Opinion ID: 1846468
Heading Depth: 3
Heading Rank: 3

Heading: Were the Bad-Faith Claims Properly Submitted to the Jury?

Text: We begin our analysis of whether the bad-faith claims were properly submitted to the jury by noting that this case involves allegations against National of both normal and abnormal bad faith; we conclude that the jury could have properly found National liable under either type or both types of bad faith. Consequently, we conclude that Sockwell's claims of bad faith were properly presented to the jury. We now address National's argument that the trial court improperly submitted the bad-faith claims to the jury because, it argues, Sockwell failed to establish the prima facie elements of her bad-faith claims. National contends that, because Sockwell's claim for UIM benefits had not ripened at the time National denied her claim, she cannot establish that she was entitled to benefits; thus, it argues, there can be no bad faith resulting from that denial. We reject this argument for two reasons. First, National did not deny Sockwell's claim because her claim for UIM benefits had not yet ripened. National never even inquired as to whether Sockwell had settled her claims with the other insurance carriers involved. We note that it is the insurer's duty to marshal all of the facts pertinent to its denialbefore denying the claimif the insurer wishes to rely upon those facts as a defense to a claim of bad faith. See Aetna Life Ins. Co. v. Lavoie, 505 So.2d at 1053 (Once the bad faith has occurred, once the duty to use good faith in considering insurance claims has been breached, the insurance company cannot later seek to justify its denial by gathering information which it should have had in the first place.); see also Blackburn v. Fidelity & Deposit Co., 667 So.2d at 672. More significantly, National does not and cannot allege on appeal that a proper investigation and evaluation of Sockwell's claim would have revealed that coverage was not due under the policy; in fact, the record reveals just the opposite National, through Kathy West, admitted at trial that the medical records and other documentation submitted to its claims adjuster, before the September 1998 denial, established that Sockwell's claim was due to be paid. Additionally, West admitted that, after this lawsuit was filed, National paid Sockwell the UIM limits available under her insurance policies. Thus, we conclude that, under the facts of this case, the breach-of-contract element required for a bad-faith claim was satisfied. We also note that the case was submitted to the jury only on the bad-faith claims; the jury did not hear Sockwell's breach-of-contract claim. In the case of State Farm Fire & Casualty Co. v. Slade, supra, this was a point of some distinction: Therefore, we reject the Slades' argument that in the abnormal bad-faith case in which the insurer fails to properly investigate the insured's claim contractual liability is not a prerequisite to bad-faith liability, and the Slades' argument that the tort of bad faith provides a cause of action that is separate and independent of an insurance contract. In so doing, we make it clear that in order to recover under a theory of an abnormal bad-faith failure to investigate an insurance claim, the insured must show (1) that the insurer failed to properly investigate the claim or to subject the results of the investigation to a cognitive evaluation and review and (2) that the insurer breached the contract for insurance coverage with the insured when it refused to pay the insured's claim. This is nothing new. Under the elements established in Bowen, supra, the plaintiff has always had to prove that the insurer breached the insurance contract. Practically, the effect is that in order to prove a bad-faith-failure-to-investigate claim, the insured must prove that a proper investigation would have revealed that the insured's loss was covered under the terms of the contract. This result preserves the link between contractual liability and bad-faith liability required by Chavers, supra, and Dutton, supra. Slade, 747 So.2d at 318 (footnote omitted). However, in a footnote to the above-quoted language, the Slade Court noted: We note that this holding has no effect on those cases in which an insured sues the insurer for bad-faith denial of an insurance claim but does not sue for breach of contract and the case proceeds to the jury on a claim of bad faith alone. See Livingston v. Auto Owners Ins. Co., 582 So.2d 1038 (Ala.1991); Jones v. Alabama Farm Bureau Mut. Cas. Co., 507 So.2d 396 (Ala.1986); Aetna Life Ins. Co. v. Lavoie, [505 So.2d 1050 (Ala. 1987)], supra. 747 So.2d at 318 n. 7. Thus, even if we accepted National's argument, which we do not, we would still conclude that Sockwell's abnormal bad-faith claim was properly presented to the jury. Accordingly, we reject National's claim that Sockwell's bad-faith claims must fail because she had yet to exhaust the other coverages available to her at the time National improperly denied her claim for UIM benefits. We also reject National's argument that it was entitled to a postverdict judgment as a matter of law because, it argues, Sockwell failed to establish that National acted with bad-faith intent. We conclude that the jury heard ample evidence upon which it could have found that National acted in bad faith. First, we note that the record contains conflicting evidence regarding the date National decided to deny Sockwell's claim. Although the denial letter made the basis of this action was not formally issued until September 1998, Sockwell presented evidence indicating that the decision to deny the claim was made as early as May 18, 1998, while National was purportedly still investigating Sockwell's claim. The jury could have inferred National's intentional bad faith from this evidence. Additionally, it is undisputed that, even though National knew the UIM provision and the workers' compensation limit-of-liability provision were void under Alabama law, it took no action to delete those provisions from its standard policy and still had not done so at the time Sockwell's claim went to trial. The jury could have construed National's failure to update its policy as further evidence of bad faith. Second, even if the workers' compensation limit-of-liability provision contained in the National policy had not been void under Alabama law and the adjuster had been able to properly apply that provision to Sockwell's claim, the adjuster never even attempted to apply the provision as written. As Kathy West admitted at trial, before the issuance of the September 1998 denial letter, National's claims file contained documentation establishing that Sockwell had suffered all of the elements of loss sustainable in an automobile accident. However, National's adjuster never even attempted to discern which of those elements of loss were not covered under Alabama workers' compensation law and, thus, which of those elements would be compensable under the National policy. The jury could have construed this as evidence indicating that the adjuster either intentionally or recklessly disregarded the facts and proof submitted by Sockwell in support of her claim. Whether to accept National's self-serving statement that its adjusterone with 24 years of experience in adjusting workers' compensation and automobile claimssimply made a mistake in failing to pay Sockwell's claim and in failing to properly evaluate Sockwell's claim presented a question of fact for the jury. See Employees' Benefit Ass'n v. Grissett, 732 So.2d 968, 977 (Ala.1998). Based upon this evidence, we conclude that the trial court properly presented the bad-faith claims to the jury. For these reasons, we reject National's argument that Sockwell failed to establish the prima facie elements of her bad-faith claims. The trial court properly denied National's preverdict and postverdict motions for a judgment as a matter of law.