Petition for Writ of Certiorari — Ford Life Insurance v. Miller

“oT Court, U.>

{

No.

In THE

Supreme Court of the United States

OCTOBER TERM, 1995

Forp LIFE INSURANCE COMPANY,

Petitioner,

Vv.

JoYCE MILLER,

Administratrix for the ESTATE OF MEARL M. MILLER,

Respondent.

Petition for Writ of Certiorari to the

Supreme Court of Alabama

PETITION FOR WRIT OF CERTIORARI

Of Counsel: WILLIAM L. HOWELL *

Davip A. MCDONALD WILLIAM L. HOWELL, P.A.

P.O. Box 882 P.O. Box 36695

Mobile, AL 36601 (334) 348-9510

(3384) 434-0045 * Counsel of Record for Petitioner

Ford Life Insurance Company

ee

WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON. D.C. 20001

| Gltn

QUESTION PRESENTED

Whether the Alabama Supreme Court, by (a) refusing

to recognize the traditional distinction between general

and soliciting agents, and instead, holding that Petitioner

could be contractually bound by its soliciting agent to

terms contrary to Petitioner’s. written insurance policy,

(b) retroactively applying this newly fashioned agency

law, (c) refusing to enforce a statute which would man-

date summary judgment in Petitioner’s favor, and (d)

applying the less onerous “breach of contract” standard

when holding respondent had presented prima facie evi-

dence of Petitioner’s bad faith, deprived Petitioner of its

right to due process?

ii

RULE 29.1 DISCLOSURE STATEMENT

Petitioner Ford Life Insurance Company (“Ford Life”)

is a wholly-owned subsidiary of American Road Insur-

ance Company. American Road Insurance Company, in

turn, is a jointly owned subsidiary of Ford Motor Credit

Company (“FMCC”) and Ford Holdings, Inc. FMCC

and Ford Holdings, Inc., in turn, are wholly owned sub-

sidiaries of Ford Motor Company. Ford Life has no

subsidiaries.

oO ee Malte ante eomeeennelalllal

2 Acasa th teh OF anhalt oF

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TABLE OF CONTENTS

Page

oR Bg | yi R STS EN SS OE eD i

RULE 29.1 DISCLOSURE STATEMENT ................ ii

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Sa I tle dks dcsecinniedcttinescdiapay nasaanstinctiecios 1

INIT Uarniherti dba itessniathchsdecoccdcasnchinticsansses-—ia-negeecknnes 1

CONSTITUTIONAL PROVISION INVOLVED ............. 1

a I alt sacctticcdiciile he eandbbneccendincvemnnstsinacevesvomess 1

STATEMENT OF THE CASE ...W..u2...2.n...2------eeeeeceeceeeeee 3

FO) LAID 3

Oe lll RE a A A MN OE

PRESEN™ “TION OF THY FEDERAL QUESTICN . 9

PM Oe inner ceereomconrcere-nnenee 11

REASONS FOR GRANTING THE PETITION ........... 14

I. THE ALABAMA SUPREME COURT'S RE-

VERSAL OF SUMMARY JUDGMENT ON

RESPONDENT’S BREACH OF CONTRACT

CLAIM WAS PREMISED UPON THE

COURT’S UNANTICIPATED DEPARTURE

FROM ESTABLISHED ALABAMA LAW....._.. 14

Il. THE ALABAMA SUPREME COURT, IN

REVERSING SUMMARY JUDGMENT ON

RESPONDENT’S BREACH OF CONTRACT

CLAIM, IMPROPERLY MANIPULATED

ALABAMA LAW SO AS TO AVOID APPLY-

ING § 27-14-7 CODE OF ALABAMA (1975)... 17

(iii)

iv

re Te ee ae

TABLE OF CONTENTS—Continued

Page

Ill. THE ALABAMA SUPREME COURT IMPROP-

ERLY APPLIED ITS NEWLY FASHIONED

EXCEPTION TO §27-14-7 CODE OF ALA-

BAMA (1975) RETROACTIVELY ..................... 19

IV. THE ALABAMA SUPREME COURT’S TRUE

MOTIVE IN REVERSING SUMMARY JUDG-

MENT ON RESPONDENT’S BREACH OF

CONTRACT AND BAD FAITH CLAIMS WAS

TO CIRCUMVENT THE ALABAMA LEGIS-

LATURE’S AUTHORITY TO GOVERN THE

INSURANCE INDUSTRY, AND, BECAUSE

OF ITS DISAPPROVAL OF THE LAW

CURRENTLY IN FORCE AND EFFECT,

TO ADOPT ITS OWN LAW REGARDING i

PROPER PRE-POLICY ISSUANCE PROCE-

TEED i aann.vcsnonovnisi.nn-suidieehalepiiaiialtianlasiaieaieiadiaaediinitcbeins 21

Vv. THE ALABAMA SUPREME COURT IMPROP-

ERLY REVERSED SUMMARY JUDGMENT

ON RiSPONDENT’S BAD FAITH CLAIM

BASED ONLY ON ITS CONCLUSION THAT

RESPONDENT HAD PRESENTED A PRIMA

FACIE CASE TO SUPPORT ITS BREACH

OF CONTRACT CLAIM, WITHOUT EVEN

ACKNOWLEDGING THE MORE ONEROUS |

BURDEN NECESSARY TO PROCEED WITH

A BAD PADIS CLAIM ok. 23

VI. EVEN THOUGH PETITIONER MAY ULTI-

MATELY PREVAIL ON RESPONDENT’S

BAD FAITH CLAIM, REQUIRING A JURY

TRIAL THEREON WILL DEPRIVE PETI-

TIONER OF ITS RIGHT TO DUE PROCESS.. 27

Le Tey re eed

CONC ardesiececithinnisisihericdactrinitiohskoctiaavcdia tae. 30

APPENDIX

A. Alabama Supreme Court Opinion ............0000000..... la

B. Alabama Supreme Court Overruling of Applica-

SO TI TE iia decent ec, 10a

3H Oo 9

Vv

TABLE OF CONTENTS—Continued

Page

Trial Court Summary Judgment Order .............. lla

Petitioner’s Application for Rehearing ................ 40a

Survey of Alabama Punitive Damages ................ 66a

Huff v. United Insurance, Alabama Supreme

Cer ec. PARR CO chilies tcheseices csc 127a

vi

)

TABLE OF AUTHORITIES

Cases: Page

AETNA Life Ins. Co. v. Lavoie, 505 So.2d 1050

Eid. GED: vicincvnentidevbaddcdanbialonimndibiistalibtiisnt, 26

Alabama Farm Bureau Mutual Ins. v. Davis, 354

So.2d 15 (Ala. Civ. App. 1978) ............................. 16

American Life Insurance v. Buntyn, 148 So. 617

| SESE cares. martin ORR Sel CSPI tee A 16

Auto-Owners Insurance Co. v. Ogden, Ala. S.Ct.

1930868, 1995 Ala. LEXIS 70, —— So.2d ——

(1995) (Maddox, J. dissenting) ......................... 24

Banker’s Credit Life Ins. Co. v. Ayers, 223 Ala. |

re SE RRR a he 15

Blue Cross/Blue Shield of Alabama v. Granger,

SES ae Tee CRs BOD citticienesettseteerctineen 26

BMW of North America, Inc. v. Gore, No. 94-896,

et | I sia ectie Seinih enters cient tn 2

Bouie v. City of Columbia, 378 U.S. 347 (1964) .... 19

Brinkeroff-Faris Trust Co. v. Hill, 281 U.S. 673

ERM e See cRGT SOAR IAR EI Born ats Re 10

Chavers v. Nat'l Sec. Fire & Cas. Co., 405 So.2d 1

CF. RIND Sin ccidlnbleeptenintiittineeetenate eden 23, 24

City Mortgage and Discount Co. v. Palatine Ins.

Cars GD Bi: TER, DE A Gi kicker 15

City of Newport v. Facts Concerts, Inc., 453 U.S.

a} SORTS rae ere ere Sh 10

Coastal States Life Insurance Co. v. Leonard, 279

Ale. 391, TRB Bes SiS CAB RGD anicseeeeccne 16

Commercial Casualty Insurance v. Hudgens, 160

it I Rs I chtittiacinctdsidiatctiainesion ee Dakidlbotainn 16

Continental Assurance Co. v. Kountz, 461 So.2d

RN is CI Sal ccna ett oe 26

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469

IE a citasainccllcgneciadis sik tknciecidsDcethia ia laetidheehs coed teint 10

Frank v. Mangum, 237 U.S. 309 (1915) —.............. 19

General Motors Co. v. Johnson, 592 So.2d 1054

ERs, TEE sceittrecceecnicsinitncsinienhash bphsdedsiantncbiedeneahiiencecsant 29

Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974)... 11

Gillion v. Alabama Forestry Ass’n, 597 So.2d 1315

Ci IR elit Sectlsiedscsscebehalidslapsasesisiesienipenicintneenen 25

Globe & Rutgers Fire Ins. Co. v. Pappas, 219 Ala.

vii

TABLE OF AUTHORITIES—Continued

Green Oil Co. v. Hornsby, 539 So.2d 218 (Ala.

AST EE IR Pe A ip RR OR SOR Oe

Gulf Atlantic Life Insurance Co. v. Barnes, 405

RE I AE Ca chili icdthncdaeidtbeceistcidarencioocin

Herricks v. Mutual Life Ins. Co. of New York, 294

Ala. 446, 318 So.2d 688 (1975) -......22.20. uo.

Honda Motor Co. v. Oberg, 114 S. Ct. 2331 (1994)...

Huff v. United Ins. Co., A.S.C. No. 198, 1516 (May

eRe ne EET ee A AE SC OE RA

Independent Life & Acc. Ins. Co. v. Harrington,

1994 W.L. 407246 (Ala. 1994) 2.000.

Independent Life & Accident Insurance Co. v.

Parker, 449 So.2d 233 (Ala. 1984) 2.000000.

InterContinental Life Ins. Co. v. Lindblom, July,

International Board of Elec. Workers v. Foust,

GN ee EO eal i

Interocean Casualty Co. v. Irvin, 229 Ala. 312, 156

RT RE Re Ne Ce ce

Jefferson Life & Casualty Co. v. Williams, 37 Ala.

App. 718, 76 So.2d 185 (1954) ......222202..

Johnson v. Life of Georgia, No. CV-93-969 (Cir.

Ct. of Mobile Co., AL, Sept. 16, 1994) .....00..

Jones v. Alabama Farm Bureau Mutual Cas. Co.,

re Re I UD ie acriciteinedaneceins

Jones v. Liberty National Life Ins. Co., 35 Ala.

App. 52, 47 So.2d 222, aff'd, 254 Ala. 111, 47

BN IE a accident te is

Kolender v. Lawson, 461 U.S. 35 (1983) ...............

Land & Associates, Inc. v. Simmons, 562 So.2d 140

(Ala. 1989) (cert. denied, —— U.S. ——, 111

S. Ct. 1805, 1138 L.Ed.2d 240 (1991) ) ........0........

Landgraf v. USI Film Products, 114 S. Ct. 1483

Liberty National Life Ins. Co. v. McAllister, No.

1931163 Slip. Op. (Ala. F. 2495) 2.000222.

Liberty National Life Insurance Co. v. Staggs, 242

BA ee ee Ge a it a

Life Ins. Co. of Virginia v. Newell, 223 Ala. 401,

BE SI vn ocsicicettailantunitoreickininnicinnbllcdiinbapmscteiomaaibibies

Page

2

25

15

15

viii

TABLE OF AUTHORITIES—Continued

Page

Marks v. United States, 430 U.S. 188 (1977)........ 19

McLaughlin v. Alabama Farm Bureau Mut. Cas.

Insurance Co., 487 So.2d 86 (Ala. 1983) ............. 25

National Life & Accident Ins. Co. v. Allen, 285 Ala.

Gi, S54 Baws Ges: Ceeres wie &, 16, 24

National Savings Life Ins. Co. v. Dutton, 419 So.2d

pe Ege SR eR ete ee 25

North Carolina Mutual Life Ins. Co. v. Kerley, 109

So, Fe re De Be: Ce acdics ak 15

Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1

CRUD snl ee cit Ce ea as 2

Powell v. Prudential Insurance Co. of America, 45

ae oO}: eae i Tecctik ia nnelbbcnsahcaamtaosieecs 14

PruneYard Shopping Ctr. v. Robins, 447 U.S. 74

eNO Derr vA MICU AD Mn CS KU ARRS One ROR 10

Robinson v. Aetna Ins. Co., 128 Ala. 477, 30 So.

Rk EERE RIE LR BSAA oR oe ee 18

Saunders v. Shaw, 244 U.S. 317 (1917) ................ 10

Sear’s Roebuck & Co., et al. v. Harris, et al., No.

SU sciccrnecnnicisnintlnsichbpiarska<tapsci cena Re adlb nats dbececibilees 2

Security Life and Trust Co. v. Galin, 280 Ala. 325,

SE Re Pe ED Sikiesscenceteeentdecaieiiendiens. 15

Smith v. Equifax Serv., Inc., 537 So.2d 463 (Ala.

«| RIE RR Sane ae re x BAB CE OVE or OT Dope ERE 13

Southern Life & Health Ins. Co. v. Turner, 586

PEE RE 5. RRGNI NERS ire wee ENE races 29

Southern State Fire Ins. Co. v. Kronenberg, 199

pS ee RR, RINGERS err ach cee ee Sree 18

Todd v. Woodmen, 620 So.2d 591 (Ala. 1993)........ 15

Tutton v. Liverpool and London and Globe Ins. Co.,

, ge WR Eg SRE eae cree 15

TXO Prod. Corp. v. Alliance Resources Corp., 113

A Gs. my eR SEIN ARI eect OF 29

United Ins. Co. v. Headrick, 275 Ala. 594, 157

SERED OSES REL RE RES ES 15

United Security Life Insurance Co. v. St. Claire,

3a ee ee Ls SD ee es 16

Washington National Ins. Co. v. Strickland, 491

Xt & » Bo. 5 See sccidibleaidades inka 15, 18

ix

TABLE OF AUTHORITIES—Continued

Page

Watson v. Prudential Ins. Co., 399 So.2d 285 (Ala.

SCRE SERIES NE SUS PW GUM YMRS IR ES A), Lal hier ea 15

Williamson v. New Orleans Ins., 84 Ala. 106

Abr TREC Ae RENT II anc te a RPS PA RR ea 16

Constitution and Statutes:

I i sduiintheminiewnnte 1

§ 27-14-7 Code of Alabama (1975) ..............0...-.......-- §-7, 18

Miscellaneous:

G. Jaynes, Where the Tort Blossom, Time, Mar.

20, 1995, p. 38; D. Frum, Unreform, Forbs,

Ey kg RURAL Saati tone RR Robes SSR COR 28

M. Peterson, S. Sarma & M. Chanley Punitive

Damages: empirical findings iii, 50 (1987)........ 28

D. Helnsler, M. Vaiana, J. Kakalik, M. Peterson,

Trends in Tort Litigation: The Story Behind

St ee i. 29

Malcolm E. Wheeler, A Proposal for Further Com-

mon Law Development of the Use of Punitive

Damages in Modern Product Liability Litiga-

tion, 40 Ala. L. Rev. 919, 944 (1989) .....000. 29

‘cca

PETITION FOR WRIT OF CERTIORARI

Ford Life Insurance Company, (“Ford Life”) respect-

fully petitions this Court for a Writ of Certiorari to re-

view the Judgment of the Alabama Supreme Court in this

; Case.

