Title: State Farm Fire and Casualty Company, Sally Hines and B.G. Hines v. Wonderful Counselor Apostolic Faith Church
Citation: N/A
Docket Number: 1050872
State: Alabama
Issuer: Alabama Supreme Court
Date: December 31, 2008

REL: 12/31/2008
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, 2008-2009
____________________
1050872
____________________
State Farm Fire and Casualty Company, Sally Hines, and B.G.
Hines
v.
Wonderful Counselor Apostolic Faith Church
Appeal from Tuscaloosa Circuit Court 
(CV-02-1068)
On Application for Rehearing
PER CURIAM.
APPLICATION OVERRULED. NO OPINION.
Cobb, C.J., and See, Lyons, Woodall, Stuart, Bolin, and
1050872
2
Parker, JJ., concur.  
Smith, J., concurs specially.
Murdock, J., dissents.
1050872
WCAFC is also referred to in the record as "Wonderful
1
Council Pentecostal Assembly, Inc.," and "Wonderful Counselor
Church." 
3
SMITH, Justice (concurring specially).
State Farm Fire and Casualty Company ("State Farm"),
Sally Hines, and B.G. Hines (hereinafter referred to
collectively as "the defendants") appealed from a judgment
entered on a jury verdict in favor of the plaintiff below,
Wonderful Counselor Apostolic Faith Church ("WCAFC"),  in this
1
action seeking damages for suppression and breach of contract.
On May 23, 2008, this Court affirmed the judgment of the trial
court without an opinion.  Subsequently, the defendants filed
an application for rehearing.  I concur to overrule their
application, and I write to express why I do so.
In 1989, WCAFC began constructing a new church building.
Bennie Sue Morgan, the pastor of WCAFC, contacted Sally Hines,
a State Farm agent, to obtain a quote for insurance coverage
for the new church building.  Sally's husband, B.G. Hines, was
employed by Sally in her office and provided Morgan with a
quote for the insurance.  Both Sally and B.G. testified that
Morgan requested an insurance limit of $100,000.  Morgan
completed an application, which requested a policy on the
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4
church building with "replacement cost coverage" and a policy
limit of $100,000.  
 The insurance policy was issued February 18, 1990.  The
policy limited the amount payable for a loss to the church
building at $100,000.  The declarations page of the policy
specified this limit and referred to it as the "limits of
insurance."  Every year at renewal the "limits of insurance"
amount was increased, purportedly to account for inflation.
The policy at issue in this case, which was renewed on January
12, 2000, set the "limits of insurance" amount for the church
building at $127,500.
In addition to the increase in the "limits of insurance"
amount at the policy renewal every year, the policy also
contained a provision to increase the "limits of insurance"
amount throughout the year the policy is in place.  This
provision is titled "Inflation Coverage."
On August 2, 2000, the church building was destroyed by
fire.  WCAFC obtained two estimates to rebuild the church
building--both estimates exceeded $200,000.  Using the
inflation-coverage 
provision, 
State 
Farm 
calculated 
that 
under
the "limits of insurance" at the date of the loss the payment
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5
under the policy for the church building was $129,795.  
WCAFC and Morgan subsequently sued State Farm, Sally
Hines, and B.G. Hines seeking damages for, among other things,
breach of contract, suppression, negligent failure to procure
insurance, and various theories of fraud. 
The jury returned a verdict finding that Sally and B.G.
were agents of State Farm and found in favor of all three
defendants on the counts of fraud and negligent failure to
procure insurance.  As to the breach-of-contract count, the
jury found in favor of WCAFC and against State Farm.  As to
the suppression count, the jury found in favor of WCAFC and
against all defendants.  The trial court ultimately entered a
judgment in favor of WCAFC in the amount of $90,000 in
compensatory damages against all defendants; $300,000 in
punitive damages against State Farm; $25,000 in punitive
damages against Sally; and $25,000 in punitive damages against
B.G.  The defendants appealed, and this Court affirmed the
trial court's judgment without an opinion.  The defendants now
apply for a rehearing.
