Title: Harriet Maloof and John A. Maloof, Jr. v. John Hancock Life Insurance Company and Parker A. Glasgow
Citation: N/A
Docket Number: 1090684
State: Alabama
Issuer: Alabama Supreme Court
Date: September 30, 2010

REL: 09/30/2010
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
SPECIAL TERM, 2010
____________________
1090684
____________________
Harriet Maloof and John A. Maloof, Jr.
v.
John Hancock Life Insurance Company and Parker A. Glasgow
Appeal from Jefferson Circuit Court
(CV-08-900797)
STUART, Justice.
Harriet Maloof and John A. Maloof, Jr., sued John Hancock
Life Insurance Company ("John Hancock") and Parker A. Glasgow,
an independent insurance agent, in the Jefferson Circuit
Court, alleging fraudulent misrepresentation, suppression,
1090684
Manulife 
Financial 
acquired 
John 
Hancock 
in 
approximately
1
2004 and now conducts most of its business in the United
States as John Hancock.
2
breach of contract, negligent and/or wanton failure to procure
insurance, and breach of fiduciary duties arising out of
Glasgow's sale of two universal life-insurance policies to the
Maloofs in 1989 and 1992.  The trial court entered a summary
judgment in favor of John Hancock and Glasgow on all the
claims, and the Maloofs appeal as to all the claims except the
breach-of-contract claim.  We affirm.
I.
John Maloof first became acquainted with Glasgow in
approximately 1969 when they met at the University of Alabama
at Birmingham Hospital where John worked as a cardiologist;
Glasgow sold insurance to other physicians at the hospital.
Over the next two decades, John purchased at least two life-
insurance policies from Glasgow, as well as disability
insurance.  In 1989, after consulting with Glasgow, John
elected to replace five existing life-insurance policies
providing approximately $275,000 of coverage with two new
policies issued by Manulife Financial.   When questioned by
1
Glasgow's attorney during his deposition, John explained that
1090684
3
the object of these transactions was to provide funds to pay
the estate taxes that would be due upon John's death:
"The reason that these policies were even being
discussed was because we were talking about estate
planning and we got into a discussion of –- of
estate taxes and things like that.  The entire
reason for even considering these policies was to
fund estate tax planning.  Parker was kind enough to
make me an appointment with [Birmingham attorney]
Kirby Sevier, who's an estate planner, and arranged
it, and we went over there together.  The whole
purpose of the policies was to take care of estate
planning.  That was the reason for the policies."
John also testified that Glasgow assured him that taking out
these policies was in his and Harriet's best financial
interests.  One of the policies purchased by John in 1989 was
a $500,000 universal-life policy; the other policy was a
renewable and convertible $500,000 term-life policy with an
initial term of three years.  In 1992, John purchased another
$500,000 of life insurance from Manulife through Glasgow; this
coverage was another universal-life policy with a face value
of $250,000 and a $250,000 term rider.  John stated in his
deposition that this policy was also purchased as an estate-
planning move to provide liquidity for any estate taxes due
upon his death and that Glasgow again represented that it was
1090684
4
in John's best financial interests to purchase the policy.
All the policies named Harriet as the beneficiary. 
During the next several years, the Maloofs received
quarterly bills for each of the three insurance polices and
paid them as they came due.  The quarterly payment for the
1989 universal-life policy was $1,275.25, the quarterly
payment for the 1992 universal-life policy was $1,418.14, and
the quarterly payment for the 1989 term-life policy was
initially $493, but increased to $1,028 in 1992 and to $1,633
in 1995.  In 1998, the Maloofs elected not to renew the term-
life policy and it was canceled.  Thereafter, the Maloofs
continued to pay the quarterly bills for the two universal-
life policies without incident until 2007.  
On January 4, 2007, the Maloofs made what would
ultimately be their last quarterly payment of $1,418.14 on the
1992 universal-life policy, and on February 12, 2007, the
Maloofs made what would ultimately be their last quarterly
payment of $1,275.25 on the 1989 universal-life policy.  The
Maloofs subsequently received a notice from John Hancock dated
February 13, 2007, notifying them that an additional premium
payment of $5,265.12 was required by April 15, 2007, in order
1090684
5
to continue the 1992 universal-life policy until July 13,
2007; otherwise, the notice informed them, the 1992 universal-
life policy would terminate on April 15.  They later received
another notice from John Hancock, dated May 29, 2007,
informing them that an additional premium payment of $7,573.15
was required by July 29, 2007, in order to continue the 1989
universal-life policy until November 29, 2007; otherwise, this
notice informed them, that policy would terminate on July 29.
After receiving these notices, John contacted Glasgow, who had
retired in 2000, to inquire why his policies would be
terminating, even though he had timely paid the premiums on
the policies for approximately 18 years.  John states that
Glasgow told him that he would investigate the matter, and it
appears that Glasgow did subsequently contact John Hancock;
however, John states that Glasgow ultimately told him that
there was nothing Glasgow could do.  At his deposition, John
testified that he decided not to pay the additional premiums
requested by John Hancock to keep his policies in effect
because doing so would essentially be "just throwing money
away."  The Maloofs subsequently received notice from John
Hancock that the 1992 universal-life policy was terminated on
1090684
6
April 15, 2007, and that the 1989 universal-life policy was
terminated on July 29, 2007.