OPINIONS BELOW

The February 24, 1995 opinion of the Supreme Court

: of Alabama reversing in part the Summary Judgment of

the trial court is unreported and reproduced at App. A.

The Alabama Supreme Court’s May 12, 1995 Order over-

ruling Petitioner’s Application for Rehearing was ren-

dered without opinion and is reproduced at App. B. The

trial court’s April 27, 1993 Order granting Petitioner’s

; Motion for Summary Judgment is unreported and repro-

duced at App. C.

JURISDICTION

Petitioner raised its Constitutional objection to the Ala-

bama Supreme Court’s unforeseen departure from estab-

lished Alabama common law and the Court’s refusal to

| enforce an applicable statute in its Application for

Rehearing; Petitioner’s Application for Rehearing is re-

: produced at App. D. The Supreme Court of Alabama

overruled Petitioner’s Application for Rehearing on May

12, 1995. This Petition is being filed within ninety (90)

days of the denial of rehearing. This Court has jurisdic-

tion over this case pursuant to 28 U.S.C. § 1257(a).

AP IS cy win aM SB

CONSTITUTIONAL PROVISION INVOLVED

1. The Due Process Clause of the Fourteenth Amend- |

ment provides, in pertinent part: “[{NJor shall any State |

deprive any person of . . . property, without due process

OE iW. .” :

INTRODUCTION

This case presents the latest installment in the continu-

ing saga of the Alabama Supreme Court’s arbitrary, un-

predictable and inconsistent review of a trial court’s dis-

positive rulings regarding claims for punitive damages.

2

In Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1

(1991) this Court approved the Alabama punitive dam-

age system. 499 U.S. at 20-21. At issue in Haslip was

the adequacy of Alabama’s post-judgment review of jury

awarded punitive damages in protecting the defendant’s

right to due process.’

However, since Haslip, this Court has been bombarded

with pleas to revisit the constitutionality of Alabama’s

punitive damage system *—-these petitions document the

unbridled proliferation of jury awarded punitive damages

and the Alabama Supreme Court’s remarkable disregard

for a defendant’s, especially an out-of-state corporate de-

fendant’s, due process rights when reviewing punitive

damage awards. This petition demonstrates that when

punitive damages against an out of state corporate de-

fendant are at issue, the Alabama Supreme Court no

longer suspends manifesting its disdain for due process

until the post-judgment verdict review; instead, the Ala-

bama Supreme Court, unchecked by this Court, is grow-

ing increasingly bold in its unabashed disregard of the

due process rights of out of state corporate defendants.

In the case sub judice, the Alabama Supreme Court over-

turned the trial court’s Summary Judgment on plaintiff's

bad faith claim (which requests punitive damages), only

after the Court: (a) refused to recognize the traditional

distinction between general and soliciting agents, (b) un-

foreseeably tnanipulated a previously limited exception to

the distinction between general and soliciting agents so

that the “exception” now supersedes the rule, (c) retro-

actively applied its newly fashioned law (to Petitioner’s

great detriment), and (d) refused to enforce an appli-

cable statute (§ 27-14-7 Code of Alabama (1975)).

1The Haslip Court deemed the post-judgment review as man-

dated in Green Oil Co. v. Hornsby, 539 So.2d 218 (Ala. 1989) to

sufficiently protect a defendant’s right to due process. Haslip at

21-22.

2 See for example InterContinental Life Ins. Co. v. Lindblom,

July, 1992; Sear’s Roebuck & Co., et al. v. Harris, et al., No. 93-

1589; BMW of North America, Inc. v. Gore, No. 94-896.

3

Even more disturbing, the Court reversed Summary Judg-

ment on respondent’s bad faith claim without even dis-

cussing or disclosing how it came to pass that respondent

met the onerous burden of presenting a prima facie case

of bad faith. Instead, the Court reversed Summary Judg-

ment on respondent’s bad faith claim merely because it

found respondent had presented sufficient evidence to sup-

port its breach of contract claim.

The Alabama Supreme Court, by changing Alabama

laws to accommodate respondent’s claim, retroactively

imputing knowledge of its imprudent ruling to Petitioner,

and reversing the trial court’s Summary Judgment on a

claim requesting punitive damages without referencing

any evidence of record to support such a ruling, denied

Petitioner its right to due process.

STATEMENT OF THE CASE

A. Statement of the Facts.

On February 28, 1989, decedent, Mr. Miller purchased

an automobile from Treadwell Ford (hereinafter “Tread-

well”). Mr. Miller’s daughter, Paula Goss, and her hus-

band Howard Goss, accompanied him to Treadwell.

During the initial negotiations regarding Mr. Miller’s

purchase of the Treadwell automobile, a Treadwell sales-

man asked Mr. Miller whether he wanted to purchase

credit life insurance coverage on the vehicle. Such cov-

erage was available, at the purchaser’s option, through

Petitioner, Ford Life Insurance Company (hereinafter

“Ford Life” or “Petitioner”). Mr. Miller had purchased

credit life insurance on every vehicle he had ever pur-

chased, however, the Gosses testified that Mr. Miller

declined because he could not afford the premium and

because he had emphysema. The Gosses further testified

that another Treadwell employee, presumably from the

insurance department, advised Mr. Miller that if he did

not buy the credit life coverage, he could not finance the

purchase of the car.

According to the Gosses, Mr. Miller refused to purchase

the vehicle on those terms and made preparations to leave

4

the dealership. However, the Treadwell employee said,

“Wait a minute. We will strike up something else.”

Some time thereafter, Mr. Miller and the Treadwell sales-

man reached an agreement whereby Mr. Miller purchased

both the vehicle and credit life insurance. Neither Goss

recalls what transpired after the Treadwell salesman of-

fered to “strike up something else” that caused Mr. Miller

to change his mind regarding the purchase of credit life

insurance.

Irrespective of the alleged misrepresentation by the

Treadwell employee(s), paragraph eight of the Install-

ment Sales Contract signed by Mr. Miller specifies that

the purchase of credit life insurance is optional.* Mr.

Miller signed this paragraph indicating he wanted to pur-

chase credit life insurance and acknowledging that he

understood the purchase of credit life insurance was op-

tional (C-26, 143, 1108, 1115, 1116); Paula Goss testi-

fied that Miller knew the credit life insurance was op-

tional (C-1109, 1110); and, Miller’s widow admitted that,

shortly after purchasing the insurance, Miller stated he

knew, before purchasing the insurance, he did not have to

do so to obtain financing. (C-1085, 1086).

To be eligible for credit life insurance coverage through

Ford Life, all applicants must sign the following health

statement embodied in the Certificate of Insurance: “TI

hereby declare that to the best of my knowledge, I am

in good health.” (C-23). Ford Life relies upon the

applicant’s honesty in signing this good health statement

and does not issue coverage to those who fail and/or

refuse to sign this statement.*

3“8. INSURANCE (Optional): Credit life insurance and

credit disability insurance are not required to obtain credit, and

will not be provided unless I sign and agree to pay the additional

cost, which is included in the Amount Financed.”

4 Diane Letizio, Credit Life supervisor for Ford Life testified

that:

“Ford Life Insurance Company believed and relied upon the

truthfulness of the ‘good health’ declaration by Mear] M. Miller

Tas aa Nad GED RN RL Tr STD SH

dae Petes

ha it alae

5

At the time he signed the statement of good health,

Mr. Miller was, in fact, in very poor health.°

Both Gosses testified they could not identify the Tread-

well employee, who, they claim, told Miller he had to

purchase credit life insurance in order to finance the pur-

chase of the car. (C-570-71; 769; 787; 1113-1114). How-

ever, at the time Miller purchased the insurance, Robert

Wayne Sparks was the only Treadwell employee desig-

nated by Petitioner as its “soliciting agent,” and, Sparks,

by the express terms of: (a) the agency agreement be-

tween Sparks and Petitioner,* (b) the controlling agree-

in issuing the credit life insurance coverage specified and

would not have issued such coverage had such ‘good health’

declaration had not been executed by him.

* * % *

Ford Life Insurance Company would not have issued the credit

life insurance coverage to Mear!] M. Miller had it known he had

emphysema, or had it known that he had chronic obstructive

pulmonary disease as of the date of issuance of such coverage,

or had it known that he was not in fact in good health as

of the date of issuance of such coverage.” (C-253-256).

5 Miller was receiving social security disability benefits, had re-

tired from Ingalls Shipbuilding for medical reasons, and was suf-

fering from disabling asthmatic bronchitis, severe emphysema,

various other chronic obstructive pulmonary diseases, and a duo-

denal ulcer. (C-131; 222; 271; 273-274; 299-300; 1084).

Just weeks before signing the Good Health Certificate, Miller

spent a week in a local hospital, was treated for acute exasperation

of his COPD secondry purulent bronchitis, and had received high

doses of various bronchodilator medications. (C-188; 191; 305-308;

584; 1129).

Paula Goss even stated that he [Miller] “did not know from this

day to the next if he would still be alive or not.” (C-1103).

€ The Agency Agreement between Petitioner and Sparks stated:

“The agent has no authority to solicit any form of insurance ex-

cept in accordance with the terms of this agreement, or to counter-

sign or deliver any policy of insurance for the company other than

those so prepared by the company and furnished by the company

to the agent; and has no authority to change, alter, vary or waive

any of the terms or conditions contained in such policy.” (C-240-

246; 770; 787).

TBEST AVAILABLE COPY]

6

ment between Treadwell and Petitioner,’ and (c) Sparks’

registration with the Alabama Department of Insurance,°

did not have authority to make any additional representa-

tions or otherwise modify the terms of the credit life

policy. (C-240-246; 770; 787; 979).

On January 9, 1990, Mr. Miller died.

On March 5, 1990, Central Bank of the South, which

financed the purchase of the car and was the primary

beneficiary of the policy, notified Petitioner of Mr. Miller’s

death. (C-264). On May 9, 1990, after investigating

Mr. Miller’s voluminous medical records, Petitioner, based

upon the express terms of the insurance contract,® and

established Alabama law,” rejected Central Bank’s claim

7 The Controlling Agreement between Treadwell (Sparks’ em-

ployer) and Ford Life stated: “No agent is authorized to alter

or amend this Policy or any Certificate issued hereunder, to waive

any conditions or restrictions contained herein, to extend the time

for paying a premium, or to bind Ford Life by making any prom-

ises or representations or by giving or receiving any information.

This Policy or any certificate issued hereunder can not be amended

or altered or its conditions waived in any respect except by written

agreement endorsed herein or attached hereto and signed by an

authorized officer of Ford Life.” (C-250; 390).

8 David C. Brown, Field Sales Manager for Ford Life for over

fourteen years, testified “Mr. Sparks was registered as a limited

agent, not a general agent, of Ford Life Insurance Company, with

the Department of Insurance of the State of Alabama. . . [and]

Ford Life Insurance Company has not ratified nor condoned Mr.

Sparks’ deviation from the scope of his agency authority as

regards representations made by him to Mear! M. Miller, or anyone

else, which deviated from the express terms of the group policy

issued to Treadwell Ford or underlying certificates of insurance

issued pursuant to such group policy.” (C-242-243).

® As set forth hereinabove, to be eligible for credit life insur-

ance coverage through Ford Life, all applicants must sign a

health statement embodied in the Application that states “I

hereby declare that to the best of my knowledge, I am in good

health.” Ford Life relies upon these statements of good health

in issuing credit life insurance coverage.

10 § 27-14-7 Code of Alabama (1975) states:

(a) All statements and descriptions in any application for an

insurance policy or annuity contract, or in negotiations there-

7

and forwarded copies of the rejection letter to respond-

ent’s Estate and to Treadwell. (C-265; 391).

To date, respondent has never submitted to Ford Life

any claim form or proof of loss seeking benefits under

the policy. (C-129; 392).

On May 6, 1992, Joyce Miller, as Administratrix of

Mr. Miller’s Estate, and Paula Goss, individually, sued

Ford Life and Treadwell alleging, inter alia, fraudulent

representations, breach of contract, and bad faith. Almost

one year later, the Plaintiffs attempted to amend the

Complaint to add numerous new claims, and, apparently,

to join Joyce Miller, individually, as a Plaintiff.

B. The Decision Below.

On April 27, 1993, the trial court denied Plaintiffs’

Amendment and granted Summary judgment in favor

of both Defendants on all Counts of the Original Com-

plaint. App. C, 11a.

On February 24, 1995, the Supreme Court of Alabama

issued its decision in this case. App. A, la. The Court

for, by, or in behalf of, the insured or annuitant shall be deemed

to be representations and not warranties. Misrepresentations,

omissions, concealment of facts and incorrect statements shall

not prevent a recovery under the policy or contract unless

either:

(1) Fraudulent;

(2) Material either to the acceptance of the risk of to

the hazard assumed by the insurer; or

(3) The insurer in good faith would either not have issued

the policy or contract, or would not have issued a policy

or contract at the premium rate as applied for, or would

not have issued a policy or contract in as large an amount

or would not have provided coverage with respect to the

hazard resulting in the loss if the true facts had been made

known to the insurer as required either by the applica-

tion for the policy or contract or otherwise.

(b) No plea of misrepresentation or fraud in connection

with the issuance of a life insurance policy or annuity

contract shall be filed unless accompanied by a payment

into court of all premiums paid on the policy or contract.

8

upheld the trial court’s refusal to allow Amendments to

the Complaint, its Summary Judgment on all counts

against Treadwell, and Summary Judgment on all counts

against Petitioner except respondent’s (as administrator

of the estate of Mearl Miller) breach of contract and bad

faith claims. The Alabama Supreme Court held:

“Although we are aware that Mr. Miller signed a

Certificate stating that he was in good health, even

though he was not in good health, the facts alleged

in this case take it out of the ordinary situation.”

App. A, 6a.

The Court then cited National Life & Accident Ins. Co.

v. Allen, 285 Ala. 551, 234 So.2d 567 (1970) to support

its declaration that:

“An insurance company cannot defend its refusal to

pay benefits on grounds that the insured made 2 mis-

representation in the Application if the misrepresen-

tation was the fault of the agent and that fault was

without participation by the insured.” App. A, 6a.

The Court continued:

“I t]he jury could find that the only misrepresentation

made by Mr. Miller came when he signed a Good

Health Certificate.” (Emphasis added). App. A, 7a.