In their application for rehearing, the defendants raise
four issues.  First, the defendants claim that the punitive-
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6
damages award against them was excessive and that it was
wrongly apportioned between the parties.  In their brief
supporting the application for rehearing, the defendants
state:
"In the initial Brief of [the defendants], logical
exposition demanded that other issues be discussed
before this issue.  Therefore, the issue was not
addressed until after page 70 and perhaps this Court
was worn out before it reached this issue and did
not grasp the significance of the trial court's
error." 
However, no authority was cited in the discussion in the
original brief on this issue; therefore, the judgment of the
trial court was due to be affirmed on this ground.  See Rule
28(a)(10), Ala. R. App. P. (requiring that an appellate brief
provide "[a]n argument containing the contentions of the
appellant/petitioner with respect to the issues presented, and
the reasons therefor, with citations to the cases, statutes,
other authorities, and parts of the record relied on"
(emphasis added)); City of Birmingham v. Business Realty Inv.
Co., 722 So. 2d 747, 752 (Ala. 1998) ("When an appellant fails
to cite any authority for an argument on a particular issue,
this Court may affirm the judgment as to that issue, for it is
neither this Court's duty nor its function to perform an
1050872
Additionally, the evidence at trial indicated that money
2
"was tight" at WCAFC.  The jury could have concluded that the
defendants knew that Morgan would not have purchased a more
expensive policy, which would have had adequate coverage;
thus, Morgan was induced to purchase a less expensive policy
because she was not told that the less expensive policy did
not provide the level of coverage she requested.
7
appellant's legal research.").
In their second issue, the defendants claim that WCAFC
failed to present any evidence to satisfy the requirements of
Ala. Code 1975, § 6-11-27, for holding a principal vicariously
liable for punitive damages.  However, I believe that the
record demonstrated that WCAFC submitted substantial evidence
on this issue.2
The defendants also argue on rehearing that the trial
court erred in ruling that State Farm had a duty to disclose
to WCAFC its "internal operating procedure" by which it
estimated the replacement cost of the church building.  In
support of this argument, State Farm, in its original brief,
cited, without explanation, State Farm Fire & Casualty Co. v.
Owen, 729 So. 2d 834 (Ala. 1998).  Owen sets forth an
analysis, which can include numerous factual considerations,
to determine, in an action alleging suppression, whether an
1050872
Under Ala. Code 1975, § 6-5-102, an obligation to
3
communicate may arise from the "confidential relations" of the
parties or from the particular circumstances of the case.  In
determining the "particular circumstances of the case," the
Court in Owen looked to "(1) the relationship of the parties;
(2) the relative knowledge of the parties; (3) the value of
the particular fact; (4) the plaintiff's opportunity to
ascertain the fact; (5) the customs of the trade; and (6)
other relevant circumstances."  729 So. 2d at 842-43.
8
insurer had a duty to speak.   Under the facts of that case,
3
this Court held that the insurer had no duty to disclose
certain underwriting procedures.  Owen, however, does not
establish a per se rule barring the admission of internal
underwriting procedures. 
The defendants in their original brief in this case did
not address the factors found in Owen; instead, they cited
Owen for the proposition that "State Farm had no duty to
disclose 
its internal operating procedure 
to 
[WCAFC]." 
 
Again,
Owen did not establish a per se rule; without any explanation
as to why Owen forbade the admission of the procedures into
evidence or why there was no duty to disclose the estimated
replacement amount, the defendants did not meet their burden
in establishing that the trial court erred to reversal.
Finally, the defendants state: "This Honorable Court left
undisturbed and unaddressed the trial court's ruling, as a
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9
matter of law, that the Inflation Coverage contained in State
Farm's church policy was ambiguous."  State Farm contends that
its policy was not ambiguous and that the trial court erred in
holding otherwise.  I agree.  However, as explained below,
this error does not alter the result in this case or require
a reversal.
At trial, the trial court determined that the inflation-
coverage provision of the policy was ambiguous.  This ruling
formed the basis of the breach-of-contract claim that was
submitted to the jury.
"Whether a provision of an insurance policy is
ambiguous is a question of law. Turvin v. Alfa Mut.
Gen. Ins. Co., 774 So. 2d 597, 599 (Ala. Civ. App.
