Opinion ID: 1862141
Heading Depth: 3
Heading Rank: 1

Heading: Fraud in the Sale of the Policy

Text: The Slades contend that the trial court erred when it granted State Farm's preverdict motion for a JML on the Slades' claim that State Farm's agent, Chester Carr, had fraudulently induced them to buy State Farm's policy. They maintain that Carr misrepresented the extent of the coverage under their policy and suppressed the fact that the policy contained exclusions. They say that Carr stated to Mr. Slade that the Slades' policy was an all-risk, full-coverage-on-everything policy, and that that statement was a misrepresentation because in fact the policy contained exclusions, which they say Carr suppressed. They also say that Carr stated that the policy was the Cadillac of all insurance and that it was the very best. They maintain that they relied on those statements, by entering into the insurance contract, and that the reliance was to their detriment. They also claim that Carr fraudulently suppressed the fact that their policy would contain exclusions. In granting State Farm's preverdict motion for a JML, the trial court held that the Slades could not have justifiably relied on Carr's statements because both Mr. and Mrs. Slade are well-educated, because they had entered into several insurance contracts before entering this one, and because they were put on notice of the exclusions in the policy because the exclusions were not hidden. The trial court also held that no confidential relationship existed between Carr and the Slades and, therefore, that Carr had no duty to tell the Slades about the exclusions. First, we address the Slades' misrepresentation claim. To establish a claim of fraudulent misrepresentation under the old justifiable-reliance standard, a plaintiff must prove (1) that the defendant misrepresented a material fact; (2) that the misrepresentation was made either innocently or willfully to deceive, or was made recklessly without knowledge that it was false; (3) that the plaintiff, under the circumstances, justifiably relied upon the misrepresentation; and (4) that the plaintiff suffered injury as a proximate consequence of the reliance. Applin v. Consumers Life Ins. Co., 623 So.2d 1094 (Ala.1993), overruled on other grounds, Boswell v. Liberty Nat'l Life Ins. Co., 643 So.2d 580 (Ala. 1994). The Slades contend that Carr misrepresented to them the extent of the coverage the policy would provide. Mr. Slade testified that he understood Carr's statements that their policy was an all-risk, full-coverage-on-everything policy to mean that there were no exclusions. In making this argument, the Slades cite Alabama Farm Bureau Mutual Casualty Insurance Co. v. Griffin, 493 So.2d 1379 (Ala.1986), in which this Court held that an agent's specific statements about coverage that were not true amounted to actionable fraud. However, Griffin is distinguishable from the present case. In Griffin, the plaintiff asked specific questions about insurance coverage and the agent made specific misrepresentations about the scope of coverage. Here, the Slades never asked Carr whether the policy contained any exclusions, and Carr did not tell Mr. Slade that the policy did not contain any exclusions. Therefore, Carr did not misrepresent the scope of the Slades' coverage. We also conclude that the Slades could not have justifiably relied on Carr's other statements because these other statements amounted to nothing more than mere puffery, in light of the Slades' level of education and degree of sophistication. See McGowan v. Chrysler Corp., 631 So.2d 842, 846 (Ala.1993) (salesman's statements to sophisticated purchaser that automobile was a top-of-the-line car and a smooth-riding car were considered puffery, under the justifiable-reliance standard). Therefore, we agree with the trial court that, as a matter of law, the Slades did not justifiably rely on any misrepresentation by Carr. Accordingly, the trial court did not err when it entered a preverdict JML on the Slades' misrepresentation claim. Second, we address the Slades' contention that the trial court erred when it entered a JML for State Farm on their fraudulent-suppression claim. The Slades maintain that Carr had a duty to disclose to Mr. Slade, at the time of the sale, the fact that their policy contained exclusions and that his failure to do so caused them to rely to their detriment by purchasing the insurance policy. To establish a claim of fraudulent suppression, a plaintiff must produce substantial evidence establishing the following elements: (1) that the defendant had a duty to disclose an existing material fact; (2) that the defendant suppressed that existing material fact; (3) that the defendant had actual knowledge of the fact; (4) that the defendant's suppression of the fact induced the plaintiff to act or to refrain from acting; and (5) that the plaintiff suffered actual damage as a proximate result. Booker v. United Am. Ins. Co., 700 So.2d 1333, 1339 (Ala.1997); Dodd v. Nelda Stephenson Chevrolet, Inc., 626 So.2d 1288, 1293 (Ala.1993). In reviewing this issue, we note that neither the parties nor the trial court had the benefit of our recent decision in State Farm Fire & Casualty Co. v. Owen, 729 So.2d 834 (Ala.1998), in which we held that the question whether one has a duty to disclose is a question of law. Although the trial court did not have the benefit of Owen, it followed the rule adopted in that case and held that, as a matter of law, Carr did not have a duty to disclose to Mr. Slade the existence of exclusions in the Slades' policy. We now must determine whether that holding was correct. Generally, mere silence does not constitute fraud. However, § 6-5-102, Ala.Code 1975, establishes two situations in which a duty to speak could arise: from the confidential relations of the parties or from the particular circumstances of the case. The Slades do not contend that their relationship with State Farm was a confidential one. Therefore, we must determine whether a duty to speak arose from the circumstances of this case. In ascertaining whether the circumstances of the case created a duty to disclose, we must consider a number of factors: (1) the relationship of the parties; (2) the relative knowledge of the parties; (3) the value of the particular fact; (4) the plaintiffs opportunity to ascertain the fact; (5) customs of the trade; and (6) other relevant circumstances. Owen, 729 So.2d at 842-43. Moreover, we must examine the relationship or circumstances at the time of the alleged suppression. Id. After examining these factors and the facts of this case, we conclude that the trial court correctly held that Carr did not have a duty to disclose the existence of exclusions in the Slades' policy. Although the Slades say that they had dealt with Carr several times before and had with him what they describe as a trustworthy relationship, Mr. Slade was a knowledgeable businessman. Mr. Slade owned several businesses and had entered into several insurance contracts before. Thus, he did not come to the table without any knowledge of insurance practices. Owen, 729 So.2d at 843. [10] Furthermore, although the value of the fact at issue, i.e., the fact that the policy had exclusions, was important, Mr. Slade could have ascertained the existence of that fact. This case is like Owen, in that there was no evidence that Mr. Slade inquired into the scope of coverage or asked any questions regarding the existence of exclusions. There was no evidence that State Farm or Carr prevented him from obtaining this information or from viewing the policy before purchasing it. Mr. Slade could have done any of these things. Moreover, he had purchased several insurance policies before; this fact would indicate that he knew that insurance policies contain exclusions. Therefore, the trial court properly determined that Carr had no duty to disclose the existence of exclusions in the Slades' policy; the court properly entered a preverdict JML on the Slades' suppression claim.