argue that the trial court erred in
entering a summary judgment for Alfa on their "abnormal" bad-
faith claim.  They argue that Alfa intentionally or recklessly
failed to investigate the claim because neither Ralph Jones
nor Bradshaw ever inspected the roof of the Joneses' house or
their attic.  Specifically, they argue that Ralph Jones
focused exclusively on the foundation to the exclusion of all
evidence available to him even though they had made a specific
claim for roof damage and the hurricane had blown a tree onto
the eave of their house.  They also argue that neither Ralph
1060179
30
Jones nor Bradshaw gathered any "before and after" evidence
from the Joneses or from any other source.   The Joneses note
that their expert witness, Andrew Beverly, stated that "[a]ny
investigation by Alfa that 
did not 
include 
the above-described
activities 
would 
not 
satisfy 
proper 
claims 
handling 
practice."
In State Farm Fire & Casualty Co. v. Slade, 747 So. 2d
293 (Ala. 1999), this Court addressed a similar situation.  In
Slade, a retaining wall attached to the insureds' house
collapsed after it was struck by lightning, causing the ground
around the pool area to give way.  The insureds subsequently
noticed cracking in the ceilings and interior and exterior
walls of their house, and they informed their insurer of the
cracks.  The insured also had three separate firms determine
what had caused the cracks, and all three reports indicated
that the cracks were caused by settling and sifting of the
soil beneath the house, which was caused by the collapse of
the retaining wall.  The insurer hired a structural engineer
to inspect the house, but the insurer did not inform the
structural engineer about the lightning strike nor tell the
engineer that it was the insurer's claim-handling policy to
attempt to find coverage for the insured.  The engineer was
1060179
31
not qualified to conduct nor did he conduct an investigation
regarding possible lightning damage.  After visiting the
property with the structural engineer, the insurer's claims
superintendent sent the insureds a reservation-of-right
letter.   The engineer concluded that the damage to the house
was the result of "post-construction differential foundation
settlement"; subsequently the insurer denied the insureds'
claim.  However, the insurer did not communicate this to the
insureds.  Instead, the insurer refused to give the insureds
a copy of the engineer's report and continued to hire more
engineers to investigate, even telling one engineer to
investigate the property "with the purpose being to defend the
insurance company against any claim of lightning-related,
settlement, or structural damage."  Over five months after
deciding to deny the claim, the insurer wrote a formal denial
letter to the insureds.  The insureds then sued the insurer,
alleging various claims, including a claim of abnormal bad-
faith failure to investigate.  In affirming the trial court's
denial of the insurer's motion for a judgment as a matter of
law, this Court observed:
"'The absence of a debatable reason not to pay
a claim cannot be grounded on the vagaries of
1060179
32
construction of an ambiguity.' [Employees' Benefit
Ass'n v.] Grissett, 732 So. 2d [968,] 977 [(Ala.
1998)].  An insurer can be liable for the tort of
bad faith when it fails to properly investigate the
insured's claim.  Thomas [v. Principal Fin. Group,
556 So. 2d 735 (Ala. 1990)].  Here, the [insureds]
produced substantial evidence, in the form of expert
testimony, indicating that the term 'dwelling' did
include their retaining wall.  They also presented
substantial evidence indicating that [the insurer]
did not investigate their claim properly.  The
[insured] produced evidence indicating that [the
insurer] never, in the course of its investigation,
sent to their home someone who was qualified to
conduct a lightning investigation.  The [insureds]
presented evidence indicating that [the insurer]
never interviewed any of the witnesses present on
the day lightning struck their retaining wall.   The
[insureds] presented expert testimony indicating
that these omissions amounted to an improper
investigation, on the basis that an investigation of
a claim such as the [insureds] made required the use
of a lightning expert.  The [insureds] also
presented evidence indicating that [the insurer] did
not investigate lightning as a cause.  The
[insureds] produced evidence indicating that [the
insurer] told its engineer ... to investigate a
'possible soil problem' and that it did not tell
[the engineer] about the lightning strike.  This
evidence conflicted with [the insurer's] 'Good Faith
Claims Handling' video, which was admitted into
evidence and which contained a statement that [the
insurer's] claims-handling policy was to attempt to
find coverage.
"This evidence, the [insureds] say, shows that
[the insurer] never investigated the possibility
that lightning directly struck their dwelling, a
fact, which if proven, would negate the application
of the earth-movement exclusion.  The [insureds]
maintain that this failure created a question of
fact 
as 
to 
whether 
[the 
insurer] 
properly
1060179
33
investigated their claim, and, therefore, that the
trial court properly submitted this portion of their
bad-faith claim to the jury.  We agree.
"Furthermore, [the insurer's] argument on this
point, i.e., that it cannot be held liable because
it believes it properly investigated noncovered
events and found evidence that noncovered events
caused the [insureds'] loss, is unacceptable.  An
insurance company's duty to investigate does not
extend only to those events that are not covered.
As this Court stated in [Aetna Life Insurance Co.
v.] Lavoie, 505 So. 2d [1050,] 1052-53 [(Ala.