On March 13, 2008, the Maloofs sued John Hancock and
Glasgow in the Jefferson Circuit Court, alleging fraudulent
misrepresentation, suppression, breach of contract, negligent
and/or wanton failure to procure insurance, and breach of
fiduciary duties arising out of their purchase of the
universal-life policies in 1989 and 1992.  The gravamen of
their complaint was that Glasgow had misrepresented to them
that purchasing those insurance policies was in their best
financial interests and that the policies would provide
benefits that would be available to pay any estate taxes due
upon John's death when, in fact, based upon the projected
insurance and interest rates at the time of sale, those
policies would likely lapse when John was approximately 78
years old unless the Maloofs at some point substantially
increased the amount of the premiums they paid.  On April 16,
2008, John Hancock moved the trial court to stay all
proceedings pending a ruling from the United States District
Court for the Southern District of California on whether the
Maloofs' action was barred by the settlement of a class action
1090684
7
overseen by that court in 1998 in which allegedly deceptive
sales practices used by Manulife between 1982 and 1993 were
challenged; Glasgow subsequently joined in that motion.  On
June 19, 2008, the trial court entered a limited stay during
which some preliminary discovery could still be conducted;
however, that stay was lifted in its entirety effective
November 19, 2008, after the United States District Court for
the Southern District of California held that the Maloofs'
claims were not covered by the settlement of the previous
class action except to the extent that the Maloofs alleged
that the contract charges on their life-insurance policies had
been misrepresented.
On December 29, 2008, the trial court set an initial
trial date of September 21, 2009; that trial date was later
continued until February 1, 2010.  On October 22, 2009,
Glasgow and John Hancock filed their first formal answers to
the Maloofs' complaint.  On November 2, 2009, the Maloofs
moved to strike those answers, arguing that they were untimely
under Rule 12(a), Ala. R. Civ. P., which requires defendants
to "serve an answer within 30 days after the service of the
summons and complaint."  Accordingly, the Maloofs argued, John
1090684
8
Hancock and Glasgow's answers were filed over 550 days late.
On December 7, 2009, the trial court denied the Maloofs'
motion.  The Maloofs then petitioned this Court for a writ of
mandamus directing the trial court to strike John Hancock's
and Glasgow's answers as untimely; however, on January 22,
2010, this Court denied that petition, without an opinion (No.
1090375).
On November 24, 2009, Glasgow moved the trial court to
enter a summary judgment in his favor on all counts, and, on
November 25, 2009, John Hancock did the same.  The Maloofs
filed responses opposing the motions, but, on January 5, 2010,
the trial court entered an order granting the motions of John
Hancock and Glasgow and entering a summary judgment in their
favor.  On February 10, 2010, the Maloofs filed their notice
of appeal to this Court.
II.
The Maloofs first make the general argument that the
summary judgment entered by the trial court was erroneous
because, they say, it was based at least partly upon
affirmative defenses asserted by John Hancock and Glasgow;
however, 
the 
Maloofs 
argue, 
those 
defenses 
had 
been
1090684
9
effectively waived because John Hancock and Glasgow did not
assert them until they filed their untimely answers more than
550 days after the answers were due.  See Baldwin County Elec.
Membership Corp. v. City of Fairhope, 999 So. 2d 448, 461
(Ala. 2008) (stating that the appellant had waived affirmative
defenses first asserted in an untimely pleading).  However, in
both their motion to strike John Hancock's and Glasgow's
answers and their brief filed with this Court, the Maloofs
fail to address the significance of the stay entered by the
trial court on June 19, 2008; rather, they argue only that the
answers were late because they were not filed within 30 days
after the summonses and complaints were served.  In fact, the
order entered by the trial court on June 19, 2008, granting a
limited stay states that "either party shall file an
appropriate d[i]sposit[i]ve pleading to the court" when the
United States District Court for the Southern District of
California ruled on John Hancock's motion asserting that the
Maloofs' claims were part of a 1998 class action presided over
by 
that 
court, 
thus 
indicating 
that 
the 
defendants'
obligations to file merits-related pleadings or motions were
in abeyance during the duration of the stay.  Accordingly,
1090684
10
John Hancock's and Glasgow's answers were not late merely
because, as the Maloofs argue, they were not filed by the 31st
day after the summonses and complaints were served.  Instead,
the relevant issue would instead be whether the answers were
late because they were not filed for almost a year after the
stay was lifted on November 19, 2008.  However, this is not an
issue that was raised by the Maloofs in either the trial court
or in their brief filed with this Court.  They instead have
argued exclusively that the answers were late because they
were not filed within 30 days after the summonses and
complaints were served.  This Court will not consider an
argument not raised in the trial court or in the appellate
briefs; accordingly, there is no basis on which to hold that
the trial court erred in failing to grant the Maloofs' motion
to strike John Hancock's and Glasgow's answers.  See Yellow
Dog Dev., LLC v. Bibb County, 871 So. 2d 39, 41 (Ala. 2003)
("[T]his Court will not 'reverse a trial court's judgment
based on arguments not presented to the trial court or based
on arguments not made to this [C]ourt.'" (quoting Brown v.
Wal-Mart Stores, Inc., 864 So. 2d 1100, 1104 (Ala. Civ. App.
2002))). 
1090684
11
III.
We next consider the Maloofs' arguments that the trial
court erred by entering a summary judgment in favor of John
Hancock 
and 
Glasgow 
on 
the 
Maloofs' 
fraudulent-
misrepresentation and suppression claims, their negligent-
and/or wanton-failure-to-procure-insurance claim, and their
breach-of-fiduciary-duties 
claim; 
the 
Maloofs 
do 
not 
challenge
the judgment entered on their breach-of-contract claim.  We
review these arguments pursuant to the following standard of
review.  