Accordingly, the Court concluded,

“we disagree with the trial court’s conclusion that

the Ford Life representative, as a soliciting agent,

could not legally bind the company. The evidence,

viewed in a light most favorable to Mrs. Miller, indi-

cates that the Ford Life representative knew that

Mr. Miller had health problems, but issued the policy

anyway.” App. A, 7a.

After concluding respondent had presented sufficient

evidence to rebut Petitioner’s showing that no contract

existed, the Alabama Supreme Court, without any dis-

cussion regarding respondent’s much more onerous evi-

dentiary burden needed to proceed with her bad faith

claim, reversed the trial court’s Summary Judgment

thereon, stating:

9

“[bJecause we reverse as to the breach of contract

claim, we also reverse the Summary Judgment as to

the bad faith claim.” App. A, 7a.

On March 17, 1995, Petitioner applied for rehearing

on the Alabama Supreme Court’s ruling regarding re-

spondent’s bad faith claim, and, in support therefor, filed

a brief specifying how the Court’s February 24, 1995,

opinion deprived Petitioner of its constitutional rights.

App. D, 40a.

On May 12, 1995, the Alabama Supreme Court, with-

out rendering an opinion, overruled Petitioner’s Applica-

tion for Rehearing. App. B, 10a.

PRESENTATION OF THE FEDERAL QUESTION

The Due Process Clause of the Fourteenth Amendment

provides, in pertinent part:

“[N]or shall any State deprive any person of .. .

property, without due process law. .. .”

The Alabama Supreme Court reversed Summary J udg-

ment on respondent’s contract claim because the Court

refused to recognize the traditional distinction between

general and soliciting agents, manipulated an inapplicable

exception to the established rule that insurers are not

bound by the independent actions of their soliciting

agents, while at the same time it refused to enforce an

applicable statute, which would have mandated Summary

Judgment in Petitioner’s favor, thereafter, the Court ret-

roactively imputed knowledge of its departure from es-

tablished law to Petitioner at the time it denied Central

Bank’s claim. Incredibly, based upon its newly fashioned

law, the Alabama Supreme Court held, without explana-

tion, respondent had presented a prima facie case of Peti-

tioner’s bad faith.

In its Answer to respondent’s Complaint, Petitioner

objected to respondent’s claim for punitive damages as a

violation of its rights to due process. Petitioner raised

the particular due process challenge to the Alabama Su-

10

preme Court’s startling ruling at the first possible oppor-

tunity—in its Application for Rehearing. Accordingly,

the federal question was timely and properly raised. As

this Court explained in Pruneyard Shopping Ctr. v. Robins,

447 U.S. 74, 86 N. 9 (1979), “federal claims . . . have

been adequately presented even though not raised in lower

state courts when the highest state court renders an un-

expected interpretation of state law.” See also, Brinkeroff-

Faris Trust Co. v. Hill, 281 U.S. 673, 677-78 (1930)

(Federal claim first raised on Petition for Rehearing in

State Supreme Court was timely “since it was raised at

the first opportunity”); Saunders v. Shaw, 244 U.S. 317,

320 (1917) (violation of Fourtenth Amendment for

State Supreme Court to reverse trial court in such a way

as to deny litigant an opportunity to present evidence—

“it would leave a serious gap in the remedy for infrac-

tion of [federal] constitutional rights if the party aggrieves

in such a way could not come here”).

According to Cox Broadcasting Corp. v. Cohn, 420

U.S. 469, 485 (1975), this Court’s jurisdictional require-

ment that a judgment be final is satisfied because the

Alabama Supreme Court’s judgment regarding the via-

bility of respondent’s bad faith claim is final and is not

subject to further review by the trial court. Petitioner

may prevail at trial on respondent’s bad faith claim, how-

ever, if the Alabama Court erroneously ruled (as Petitioner

vigorously contends), there should be no trial on respond-

ent’s bad faith claim at all, and postponement of review

by this Court until after Petitioner suffers the crippling

costs of a jury trial on respondent’s bad faith claim, ac-

cording to Cox, would deny Petitioner of its right to due

process.

This Court, mindful of the hardship imposed by puni-

tive damages, has not, in the past, hesitated to limit or

even bar the recovery of punitive damages if necessary to

further a strong countervailing interest. See, e.g., City

of Newport v. Facts Concerts, Inc., 453 U.S. 247 (1981)

(municipalities are immune from punitive damages); In-

ternational Board of Elec. Workers v. Foust, 442 U.S.

11

42 (1979) (punitive damages may not be asserted against

union that breaches its duty of fair representation); Gertz

v. Robert Welch, Inc., 418 U.S. 323, 349-50 (1974)

(punitive damages may not be assessed in defamation

action without proof of “actual malice”). Petitioner’s

brief presents just such a countervailing interest—the right

of an out-of-state corporate defendant to preserve, un-

molested by the Alabama Supreme Court, its right to due

process.

SUMMARY OF ARGUMENT

Respondent, as administrator of decedent, Mearl

Miller’s estate, sued Petitioner, a credit life insurer, for

breach of contract, bad faith and fraud regarding a credit

life insurance policy which Petitioner, based on false in-

formation, had issued to decedent. The trial Court

granted Summary Judgment in favor of Petitioner of Peti-

tioner on all counts; the Alabama Supreme Court reversed

and remanded respondent’s breach of contract and bad

faith claims. In so doing, the Alabama Supreme Court

ignored established Alabama law which prohibits solicit-

ing agents from independently negotiating and binding

their principals to a contract that is manifestly different

from, and in fact diametrically opposed to, the clear and

unambiguous terms of the written contract drafted by the

principal.

The Court further refused to enforce § 27-14-7 Code of

Alabama (1975), a statute directly on point, which pro-

hibits recovery on an insurance contract if the insured

fraudulently misrepresents his health in the insurance ap-

plication or if the insurer in good faith would not have

issued the policy had it been apprised of the “true facts”

regarding the applicant’s health at the time the policy

was issued.

The Alabama Supreme Court refused to even acknowl-

edge that its holding departed from established Alabama

law. Instead, the Court attempted to rationalize its rul-

ing by manipulating an exception to the rule that solicit-

12

ing agents cannot be deemed to bind their principals in

contract. As interpreted by the Alabama Supreme Court,

the “exception” now supersedes the rule. As applied by

the Alabama Supreme Court, the historically recognized

distinction between general and soliciting agents was

abolished retroactively. Simultaneously, the Court created

a standard of review in insurance cases whereby it, sua

sponte, and thus, arbitrarily, will determine whether an

insurer is entitled to enforcement of § 27-14-7 Code of

Alabama (1975).

Finally, as if it had not yet bagged its limit of con-

stitutional abuses in one ruling, the Alabama Supreme

Court reversed Summary Judgment on respondent’s bad

faith claim simply “[b]ecause we reverse as to the breach

of contract claim.” App. A, 8a. When the Court, via

Petitioner’s Application for Rehearing, was given the op-

portunity to correct its error, by, at the very least, identi-

fying the evidence of record upon which it premised

reversal of Summary Judgment on respondent’s bad faith

claim, it declined to do so, and, instead, overruled Peti-

tioner’s Application for Rehearing without opinion—re-

fusing even to acknowledge the distinction between evi-

dence sufficient to proceed with a breach of contract

claim and the much more onerous evidentiary burden

necessary to proceed with a bad faith claim.

Petitioner respectfully submits that the Alabama Su-

preme Court, in abolishing the traditional distinction be-

tween general and soliciting agents, refusing to enforce

a clear and unambiguous statute, retroactively imputing

knowledge of this unforeseeable departure from estab-

lished law to Petitioner at the time it refused to pay a

claim on the policy at issue, and refusing to explain how

respondent met its evidentiary burden of presenting a

prima facie case of Petitioner’s bad faith, trampled Peti-

tioner’s rights to due process.

The inexplicableness of the Alabama Supreme Court’s

ruling is manifested by its treatment of Treadwell, a local

car dealership whose employees made the misrepresenta-

bith Wt et Nl BO? ns a Sw i

13

tions upon which respondent based her complaint. The

trial court had granted Summary Judgment on respond-

ent’s fraud and breach of contract claims against Tread-

well; the Alabama Supreme Court affirmed. Citing Smith

v. Equifax Serv., Inc., 537 So.2d 463 (Ala. 1988), the

Court held “an agent cannot be held liable for his princi-

pals breach of contract.” App. A, 5a. Apparently, the

Alabama Supreme Court, when considering the liability

of a local defendant is less eager to manipulate Alabama

law so as to resucitate claims for relief properly laid to

rest by the trial court.

The Alabama Supreme Court’s erratic adherence to

precedent has placed Petitioner in the perilous and preju-

dicial position of defending a claim seeking punitive dam-

ages for an act committed by a Treadwell employee, while

Treadwell, conversely, is completely exculpated for the

acts of its own employee.

The Court’s disparate treatment of Treadwell and Ford

Life deprives Ford Life of affirmative defenses to re-

spondent’s Complaint and of cross claims against Tread-

well for violation of the controlling agreement between

Treadwell and Ford Life."

This Court is no stranger to the potential constitutional

pitfalls of submitting a claim for punitive damages to

a jury and has recently held that the imposition of puni-

tive damages “is an exercise of state power that must

comply with the Due Process Clause of the Fourteenth

Amendment.” Honda Motor Co. vy. Oberg, 114 S. Ct.

1! The Controlling Agreement between Treadwell and Ford Life

states: “No agent is authorized to alter or amend this Policy or

any Certificate issued hereunder, to waive any conditions or re-

strictions contained herein, to extend the time for paying a pre-

mium, or to bind Ford Life by making any promises or represen-

tations or by giving or receiving any information. This Policy

or any Certificate issued hereunder can not be amended or altered

or its conditions waived in any respect except by written agreement

endorsed herein or attached hereto and signed by an authorized

officer of Ford Life.” (C-250: 390).

14

2331, 2342 (1994). This case presents the Court with

the unique opportunity of protecting an out-of-state cor-

porate defendant’s due process rights before it undergoes

a protracted and financially crippling trial, while at the

same time affording the Court an opportunity to comment

upon the Alabama Supreme Court’s departure from the

precepts set forth in Haslip.

REASONS FOR GRANTING THE PETITION

I. THE ALABAMA SUPREME COURT’S REVERSAL

OF SUMMARY JUDGMENT ON RESPONDENTS

BREACH OF CONTRACT CLAIM WAS PREMISED

UPON THE COURT’S UNANTICIPATED DEPAR-

TURE FROM ESTABLISHED ALABAMA LAW.

In reversing Summary Judgment on respondent’s breach

of contract claim, the Alabama Supreme Court held: “We

disagree with the trial court’s conclusion that the Ford

Life representative, as a soliciting agent, could not legally

bind the company.” App. A, 7a. Prior to the Alabama

Supreme Court’s stated disagreement with the trial court’s

conclusion, the settled law in Alabama had been exactly

as the trial court held—soliciting agents did not have the

authority to bind insurers to terms expressly contrary to

those contained in the contract. See, Powell v. Prudential

Insurance Co. of America, 45 So. 208 (1907). In Powell,

decedent applied for life insurance and signed a good

health certificate indicating that to the best of his knowl-

edge he was in good health. The policy issued to decedent

expressly stated that decedent’s application became part

of the contract. One month after applying for insurance,

Powell became fatally ill, and, shortly thereafter died.

Prudential denied a claim tendered by Powell’s estate

because Powell was in bad health when he signed the

good health certificate. Witnesses for the estate testified

that Prudential’s soliciting agent had made assurances

that the life insurance policy would still be valid even

though decedent was sick when applying for the policy.

In rejecting the estate’s claim that Prudential’s soliciting

iat a la 6 sn raw ‘

15

agent had waived the good health prerequisite, the Ala-

bama Supreme Court held that the insured cannot be

deemed ignorant of the terms of his own policy, and

“[nJo conclusion can be indulged that the agent, under

such circumstances had, or could have acted on, any

real or supposed authority, for waiving any conditions

specified as grounds of forfeiture.” To do otherwise, the

Court held “would be against the plainest dictates of

reason and justice.” ”

Although the Court refused to acknowledge it, its

ruling herein is contrary to Powell and its progeny. Ad-

mittedly, the Alabama Supreme Court has, on very few

occasions, applied a limited exception to the rule that

soliciting agents do not have the authority to bind in-

surers in contract. However, this limited exception had,

before the Court’s ruling sub judice, selectively been ex-

12 See also, North Carolina Mutual Life Ins. Co. v. Kerley, 109

So. 755, 215 Ala. 100 (1926): Globe & Rutgers Fire Ins. Co. v.

Pappes, 219 Ala. 832, 122 So. 346; Banker’s Credit Life Ins. Co. v.

Ayers, 223 Ala. 407, 137 So. 23; Life Ins. Co. of Virginia v. Newell,

223 Ala. 401, 137 So. 16; City Mortgage and Discount Co. v. Pala-

tine Ins. Co., 226 Ala. 179, 145 So. 490: Tutton v. Liverpool and

London and Globe Ins. Co., 237 Ala. 230, 186 So. 551; First Na-

tional Life Insurance Co. of America v. Rector, 225 Ala. 116,

142 So. 392 (1932); Jones v. Liberty National Life Ins. Co., 35

Ala. App. 52, 47 So.2d 222, aff'd 254 Ala. 111, 47 So.2d 227 ;

Jefferson Life & Casualty Co. v. Williams, 37 Ala. App. 718, 76

So.2d 185 (1954); Security Life and Trust Co. v. Galin, 280

Ala. 325,193 So.2d 766 (1967) (“An agent whose authority is

limited to soliciting insurance, delivering policies and collecting

premiums has no power to change stipulations in a contract of in-

surance, to do so he must either be a general agent or be spe-

cifically authorized or his course of dealing to that extent have been

ratified expressly or impliedly. United Ins. Co. v. Headrick, 275

Ala. 594, 157 So.2d 19; Liberty National Life Insurance Co. v.

Staggs, 242 Ala. 363, 6 So.2d 432”): Herricks v. Mutual Life Ins.

Co. of New York, 294 Ala. 446, 318 So.2d 683 (1975) ; Watson v.

Prudential Ins. Co., 399 So.2d 285 (Ala. 1981); Washington Na-

tional Ins. Co. v. Strickland, 491 So.2d 872 (1985) ; Land & Asso-

ciates, Inc. v. Simmons, 562 So.2d 140 (Ala. 1989) (cert. denied,

US. , 111 S. Ct. 1305, 113 L. Ed. 2d 240 (1991)); Todd

v. Woodmen, 620 So.2d 591 (Ala. 1993).

16

tended only when the undisputed evidence indicated that

the insurance applicant was both innocent and ignorant

of the fraud perpetrated upon the insurer."*

For example, in National Life & Accident Ins. Co. v.

Allen, 285 Ala. 551, 234 So.2d 567 (1970), cited by

the Court as authority for its ruling, the applicant was a

highly unsophisticated blind man who, without dispute,

did not participate in, and, because of his physical and

intellectual incapacities, was incapable of participating

in the fraud perpetrated upon the insurer.