1987)], an insurance company has a 'responsibility
to marshal all ... facts' necessary to make a
determination as to coverage 'before its refusal to
pay.' (Emphasis in original.)  This duty must
include a duty to investigate a covered event that
an insured claims has caused his loss.  Otherwise,
the duty to properly investigate, imposed by the law
regarding the tort of bad faith and recognized in
[Gulf Atlantic Life Insurance Co. v.] Barnes, [405
So. 2d 916 (Ala. 1981), would be meaningless.
Therefore, we reject [the insurer's] contention, and
we hold that this portion of the [insureds']
bad-faith claim was properly submitted to the jury."
Slade, 747 So. 2d at 315-16.
Similarly, even though the Joneses filed a claim with
Alfa for damage to their roof, even though the roof had
clearly visible damage from the hurricane, and even though the
Joneses contended that the damage to their house was caused by
the hurricane, neither Bradshaw nor Ralph Jones inspected the
roof or the attic during their investigation of the Joneses'
claim.  It was not until after the Joneses' house had been
1060179
34
extensively damaged by fire and after Alfa had canceled the
Joneses' farm owner's policy that Alfa sent Ralph Jones, along
with three other engineers, to the Joneses' house to reinspect
the house, including the charred attic and roof.  As Alfa's
attorney 
admitted 
during 
oral 
argument 
before 
this 
Court, 
Alfa
sent the engineers to the Joneses' house after the fire out of
fear that litigation may arise because of Alfa's denial of the
Joneses' claim following Hurricane Opal, its cancellation of
the Joneses' policy, and the fire damage to the Joneses'
house.  
The following facts taken as a whole create a jury
question.  After Hurricane Opal, Alfa never investigated any
records it had of the condition of the Joneses' house before
the hurricane.  The record reflects that Alfa never contacted
a realtor who visited the Joneses' house three days before
Hurricane Opal 
made landfall, 
even though, 
according 
to 
Harold
Jones, Bradshaw had inquired about purchasing the Joneses'
residence.  Alfa never inquired of the Joneses as to who would
have seen their house before Hurricane Opal and never
attempted to interview anyone who may have visited the
Joneses' house before Hurricane Opal.  Alfa never considered
1060179
Alfa argues to this Court that "Sanders was simply
3
without the training to know these problems existed" when he
conducted the "rewrite" inspection.  (Alfa's brief, p. 53.)
This argument disregards the question of fact that an
untrained eye can observe cracks in drywall and in brick
veneer that were evident to the Joneses.
35
its own "rewrite" inspection of the Joneses' house, including
photographs of the exterior of the house and never inquired of
Sanders, its own employee, as to the condition of the Joneses'
house when he conducted the "rewrite" inspection, even though
Sanders testified that he did not recall seeing any cracks in
the interior or exterior walls of the Joneses' house when he
conducted the "rewrite" inspection three months before
Hurricane Opal.3
As this Court observed in Slade, "an insurance company
has a 'responsibility to marshal all ... facts' necessary to
make a determination as to coverage 'before its refusal to
pay.'  ...  This duty must include a duty to investigate a
covered event that an insured claims has caused his loss."
747 So. 2d at 316.  Considering the evidence contained in the
record that is before this Court, there is certainly a
question of fact as to whether Alfa met its duty to marshal
all facts necessary to make a determination as to coverage
1060179
36
before it denied the Joneses' claim.  Thus, the trial court
erred in granting Alfa's motion for a summary judgment as to
the Joneses' claims of "abnormal" bad-faith failure to
properly investigate the Joneses' insurance claim and failure
to investigate the condition of the house before Hurricane
Opal.  We therefore reverse the summary judgment entered by
the trial court in favor of Alfa on the "abnormal" bad-faith
claim.
IV.  Conclusion
We conclude that a question of material fact exists as to
when the statutory limitations period began to run and
prohibits the trial court from entering a partial summary
judgment on the Joneses' bad-faith claims based on Alfa's
argument that the Joneses failed to file their action before
the expiration of the statutory limitations period.  Thus, the
Joneses' bad-faith claims were not barred by the statute of
limitations.  Because Alfa failed to properly investigate the
Joneses' claim and failed to properly investigate the
condition of the Joneses' house before Hurricane Opal, the
trial court erred in entering partial summary judgment in
favor of Alfa as to the "abnormal" bad-faith claim brought by
1060179
37
the Joneses.  However, the trial court's summary judgment was
proper as to the Joneses' "normal" bad-faith claim.  The
summary judgment is affirmed in part an reversed in part, and
this case is remanded for proceedings consistent with this
opinion.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
Lyons, Woodall, and Parker, JJ., concur.
See, Smith, and Murdock, JJ., concur in part and concur
in the result.
Stuart and Bolin, JJ., concur in the result.
1060179
38
SEE, Justice (concurring in part and concurring in the
result).
I concur in the main opinion except for Part III.B.2, as
to which I concur only in the result.
Murdock, J., concurs.
1060179
39
SMITH, Justice (concurring in part and concurring in the
result).
I concur in the main opinion except for Part III.B.2, as
to which I concur only in the result.