"This Court's review of a summary judgment is de
novo.  Williams v. State Farm Mut. Auto. Ins. Co.,
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."
1090684
12
Dow v. Alabama Democratic Party, 897 So. 2d 1035, 1038-39
(Ala. 2004).
The 
Maloofs' 
fraudulent-misrepresentation 
and 
suppression
claims 
were 
premised 
on 
the 
allegation 
that 
Glasgow
misrepresented to the Maloofs that the universal-life policies
were in their best financial interests and that they would
provide funds that would be available to pay the estate taxes
due upon John's death, while at the same time suppressing from
them the facts that the policies were actually not in their
best interests and that benefits from those policies would not
be available to pay estate taxes due upon John's death if he
lived beyond approximately age 78.  To merit consideration by
a jury, both of these claims require some evidence of
reasonable reliance, that is, that the Maloofs reasonably
relied upon the alleged false representations, Boswell v.
Liberty Nat'l Life Ins. Co., 643 So. 2d 580, 581 (Ala. 1994),
or that they reasonably relied "on the state of affairs as it
appeared in the absence of the suppressed information."
Houston County Health Care Auth. v. Williams, 961 So. 2d 795,
814 (Ala. 2006).  In its order granting John Hancock's and
Glasgow's motions for a summary judgment, the trial court
1090684
13
explained its conclusion that evidence of reasonable reliance
was lacking:
"Counts one and two of [the Maloofs'] complaint
allege fraud and suppression, and the undisputed
facts of this case place it squarely within the
facts and holding of the Alabama Supreme Court's
recent decision in AmerUS Life Insurance Co. v.
Smith, 5 So. 3d 1200 (Ala. 2008).  As in this case,
AmerUS involved a plaintiff insured filing suit for
substantially 
similar 
claims 
of 
fraudulent
misrepresentation 
and 
suppression 
against 
his
insurer and independent insurance agent.  The
similarities between the cases are striking insofar
as: (1) both AmerUS and this case arise from the
sale of universal life policies; (2) both AmerUS and
this case involve misrepresentations as to the
advisability 
of 
plaintiffs' 
purchase 
of 
the
universal life policies; the replacement of life
insurance policies owned by the plaintiffs, the
amount of premiums to be paid, and the length of
time in which those premiums would carry the
policies; (3) in both AmerUS and this case, the
universal life policies were sold by independent
insurance agents who were appointed to sell the
products of the insurance company and who sold a
substantial amount of business through the insurance
company; (4) in both AmerUS and this case, the
universal life policies issued by the insurance
company 
called 
for 
the 
payment 
of 
'planned
premiums'; (5) in both AmerUS and this case, the
universal life policies advised the plaintiffs to
read their policy carefully; (6) in both AmerUS and
this case, the universal life policies provided the
plaintiffs with a 'free-look' provision; (7) in both
AmerUS and this case, the universal life policies
were self-described as 'Flexible Premium Adjustable
Life Policies'; (8) in both AmerUS and this case,
the universal life policies contained statements
disclosing 
that 
the 
policies 
would 
lapse 
if
sufficient premiums were not paid to keep the
1090684
14
policies in force; (9) in both AmerUS and this case,
plaintiffs were provided documents both at the time
of 
issuance 
of 
the 
policies 
and 
afterwards,
including annual statements, showing the performance
of the policies based upon assumed interest rates
and 
indicating 
policy 
lapses, 
all 
of 
which
contradicted the alleged misrepresentations made by
the insurance agent; and (10) in both AmerUS and
this case, it was communicated to the plaintiffs
that additional premiums beyond the planned premium
would be required to sustain the policies.  In
AmerUS, the communication was verbal; here, the
communication occurred in two separate letters in
1992 and 1997 written by the insurance agent and
received and kept by the [Maloofs].  Based upon the
holding in AmerUS and its overwhelming application
to the present case, this court finds, as a matter
of law, that [the Maloofs] cannot establish the
necessary element of reasonable reliance in order to
sustain their fraud and suppression claims.  For
these same reasons, [the Maloofs] were likewise put
on notice of the alleged fraud more than two years
prior to the commencement to this action, and,
therefore, these claims are barred by the applicable
statute of limitations.
"Additional 
grounds 
bar 
some 
of 
the
misrepresentations claimed by [the Maloofs].  The
statement allegedly made to plaintiff John Maloof as
to what was in his best financial interests is a
statement of opinion and not a statement of a
material fact.  Moreover, the statement that the
policies would be available to pay estate taxes was
not false because the universal life policies would
have been available for such purposes if sufficient
premiums had been paid.
"Other grounds likewise mandate dismissal of
[the Maloofs'] suppression claims as [the Maloofs]
have failed to offer substantial evidence to
establish a duty to disclose by the defendants, and
the 
court 
finds 
that 
there 
was 
no 
special
1090684
15
relationship between the insurance agent and the
[Maloofs].  As to [the Maloofs'] claims regarding
suppression of the policies' contractual charges,
[the Maloofs] agree that such claims are barred by
the order entered earlier by the United States
District 
Court 
for 
the 
Southern 
District 
of
California and filed in this case."
In their briefs to this Court, John Hancock and Glasgow
reiterate the rationale of the trial court, while the Maloofs
attempt to distinguish AmerUS Life Insurance Co. v. Smith, 5
So. 3d 1200 (Ala. 2008), arguing that the facts in this case
are substantially different from the facts there and that
reasonable reliance is a question for the jury.  For the
reasons that follow, we disagree.
