Opinion ID: 471407
Heading Depth: 2
Heading Rank: 3

Heading: Statute of Limitations Bar to Fraud Claims

Text: 21 Counts III, IX and XI of the Lampliter complaint alleged essentially the same claim: Liberty defrauded Lampliter as to the scope of its coverage. The district court dismissed these claims as barred by Alabama's statute of limitations. For the purpose of reviewing the district court's dismissal, we assume that Liberty defrauded Lampliter. 22 The applicable Alabama statute of limitations for fraud provided one year within which to commence an action. 3 Ala.Code Sec. 6-2-3, however, operates as a saving clause by tolling the limitations period in fraud cases until the fraud is discovered. 4 Ala.Code Sec. 6-2-3 does not require actual notice of fraud, the limitations period commences once the fraud is readily discoverable or the potential plaintiff is on notice that a fraud may have been perpetrated. Johnson v. Shenandoah Life Insurance Co., 291 Ala. 389, 281 So.2d 636, 642-43 (1973). Facts that would provoke a reasonable person's inquiry and lead to a discovery of the fraud commence the limitations period. Butler v. Guaranty Savings & Loan Ass'n, 251 Ala. 449, 37 So.2d 638 (1948). 23 Lampliter filed this complaint on June 21, 1984 and argues that its complaint is timely because fraud was not discoverable until June 27, 1983--the date Liberty denied coverage. Based on uncontroverted evidence, the district court found that Lampliter purchased liquor liability insurance from Liberty on May 25, 1983--one week after the Hickman suit was filed in state court. 5 The district court concluded as a matter of law, therefore, that a reasonable person would have discovered the alleged fraud on May 25, 1983. Quite simply, on that date Lampliter should have realized that it did not have the coverage that Liberty had allegedly misled it into believing it had. Accordingly, the district court determined that Lampliter's suit was barred because it was filed more than a year after Lampliter should have been aware that it had been defrauded. 24 Lampliter argues that the fraud was not discoverable until June 27, 1983, when Liberty issued its letter denying coverage. Lampliter asserts that Liberty's interim communications that it was getting a legal opinion and its request to the Hickman and Bass courts for an extension of time in which to file a complaint, reasonably lulled Lampliter into believing there was coverage. This argument, however, is undermined by the Alabama Supreme Court's recent decision in Moore v. National Security Insurance Co., 477 So.2d 346 (Ala.1985). There, plaintiffs could not skirt a statute of limitations bar to their fraud action by arguing that the defendant insurance company was estopped from raising a limitations defense because it had assured the plaintiffs that it was investigating their claim. Moore reaffirmed that whether a statute has run is a question more properly directed to the plaintiffs' diligence and not to the defendants'. Id. at 348 (quoting Page v. Hale, 472 So.2d 634 (Ala.1985)). The burden was squarely on Lampliter to prove that it was unaware of facts that would lead a reasonable person to suspect fraud. Walker v. American Motorists Insurance Co., 529 F.2d 1163, 1165 (5th Cir.1976) (citing Alabama case law). 6 Lampliter does not present any material question of fact as to whether, on May 25, 1983, it bought coverage it thought it already had. 25 The dictates of Johnson; Butler; Moore; and Page are clear. The limitations period commenced once Lampliter was on notice that it may have been defrauded and was not tolled by Liberty's investigation into the merits of Lampliter's claim. Lampliter knew or should have known that on May 25, 1983, when it purchased liquor liability coverage, that any previous representations that it had liquor liability coverage were fraudulent. As in Walker, summary judgment was appropriate because Lampliter brought forth no evidence that it could not have been aware of Liberty's fraud before Liberty denied coverage. 7 Lampliter's June 21, 1984 action was untimely.