By contrast, in the case sub judice even the Alabama

Supreme Court, in fulfilling its obligation to review the

record in a light most favorable to respondent, acknowl-

edged, “the jury could find that the only misrepresenta-

tion made by Mr. Miller came when he signed a good

health certificate.” App. A, 7a. Heretofore, such a show-

13 See e.g.: First National Life Insurance Co. v. Rector, 225

Ala. 116, 142 So. 392 (1932) (Applicant did not know and could

not have known that soliciting agent fraudulently failed to write

down applicant’s disclosure regarding previous medical treatment) ;

American Life Insurance v. Buntyn, 148 So. 617 (Ala. 1933)

(Soliciting agent, while filing out application, unbeknownst to the

applicant, did not record applicant’s truthful response to insurer’s

application questions) ; Interocean Casualty Co. v. Irvin, 229 Ala.

$12, 156 So. 844 (1934) (Soliciting agent filled out an application

for accident and health insurance on behalf of deaf and dumb appli-

cant who could neither read nor write and fraudulently misrepre-

sented that neither the applicant’s hearing nor vision was impaired) ;

Commercial Casualty Insurance v. Hudgens, 160 So. 106 (Ala.

1935) (Soliciting agent, while filling out the application, unbe-

knownst to the applicant, did not record applicant‘s truthful re-

sponses to insurer’s application questions); Coastal States Life

Insurance Co. v. Leonard, 279 Ala. 171, 182 So.2d 913 (1966)

(Soliciting agent filled out application for accidental death benefits

by recording applicant’s oral responses to the application questions,

however, instead of asking applicant all the questions contained in

the application, agent fraudulently inserted his own answers to

the questions). See also Williamson v. New Orleans Ins., 84 Ala.

106 (1887); United Security Life Insurance Co. v. St. Claire, 130

So.2d 213 (Ala. 1961); Alabama Farm Bureau Mutual Ins. v.

Davis, 354 So.2d 15 (Ala. Civ. App. 1978).

17

ing of conscious misrepresentation would preclude the

existence of a genuine issue of material fact on a breach

of contract claim, because, as more specifically set forth

below, § 27-14-7 Code of Alabama (1975) prohibits an

applicant from recovering on an insurance policy if he

misrepresents his health when applying for insurance,

or, if the insurer, in good faith would not have issued

the policy had it known the “true facts” concerning the

applicant’s health.

By its extensive recitation of established Alabama law,

Petitioner is not requesting this Court to reweigh the

merits of the Alabama Supreme Court’s policy determina-

tions or to otherwise conduct a wholesale review of the

Alabama Supreme Court’s opinions, nor is Petitioner sug-

gesting that the Alabama Supreme Court does not have

the authority to depart from, or even overrule established

Alabama law in an attempt (even if misguided) to pro-

tect the rights of Alabama citizens. However, Petitioner

vigorously contends that the Due Process Clause of the

Fourteenth Amendment prohibits the Alabama Supreme

Court from, as it did in this case, implicitly overruling

existing law, and, based upon such an unanticipated de-

parture from established law, forcing an insurer to submit

to a trial on a claim requesting punitive damages merely

because the insurer lacked the “foresight” to anticipate

the Alabama Supreme Court’s capacity to completely dis-

regard stare decisis.

II. THE ALABAMA SUPREME COURT, IN REVERS-

ING SUMMARY JUDGMENT ON RESPONDENT’S

BREACH OF CONTRACT CLAIM, IMPROPERLY

MANIPULATED ALABAMA LAW SO AS TO AVOID

APPLYING § 27-14-7 CODE OF ALABAMA (1975).

When addressing Petitioner’s request that the Court

adhere to § 27-14-7 Code of Alabama (1975) which pro-

hibits recovery under an insurance policy if the applicant,

in applying for insurance, made representations that were

either fraudulent, material to the acceptance of the risk,

or if the insurer would not have issued the policy if the

18

“true facts” regarding the applicant’s health had been

known,'* the Court acknowledged the statute’s existence,

but refused to enforce it because, it held that a jury

could find decedent, in telling Treadwell’s employee he

had emphysema, sufficiently informed Petitioner that he

was in fact in bad health so as to render the written

statement of good health provided Petitioner a nullity.

Such a ruling, although not expressly stated, renders all

disclosures to a soliciting agent to be disclosures to the

principal, and, as such, abolishes the traditional distinc-

tion between general and soliciting agents.’ Moreover,

the Court’s ruling deprives insurers of their right to limit

the authority of their agents to bind them in contract.”*

14 § 27-14-7 Code of Alabama (1975) states:

(a) All statements and descriptions in any application for an

insurance policy or annuity contract, or in negotiations there-

for, by, or in behalf of, the insured or annuitant shall be

deemed to be representations and not warranties. Misrepre-

sentations, omissions, concealment of facts and incorrect state-

ments shall not prevent a recovery under the policy or contract

unless either:

(1) Fraudulent;

(2) Material either to the acceptance of the risk of to the

hazard assumed by the insurer; or

(3) The insurer in good faith would either not have issued

the policy or contract, or would not have issued a policy

or contract at the premium rate as applied for, or would

not have issued a policy or contract in as large an amount

or would not have provided coverage with respect to the

hazard resulting in the loss if the true facts had been

made known to the insurer as required either by the appli-

cation for the policy or contract or otherwise.

(b) No plea of misrepresentation or fraud in connection with

the issuance of a life insurance policy or annuity contract shall

be filed unless accompanied by a payment into court of all

premiums paid on the policy or contract.

15 See argument supra.

16 The Alabama Supreme Court, for over a century has recognized

an insurer’s fundamental right to limit the authority of its agents

to bind them in contract. See for example Robinson v. Aetna Ins.

19

III. THE ALABAMA SUPREME COURT IMPROPERLY

APPLIED ITS NEWLY FASHIONED EXCEPTION

TO § 27-14-7 CODE OF ALABAMA (1975) RETRO-

ACTIVELY.

So as to avoid its effect, the Alabama Supreme Court

judicially limited § 27-14-7 Code of Alabama (1975),

this in turn exposed Petitioner to punitive damages for

actions which, at the time performed, were in accordance

with the law—such retroactive applications of newly

fashioned law deprives Petitioner of its right to due

process. This Court has held that the Ex Post Facto

Clause limits the powers of the Legislature and does not

of its own force apply to the judicial branch. See Frank

v. Mangum, 237 U.S. 309 (1915). However, the “fair

warning” principle contained in the Ex Post Facto Clause

is “fundamental to our concept of constitutional liberty,”

and is a component of Due Process. Marks v. United

States, 430 U.S. 188, 191-92 (1977). See also Kolender

v. Lawson, 461 U.S. 352, 358 (1983). There is a con-

Stitutional right to notice of any conduct that will give

rise to punishment, a right protected against judicial in-

fringement by the Due Process Clause of the Fifth Amend-

ment. Marks v. United States, 430 U.S. at 192. In Marks,

the Court observed that a retroactive judicial enlarge-

ment of a criminal statute operates as ex post facto of

law. Id. Since a state legislature is barred by the Ex

Post Facto Clause from passing retroactive laws, the

Court stated, “it must follow that a State Supreme Court

is barred by the Due Process Clause from achieving pre-

cisely the same result by judicial construction.” Jd. See

also, Bouie v. City of Columbia, 378 U.S. 347, 354

(1964). Marks involved the judicial enlargement of a

quasi criminal federal statute prohibiting transportation

of obscene materials. Its rationale should apply equally

to the retroactive enlargement of an established common

Co., 128 Ala. 477, 30 So. 665 (1901); Southern State Fire Ins. Co.

v. Kronenberg, 199 Ala. 164, 170-71, 7463, 67 (1917); Washington

Nat’l Ins. Co. v. Strickland, 491 So.2d 872 (1985).

20

law remedy to the extent that it emasculates a clear and

unambiguous statutory provision and provides for the

assessment of punitive damages thereunder. This Court,

in Landgraf v. USI Film Products, 114 S. Ct. 1483, 1490

(1994) recognized that “[t]he very labels given ‘punitive’

or ‘exemplary’ damages, as well as the rationales that

support them, demonstrate that they share key charac-

teristics of criminal sanctions. Retroactive imposition of

punitive damages would raise a serious constitutional ques-

tion.” And, as will be demonstrated herein below, the

impetus for the Court’s refusal to enforce § 27-14-7 Code

of Alabama (1975) was based not upon established prin-

cipals of law as the Alabama Supreme Court attempted

to conjure, but instead was based upon the Court’s un-

willingness to abide by the constitutional limits placed

upon it to uphold, rather than circumvent, legislative

enactments.

Again, Petitioner is not requesting this Court to inter-

vene in this case and conduct a wholesale review of the

Alabama Supreme Court’s decisions. However, Petitioner

respectfully submits that in circumstances such as the case

sub judice, where the Alabama Supreme Court overrules

established law (thereby creating a cause of action where

none previously existed), retroactively imputes to the de-

fendant knowledge of the Court’s unanticipated departure

from established law, and refuses to enforce a duly en-

acted statute based upon the Court’s capricious broaden-

ing of a common law exception (a broadening so com-

prehensive that the “exception” now supersedes the rule),

Petitioner’s right to due process mandates a review of the

Alabama Supreme Court’s ruling.

21

IV. THE ALABAMA SUPREME COURTS TRUE

MOTIVE IN REVERSING SUMMARY JUDGMENT

ON RESPONDENT'S BREACH OF CONTRACT

AND BAD FAITH CLAIMS WAS TO CIRCUMVENT

THE ALABAMA LEGISLATURE’S AUTHORITY TO

GOVERN THE INSURANCE INDUSTRY, AND,

BECAUSE OF ITS DISAPPROVAL OF THE LAW

CURRENTLY IN FORCE AND EFFECT, TO ADOPT

ITS OWN LAW REGARDING PROPER PRE-POLICY

ISSUANCE PROCEDURES.

The arbitrariness of the Alabama Supreme Court’s rul-

ing herein is reflected in Huff v. United Ins. Co., Ala. S.

Ct. No. 193 1516 (May 1995), rendered just three months

after the ruling sub judice. App. F, 127a. In Auff,

decedent applied for life insurance for himself and his

wife. Huff failed to acknowledge any health problems on

the completed application. However, Mr. Huff had been

treated for heart problems; Mrs. Huff had suffered from

diabetes and its accompanying complications.

Shortly after United issued the policy, Mr. Huff died

of a heart attack, and Mrs. Huff submitted a claim

thereon. Upon investigation, United discovered that Huff

had misrepresented his health, and because of the misrep-

resentation, refused to pay the death benefit. Mrs. Huff

filed an action against United for breach of contract, bad

faith, and fraud.

In affirming Summary Judgment in favor of United,

the Alabama Supreme Court held:

“[t]his fact situation illustrates an all-too-common

situation for Alabamians in life insurance transac-

tions. United issued the policy without investigating

the applicants’ health. As the law in Alabama cur-

rently stands, an insurance company may issue a life

insurance policy with its knowledge of its applicant’s

health coming solely from its agent’s questioning of

the applicant about his or her health history. . . .

When the policy is sold, an agent is not required to

delve thoroughly into the applicant’s background for

the details of his health history. Such a requirement

22

could prevent situations like the one in this case.”

-(Emphasis added). App. F, 13 1a.

Despite its disapproval of Alabama’s legislative ap-

proved pre-policy issuance procedure, the Court, in a rare

showing of judicial restraint, affirmed Summary Judgment

in favor of United, holding:

“Undoubtedly, it would be in the interests of the

insurer, the applicant, and judicial economy for the

insurer to investigate the applicant’s health history

before issuing a policy. Apparently, though, until

that is required, the sale of this type of life insurance

policy with no serious attempt to determine the

applicant’s true health history will continue, to the

frustration of ‘beneficiaries’ of the deceased.” (Em-

phasis added). App. F, 131a-132a.

The Court failed to explain how it would be more eco-

nomical for an insurer, particularly one providing in-

expensive short-term credit life insurance, to, before issu-

ing a policy, conduct a detailed investigation of the appli-

cant’s health history, the cost of which would inevitably

be passed on to the applicant, rather than rely on the

applicant to tell the truth when responding to application

questions regarding his/her health. Incredibly, the Huff

Court blames insurers when insurance applicants misrep-

resent the status of their health and recommends imposing

requirements upon insurers to conduct an additional in-

vestigation to determine whether the applicant in fact told

the truth. This, the Alabama Supreme Court deems fair.

Irrespective of the soundness of its logic, the Alabama

Supreme Court’s dicta in Huff reveals its real motivation

for reversing Summary Judgment herein—the Court sim-

ply does not approve of Alabama’s legislatively adopted

and approved pre-policy issuance procedures for insurers.

Instead, the Court would like to impose upon every in-

surer, even those who offer short-term credit insurance,

a duty to conduct an investigation regarding the appli-

cant’s health. However, as the Court in Huff begrudgingly

admitted, but the Court in Miller conveniently side-

stepped, in the absence of clearly defined constitutional

23

mandates to the contrary, modification of statutory law

falls within the purview of the Alabama legislature, not

the Alabama Supreme Court. The Court’s ruling in this

case is judicial activism at its worst. To reach a decision

it deemed fair, the Alabama Supreme Court usurped the

Alabama legislature’s authority to legislate, and, as a re-

sult thereof, deprived Petitioner of its right to due process.

Vv. THE ALABAMA SUPREME COURT IMPROPERLY

REVERSED SUMARY JUDGMENT ON RESPOND-

ENT’S BAD FAITH CLAIM BASED ONLY ON ITS

CONCLUSION THAT RESPONDENT HAD PRE-

SENTED A PRIMA FACIE CASE TO SUPPORT

ITS BREACH OF CONTRACT CLAIM, WITHOUT

EVEN ACKNOWLEDGING THE MORE ONEROUS

BURDEN NECESSARY TO PROCEED WITH A

BAD FAITH CLAIM.

In reversing Summary Judgment on respondent’s bad

faith claim, the Alabama Supreme Court recited no evi-

dence regarding Petitioner’s bad faith in refusing to pay

on decedent’s policy. This was no mere oversight—re-

spondent presented to the Court no evidence of Petition-

er’s bad faith in handling her claim. To begin with,

respondent has never filed a claim on decedent’s policy:

nor has respondent explained how Petitioner can be liable

to her for bad faith on a claim she never filed. More

importantly, respondent bases her bad faith claim on the

pre-policy purported misrepresentation by the Treadwell

employee regarding Mr. Miller’s eligibility for credit life

insurance. Incredibly, the Alabama Supreme Court fol-

lowed respondent’s argument, even though the tort of bad

faith, by definition, arises only after the insured proves

the existence of an insurance contract between the parties

and a breach thereof by the insurer.” In what is sure to

be recognized as a landmark decision, the Alabama Su-

preme Court has deemed allegations of pre-policy state-

ments by an insurer’s soliciting agent to be prima facie

evidence of a tort that, by definition, is limited to an

insurer’s post-contract, indeed post-claim, activities.