Regardless of any oral misrepresentations that Glasgow
may have made to convince the Maloofs to apply for new life-
insurance policies, it is undisputed that the Maloofs had 20
days to review both the 1989 and 1992 universal-life policies
after they received the policies and that they could cancel
the policies at any time within that 20-day "free-look" period
and receive a full refund of any premiums paid.  Page three of
both the 1989 and 1992 policies clearly states that "[t]his
policy provides life insurance coverage for the lifetime of
the life insured if sufficient premiums are paid.  Premium
1090684
16
payments in addition to the planned premium may need to be
made to keep this policy and coverage in force."  (Emphasis
added.)  When questioned by Glasgow's attorney about this
language when he was deposed, John acknowledged that he
understood its plain meaning:
"Q:
What does that mean please, sir?
"A:
It means you may have to pay more to keep the
policy in force.
"Q:
All 
right. 
 
And 
you 
have 
no 
trouble
understanding that language?
"A:
I understand it.
"Q:
Okay.  And so you would have understood back in
[19]89, when you got this policy, that you may
be required to make additional premium payments
in the future, is that right?
"A:
Yes."
Moreover, within the 20-day free-look period the Maloofs had
to review the 1989 and 1992 universal-life policies after
receiving them, they also received a document produced by John
Hancock labeled "Statement of Policy Cost and Benefit
Information" for each policy.  This document summarized the
contract and surrender charges associated with the policy, as
well as the expected life of the policy based on the premiums
paid and  interest rates and mortality rates applied.  The
1090684
John Hancock and Glasgow submitted additional evidence
2
indicating that, over the approximately 18-year period between
the time they purchased the first universal-life policy in
17
document received in conjunction with the 1989 universal-life
policy stated that the policy would lapse in approximately 4
years based on guaranteed interest rates and mortality rates,
while the policy would lapse in approximately 18 years based
on the current interest rates and mortality rates.  The
document received in conjunction with the 1992 universal-life
policy stated that the policy would lapse in approximately 4
years based on guaranteed interest rates and mortality rates,
while the policy would lapse in approximately 16 years based
on the current interest rates and mortality rates.  Both
documents also contained the following disclaimer:
"The projected 
results 
of 
your 
insurance 
program
may change significantly with variations in interest
rates; mortality rates (risk charges); and the
frequency, timing and amounts of premium payments.
The projected values using 'current rates' are not
guaranteed and the values with guaranteed rates are
the minimum that you will receive upon the surrender
of the policy.
"Read your policy very carefully.  In addition,
there are other factors which could affect the
projected values."
John acknowledged in his deposition that the language of this
disclaimer was "perfectly clear."2
1090684
1989 and the time John testified that he realized his policy
was in danger of lapsing in 2007, the Maloofs were sent other
letters and documents indicating that the universal-life
policies could lapse before John died.
18
In AmerUS, this Court stated:
"In 
light 
of 
the 
language 
of 
the 
documents
surrounding 
the 
insureds' 
purchase 
of 
the
life-insurance policies at issue in this case and
the conflict between [the insurance agent's] alleged
misrepresentations and the documents presented to
[the plaintiff], it cannot be said that [the
plaintiff] reasonably relied on [the insurance
agent's] representations.  As this Court stated in
Torres [v. State Farm Fire & Cas. Co., 438 So. 2d
757 (Ala. 1983)]:  '[T]he right of reliance comes
with a concomitant duty on the part of the
plaintiffs to exercise some measure of precaution to
safeguard their interests.'  438 So. 2d at 759.  The
insureds here took no precautions to safeguard their
interests.  If nothing else, the language in the
policies and the cost-benefit statement should have
provoked inquiry or a simple investigation of the
facts by [the plaintiff].  Instead, based upon the
record before us, we must conclude that [the
plaintiff] 'blindly trust[ed]' [the insurance agent]
and 'close[d] [his] eyes where ordinary diligence
require[d] [him] to see.'  Munroe v. Pritchett, 16
Ala. 785, 789 (1849). ...  We conclude that no
reasonable person could read the policies and the
cost-benefit statement and not be put on inquiry as
to the existence of inconsistencies, thereby making
reliance on [the insurance agent's] representations
unreasonable as a matter of law.  Because the
insureds failed to present substantial evidence
indicating that [the plaintiff's] reliance on [the
insurance agent's] representations was reasonable,
[the life insurance company] is entitled to a JML."
1090684
19
5 So. 3d at 1215-16.  We agree with the trial court that our
holding in AmerUS controls here.  The Maloofs argue that this
case 
is 
different 
from 
AmerUS 
because 
the 
alleged
misrepresentations were different; however, that fact is
ultimately immaterial.  The relevant inquiry is the same in
both AmerUS and this case:  whether it was reasonable for the
insured to rely on an insurance agent's representations about
an 
insurance 
policy 
when 
those 
representations 
are
contradicted by language in the insurance policy itself.  This
Court has repeatedly stated that it is not, not only in
AmerUS, but also in Baker v. Metropolitan Life Insurance Co.,
907 So. 2d 419 (Ala. 2005); Liberty National Life Insurance
Co. v. Ingram, 887 So. 2d 222 (Ala. 2004); and Alfa Life
Insurance Co. v. Green, 881 So. 2d 987 (Ala. 2003).  
The Maloofs claim that Glasgow misrepresented to them
that the universal-life policies they purchased were in their
best interests and that they would provide funds that would be
available to pay the estate taxes due upon John's death, while
at the same time suppressing from them the facts that the
policies were actually not in their best interests and that
benefits from those policies would not be available to pay
1090684
20
estate taxes due upon John's death if he lived beyond
approximately age 78.  However, the Maloofs could not have
reasonably 
relied 
on 
the 
alleged 
misrepresentations 
concerning
the availability of benefits from those policies to pay estate
taxes due upon John's death in light of the clear language of
the insurance policies.  Moreover, with regard to Glasgow's
alleged misrepresentation that the purchase of the 1989 and
1992 universal-life policies was in the Maloofs' best
financial interests, we agree with the trial court that this
was merely a statement of an opinion, not of a material fact.
