Opinion ID: 1908944
Heading Depth: 1
Heading Rank: 5

Heading: The Bad-Faith Failure-to-Pay Claim

Text: The circuit court submitted to the jury the plaintiff's bad-faith claim with respect to Alfa's failure to pay Thomas's claim arising from Hurricane Opal. On that claim, the jury returned a verdict against Alfa, finding Alfa liable for $10,000 in compensatory damages and $50,000 in punitive damages, and the trial court entered a judgment on that verdict. However, on Alfa's post-trial motion, the circuit court vacated its previous judgment with respect to the bad-faith claim and entered a judgment as a matter of law for Alfa on that claim. Mrs. Thomas appeals from that aspect of the judgment. The elements of a claim for bad-faith failure to pay an insurance claim are 1) an insurance contract between the parties and a breach thereof by the defendant, 2) an intentional refusal to pay the insured's claim, 3) the absence of any reasonably legitimate or arguable reason for that refusal, 4) the insurer's actual knowledge of the absence of any legitimate or arguable reason. Blackburn v. Fidelity & Deposit Co. of Maryland, 667 So.2d 661, 667-68 (Ala.1995); National Sec. Fire & Cas. Co. v. Bowen, 417 So.2d 179, 183 (Ala.1982). In addition, a plaintiff may satisfy her burden by proving that the insurer intentionally or recklessly failed to determine whether it had a legitimate or arguable reason to refuse to pay the claim. Id. The plaintiff's contract claim is an important part of her bad-faith claim. In the normal case, a plaintiff's bad-faith claim may not be submitted to the jury unless she shows that she is entitled to a directed verdict on the contract claim. Blackburn, 667 So.2d at 668; National Sav. Life Ins. Co. v. Dutton, 419 So.2d 1357, 1362 (Ala.1982). Alfa argues that the JNOV on Mrs. Thomas's bad-faith claim should be affirmed because, it says, Mrs. Thomas did not meet the directed-verdict test. We disagree. It is undisputed that there was an insurance contract and that the contract was breached. Alfa employees testified in Mrs. Thomas's case-in-chief that the standard fire insurance policy sold to Mrs. Thomas covered most of the wind-damage claims that arose from Hurricane Opal. Alfa has not appealed from that portion of the judgment that reflects the jury's finding that Alfa breached its agreement with Mrs. Thomas. Based on the testimony offered in the plaintiff's case, Mrs. Thomas would have been entitled to a directed verdict on the contract claim. Therefore, the circuit court correctly submitted the bad-faith claim to the jury. Alfa also argues that the circuit court's JNOV on the bad-faith claim should be affirmed because, Alfa says, it had an arguable basis for denying coverage, that is, that when Ledbetter and Alfa's adjuster investigated Mrs. Thomas's claim, they found no damage. See Chastain v. Baldwin Mut. Ins. Co., 495 So.2d 684 (Ala.Civ.App.1986). Mrs. Thomas responds by claiming that the investigation conducted by Alfa was such a poor one that it amounted to an intentional failure by Alfa to determine whether her claim was valid. Blackburn, 667 So.2d at 661. Mrs. Thomas presented substantial evidence to the jury indicating that Ledbetter and the adjuster spent just a few minutes making a cursory inspection and that the wind damage to the home, damage Ledbetter and the adjuster said they did not see, was significant and noticeable. [3] Moreover, the plaintiff presented evidence indicating that when Annie Thomas questioned Alfa's failure to pay, Mr. Ledbetter rudely told her that her mother had no coverage for the wind damage because her mother's house was not up to standards. We think the jury reasonably could have inferred that Alfa just did not want to be bothered by a claim on a substandard dwelling. In reviewing the circuit court's entry of the judgment as a matter of law, we look to see whether the nonmovant has presented sufficient evidence to allow submission of the case or issue to the jury for a factual resolution. Liberty Nat'l Life Ins. Co. v. Allen, 699 So.2d 138, 140-41 (Ala.1997). `[W]hether there is a bad faith claim will be determined by the facts and circumstances of each case.' Blackburn, 667 So.2d at 672 (quoting Safeco Ins. Co. of America v. Sims, 435 So.2d 1219, 1223 (Ala.1983)). Viewing the evidence in a light most favorable to Mrs. Thomas, the jury could have reasonably concluded that Alfa had no reasonably legitimate or arguable reason for denying her claim. Therefore, the circuit court erred when it entered the judgment as a matter of law on the bad-faith claim. We are of the opinion that $15,000 is the compensatory-damages award against which to measure reasonableness in the event the punitive-damages award ($50,000) is challenged as being excessive.