Opinion ID: 1812374
Heading Depth: 1
Heading Rank: 6

Heading: DAMAGES FOR BREECH [sic] OF CONTRACT OR FOR FRAUD WITH REGARD TO BENEFITS

Text: If Mrs. Stair's disability was in fact covered by the policy, notwithstanding her retirement, then; as a result of the Defendants' breech [sic] of the policy or fraud with regard to the benefits, Mrs. Stair was deprived of her benefits and suffered grave mental anguish, the latter resulting in physical suffering as follows: (a) Actual damages: (1) Benefits due under the policy: 4.5 months disability- $900.00 Less paid by the Defendants- $120.00 Total $780.00 (2) For mental anguish $75,000.00 (3) For physical suffering 25,000.00 ___________ Total actual damages $100,780.00 (b) Punitive Damages for fraud of benefits- $1,007,800.00 Therefore, the plaintiff demands judgment in the amount of $1,108,580.00. Before addressing the merits of this appeal, we must clarify the posture in which this matter is presented. This action was commenced after the death of Ann Simerly Stair. All of the defendants except Western Life Insurance Company were dismissed. Sanford has since abandoned his claim that Western Life fraudulently induced Stair to buy the policy and keep it in force. Western Life has admitted liability in the amount of $780.00 based on the claim for benefits and partial summary judgment was entered accordingly. That order was not appealed. We now proceed to the merits. Sanford asserts a claim for relief for fraud of insurance benefits. For the purposes of this discussion, we assume, without deciding, that such a claim exists in Alabama. In essence, Sanford's claim for relief is identical to the tort of bad faith, recognized in California and defined as follows: Every contract contains an implied in law covenant of good faith and fair dealing; this covenant provides that neither party will interfere with the rights of the other to receive the benefits of the agreement. (Gruenberg v. Aetna Ins. Co., supra, 9 Cal.3d 566, 574, 108 Cal.Rptr. 480, 510 P.2d 1032; Communale v. Traders & General Ins. Co., 50 Cal.2d 654, 658, 328 P.2d 198, 68 A.L.R.2d 883.) Breach of the covenant provides the injured party with a tort action for `bad faith,' notwithstanding that the acts complained of may also constitute a breach of contract. (Crisci v. Security Ins. Co., supra, 66 Cal.2d 425, 430, 58 Cal.Rptr. 13, 426 P.2d 173; Fletcher v. Western National Life Ins. Co., supra, 10 Cal.App.3d 376, 401, 89 Cal.Rptr. 78.) The cause of action is applicable to all insurance contracts, including policies of title insurance. ( Kapelus v. United Title Guaranty Co., 15 Cal. App.3d 648, 653, 93 Cal.Rptr. 278.) Jarchow v. Transamerica Title Ins. Co., 48 Cal.App.3d 917, 940, 122 Cal.Rptr. 470, 486 (1975). The fountainhead of such a claim would be that the defendant insurance company has breached its duty of good faith and fair dealing by interfering with Stair's right to receive the benefits of the policy. Because Stair died before this action was commenced, the trial court ruled that her action did not survive under § 6-5-462, Code of Alabama 1975, which reads: In all proceedings not of an equitable nature, all claims upon which an action has been filed and all claims upon which no action has been filed on a contract, express or implied, and all personal claims upon which an action has been filed, except for injuries to the reputation, survive in favor of and against personal representatives; and all personal claims upon which no action has been filed survive against the personal representative of a deceased tort-feasor. Sanford contends this ruling was error because his fraud claim constituted an action on a contract as contemplated by the statute. We disagree. In asking redress against Western Life for defrauding Stair of insurance benefits, Sanford necessarily avers a breach of duty imposed by law whether that duty be of good faith, fair dealing or honest disclosure; although such a duty, if it exists, must arise from the relationship of the parties as created by the insurance contract. This does not mean, however, that an action for breach of this duty is one on a contract. Rather, the contract merely establishes the