See State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 322-
23 (Ala. 1999) (holding that insurance agent's statements that
the purchased insurance policy was "the Cadillac of all
insurance" and "the very best" amounted to mere puffery that
could not reasonably be relied upon in light of the insured's
level 
of 
education 
and 
degree 
of 
sophistication).
Accordingly, the trial court did not err by entering a summary
judgment in favor of John Hancock and Glasgow on the Maloofs'
fraud claims.
The Maloofs have also argued that the trial court erred
by entering a summary judgment in favor of John Hancock and
1090684
21
Glasgow on their claim alleging that John Hancock and Glasgow
negligently and/or wantonly failed to procure insurance for
them.  We have stated that "'when an insurance agent or
broker, with a view to compensation, undertakes to procure
insurance for a client, and unjustifiably or negligently fails
to do so, he becomes liable for any damages resulting
therefrom.'"  Crump v. Geer Bros., 336 So. 2d 1091, 1093 (Ala.
1976) (quoting Timmerman Ins. Agency, Inc. v. Miller, 285 Ala.
82, 85, 229 So. 2d 475, 477 (1969)).  The Maloofs allege that
Glasgow agreed to procure life-insurance policies for them
that would provide benefits available to pay estate taxes due
upon John's death; however, they argue, they now have no such
life-insurance policies.
The undisputed facts indicate that Glasgow did in fact
procure two universal life-insurance policies for the Maloofs
and that, had the Maloofs continued to pay sufficient premiums
on those policies, they would have remained in effect and the
benefits of those policies would have been available for any
purpose after John died.  John Hancock did not spontaneously
act to cancel the policies in 2007, nor did Glasgow take any
action leading to their cancellation; rather, the Maloofs
1090684
22
elected not to pay the increased premiums required to keep the
policies in effect.  There is no doubt that they made that
decision with full knowledge of the fact that the failure to
pay the increased premiums would lead to the cancellation of
the policies.  Thus, the undisputed facts indicate that
Glasgow in fact fulfilled the Maloofs' request to procure
life-insurance policies that would provide funds that could be
used to pay estate taxes upon John's death, and those policies
were canceled only after the Maloofs failed to pay the
required premiums.  John Hancock and Glasgow cannot be held
liable for the negligent or wanton failure to procure
insurance based on the Maloofs' failure to pay the required
premiums; accordingly, the summary judgment was properly
entered on this count.
The Maloofs' final argument is that the trial court erred
by entering a summary judgment in favor of John Hancock and
Glasgow on the Maloofs' claim that John Hancock and Glasgow
breached certain duties owed to them because of their alleged
fiduciary relationship with Glasgow, namely, the duty to
disclose material facts related to the insurance policies and
the duty to act in the Maloofs' best interests.  This Court
1090684
23
discussed this claim in a similar context in Guinn v. American
Integrity Insurance Co., 568 So. 2d 760, 764 (Ala. 1990),
where we stated:
"[The plaintiff's] breach of fiduciary duty
claim was premised on her allegation that her
reposal of trust in [the defendant insurance agents]
to advise her on what policies she should purchase,
coupled with their acceptance of that trust, created
a fiduciary relationship.  She argues that her
reliance, along with her advanced age, lack of
mental strength, lack of knowledge of insurance
matters, 
and 
the 
agents' 
superior 
knowledge
concerning 
insurance, 
constituted 
special
circumstances that warranted the imposition of a
fiduciary duty on [the agents].
"This Court has held that an insurance agent may
be the agent of the insured, the insurer, or both.
Washington National Ins. Co. v. Strickland, 491 So.
2d 872, 874-75 (Ala. 1985).  However, an insurance
agent is generally not considered to be an agent of
the insured until a contract of insurance has been
entered 
into. 
 
Strickland, 
supra; 
Highlands
Underwriters Ins. Co. v. Eleganté Inns, Inc., 361
So. 2d 1060 (Ala. 1978).  Until such a contractual
relationship has been established, the parties
remain in the relationship of salesperson and
prospective customer.  The salesperson and his
principal 
may 
be 
liable 
for 
damages 
if 
he
misrepresents material facts in an attempt to induce
the prospective customer to enter into the contract,
Harrell v. Dodson, 398 So. 2d 272 (Ala. 1981); Ala.
Code 1975, § 6-5-101 through 6-5-104.  However, that
potential liability does not indicate the existence
of a fiduciary relationship.
"In addition, the existence of a duty is a
question of law for the trial court.  Berkel & Co.
Contractors v. Providence Hospital, 454 So. 2d 496
1090684
24
(Ala. 1984); Hand v. Butts, 289 Ala. 653, 270 So. 2d
789 (1972).  Because [the plaintiff] failed to
present evidence of a relationship between herself
and [the defendant agents] that gave rise to a
fiduciary duty, the court did not err in dismissing
the claim based on an alleged fiduciary duty." 
For the reasons that follow, we similarly conclude in this
case that there was insufficient evidence of a relationship
between the parties that would give rise to fiduciary duties.