17 Chavers v. Nat’l Sec. Fire & Cas. Co., 405 So.2d 1 (Ala. 1981).

|

|

24

It is noteworthy that, National Life and Accident Ins.

Co. v. Allen, 285 Ala. 551, 234 So.2d 567 (1970),

upon which the Court relied in reversing Summary Judg-

ment on respondent’s breach of contract and bad faith

claims, was decided before the Alabama Supreme Court

recognized the tort of bad faith. Accordingly, the Allen

Court did not have an opportunity to address the distinc-

tion between evidence sufficient to proceed with a breach

of contract claim and evidence sufficient to meet the more

onerous burden necessary in order to proceed with a bad

faith claim. However, the Alabama Supreme Court has,

on numerous occasions since Allen, distinguished between

the two burdens, and consistently held plaintiffs to a very

strict standard of presenting a prima facie case of bad

faith.

The Alabama Supreme Court first recognized a cause

of action for bad faith failure to pay an insurance claim

in Chavers v. Nat'l Sec. Fire & Cas. Co., 405 So.2d 1

(Ala. 1981).

Although the Court has greatly vacillated in its defini-

tion of what constitutes a prima facie case of bad faith,”

it remains undisputed that the necessary elements of bad

faith are:

“(a) an insurance contract between the parties

and a breach thereof by the Defendants;

(b) an intentional refusal to pay the insured’s

claim;

(c) the absence of any reasonably legitimate or

arguable reason for that refusal (the absence of a

debatable reason);

(d) the insurer’s actual knowledge of the absence

of any legitimate or arguable reason;

(e) if the intentional failure to determine the

existence of a lawful basis is relied upon, the Plain-

tiff must prove the insurer’s intentional failure to

18 See Auto-Owners Insurance Co. v. Ogden, Ala. S.Ct. 1930368,

1995 Ala. LEXIS 70,

senting).

So.2d (1995) (Maddox, J. dis-

25

determine whether there is a legitimate or arguable

reason to refuse to pay the claim.” ”

Shortly after recognizing the tort of bad faith, the Ala-

bama Supreme Court went out of its way to assure in-

surers that they would not be inundated with bad faith

claims: “Bad faith, then, is not simply bad judgment or

negligence. It imports a dishonest purpose in means of

breach of known duty, i.e., good faith and fair dealing,

through some motive of self-interest or ill will. ... We

are satisfied that the application of the test formulated

above, which recognizes the intentional nature of the tort

of bad faith and puts the test upon an objective basis, will

minimize the fears expressed by the Defendant insurance

company that to permit claims for bad faith would result

in extortionate lawsuits. Such result cannot follow when

an insurance company in the exercise of ordinary care

makes an investigation of the facts and law and concludes

on a reasonable basis that the claim is at least debatable.”

Gulf Atlantic Life Ins. Co. v. Barnes, 405 So.2d 916

(Ala. 1981) adopting Anderson v. Continental Insurance

Co., 85 Wis.2d 675, 693, 271 N.W.2d 268, 377 (1978).

“In the normal case in order for a Plaintiff to make out

a prima facie case of bad faith refusal to pay an insurance

claim, the proof offered must show that the Plaintiff is

entitled to a directed verdict on the contract claim and,

thus, entitled to recover on the contract claim as a matter

of law. Ordinarily, if the evidence produced by either

side creates a fact issue with regard to the validity of the

claim and, thus, the legitimacy of the denial thereof, the

tort claim must fail and should not be submitted to the

jury.” National Savings Life Ins. Co. vy. Dutton, 419

So.2d 1357, 1362 (Ala. 1982).

1 Gillion v. Alabama Forestry Ass’n., 597 So.2d 1315, 1321 (Ala.

1992) citing Independent Life & Accident Insurance Co. v. Parker,

449 So.2d 233 (Ala. 1984). The Gillion Court further states: ee |

any one of the reasons for denial of coverage is at least ‘arguable,’

this Court need not look any further.” Gillion citing McLaughlin

v. Alabama Farm Bureau Mut. Cas. Insurance Co., 437 So.2d 86, 91

(Ala. 1983).

26

The Alabama Supreme Court, in circumstances where

it would be impossible for a plaintiff to prevail on a mo-

tion for directed verdict on the contract claim, has relaxed

the plaintiff's preliminary evidentiary burden necessary for

proceeding with a jury trial on his bad faith claim.”

However, in these limited circumstances, the Court waived

the “directed verdict on the contract claim” burden be-

cause the normally independent issue of an insurer’s li-

ability to pay a particular claim on a policy (the existence

of which is undisputed) and whether the insurer properly

processed the insured’s claim were inseparably linked.”

This is not such a case. In this case, Petitioner does not

dispute its liability on a particular claim; instead, Peti-

tioner, based on established law maintains that Mr. Mil-

ler’s misrepresentation precludes the existence of a con-

tract. As demonstrated supra, the Alabama Supreme

Court, in reversing Summary Judgment on respondent’s

breach of contract claim, created a new basis upon which

insurers may be bound in contract, and, based on this

newly fashioned law, returned respondent’s bad faith

claim to the trial court. In so doing, the Alabama Su-

preme Court has rendered Petitioner’s compliance with

“See, for example, Continental Assurance Co. v. Kountz, 461

So.2d 802 (Ala. 1984); AETNA Life Ins. Co. v. Lavoie, 505 So.2d

1050 (Ala. 1987); Blue Cross/Blue Shield of Alabama v. Granger,

461 So.2d 1320 (Ale. 1984).

*1 See, for example, Jones v. Alabama Farm Bureau Mutual Cas.

Co., 507 So.2d 396 (Ala. 1987) (Plaintiffs had a home owner’s

policy insuring against damage caused directly by lightning but

not against indirect damage such as from a tree falling on the

power line. After a severe storm, plaintiffs filed a claim for dam-

aged personal property. Farm Bureau’s adjuster denied plaintiffs’

claim, because he testified, plaintiff told him the damage was caused

when a tree limb fell on their power line, causing a power surge.

Plaintiffs denied this statement, insisting they had informed the

adjuster the damage was caused by lightning. Because Farm Bu-

reau’s sole basis for denying plaintiffs’ claim was their alleged

statements as to the cause of the damage, and because it was

undisputed that Farm Bureau would be liable for damage caused

by lightning, the Alabama Supreme Court waived the “directed

verdict on the contract claim” burden.

27

the laws in force and effect at the time it notified respond-

ent of Mr. Miller’s ineligibility for insurance to be grounds

for a claim alleging intentional misconduct. By holding

allegations of pre-policy misconduct to be sufficient to

proceed on a claim that is limited in scope to post-policy

conduct, and by further failing to recognize the important

distinction between prima facie evidence of breach of

contract and prima facie evidence of bad faith, the Ala-

bama Supreme Court deprived Petitioner of its right to

due process.

VI. EVEN THOUGH PETITIONER MAY ULTIMATELY

PREVAIL ON RESPONDENT'S BAD FAITH CLAIM,

REQUIRING A JURY TRIAL THEREON WILL

DEPRIVE PETITIONER OF ITS RIGHT TO DUE

PROCESS.

In light of this Court’s already overladened docket, the

easiest response to Petitioner’s request for a Writ of Cer-

tiorari would be for this Court to acknowledge the very

Serious ramifications of the Alabama Supreme Court’s

ruling herein, but to suspend judgment thereon until a jury

has had an opportunity to hear all of the evidence and

render a verdict in Petitioner’s favor. However, such an

approach is constitutionally unacceptable—forcing Peti-

tioner to submit to a jury trial on respondent’s bad faith

claim would deprive Petitioner of its right to due process.

Despite the Alabama Supreme Court’s assurances in

Barnes, bad faith claims have nearly strangled Alabama

insurers.” In the most recent calendar year, punitive dam-

age verdicts in Alabama totaled more than $200,000,000.

In the four years since this Court’s last review of the Ala-

bama punitive damage system (Haslip), Alabama juries

*2 The Alabama Insurance Commissioners Office indicates that

the following insurance companies have expressly refused to sell

policies in Alabama as a result of crippling punitive damage awards:

Aegon; Blue Ridge Insurance Company; Columbian Mutual Life

Insurance Company; Fortis Benefits; John Alden Life; Life Insur-

ance Company of Georgia; Minnesota Mutual Life Insurance Com-

pany; Northland Insurance Company; Pyramid Life Insurance

Company; Southern General Insurance Company; Time Insurance

Company; Vanguard Insurance Company; and Provident Indemnity

Insurance Company.

28

have returned punitive damage verdicts in excess of

$700,000,000.” These increasingly frequent, yet stagger-

ing punitive damage awards have captivated the nation’s

attention. Professor George L. Priest of Yale Law School

observes that Alabama’s recent flurry of punitive damages

“is unparalleled in the history of American jurisprudence.”

Testimony of George L. Priest, Johnson v. Life of Geor-

gia, No. CV-93-969 (Cir. Ct. of Mobile Co., AL, Sept.

16, 1994). National publications have noted that,

although Alabama is one of the nation’s least populated

states (approximately 400,000,000 residents) and has one

of the poorest economies, the punitive damages awarded

by juries and upheld by the Alabama Supreme Court

greatly exceed those of nearly every other state in the

union. See L. Himelstein, Jackpots from Alabama Juries,

Business Week, Nov. 28, 1994, at 83; Bueno, as Alabama

Juries Punish Business, Business Seeks to Punish the Judge,

Wall St. J., Nov. 2, 1994, at Sl. The infectious increase

of punitive damage awards in Alabama prompted one

national publication to describe Alabama as ‘tort hell’.

See G. Jaynes, Where the Tort Blossom, Time, Mar. 20,

1995, p. 38; D. Frum, Unreform, Forbs, Feb. 1, 1993

at 82."

Researchers for the Rand Institute for Civil Justice

have concluded that “[c]orporate defendants are in fact

more likely than individuals or public agencies to be the

target of [punitive damage] award” and that “[p]unitive

[damage] awards against businesses were far larger than

those against individuals in both personal injury and

business contract cases.” M. Peterson, S. Sarma & M.

Chanley Punitive Damages: empirical findings iii, 50

(1987). “[J]uries also award more money when the de-

fendants are institutions or organizations rather than

“3 See App. E, for an exhaustive survey of punitive damages in

Alabama for the preceding ten years, including verdicts from both

state and federal courts sitting in diversity.

*4 As set forth in Amicus Brief of the Business Counsel of Ala-

bama in support of Petitioner in BMW of North America, Inc. v.

Gore, No. 94-896, Oct. term, 1994.

29

individuals—the ‘deep-pocket’ effect. . . . [WlJe can

detect a separate, statistically independent effort for deep-

pocket defendants, even in cases that do not involve

products or malpractice.” D. Helnsler, M. Vaiana, Ss

Kakalik, M. Peterson, Trends in Tort Litigation: The

Story Behind the Statistics 21 (1987). See also, Malcolm

E. Wheeler, A Proposal for Further Common Law Devel-

opment of the Use of Punitive Damages in Modern Prod-

uct Liability Litigation, 40 Ala. L. Rev. 919, 944 (1989).

This Court has recently expressed concern that large

corporations face special risks in punitive damages cases.

In TXO Prod. Corp. v. Alliance Resources Corp., 113

S. Ct. 2711, 2723 (1993), (plurality opinion), this Court

observed that large punitive damage awards “may have

been influenced by prejudice against large corporations,

a risk that is a special concern when the Defendant is a

non-resident.”

The Alabama Supreme Court has done nothing to dis-

pel this Court’s concern. On the contrary, the Alabama

Supreme Court seems more inclined to foster, rather than

prevent, a jury’s abuse of an out of state corporate de-

fendant. Furthermore, the Alabama Supreme Court dces

not even require there be a relationship between jury

awarded compensatory and punitive damages.” For ex-

ample, in Liberty National Life Ins. Co. v. McAllister, No.

1931163 Slip. Op. (Ala. F. 2495), the Alabama Supreme

Court recently affirmed a jury’s $1,000,000 punitive dam-

ages verdict against an out of state corporate defendant

even though the Plaintiff suffered no actual loss.

In an atmosphere of such hostility against out of state

corporate defendant, it is a veritable certainty that any

claim requesting punitive damages against an out-of-state

25(i]mposing . . . a relationship [between compensatory and

punitive damages] would inevitably result in injustice and we de-

cline to impose it.” Southern Life & Health Ins. Co. v. Turner, 586

So.2d 854, 858 (Ala. 1991); General Motors Co. v. Johnston, 592

So.2d 1054 (Ala. 1992); Independent Life & Acc. Ins. Co. v.

Harrington, 1994 W. L. 407246 (Ala. 1994).

30

insurer, if presented to an Alabama jury, will result in

an adverse verdict, irrespective of the validity of the claim

upon which the request for punitive damages is premised.

And, requiring Petitioner to undergo such an ordeal at

the whim of the Alabama Supreme Court, would deny

Petitioner its rights to due process.

CONCLUSION

The Alabama Supreme Court’s decision to reverse

Summary Judgment on respondent’s breach of contract

and bad faith claims was not grounded in established law

as the Court represents; instead, the Court’s ruling was

founded in its growing desire to legislate, and its innate

prejudice against out-of-state corporate defendants—both

inappropriate grounds for ruling, but both representative

of a growing number of Alabama Supreme Court deci-

sions. If left unchecked by this Court, the Alabama Su-

preme Court will continue to render arbitrary decisions

against out-of-state defendants and will eventually “legis-

late” foreign corporations right out of Alabama.

This case presents to the Court a rare opportunity to

correct an unconstitutional decision before the defendant

suffers an irremediable harm. This, coupled with the op-

portunity to review Alabama’s post—Haslip progress in

balancing the competing interests of a plaintiff’s desire to

recover punitive damages and a defendant’s right to due

process, should appeal to this Court’s heightened sense of

fair play and substantial justice. Accordingly, Petitioner

respectfully requests this Court to grant its Petition for

Writ of Certiorari.

Respectfully submitted,

Of Counsel: WILLIAM L. HOWELL *

Davip A. MCDONALD WILLIAM L. HOWELL, P.A.

P.O. Box 832 P.O. Box 36695

Mobile, AL 36601 (334) 343-9510

(334) 434-0045 * Counsel of Record for Petitioner

Ford Life Insurance Company

APPENDICES

la

APPENDIX A

[Released Feb. 24, 1995]

SUPREME COURT OF ALABAMA

OCTOBER TERM, 1994-95

1921552

JOYCE MILLER, individually and as administratrix

of the estate of MEARL M. MILLER, deceased;

and PAULA Goss, individually

¥.

DoBBs MOBILE Bay, INC., et al.

Appeal from Mobile Circuit Court

(CV-92-1638)

INGRAM, JUSTICE.

This case arises out of a refusal to pay benefits under

a credit life insurance policy. Specifically, after Mearl

Miller’s death, Ford Life Insurance Company (“Ford

Life”) denied payment on his credit life policy because

it contended that a health certificate executed by Mr.