2000).  To the extent the language of an insurance
policy provision is ambiguous, all ambiguities must
be resolved against the insurance company. Twin City
Fire Ins. Co. [v. Alfa Mut. Ins. Co.], 817 So. 2d
[687,] 692 [(Ala. 2001)].  However, the parties
cannot create ambiguities by setting forth different
interpretations or '[by inserting] ... strained or
twisted reasoning.' Id.  Moreover, the mere fact
that a word or a phrase used in a provision in an
insurance policy is not defined in the policy does
not mean that the word or phrase is inherently
ambiguous. Id.  If a word or phrase is not defined
in the policy, then the court should construe the
word or phrase according to the meaning a person of
ordinary intelligence would reasonably give it. Id."
Safeway Ins. Co. of Alabama v. Herrera, 912 So. 2d 1140, 1143
(Ala. 2005). 
1050872
10
"A term in a contract is ambiguous only if, when given
the context, the term can reasonably be open to different
interpretations by people of ordinary intelligence."  Lambert
v. Coregis Ins. Co., 950 So. 2d 1156, 1162 (Ala. 2006).
Additionally, in determining whether an insurance policy is
ambiguous, "a court cannot consider the language in the policy
in isolation, but must consider the policy as a whole."  State
Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 309 (Ala.
1999); see also Allstate Ins. Co. v. Hardnett, 763 So. 2d 963,
965 (Ala. 2000) ("An insurance policy must be read as a whole.
The provisions of the policy cannot be read in isolation, but,
instead, each provision must be read in context with all other
provisions.").
Because the issue whether a contract is ambiguous is a
question of law, a de novo determination as to whether the
inflation-coverage provision is ambiguous is required.  See
State Farm Fire & Cas. Co. v. Slade, 747 So. 2d at 308.
The inflation-coverage provision states, in pertinent
part: 
"The limits of insurance specified in the
Declarations of this policy for Coverage A-Buildings
and Coverage B-Business Personal Property will
automatically increase by the applicable Inflation
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11
Coverage Index shown in the Declarations.
"To determine the limits of insurance on a
particular date, the Index level available on that
date will be divided by the Index level as of the
effective date of this inflation coverage provision
and the resulting factor multiplied by the limits of
insurance for Coverage A and Coverage B separately.
In no event will the limits of insurance be reduced
to less than those shown in the Declarations or most
recent renewal notice, whichever is greater."
As noted above, the declarations page for the policy issued
January 12, 2000, specifies the "limits of insurance" for
"Buildings" at $127,500.  The inflation-coverage index is
specified on that page as "141.2."  According to State Farm,
the "index level available" on the date of the loss--August 2,
2000--was "143.8." 
After WCAFC rested its case, the trial court ruled that
the first paragraph of the provision was ambiguous:
"The Court also feels obligated to find that
there is an ambiguity in the policy. The ambiguity
the Court finds is in paragraph one, inflation
coverage. ...[I]t is clear to the Court ... that the
limits of insurance will automatically increase by
the applicable inflation coverage index shown in the
declaration. The policy being a replacement cost
coverage policy on its face and in its application
tends to beg: Well, what is the purpose of that? In
the 
Court's 
mind, 
it 
creates 
confusion 
and,
therefore, I interpreted it against the drafter and
against State Farm in this case, and the Court would
find it creates in the mind of the layperson or
could very likely create, as it did with the Court,
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12
that you have to increase your coverage by that
multiple factor on the front page. It could have
just as easily been handled by looking to the second
paragraph and, to me, would have been sufficient in
and of itself to handle any adjustment at the point
in time of loss."
As stated above, in interpreting the inflation-coverage
provision, this Court must not read any part of the language
of the inflation-coverage provision, including the first
paragraph, "in isolation."  Slade, 747 So. 2d at 309.
Instead, this Court must read the policy "as a whole" and the
language of the inflation-coverage provision must be "read in
context with all other provisions."  Hardnett, 763 So. 2d at
965.  See also Royal Ins. Co. of America v. Thomas, 879 So. 2d
1144, 1153-54 (Ala. 2003) ("'Insurance contracts, like other
contracts, are construed to give effect to the intention of
the parties and, to determine this intent, the court must
examine more than an isolated sentence or term; it must read
each phrase in the context of all other provisions.  State
Farm Mut. Auto. Ins. Co. v. Lewis, 514 So. 2d 863 (Ala.