The Maloofs summarize their argument that they had a
special relationship with Glasgow that gave rise to fiduciary
duties as follows in their brief to this Court:
"For many years, [the Maloofs] entrusted their
financial affairs and estate planning needs to
Glasgow.  His relationship with [the Maloofs] was
far more confidential and complex than that of a
mere insurance salesman.  Glasgow indicated to the
[Maloofs] that he was their 'financial planner.'
Glasgow not only sold insurance products to the
[Maloofs], but guided and advised [them] regarding
important financial and estate planning affairs and
decisions.  He made insurance, financial and estate
planning recommendations to the Maloofs.  He
referred them to a lawyer and made the appointment
with the lawyer.  He even went with the Maloofs to
meet with the lawyer.  He witnessed their wills.
Their relationship far surpasses that of merely a
'salesperson and prospective customer' and does
indeed give rise to a fiduciary duty. [Guin, 568 So.
2d] at 764.  Glasgow's relationship with [the
Maloofs] is precisely the type that gives rise to a
fiduciary duty."
1090684
25
Maloofs' brief, pp. 59-60.  However, the Maloofs' general
contention that they had a trusting and confidential
relationship with Glasgow is belied by the testimony John gave
in his deposition regarding that relationship, where he made
the following statements:
"Every insurance agent I've ever known has had a lot
of recommendations and a lot of promises and wants
to sell me something and wants to get money and
Parker [Glasgow] is no exception.  So, I'm certain
that when I talked to him he told me whatever was
favorable that he wanted me to hear, and that's the
way it is.  That's –– that's the way it was.  And
Parker called.  I would see him.  I wouldn't see him
every time, but –– because I knew that he wanted to
sell me something.  So, even though I liked him I'm
not stupid and I knew he wanted to sell me something
and I didn't want to just buy something for no
reason.  So, I'm sure he explained to me whatever it
was he thought that I should know or that I ought to
know to make me buy the policy."
          
"[T]here was a consistent record of trying to sell
me policies, and for that reason there was a lot
less credibility between me and Mr. Glasgow than
there might have been otherwise."
          
"My perception was that he wanted to sell me
policies for whatever reason rather than the correct
reason."
          
1090684
26
"He was forever trying to sell me policies.  Every
time I saw him he had one idea after another selling
–– do this, do that, trade this in, do that.  All he
wanted to do was sell me policies and make a
commission."
          
"I always considered whatever [Glasgow] said.  I
took everything with a grain of salt."
This testimony indicates that the Maloofs certainly did not
view their relationship with Glasgow, though cordial and long-
standing, as anything special or outside the typical
salesperson-customer relationship.  Combined with the facts in
the 
record 
indicating 
that 
John 
is 
a 
well-educated
professional and an experienced investor, we agree with the
conclusion of the trial court that there was "no evidence that
would justify the imposition of a fiduciary duty owed to [the
Maloofs] by [John Hancock and Glasgow]" and that the summary
judgment was accordingly proper.
IV.
The Maloofs sued John Hancock and Glasgow, alleging
fraudulent 
misrepresentation, 
suppression, 
breach 
of 
contract,
negligent and/or wanton failure to procure insurance, and
breach of fiduciary duties arising out of Glasgow's sale of
certain life-insurance policies to the Maloofs in 1989 and
1090684
27
1992.  After the trial court entered a summary judgment in
favor of John Hancock and Glasgow on all the claims asserted
by the Maloofs, the Maloofs appealed.  Because no genuine
issue of material fact exists, we affirm the judgment of the
trial court.
AFFIRMED.
Lyons, Smith, Bolin, Parker, Murdock, and Shaw, JJ.,
concur.
Woodall, J., concurs in the result.
Cobb, C.J., dissents.
1090684
28
COBB, Chief Justice (dissenting).
I respectfully dissent.  I believe that, in affirming the
summary judgement of this case, the majority improperly
substitutes itself for the trier of fact. Since Foremost
Insurance Co. v. Parham, 693 So. 2d 409 (Ala. 1997), the test
for when an aggrieved person is charged with discovering fraud
has been "reasonable reliance."
"[T]he trial court can enter a judgment as a matter
of law in a fraud case where the undisputed evidence
indicates that the party or parties claiming fraud
in a particular transaction were fully capable of
reading and understanding their documents, but
nonetheless made a deliberate decision to ignore
written contract terms."
693 So. 2d at 421 (emphasis added). 
The standard of appellate review of a summary judgment
requires that we view the evidence most favorably in favor of
the nonmovants, John A. Maloof, Jr., and Harriet Maloof, Wilma
Corp. v. Fleming Foods of Alabama, Inc., 613 So. 2d 359 (Ala.
1993); Hanners v. Balfour Guthrie, Inc., 564 So. 2d 412, 413
(Ala. 1990).  I emphasize that neither the trial court nor
this Court is in the business of weighing the facts at the
summary-judgment stage.  That is, we should consider only
whether the evidence offered in support of the summary-
1090684
29
judgment motion is "evidence of such weight and quality that
fair-minded persons in the exercise of impartial judgment can
reasonably infer the existence of the fact sought to be
proved."  West v. Founders Life Assurance Co. Of Florida, 547
So. 2d 870, 871 (Ala. 1989). Moreover, the nature of the
misrepresentations constituting the fraud and suppression
asserted by the Maloofs in this case is of particular note.
Specifically, Parker Glasgow, an agent for John Hancock
Insurance Company, represented that the policies would be in
the Maloofs' best financial interests and that the policies
would supply  benefits at John's death of approximately
$1,000,000.  Although the policies and documents delivered to
the Maloofs indicated that they might be subject to additional
premium payments, representations by Glasgow indicated that
the policies would become self-sustaining, and his October 30,
1992, letter to the Maloofs indicated that 
"[the policy] is building up cash value and this
cash value will help to keep the premiums level at
a later date.  It may be necessary to pay more into
this policy in order for it to be maintained at the
full death benefit level of $500,000 past age 74
according to current interest rates.  I went over
this with you in a letter February 7, 1990.