Miller was false and that he had been in bad health when

he purchased the insurance. After Ford Life refused to

pay any benefits under the policy, Joyce Miller, as ad-

2a

ministratrix of the estate of Mearl Miller,’ and Paula

Goss, individually, sued Ford Life and Dobbs Mobile

Bay, Inc., d/b/a Treadwell Ford, an automobile dealer-

ship (“Treadwell”). The trial court entered summary

judgments in favor of Ford Life and Treadwell, and

Miller and Goss appealed.

On a motion for summary judgment, the burden is

initially on the movant to make a prima facie showing

that there is no genuine issue of material fact (i.e., that

there is no dispute as to any material fact), and that he

is entitled to a judgment as a matter of law. Rule 56,

Ala.R.Civ.P.; McClendon v. Mountain Top Flea Market,

Inc., 601 So.2d 957 (Ala. 1992); Elgin v. Alfa Corp.,

598 So.2d 807 (Ala. 1992). “The burden does not

shift to the opposing party to establish a genuine issue

of material fact until the moving party has made a prima

facie showing that there is no such issue of material

fact.” McClendon, at 958; Elgin, at 810-11.

Rule 56 must be read in conjunction with the “sub-

stantial evidence rule,” § 12-21-12, Ala. Code 1975, for

actions filed after June 11, 1987. See Bass v. South-

Trust Bank of Baldwin County, 538 So.2d 794, 797-98

(Ala. 1989). In order to defeat a defendant’s properly

supported motion for summary judgment, the plaintiff

must present substantial evidence, i.e., “evidence of such

weight and quality that fair-minded persons in the exer-

cise of impartial judgment can reasonably infer the ex-

istence of the fact sought to be proved.” West v. Found-

ers Life Assurance Co. of Florida, 547 So.2d 870, 871

(Ala. 1989). This Court reviews the record in a light

most favorable to the nonmovant and must resolve all

reasonable doubts against the movant. Wilma Corp. v.

Fleming Foods of Alabama, Inc., 613 So.2d 359 (Ala.

1993). Viewed that way, the evidence before the court

1 The first complaint named Joyce Miller only as administratrix _

of the estate of Mear! Miller. In that first complaint, she did not

sue individually.

3a

on the summary judgment motion suggested the following

facts.

On February 28, 1989, Mr. Miller purchased a 1985

Ford LTD Crown Victoria automobile from Treadwell.

His daughter, Paula Goss, and Paula’s husband accom-

panied him to the Treadwell dealership and were present

during all conversations concerning the negotiations and

financing of the car. On all documents executed in con-

nection with the sale of the car, Mr. Miller identified

himself as the sole purchaser of the automobile.

During the negotiations concerning the sale of the car,

a Treadwell salesman asked Mr. Miller whether he wanted

to purchase credit life insurance coverage. Mr. Miller

replied that he did not want the coverage and he in-

formed the salesman that he was sick. Mr. Miller was

then sent to the Treadwell office to complete the nec-

essary paperwork on the purchase of the car. While in

the office, Mr. Miller talked with another Treadwell em-

ployee, who represented Ford Life; that employee asked

him again about the credit life insurance coverage. Mr.

Miller, noting that the form stated that the coverage was

optional, answered that he did not want the coverage,

and told that employee that he was sick. At that time,

the Treadwell employee/Ford Life representative stated

that if Mr. Miller did not buy the credit life coverage,

he could not by the car. Mr. Miller responded by stat-

ing that he had health problems; however, the Treadwell

employee/Ford Life representative indicated that Mr. Mil-

ler’s health would not be a problem and that the in-

surance would be effective notwithstanding the state of

his health. At that time, Mr. Miller signed the neces-

sary paperwork for the credit life insurance coverage,

including a health certificate stating that he was in good

health. Approximately four months after purchasing the

car, Mr. Miller was diagnosed with lung cancer, and he

died approximately eight months later.

Central Bank of the South had financed the purchase

of the car and was the primary beneficiary of Mr. Miller’s

4a

credit life insurance policy. His estate was listed as the

secondary beneficiary. Neither Joyce Miller (Mearl Mil-

ler’s wife) nor Paula Goss was listed as a beneficiary of

the policy. Upon Mr. Miller’s death, Central Bank filed

a claim with Ford Life under the credit life policy. Ford

Life denied the claim, contending that Mr. Miller had

not been in good health when he bought the policy.

Central Bank then repossessed the vehicle because pay-

ments were not being made, sold it, and sued Mr. Miller’s

estate for the deficiency balance.

Mrs. Joyce Miller, as administratrix, and Mrs. Goss,

individually, then filed this present action against Tread-

well and Ford Life, alleging fraudulent representations

and breach of contract. They also alleged bad-faith-

refusal-to-pay on the part of Ford Life. Almost one year

later, the plaintiffs attempted to amend the complaint in

this present action to add numerous new claims. It also

appears that, by including her name in the caption of the

proposed second amendment, Joyce Miller was attempting

to join, individually, as a plaintiff. This amendment was

denied. The trial court entered a summary judgment

in favor of each defendant, and this appeal followed.

The threshold question concerns the proper parties to

this appeal. The notice of appeal names Joyce Miller,

both as administratrix of her husband’s estate and in-

dividually, and names Goss, individually. However, as

the trial court correctly held, “[nJeither Joyce Miller nor

Paula Goss suffered any legal detriment in connection

with the purchase of the vehicle or credit life insurance,

as they were not co-buyers of the vehicle or of the credit

life insurance.” Therefore, the only plaintiff properly in

this action is Mrs. Miller, who is in it properly as ad-

ministratrix of the estate of her deceased husband. We

now proceed to discuss the administratrix’s contentions

that the trial court erred in entering the summary judg-

ments for Ford Life and Treadwell on all counts.

5a

Fraud

(Treadwell and Ford Life)

The trial court held that the fraud claims did not sur-

vive the death of Mr. Miller. We agree. Any claim

based on a fraud perpetrated on Mr. Miller would not

survive in favor of his personal representative. Ala.

Code 1975, § 6-5-462. Dennis v. Magic City Dodge,

Inc., 524 So.2d 616 (Ala. 1988); Davis v. Southern

United Life Ins. Co., 494 So.2d 48 (Ala. 1986). There-

fore, the trial court properly entered the summary judg-

ments as to the fraud claims.

Breach of Contract

(Treadwell)

The trial court held that the credit life insurance con-

tract was issued by Ford Life and that Treadwell was

acting only as Ford Life’s agent. Therefore, it held that

Treadwell would not be liable for Ford Life’s alleged

breach of contract, i.e., its failure to pay on the policy.

We agree. An agent cannot be held liable for his prin-

cipal’s breach of contract. Smith v. Equifax Services

Inc., 537 So. 2d 463 (Ala. 1988). Therefore, the trial

court properly entered the summary judgment for Tread-

well on the breach of contract claim.

Breach of Contract

(Ford Life)

The trial court held that the credit life insurance con-

tract was unenforceable because, it held, Mr. Miller had

made fraudulent statements concerning his health; it held

that Mr. Miller’s signing of the good health statement

barred a recovery, citing Ala. Code 1975, § 27-14-7.

That provision states that misrepresentations of fact can

prevent recovery under an insurance policy if they are

fraudulent, if they are material to the acceptance of the

risk, or if the insurer would not have issued the policy

6a

or would not have issued it in the manner in which it

was issued if the “true facts” had been known. The

court further held that even if the Treadwell employee/

Ford Life representative had made any misrepresentations

to Mr. Miller, that employee did not have the authority

to do so. In other words, the trial court concluded that

Ford Life’s representative (Robert Wayne Sparks),

working on Treadwell’s premises, was only a “soliciting

agent” for Ford Life and, as such, had no authority to

alter the written contract, which required that the appli-

cant be in good health when it was entered in order to

receive the benefits of the policy.

The trial court held that Mr. Miller had misrepre-

sented his health condition to Ford Life and, therefore,

that his estate could not recover. Although we are aware

that Mr. Miller signed a certificate stating that he was

in good health, even though he was not in good health,

the facts alleged in this case take it out of the ordinary

situation. Here, the evidence, viewed most favorably to

Mrs. Miller, indicates that Mr. Miller never contended

that he was in good health. In fact, he old the Tread-

well salesman and the Ford Life representative that he

did not want the credit life coverage, because he was

sick. Mrs. Miller presented evidence that Mr. Miller pur-

chased the insurance only after the Ford Life representa-

tive had insisted that his poor health would not be a

problem.

It is well settled that an insurance company cannot

defend its refusal to pay benefits on grounds that the in-

sured made a misrepresentation in the application if the

misrepresentation was the fault of the agent and that

fault was without participation by the insured. National

Life & Acc. Ins. Co. v. Ailen, 285 Ala. 551, 234 So.2d

567 (1970). Moreover, Ala. Code 1975, § 27-14-7, does

not apply where there has been no concealment by the

insured. Duren v. Northwest Nat'l Life Ins. Co., 581

So.2d 810 (Ala. 1991).

Ta

Viewing the record most favorably to Mrs. Miller, we

find no misrepresentations or fraudulent statements made

by Mr. Miller to the Ford Life representative. A jury

could find that he told everyone he was sick and that he

did not want the credit life insurance coverage and that

he did not conceal his poor health from anyone. The

jury could find that the only misrepresentation made by

Mr. Miller came when he signed a good health certificate.

However, the jury could find that that misrepresentation

was made at the insistence of the Ford Life representa-

tive.

Clearly, on the breach of contract claim Mrs. Miller

met her burden of establishing a genuine issue of material

fact, and the trial court erred in entering a summary

judgment in favor of Ford Life as to that claim.

We disagree with the trial court‘’s conclusion that the

Ford Life representative, as a soliciting agent, could not

legally bind the company. The evidence, viewed in a

light most favorable to Mrs. Miller, indicates that the

Ford Life representative knew that Mr. Miller had health

problems, but issued the policy anyway. In fact, it in-

dicates that he stated that if Mr. Miller did not buy the

credit life policy, he could not buy the car. Under these

specific facts, we hold that Ford Life cannot defend its

refusal to pay on the basis that its agent did not have

the authority to bind it.

As stated by the Arkansas Supreme Court in a case

factually similar to this one:

“Obviously the agent is encouraged to sell insurance,

which is Ford Life’s business, and paid a handsome

commission. Everyone is satisfied until the death of

the insured when it may be learned that he was

not ‘in good health.’

“Such a situation puts an unrealistic burden on

an insured which can only result in a decided ad-

vantage enuring to the benefit of the company.”

8a

Ford Life Ins. Co. v. Jones, 262 Ark. 881, 886, 563

S.W.2d 399, 402 (1978).

The Mississippi Supreme Court also was faced with a

similar situation in Southern United Life Ins. Co. v.

Caves, 481 So.2d 764, 768 (Miss. 1985). In Caves,

the agent knew that the applicant for credit life insur-

ance coverage had suffered heart problems in the recent

past. However, even though there was a “good health”

clause in the application, the agent altered the terms and

approved credit life insurance on the applicant. The

Mississippi Supreme Court held that the agent’s knowl-

edge of the applicant’s preexisting heart condition was

imputed to the insurer. Therefore, because the agent’s

actions were binding on the principal, the policy condi-

tions of insurability were effectively waived. Caves. The

Mississippi court said:

“Where an insurance company makes no effort to

establish clear and meaningful guidelines to assist

its agents in discerning persons eligible for coverage,

but merely relies on the agents’ judgment to select

those persons appearing to be healthy, that company

by its actions manifests an intention to ‘insure the

world.’ ”

481 So. 2d at 768.

Therefore, the summary judgment in favor of Ford Life

is reversed as to Mrs. Miller’s breach of contract claim.

Bad Faith

(Ford Life)

Because the trial court held for Ford Life on the

breach of contract claim, it also entered a summary

judgment in favor of Ford Life on Mrs. Miller’s bad

faith claim. Because we reverse as to the breach of con-

tract claim, we also reverse the summary judgment as to

the bad faith claim.

9a

The judgments are affirmed in part and reversed in

part, and the cause is remanded.

AFFIRMED IN PART; REVERSED IN PART; AND

REMANDED.

Shores, Kennedy, and Butts, JJ., concur.

Almon, J., concurs in the result.

Maddox, J., concurs in part and dissents in part.

MADDOX, JUSTICE (concurring in part; dissenting in

part).

I would affirm the judgment of the trial couit; there-

fore, I concur in part and dissent in part.

~

10a

APPENDIX B

IN THE SUPREME COURT OF ALABAMA

May 12, 1995

1921552

JOYCE MILLER, individually and as administratrix of

the estate of MEARL M. MILLER, deceased, et al.

Vv.

DossBs MoBILE BAY, INC., et al.

(Mobile: CV-92-1638)

NOTICE

The application for rehearing filed in this cause is

overruled. No opinion written on rehearing.

INGRAM, J.—Almon, Shores, Kennedy and Butts,

JJ., concur; Maddox, J., dissents.

lla

APPENDIX C

IN THE CIRCUIT COURT

OF MOBILE COUNTY, ALABAMA

Case No. CV-92-1638

JOYCE MILLER, administratrix for the EsTATE of

MEARL M. MILLER; and PAULA Goss,

Plaintiffs,

versus

Dosss MoBiLeE Bay, dba TREADWELL Forp;

ForRD LIFE INSURANCE COMPANY, et al.,

Defendants.

ORDER GRANTING SUMMARY JUDGMENT

IN FAVOR OF FORD LIFE INSURANCE COMPANY

This matter having come to be heard by the Court

on the Motion For Summary Judgment filed by defend-

ant, Ford Life Insurance Company, on the 26th day of

March,. 1993, and the Court having considered the ex-

cerpts of depositions, exhibits, and briefs submitted on be-

half of Ford Life in support of its motion, together with

the brief, deposition excerpts, and exhibits submitted as

of the 26th day of March, 1993, in opposition thereto

by the plaintiffs, the Court finds and concludes as

follows:

STATEMENT OF THE CASE

1. The plaintiffs, Joyce Miller, as administratrix for

the Estate of Mearl Miller, and Paula Goss, individually,

filed their original Complaint on May 6, 1992, against

Ford Life Insurance Company (Ford Life), Dobbs Mo-

bile Bay, Inc. d/b/a Treadwell Ford (Treadwell), and

several fictitious parties. The plaintiffs filed an Amended

12a

Complaint on or about December 9, 1992, adding Cen-

tral Bank of the South as an involuntary plaintiff. The

Amended Complaint asserted the same allegations against

Ford Life and Treadwell as in the original Complaint.

2. In both the original and amended complaints, plain-

tiffs allege four causes of action. The First Cause of

Action is predicated upon alleged fraudulent representa-

tions made by defendants, Ford Life and Treadwell, in

connection with the purchase by Mearl M. Miller, de-

ceased, of credit life insurance at the time of his purchase

of a 1985 Ford LTS Crown Victoria from Treadwell.