1987).'" (quoting  Hall v. American Indem. Group, 648 So. 2d
556, 559 (Ala. 1994))).  
The first paragraph of the inflation-coverage provision
states generally that the policy "limits of insurance"
1050872
I have rounded the "resulting factor" in this case to the
4
nearest one thousandth: 1.018.
State Farm actually paid WCAFC $144,233, which reflects
5
payment under the policy for coverage for both the church
building and the personal property lost in the fire.  The
13
automatically increase "by the applicable Inflation Coverage
Index."  The second paragraph explains how this calculation is
made: "To determine the limits of insurance on a particular
date ['the adjusted limit'], the Index level available on that
date ['A'] will be divided by the Index level as of the
effective date of this inflation coverage provision ['B'] and
the resulting factor multiplied by the limits of insurance
['C']...."  (Emphasis added.)  This can be expressed in the
following equation: A÷B×C= "the adjusted limit."  
The index level available on the date of the loss, 143.8,
is divided by the "Index level as of the effective date of
this inflation coverage provision," which was 141.2.  The
resulting 
quotient 
("the 
resulting 
factor")  
is 
then
4
"multiplied by the limits of insurance," $127,500, resulting
in the adjusted limit: 143.8 ÷ 141.2 × $127,500 = $129,795.
This result is the same "adjusted limit" State Farm calculated
under the inflation-coverage provision and paid WCAFC for the
loss of the church building.5
1050872
amount of coverage for the church building under the policy is
the issue on appeal.  
14
WCAFC's 
interpretation 
of 
the 
inflation-coverage
provision, however, is quite different.  WCAFC stated in its
brief:
"However, the more reasonable interpretation of the
inflation coverage provision is that the limits of
insurance as specified on the current declarations
page, or $127,500 for 2000, are automatically
increased by the Inflation Coverage Index of 141.2.
Because it is an inflation index, it is 'obvious,'
as 
conceded 
by 
State 
Farm's 
corporate
representative, John Hill, that 141.2 represents a
percentage and must be divided by 100 before the
limits are increased through multiplication. (R.
997). It is more than reasonable, therefore, that
paragraph one automatically increases the 'limits of
insurance' to $180,030. Paragraph two then provides
a minor adjustment to the 'limits of insurance' as
previously figured in paragraph one by dividing the
index level on the date of loss, 143.8, by the
inflation coverage index on the declarations page,
141.2, and then multiplying the result by $180,030."
WCAFC's brief at 26 n.3.
This is not a reasonable interpretation of the inflation-
coverage provision.  First, WCAFC reads the first paragraph in
isolation, ignoring the second paragraph, the opening phrase
of which explains how "[t]o determine the limits of insurance
on a particular date."  Attempting to determine the adjusted
limit using the plain text of the first paragraph alone
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15
requires one to "increase" the "limits of insurance" by the
"applicable Inflation Coverage Index."  Thus the $127,500
"limits of insurance" would be "increased" by 141.2, which if
multiplied results in the incredible adjusted limit of
$18,003,000--a 
facially 
unreasonable 
adjustment 
for 
only 
eight
months of inflation.  
WCAFC suggests, however, that the "applicable Inflation
Coverage Index" is actually a percentage, and that the
$127,500 
"limits 
of 
insurance" 
would 
be 
"increased" 
by 
141.2%.
To perform this calculation, WCAFC reads the text of the
inflation-coverage provision to require that 141.2 be divided
by 100, then multiplies the resulting quotient by the policy
limit, resulting in an adjusted limit of $180,030.  WCAFC's
interpretation requires that the inflation-coverage index be
read as a percentage, that this figure be divided by 100, and
that the resulting quotient then be multiplied by the policy
limit--none of which is actually specified in that paragraph.
The second paragraph, WCAFC suggests, makes a "minor
adjustment" to the "limits of insurance" calculated in the
first paragraph.  To do this, the index level on the date of
loss, 143.8, is divided by the inflation-coverage index,
1050872
WCAFC does not suggest, as it does for the first
6
paragraph, that the second paragraph requires the "inflation-
coverage index" to be multiplied by 100 or to be considered a
percentage. 