However, the insurance amount could be reduced at
some later date and that would have the effect of
1090684
30
extending the policy for a longer period of time.
For example, you could stop paying the premium at
age 65, reduce the death benefit and, thereby,
extend the coverage into your 80's."
(Emphasis supplied.)  
Whether the policy language suggesting that additional
premiums might be required negates a claim of fraud in light
of this letter and the evidence concerning Glasgow's
representations is a genuine issue of material fact that
precludes a summary judgment.  The trier of fact could
reasonably infer that Glasgow's representations and letter do
suggest that the policies will generate income sufficient to
pay extra premium requirements so that the policies will
remain in force in spite of any increased premium.  
There is no evidence in this case suggesting that at the
time John Maloof executed these policies he was informed, or
should have reasonably been able to discover, that greatly
increased premiums, premiums approaching the actual value of
the policies, would be absolutely necessary in order to
sustain the policies.  Rather, the policies and the
accompanying documentation note that "[t]he projected results
of your insurance program may change significantly with
variations in interest rates; mortality rates (risk charges);
1090684
31
and the frequency, timing and amounts of premium payments."
Whether policy results may be "significantly" better or worse
than expected was left to the speculation of the policyholder.
In this case, of course, Glasgow's speculation for John Maloof
was that the policy would generate such income that premium
payments might be reduced or eliminated.  However, the
evidence presented by the Maloofs' expert, Dr. David Lange,
makes clear that these policies were so significantly
underfunded that John Hancock knew at the time it issued the
policies that significant additional payments would almost
certainly be necessary.  When asked about the language in
Glasgow's letter that premium payments "may be" required, Dr.
Lange stated: 
"But [Glasgow is] an insurance sales person who
sold this policy and ran the illustration and would
certainly be aware of the Statement of Policy Cost
and Benefit Information and be aware the interest
rates had declined.
"In fact, the —- that this policy by '92, and
since he had run a large number of illustrations in
these various documents, he had to know from the
beginning it wasn't going to make it.  It was going
to make it to seventy-four or thereabouts.  And
since interest rates were coming down, was unlikely
to do so.  I'm amazed, absolutely amazed that he
would use the phrase: 'it may be necessary.'"
1090684
32
Further, when questioned about Glasgow's representation that
the policy period could be extended by a reduction in the
death benefit, Dr. Lange stated, "It's actually a complete
falsity."
A reasonable person could understand from this evidence
that it was readily apparent to John Hancock and to Glasgow
that the policies were so underfunded at the time they were
issued that they would fail in the purpose intended for the
Maloofs.  Moreover, an insurance expert like Dr. Lange,
trained in the mathematics of insurance policies, could also
uncover this fact.  However, when questioned about a layman's
ability to understand the policies, Dr. Lange stated:
"The difficulty I have with that is because of the
calculations involved in there, that I'm not sure
someone, even if they read it, would appreciate the
mathematics involved."
Thus, there is a genuine issue of material fact in this case
as to whether the various documents supplied by John Hancock,
including the policies and the annual statements and updates,
disclosed facts from which a layman like John Maloof could
discern that the policies were so underfunded that they could
never serve his estate-planning purposes.  Further, none of
those documents directly contradict Glasgow's representations
1090684
33
that 
the 
policies 
would 
generate 
income 
that 
would
significantly defray additional premium costs or that the
policies could be extended at the same premium costs by
reducing death benefits.  None of the documents supplied to
the Maloofs before the policies were canceled makes clear that
huge increases in premium payments will absolutely be required
in order to maintain the policies.  In fact, the Maloofs
became aware of the fraud and suppression asserted in their
claims only when they received notice that the policies were
being canceled unless the Maloofs paid substantial additional
premiums.  Further, this cancellation was to take place in
spite of the fact that the Maloofs had timely paid all
premiums required on the policies during the 18 years since
the first policy was purchased.
In addition to my concern that the summary judgment
incorrectly holds that there is no genuine issue of fact as to
whether 
the 
Maloofs 
could 
have 
relied 
on 
the
misrepresentations by Glasgow in this case, the above
recitation of facts highlights the ambiguities in the instant
policies, particularly from a layman's perspective.  Although
the analysis of this issue does not involve a breach-of-
1090684
34
contract claim, the majority's conclusion that the policies
and the documentation from John Hancock are clear about the
effect, or lack of effect, of these policies certainly flies
in the face of the rule that ambiguities in an insurance
contract are to be construed against the drafter of the
contract.  Twin City Fire Ins. Co. v. Alfa Mut. Ins. Co., 817
So. 2d 687, 695 (Ala. 2001).  See also Life Ins. Co. of
Georgia v. Miller, 292 Ala. 525, 296 So.2d 900 (1974).
Although the trial court relied on AmerUS Life Insurance
Co. v. Smith, 5 So. 3d 1200 (Ala. 2008), I believe that there
are significant differences between the facts in this case and
those in that case.  In AmerUS, the plaintiff admitted that he
did not read his policies, and the information supplied in the
policy information directly contradicted the representations
of the insurance agent.  Thus, the Court concluded that the
plaintiff's reliance on the agent's representations could not,
as a matter of law, be reasonable.  This is not the case here.