relationship from which such a legally imposed duty could spring. See, e. g.: Sewell v. Grand Lodge of Int'l Ass'n of Mach. & Aero Workers, 445 F.2d 545 (5th Cir. 1971), cert, denied, 404 U.S. 1024, 92 S.Ct. 674, 30 L.Ed.2d 674 (1972); United States Fidelity & Guaranty Co. v. Birmingham Oxygen Service, Inc., 290 Ala. 149, 274 So.2d 615 (1973); Paul v. Escambia County Hospital Board, 283 Ala. 488, 218 So.2d 817 (1969); Vines v. Crescent Transit Co., 264 Ala. 114, 85 So.2d 436 (1956). The fraud action brought by Sanford is ex delicto in nature. As such, it does not survive in favor of the personal representative of a deceased person under the provisions of § 6-5-462, supra. Standard Accident Ins. Co. v. Whitset, 270 Ala. 334, 118 So.2d 922 (1960). We are not persuaded by Sanford's argument that Western Life is estopped to raise the non-survival of Stair's claim. He asserts: 1) That the insurance contract contains a provision which prevented Stair from bringing an action for sixty days; 2) that even if this provision were waived, Stair had a contractual right not to bring her action within the sixty-day period; and 3) that the placing of such a provision in the contract was sufficient affirmative conduct by Western Life to invoke the doctrine of estoppel. The contract contains the following provision: No action at law or in equity shall be brought to recover on this Policy prior to the expiration of sixty days after written proof of loss has been furnished in accordance with the requirements of this Policy . . .. The language of this provision contemplates an action ex contractu to recover on this Policy. It addresses only the time in which an action to recover on the contract may be commenced and does not limit the rights of a party to bring an action sounding in tort. The provision could not have been invoked to prevent Stair from bringing an action ex delicto against Western Life, and it cannot be relied upon to excuse her delay. We cannot accept the notion that the mere placing of a provision into a contract is sufficient affirmative conduct to invoke the doctrine of estoppel so as to affect the rights of the litigants in an action to which the provision has no application. Finally, we consider Sanford's contention that it was error to strike his demand for damages for mental anguish and physical suffering resulting from Western Life's breach of the insurance contract. He has carefully surveyed the Alabama decisions allowing recovery of such damages in actions on contracts. Alabama Water Service Co. v. Wakefield, 231 Ala. 112, 163 So. 626 (1935)(breach of contract to provide water service); Becker Roofing Co. v. Pike, 230 Ala. 289, 160 So. 692 (1935)(breach of warranty regarding roofing of residence); F. Becker Asphaltum Roofing Co. v. Murphy, 224 Ala. 655, 141 So. 630 (1932) (breach of warranty regarding roofing of residence); Nashville, C. & St. L. Ry. v. Campbell, 212 Ala. 27, 101 So. 615 (1924) (breach of contract to deliver a passenger to a certain railroad station); Pullman Co. v. Meyer, 195 Ala. 397, 70 So. 763 (1916) (breach of contract to provide special accommodations). As a general rule, mental anguish is not a recoverable element of actual damages growing out of a breach of contract. Birmingham Water Works Co. v. Vinter, 164 Ala. 490, 51 So. 356 (1910). Certain exceptions to this rule have been stated in the cases relied upon by the appellant. F. Becker Asphaltum Roofing Co., supra. In that case, the following rationale for the exception was quoted with approval from 8 R.C.L. page 529, § 83: . . .`Yet where the contractual duty or obligation is so coupled with matters of mental concern or solicitude, or with the feelings of the party to whom the duty is owed, that a breach of that duty will necessarily or reasonably result in mental anguish or suffering, it is just that damages therefor be taken into consideration and awarded.' . . . (224 Ala. at 657, 141 So. at 631.) We agree with the trial court that this case does not fall within an exception to the general rule. Nothing more being shown for reversal, the judgment appealed from is affirmed. AFFIRMED. TORBERT, C. J., and MADDOX, JONES and BEATTY, JJ., concur.