Specifically, the plaintiffs allege that defendants inten-

tionally, recklessly, or by mistake, represented to Mearl

Miller (deceased) and Paula Goss, his daughter, that

defendants would pay benefits under the credit life in-

surance policy, which, plaintiffs allege were fraudulent

representations. In the Second Cause of Action, plaintiffs

contend that Treadwell fraudulently represented to Mearl

Miller (deceased) and Paula Goss, his daughter, that

Treadwell Ford would not approve the sale of the vehicle

without the purchase of credit life insurance. In the Third

Cause of Action, the plaintiffs allege breach of the credit

life insurance contract against both Treadwell and Ford

Life. In the Fourth Cause of Action, the plaintiffs allege

bad faith refusal to pay against Ford Life in connection

with its refusal to pay benefits under the credit life in-

surance contract.

3. In its anwer, Ford Life denied the material allega-

tions of all of the four causes of action. In addition,

Ford Life affirmatively plead that the Complaint fails

to state a claim against it upon which relief may be

granted; that the First, Second and Fourth Causes of

Action are barred by the two year Statute of Limitations

under Alabama Code, § 6-2-38 (1975); that the First

and Second Causes of Action are barred on the grounds

that the alleged fraud claims did not survive the death

of Mearl M. Miller under Alabama Code, § 6-5-462

13a

(1975); and that the plaintiffs did not justifiably rely to

their detriment upon any alleged misrepresentations made

by defendant.

4. On March 11, 1993, an appearance was filed by

J. Patrick Courtney, III, as additional counsel to plain-

tiffs and on the same date, plaintiffs filed a Motion For

Leave To Amend Their Complaint, together with a pro-

posed Amended Complaint.

5. The Amended Complaint filed on March 11, 1993,

added several new claims of relief against the same de-

fendants, which included: fraudulent concealment under

circumstances which give rise to the duty to disclose;

intentional failure to investigate; breach of a fiduciary

duty; negligence in selling a policy; negligence in super-

vision of the procedure of the sale of an insurance policy;

and, conspiracy to defraud. Further, it appears that

plaintiffs attempted to add Joyce Miller McLeod, in-

dividually, as a plaintiff, as it appears in the caption of

the proposed Second Amended Complaint without any

further discussion or mention of her as a plaintiff and

without having filed leave of Court to add her, individ-

ually, as a plaintiff.

6. Defendants, Ford Life and Treadwell Ford, both

objected to Plaintiffs’ Motion To Amend The Complaint

and moved to strike the proposed Amended Complaint

on the grounds that they would suffer substantial preju-

dice as a result of the late filing of the Amended Com-

plaint with the case having been set for trial on April

7, 1993.

7. The defendant, Ford Life, filed its Motion For

Summary Judgment on March 9, 1993, together with ex-

cerpts of depositions and exhibits to the depositions in

support of its motion, and had previously filed a Motion

To Dismiss on September 4, 1992, which had been par-

tially granted and a renewed Motion To Dismiss on Feb-

ruary 17, 1993. Treadwell Ford also filed its Motion

l4a

For Summary Judgment supported by deposition excerpts

and exhibits on March 9, 1993. Both Ford Life and

Treadwell submitted briefs in support of their Motions

For Summary Judgment.

8. The plaintiffs filed their Brief In Opposition To

The Motions For Summary Judgment on March 26,

1993, together with an affidavit of plaintiff, Paula Goss,

on March 26, 1993.

9. The Court took the Motions For Summary Judg-

ment and responses thereto under submission on March

26, 1993 and did not order a continuance to permit the

filing of additional evidence nor did the Court order that

the parties could further supplement the evidence in the

record before the Court.

10. Thereafter, the plaintiffs attempted to file an Af-

fidavit of Allen Bishop on March 29, 1993, in opposition

to the Motions For Summary Judgment and also at-

tempted to file additional evidence in opposition to said

motions on April 7, 1993.

FINDINGS OF FACT

PURCHASE OF VEHICLE

1. On or about February 28, 1989, Mearl M. Miller,

deceased, purchased a 1985 Ford LTD Crown Victoria

from a salesman at Dobbs Mobile Bay, Inc., dba Tread-

well Ford (hereinafter “Treadwell Ford”).

2. At the same time that he purchased the vehicle,

the deceased, Mearl M. Miller, solely, purchased a Group

Credit Life Insurance Coverage on his life from Ford

Life Insurance Company (hereinafter “Ford Life”).

3. In connection with his purchase of the vehicle and

Credit Life Policy, Mearl Miller, deceased, executed an

installment Sale Contract (Security Agreement), a Retail

Buyer’s Order, an Odometer Mileage Statement, a Credit

Application, an Application For A Certificate Of Title,

EN IML a a

15a

and the Ford Life Insurance Company Credit Life Insur-

2ace Policy, all of which reflect that Mearl Miller was

the sole purchaser of the vehicle. He was also issued a

Bill of Sale to the vehicle which is in his name only.

4. Mearl M. Miller, deceased, was accompanied on

his visit to Treadwell Ford by his daughter, Paula Goss,

and son-in-law, Howard Lee Goss.

5. Plaintiff, Joyce Miller McLeod, the widow of Mearl

Miller, was not present at the dealership when Mr. Miller

purchased the vehicle.

6. Neither Mearl M. Miller’s son-in-law, Howard Lee

Goss, nor his daughter, Paula Goss, were a party to the

transaction for the purchase of the vehicle.

KNOWLEDGE THAT INSURANCE WAS OPTIONAL

7. According to his widow, Joyce Miller McLeod,

Mearl M. Miller, deceased, routinely purchased credit

life insurance when he purchased items on credit such

as vehicles and furniture. Mearl M. Miller’s daughter,

Paula Goss, acknowledged that he routinely purchased

credit life insurance and knew about restrictions on buy-

ing such insurance.

8. Even after the Treadwell Ford employee offered to

“strike up something else”, Mearl M. Miller, deceased,

decided to purchase the credit life insurance policy.

9. The deceased, Mearl M. Miller completely and

thoroughly read the finance contract which contained his

election to purchase the Credit Life Insurance coverage,

understood it, and knew that the purchase of the insur-

ance was Strictly optional.

10. The Treadwell Ford employee who sold the credit

life insurance policy to Mearl M. Miller, deceased. made

no additional promises to Mearl M. Miller as an encour-

agement for or inducement for him to purchase the policy.

l6a

11. The Installment Sale Contract (Security Agree-

ment) provided in paragraph 8 that the purchase of the

credit life insurance was optional. Mearl Miller, deceased,

signed his name on paragraph 8, acknowledging that the

purchase of the credit life insurance was optional.

12. Approximately one week after Mearl Miller, de-

ceased, purchased the vehicle and the Credit Life Insur-

ance Policy, he and his widow, Joyce Miller McLeod,

had a discussion regarding the purchase of the insurance

and they both looked over the documents. During this

discussion, Mearl Miller and his widow specifically dis-

cussed the credit life insurance and the fact that it was

optional rather than mandatory. During this discussion,

Mearl Miller acknowledged to Joyce Miller McLeod that

he knew that the purchase of the credit life insurance was

not a mandatory prerequisite to his purchase of the ve-

hicle.

13. The deceased, Mearl Miller, and his widow, Joyce

Miller McLeod knew by the first week in March of 1989

[one week after the purchase of the vehicle and credit

life policy] that the alleged misrepresentations by the

Treadwell employees that the credit life policy was a

mandatory prerequisite to the purchase of the vehicle

were indeed false statements.

BENEFICIARY OF VEHICLE PURCHASE

14. The vehicle purchased from Treadwell Ford was

for the use of Joyce Miller McLeod, wife of the deceased,

Mearl M. Miller; and neither Paula Goss nor Howard

Goss were to use the vehicle for their personal use.

HEALTH OF DECEDENT AT TIME OF PURCHASE

15. At the time of his execution of the “good health”

statement embodied in the Ceritficate of Insurance, Mearl

M. Miller, deceased, was, without Ford Life’s knowledge

receiving Social Security Disability benefits, and had,

17a

without Ford Life’s knowledge, retired from Ingalls Ship-

building for medical reasons.

16. For the nine month period immediately preceding

his signing of the “good health” statement, Mearl M.

Miller, deceased, had been admitted to Singing River Hos-

pital at least five times for treatment of Severe Asthmatic

Bronchitis, Severe COPD (Chronic Obstructive Pulmonary

Disease), and a Large Duodenal Ulcer.

17. From October 31, 1988 to January 17, 1989

[just one month before signing the “good health” certifi-

cate], Mearl M. Miller, deceased, was a patient at Ocean

Springs Hospital where he was treated for being in the

end stage of disabling asthmatic bronchitis, severe emphy-

sema, and COPD.

18. Based upon his emphysema and other medical

problems, the deceased, Mearl M. Miller, when he was

examined by Dr. Lorino on January 20, 1989 [approxi-

mately one month prior to purchasing the Group Credit

Life Insurance coverage] was in the “end stage” of emphy-

sema.

19. Just three weeks before signing the “good health”

certificate, Mearl M. Miller, deceased, spent a week [Feb-

ruary 1 through February 7, 1989] in Providence Hos-

pital during which time he was treated for acute exacer-

bation of his chronic obstructive pulmonary disease second-

ary to purulent bronchitis.

20. On February 14, 1989 [just two weeks before

signing the “good health” certificate], Mr. Mearl M. Mil-

ler, deceased, visited Dr. Lorino’s office and was noted to

continue to have a lot of trouble with air flow obstruction

and wheezing despite high doses of corticosteroid use, as

well as other bronchodilator medications.

21. Mearl M. Miller’s health had deteriorated to such

an extent that he had to be driven by others for at least

two years prior to his signing the “good health” state-

ment.

18a

22. For at least two years prior to signing the “good

health” certificate, the deceased, Mearl M. Miller, could

not walk long distances without severe loss of breath.

23. The deceased, Mearl M. Miller, was in extremely

bad health at the time of his execution of the “good

health” statement.

PLAINTIFFS’ KNOWLEDGE OF

DECEDENT’S POOR HEALTH

24. Plaintiff, Joyce Miller McLeod, Mearl M. Mil-

ler’s surviving widow, believed him to be in severely poor

health at the time of his execution of the “good health”

statement.

25. Plaintiff, Paula Goss, does not dispute Ford Life’s

contention that Mearl M. Miller was in severely poor

health at the time of his execution of the “good health”

statement, and states that the deceased, Mearl M. Miller,

“did not know from this day to the next if he would still

be alive or not.”

DECEDENTS’ KNOWLEDGE OF POOR HEALTH

26. At the time that he signed the “good health” state-

ment, the deceased, Mearl M. Miller, knew that he was

in poor health.

27. Emphysema is a permanent, progressive, non-

reversible disease.

EXTENT OF RELIANCE BY PAULA GOSS

28. Plaintiff Paula Goss did not provide her vehicle

as a trade-in, for, nor did she provide any other consider-

ation for Mearl M. Miller’s purchase of the vehicle in

question from Treadwell Ford; instead, it was an estab-

lished practice, followed in this instance, for the deceased,

Mearl M. Miller, prior to purchasing a newer vehicle, to

swap vehicles with his daughter, Paula Goss, and then

19a

use the vehicle obtained from her as his trade-in on the

newer vehicle.

29. The referenced swap of vehicles between deceased

and his daughter, in this instance, occurred on February

25, 1989, three days before the deceased, Mearl M. Mil-

ler, purchased the subject vehicle and the Group Credit

Life Insurance coverage in question.

IDENTITY OF TREADWELL EMPLOYEE

30. Plaintiffs have not sufficiently identified and can-

not sufficiently identify the Treadwell Ford employee who

allegedly sold them, and allegedly made the misrepresenta-

tions regarding, the Credit Life Insurance policy. They

do not know his name, approximate weight, height, color

of hair or whether he wore glasses; the only thing they

know for certain is that he was a white male, and that

they would not recognize him if they saw him today.

In fact, Plaintiff Paula Goss and her husband Howard

Goss do not even agree as to the title of the unidentified

Treadwell employee who allegedly made the fraudulent

misrepresentations, or the capacity in which he was acting.

Howard Goss, husband of Plaintiff, Paula Goss, states

it was the “used car manager”; Plaintiff Paula Goss states

is was the “insurance guy”.

SCOPE OF AGENCY

31. Robert Wayne Sparks, the Treadwell employee

who was [at the time the deceased, Mearl M. Miller, ac-

quired the referenced Group Credit Life Insurance Policy]

designated by Ford Life as its agent, was a “soliciting

agent” who had no authority to change, alter, vary or

waive any of the terms or conditions contained in the

policies.

32. According to the terms of the controlling agree-

ment executed between Treadwell Ford (Sparks’ em-

ployer) and Ford Life jin effect at the time of and prior

20a

to the alleged misrepresentations of Treadwell Ford’s em-

ployee]:

No agent is authorized to alter or amend this

Policy or any Certificate issued hereunder, to waive

any conditions or restrictions contained herein, to

extend the time for paying a premium, or to bind

Ford Life by making any promises or representations

or by giving or receiving any information. This Pol-

icy or any Certificate issued hereunder can not be

amended or altered or its conditions waived in any

respect except by written agreement endorsed hereon

or attached heretu and signed by an authorized of-

ficer of Ford Life.

33. Robert Wayne Sparks, at the time of the alleged

misrepresentations by Treadwell Ford’s employee, was

registered as a “limited agent”, not a general agent, of

Ford Life with the Department of Insurance of the State

of Alabama.

DATE OF DEATH & SUBSEQUENT EVENTS

34. Mearl M. Miller died on January 9, 1990.

35. Mearl M. Miller died a pulmonary death caused

by emphysema and lung cancer working in conjunction

with each other.

36. Mearl M. Miller, deceased, would have died from

the complications existing on the day that he signed the

“good health” statement had he not contracted cancer.

37. On or about March 5, 1990, Central Bank of the

South filed a Notice of Mearl M. Miller’s death, and a

Statement of Claim.

38. On or about May 9, 1990, after an investigation

of the records of S.T. Guttman, M.D., Singing River Hos-

pital, Ocean Springs Hospital, and Gary Groff, M.D.,

which were received by Ford Life prior to its denial of

the claim form, defendant-Ford Life rejected Central

| ? '

2la

Bank’s claim under the policy, and sent copies of the

rejection letter to the Estate of Mearl M. Miller, deceased,

and to Treadwell Ford.

39. Although Central Bank of the South and Tread-

well Ford received their copies of the May 9, 1990, letter

denying Central Bank’s claim, Joyce Miller McLeod, as

Administratrix of the Estate of Mearl M. Miller, deceased,

denies ever receiving a copy of said May 9, 1990 letter

from Defendant-Ford Life.

40. Neither Joyce Miller, individually nor Joyce

Miller McLeod, as Administratrix of the Estate of Mearl

M. Miller, deceased, has submitted to Ford Life any claim

form or proof of loss seeking benefits under the policy.

41. Plaintiff Paula Goss has not contacted Defendant-

Ford Life concerning her father’s death, and neither has

She filed the requisite claim form or proof of loss.

42. Plaintiff Joyce Miller McLeod received notice of

the denial of Central Bank’s claim, at the very latest, in

June or July of 1990, but took no Steps to investigate

why the claim was denied.