In this case, without the knowledge of an insurance expert, it
is not clear that the representations that the policies would
generate income that would significantly defray premium costs
are inconsistent with the language in the policies that "[t]he
1090684
DOA is an acronym for "dead on arrival."
3
35
projected results of your insurance program may change
significantly ...."  Nor is it clear from the policies and
subsequent documentation that the policies were so underfunded
as to be, in the words of Dr. Lange, "DOA."   In fact, Dr.
3
Lange indicated that a layman could not easily comprehend the
financial-outcome implications of the policies.   Further, the
increased premiums required to sustain the policy in AmerUS
were approximately $25,000; in this case the amount of
premiums necessary to extend John Maloof's million-dollar
coverage  until age 90 exceeded $1,036,000. 
Moreover, the financial and business relationship between
the plaintiff and the agent in AmerUS was not nearly as
significant as the relationship between John Maloof and Parker
Glasgow in this case.  As I noted in my dissent in AmerUS Life
Insurance Co. v. Smith, 5 So. 3d at 1217, the reasonable-
reliance standard adopted by the Court in Foremost Insurance
Co. v. Parham, 693 So. 2d 409 (Ala. 1997), which imputes to a
signatory the knowledge of the contents of a contract, is
subject to certain exceptions.  Potter v. First Real Estate
Co., 844 So. 2d 540 (Ala. 2002).  
1090684
36
"'The instant case does not come within the rule
of Southern Building & Loan Ass'n v. Dinsmore, 225
Ala. 550, 144 So. 21 (1932), that the law imputes no
knowledge of a contract's contents to a party who
signs the contract without having read or having
knowledge of its contents, if that party is lulled
into 
a 
feeling 
of 
security 
because 
of 
a
misrepresentation of the contents of the contract
and because of special circumstances, relationships,
or 
disability 
of 
the 
party 
relating 
to 
the
contract's execution. See also Arkel Land Co. v.
Cagle, 445 So. 2d 858 (Ala. 1983); Rose v. Lewis,
157 Ala. 521, 48 So. 105 (1908).'"
AmerUS, 5 So. 3d at 1217 (Cobb, C.J., dissenting) (quoting
Holman v. Joe Steele Realty, Inc., 485 So. 2d 1142, 1144 (Ala.
1986)). As we recognized in Potter, supra, a special
relationship between the contract signatory, here John Maloof,
and the sales agent, here Parker Glasgow, can constitute an
exception to the imputation of knowledge required by the
reasonable-reliance standard.  In Potter, the relationship was
between the plaintiffs, a young married couple, and their
real-estate agent, who misrepresented to them that the
property that they sought to purchase was not located in a
flood 
plain. 
Although 
that 
relationship 
was 
entirely
contractual, the Court determined that the nature of that
relationship, in which the real-estate agent asserted that she
represented the plaintiff buyers as much as she represented
1090684
37
the seller, was such that there was a question for the trier
of fact as to whether the buyers had notice of a survey
showing that the property was located in a flood plain. Here,
there is evidence in the record that could support the
inference that John Maloof thought of Glasgow as just another
insurance salesman.  However, there is also evidence in this
record indicating otherwise, and we must view all the evidence
most favorably to the Maloofs, including John Maloof's
testimony that he relied on Glasgow, Wilma Corp., supra.
Under this standard, we consider only whether there is also
evidence from which the jury could conclude that Glasgow had
a special relationship with John Maloof that supported John
Maloof's reliance on Glasgow's assurance because the jury, as
trier of fact, would be free to disregard other statements by
John Maloof supporting a different inference. 
In fact, the record shows that Glasgow had been John
Maloof's exclusive insurance agent for some 20 years before
the transactions at issue in this case and that he also served
as John Maloof's "financial planner."  Further, John Maloof
received reports, at least annually, from Glasgow concerning
his financial interests and the effect of his insurance on his
1090684
38
estate planning; Glasgow also participated in estate-planning
meetings between John Maloof and his lawyer, and he
contributed to those meetings by representing that the
policies were valid additional assets of John Maloof's estate.
As I noted in my dissent in AmerUS, the significance of a
relationship of this type is entirely distinct from a single
transaction between an insurance agent and a client; the
relationship in this case is more of a special relationship
than the "special relationship" based on a single transaction
that this Court recognized in Potter.  If the law in Potter
concerning what constitutes a special relationship is no
longer to be recognized, then Potter should be overruled.
Accordingly, I believe that the question of Glasgow's special
relationship with John Maloof presents at least a question of
fact as to whether John Maloof could have reasonably relied on
Glasgow's representations under the facts of this case.   
Thus, I disagree that the difference in nature of the
misrepresentations in this case and those in AmerUS are
ultimately immaterial -- in this case, unlike in AmerUS, there
is a question of fact as to whether the policies and
subsequent documents supplied to the Maloofs could  reasonably
1090684
39
be understood by one who did not have specialized knowledge of
the mathematics underlying the policies; it is certainly not
apparent that the cost of keeping the policies would come to
exceed the actual value of the policies in less than 20 years.
The record also shows that Glasgow's representations as to the
performance of the policies was not directly contradicted by
the policies and other documentation, and there is at least a
question of fact as to whether Glasgow was in such a special
relationship with John Maloof that the Maloofs' reliance on
the 
misrepresentations 
was 
reasonable 
under 
the 
circumstances.
The question of reasonable reliance in this case is a question
of fact to be decided by the trier of fact; reasonable
reliance is not a standard that should be used to shield those
who make false representations that they know, or should know,
are untrue from the damage caused by their lies.  The summary
judgment in this case should be reversed. Therefore, I
dissent.