16
141.2, and then multiplied by the previously determined
adjusted limit to come to the final total limit: 143.8 ÷ 141.2
× $180,030 = $183,345.   
6
WCAFC's interpretation requires that a term in the first
paragraph--"limits of insurance"--have a different meaning in
the second paragraph.  Specifically, in the first paragraph,
the term "limits of insurance" refers to the policy limit of
$127,500, which is "specified in the Declarations" of the
policy. 
 
The 
inflation-coverage 
provision 
modifies 
this 
amount
to reach the adjusted limit, which is the "limits of insurance
on a particular date."  Under the defendants' interpretation
of the inflation-coverage provision, the term "limits of
insurance" always refers to the $127,500 amount.  WCAFC's
interpretation, 
however, 
requires 
"limits 
of 
insurance" 
in 
the
first paragraph to refer to the $127,500 limit, but in the
second paragraph to refer to the new "limits of insurance" as
modified by the first paragraph.
WCAFC's reading of the inflation-coverage provision is
1050872
17
unreasonable; it fails to read the provision in the context of
the entire policy, thus giving new meaning--or no meaning--to
terms in second paragraph.  Additionally, WCAFC's reading
changes the value and meaning of terms in the first paragraph,
but not the second paragraph, and adds calculations and unit
conversions not actually required.  WCAFC's argument is
without merit, and I see no ambiguity in the inflation-
coverage provision.  
The court "must enforce the insurance policy as written
if the terms are unambiguous...."  Safeway Ins. Co. of Alabama
v. Herrera, 912 So. 2d at 1143.  The trial court erred in
determining 
that 
the 
inflation-coverage 
provision 
was
ambiguous and in submitting the breach-of-contract claim to
the jury on that basis.  It is undisputed that State Farm paid
WCAFC the amount required by the unambiguous text of the
insurance policy; thus, State Farm is due a judgment in its
favor on this count. 
However, it appears to me that the fact that the breach-
of-contract claim should not have been submitted to the jury
would not make a difference in the judgment award in this
case.  Because the defendants have not demonstrated that the
1050872
Because the parties do not dispute that Sally and B.G.
7
could not be liable for breach of contract, no compensatory-
damages award on the breach-of-contract claim was entered
18
trial court erred in denying their motion for a judgment as a
matter of law or in entering a judgment on the suppression
claim, that particular judgment is due to be affirmed.  This
raises a troubling issue.  The jury rendered two different
compensatory-damages 
awards: 
$90,000 
on 
the 
breach-of-contract
claim against State Farm, and $90,000 on the suppression claim
against all three defendants.  The trial court, however, in an
apparent attempt to avoid a double recovery, entered a single
$90,000 
compensatory-damages 
award 
against 
all 
three
defendants.
If, as I believe, the breach-of-contract claim is due to
be reversed but the suppression claim is due to be affirmed,
to what extent should the $90,000 compensatory-damages award
remain standing?  The verdict in this case was not a general
verdict.  There is no dispute that the jury found against
State Farm on the breach-of-contract claim and awarded
$90,000.  There is no dispute that the jury found in favor of
WCAFC on the suppression claim and awarded $90,000 in
compensatory-damages against all three defendants  and
7
1050872
against them.
19
$350,000 in punitive damages.  Removing the $90,000
compensatory-damages judgment on the breach-of-contract claim
leaves the same monetary judgment against all three
defendants: $440,000.
Neither party addresses this issue or presents authority
demonstrating what this Court should do in this situation.  It
is not the duty of this Court to seek out authority or to
formulate legal rationales in an attempt to reverse a trial
court's decision based on a jury's verdict.  Instead, it is
the appellants' duty to provide a basis for reversing the
judgment of the trial court.  Because the verdict on the
suppression claim would support all the damages awarded in
this case, and because the parties do not provide the Court
with authority or legal reasoning on which to hold otherwise,
I concurred originally to affirm the judgment of the trial
court, and I concur in overruling the application for
rehearing.