SUPPLEMENTAL FINDINGS OF FACT

CONCERNING THE AFFIDAVIT OF PAULA GOSS

The affidavit of Plaintiff, Paula Goss, filed in opposi-

tion to the Defendants’ Motions for Summary Judgment:

(a) is entitled to no weight or consideration as re-

gards the following allegations of the affidavit since such

allegations contradict the following deposition testimony

of the affiant:

CONTRADICTORY

AFFIDAVIT ARGUMENTS DEPOSITION TESTIMONY

1. “{A]fter being apprised of Q: “Did he [the agent] make a

my father’s health condition, promise to him [Mearl Miller]

[the agent] indicated that would that he would do something

not be a ‘problem’ and that the extra if he would buy that credit

insurance would be effective.” life?”

Pg. 2. A: “No.” Pg. 38, Ins. 19-21.

22a

Q: “Was there any discussions

with regard to . . . what benefits

would or wouldn’t be paid under

the coverage?”

A: “No.”

Q: “Wasn’t discussed at all?”

A: “No.” 2nd Dep., Pg. 11, 1n.

23 through Pg. 12, In. 10.

2. “I allowed my 1978 Chevrolet Q: “[Y]Jou all had made the

Impala station wagon to be deal that you were going to swap

traded in toward the purchase’ those two vehicles even before

of the new car.” Pg. 3. you went shopping for the ’85

. is that correct?”

A: “Yes.” 2nd Dep. Pg. 9, Ins.

1-4,

Q: “But as far as the method

of trading the cars, that was

something you agreed on, and

you had done something similar

in the past.”

A: “Yes. This was not the first

time.”

Q: “And, that was a fair deal

from your point of view; is that

right?”

A: “Yes. I got a good car out

of the deal.” Pg. 14 Ins. 5-11.

(b) is entitled to no weight or consideration as regards

the following allegations of the affidavit since such alle-

gations are hearsay, not based on first hand personal

knowledge, not authenticated, and are argumentative,

speculative, conclusory, conjectural, and self-serving:

1. “The factual allegations contained therein [the Sec-

ond Amended Complaint] are true and correct.” Pg. 2.

2. “At the time neither my father nor myself were

aware that he had any health problems of significance

other than emphysema.” Pg. 2.

23a

3. “It was that condition [lung cancer], not emphy-

sema, which caused his death.” Pg. 2.

4. “Had we been advised that my father’s emphysema

condition violated the ‘good health certificate’ on the in-

surance application . . . we would not have paid for that

insurance.” Pg. 2.

5. “We had no reason to dispute or doubt the Ford

Life sales agent’s representations and assurances made

with respect to my father being covered by the policy.”

Pg. 2.

6. “The ‘good health certificate’ was somewhat vague

ie a a

7. “(W]e fully discussed my father’s health condition

with the sales agent.” Pg. 3.

8. “It was our impression that the [sales agent] had a

great deal more experience in handling matters of this sort

than we did and, as such, we trusted him when he told us

that the emphysema did not violate the good health pro-

vision.” Pg. 3.

9. “We did not discover that the representations made

to us . . . were false until some time after . . . May 9,

1990.” Pg. 3.

10. “Our discovery of Defendants’ fraudulent activi-

ties was within two years preceding the filing of this

lawsuit.” Pg. 3. |

11. “as a result of Ford Life not paying on its policy

as represented, both Joyce Miller and myself have been

directly injured.” Pg. 4.

12. “[W]e [Joyce Miller and Paula Goss] as individ-

uals and as beneficiaries of my father’s estate, have lost

the amounts paid down for the purchase of the LTD and

the amounts paid on the loan prior to my father’s death.”

Pg. 4.

24a

13. “If [the sales agent] had told me the truth... I

| certainly wouldn’t have traded in my car toward purchase

| of the new vehicle.” Pg. 5.

14. “I feel sure my father wouldn’t have bought the

— insurance if we had been advised of that.” Pg. 5.

15. “If... we couldn’t buy the car without the in-

surance, we wouldn’t have bought the car.” Pg. 5.

16. “I feel we were lied to, that my father and I relied

upon the [agent] to tell me the truth, that we were not

told the truth, and that my mother and I have been dam-

aged in a variety of ways as a result.” Pg. 5.

17. “My perception is that if Ford Life can avoid the

consequences of its wrong doings . . . they will be able to

continue doing this to many, many, more people.” Pg. 5.

CONCLUSIONS OF LAW

SUMMARY JUDGMENT

1. When a summary judgment motion is filed, the

movant bears the initial burden of making a prima facie

showing that no genuine issue of material fact exists and

that he is entitled to a judgment as a matter of law.

56(c), ARCP; Tripp v. Humana, Inc., 474 So.2d 88

(Ala.1985); Duncan v. Auto Owners Insurance Co., 592

So.2d 568 (Ala.1992).

2. Once the movant meets his initial burden, the bur-

den shifts to the non-movant to rebut this initial show-

ing by producing substantial evidence creating a genuine

issue of material fact or by showing that the movant is

not entitled to a judgment as a matter of law. Section

12-21-12, Code of Alabama, 1975, (Supp. 1988); Dun-

can v. Auto Owners Insurance Co., 592 So.2d 568 (Ala.

1992); West v. Founders Life Ins. Co. of Florida, 547

So.2d 870, 871 (Ala.1989).

3. The trial court in considering a motion for sum-

mary judgment must consider the movant’s evidence as

eT aa ea Neen

25a

uncontroverted and enter summary judgment if the op-

posing affidavit does not contradict that presented by the

movant. Garrison v. Stanford, 586 So.2d | (Ala.Civ.

App.1991); Turner v. Systems Fuel, Inc., 475 So.2d 539

(Ala.1985).

4. An affidavit opposing a motion for summary judg-

ment must be made on personal knowledge and must set

forth facts to show that the evidence would be admissible

as testimony to contradict the movant’s evidence. Craw-

ford v. Hall, 531 So.2d 874 (Ala. 1988); Richardson

v. Kroger Co., 521 So.2d 934 (Ala.1988); Butler v.

Michigan Mutual Ins. Co., 402 So.2d 949 (Ala.1981);

Arrington v. Working Woman’s Home, 368 So.2d 851

(Ala.1979).

5. Matters based upon “information” and “belief” are

essentially hearsay, and are insufficient to raise a material

issue of fact in order to bar summary judgment. Gray

v. Reynolds, 533 So.2d 68, 78 (Ala. 1989): Welch v.

Houston County Hospital Board, 502 So.2d 340 (Ala.

1987).

6. An affidavit opposing a motion for summary judg-

ment may not contradict prior deposition testimony of

that person or party. Robinson v. Hank Roberts, Inc.,

514 So.2d 958, 961 (Ala.1987) citing Van T. Junkins

& Associates, Inc. v. U.S. Industries, Inc., 736 F.2d 656,

657 (11th Cir. 1984):

“When a party has given clear answers to unam-

biguous questions which negate the existence of any

genuine issue of material fact, that party can not

thereafter create such an issue with an affidavit that

merely contradicts without explanation previously

given clear testimony.”

7. Summary judgment is not prevented by conclusive

allegations or speculation that a fact issue exists. Murray

v. Timberlake, 564 So.2d 885 ( Ala.1990); Williams vy.

Palmer, 277 Ala. 188, 168 So.2d 220 (Ala.1964);

26a

Charles J. Arndt, Inc. v. City of Birmingham, 547 So.2d

397 (Ala.1989).

8. Bare arguments or conjecture will not satisfy the

burden of a party opposing summary judgment to offer

facts to defeat the motion. Riggs v. Bell, 564 So.2 882

(Ala.1990); Thibodeaux v. Holk, 540 So.2d 1378 (Ala.

1989).

9. Affidavits opposing motions for summary judgment

must be filed and served at least two (2) days prior to

the hearing on the motion. (56(c)(2) ARCP.

10. In deciding whether to grant or deny a motion for

summary judgment, the trial court can consider only the

material before it at the time of submission of the motion,

and any material filed after submission is too late. Garri-

son v. Stanford, 586 So.2d 1, (Ala. Civ. App. 1991);

Willis v. Ideal Basic Industries, Inc., 484 So.2d 444 (Ala.

1986); Mathis v. Jim Skinner Ford, Inc., 361 So.2d 113

(Ala. 1978).

11. In considering whether to allow supplemental af-

fidavits, the trial court may, at its discretion, consider a

tardy affidavit if it is presented to him before his ruling

on the summary judgment motion. 56(e), ARCP; Guess

v. Snyder, 378 So.2d 691, 693 (Ala. 1979); Moore v.

Glover, 501 So.2d 1197 (Ala. 1986); Roscoe v. Jones,

571 So.2d 1039 (Ala. 1990).

12. The mere pendency of discovery does not bar

summary judgment; rather, the burden is upon the non-

moving party to show that the evidence subject to pro-

duction or the answers to the interrogatories were crucial

to the non-moving party’s case. Hirsch v. Board of Com-

missioners of Alabama State Bar, 533 F.2d 942 (Sth

Cir., 1976); Noble v. McManus, 404 So.2d 248 (Ala.

1987); Reeves v. Porter, 521 So.2d 963 (Ala. 1988);

Waterview Development, Inc. v. Eureka, Inc., 512 So.2d

916 (Ala. 1987).

27a

CONTRACT

13. The only proper parties in a suit for life insurance

policy benefits are the named insureds (if other than the

decedent), the administratrix of the Estate, and possibly

named beneficiaries if payable to other than the Estate.

Cincinnati Insurance Co. v. Girod, 570 So.2d 595 (Ala.

1990); Coastal States Life Insurance Co. vy. Glass, 278

Ala. 656, 180 So.2d 255 (Ala.1965).

14. An insurance policy is unenforceable if the in-

sured makes statements that were: (a.) fraudulent; (b.)

material either to the acceptance of the risk or to the

hazard assumed by the insurer; or, (c.) if the insurer

in good faith would either not have issued the policy or

would not have issued a policy at the premium rate as

applied for. Section 27-14-7, Code of Alabama (1975).

15. Insurers have the right to expect policy applicants

to tell the truth, and they do not have a duty to inquire

further to verify that the applicant has told them the

truth. American General Life & Accident Ins. Co. v.

Lyles, 540 So.2d 696 (Ala. 1988): Old Southern Life

Insurance Co., Inc. v. Spann, 472 So.2d 987 (Ala.

1985).

16. Under the statute, insurers may void a policy even

if the decedent made innocent misrepresentations. Section

27-14-7, Code of Alabama (1975); Duren v. Northwest-

ern National Life Ins. Co., 581 So.2d 810 (Ala.1991);

Taylor v. Golden Rule Ins. Co., 544 So.2d 932 (Ala.

1989).

17. The existence and scope of an agency relationship

is for the jury to determine only “where the evidence is

in conflict.” St. Paul Fire and Marine Insurance Co. v.

Anderson, 358 So.2d 151 at 158 (Ala. Civ. App. 1977),

citing Treadwell Ford, Inc. v. Wallace, 49 Ala.App. 308,

271 So.2d 505 (1973).

18. Agents may only bind their principal insurance

companies in one of two ways: either they are general

|

|

28a

agents, with the actual authority to bind their principals,

or they are somewhat less than general agents, with the

apparent authority to bind their principals. McGhee v.

Paramount Life Insurance Co., 385 So.2d 969 (Ala.

1980); Hartford Accident & Indemnity Co. v. Oglesby,

293 Ala. 602, 308 So.2d 695 (1975); Fidelity & Cas-

ualty of New York v. Thomas, 315 F.Supp. 89 (M.D.

Ala. 1970).

19. “The doctrine of apparent authority does not rest

upon what one thinks an agent’s authority may be, or

what the agent holds out his authority to be. Rather, the

doctrine of apparent authority is based on the principal’s

holding the agent out to a third person as having the

authority under which he acts.” Automotive Acceptance

Corp. v. Powell, 45 Ala.App. 596, 234 So.2d 593

(1969).

20. Unlike a “general agent,” a “soliciting agent” has

no authority to bind his insurer principal in contract, nor

does he have the power to alter the contract. Coleman

v. Tabor, 572 So.2d 399 (Ala.1990); Autrey v. Blue

Cross and Blue Shield of Alabama, 481 So.2d 381 (Ala.

1985); Walton v. Prudential Insurance Co., 399 So.2d

285 (Ala.1981); McGhee v. Paramount Life Insurance

Co., 385 So.2d 969 (Ala. 1980) citing Liberty National

Life Insurance Co. v. Stages, 242 Ala. 363, 6 So.2d 432

(1942).

BAD FAITH

21. A successful claim for relief asserting bad faith

must show: (1) the existence of an insurance contract;

(2) breach by the insurer; (3) intentional refusal to pay

the insurance claim; (4) absence of any legitimate or

debatable reason for refusal: (5) the insurer’s actual

knowledge of the absence of an arguable reason; and,

(6) the insurance company’s intentional failure to deter-

mine whether there was a legitimate or arguable reason

to refuse to pay the claim. Aplin v. American Sec. Ins.

Co., 568 So.2d 757 (Ala. 1990); Koch v. State Farm

29a

Fire and Casualty Co., 565 So.2d 226 (Ala. 1990);

Continental Electric v. American Employers Insurance

Co., 518 So.2d 83, 86 (Ala.1987); Mueller v. Hartford

Ins. Co. of Ala., 474 So.2d 554, 556 (Ala.1985).

22. In order for an insured to recover on a bad faith

claim, insured must show that if the contract had been

tried on the date of denial the insured would have been

entitled to a directed verdict. Smith v. NBL Assurance

Corp., 589 So.2d 691 (Ala.1991); Cook v. Trinity Uni-

versal, 584 So.2d 813 (Ala.1991): Koch v. State Farm

Fire & Casualty Co., 565 So.2d 226 (Ala.1990); Jn-

surance Co. v. Citizens Bank, 491 So.2d 80 (Ala.1986).

23. The burden upon Plaintiffs of proving no “debat-

able reason” is an onerous one: “that means an arguable

reason, one that is open to dispute or question.” Na-

tional Security Fire & Casualty Co. v. Bowen, 417 So.2d

179, 183 (Ala.1992). “[{T]he insured must eliminate any

arguable reason propounded by the insurer for refusing

to pay the claim.” Burns v. Motors Ins. Corp., 530 So.2d

824, 827 (Ala. Civ. App. 1987).

FRAUD

24. Fraud based claims of relief categorically do not

survive in favor of the deceased’s personal representative.

Section 6-5-462, Code of Alabama (1975); Davis y.

Southern Life Insurance Co., 494 So.2d 48 (Ala.1986).

25. The basic elements of fraudulent misrepresenta-

tion are: (a.) misrepresentation of a material fact; (b.)

made willfully to deceive or recklessly without knowledge;

(c.) justifiable reliance the Plaintiff; and, (d.) damages.

Bama Budweiser vy. Anheuser-Busch, 611 So.2d 238

(Ala.1992) citing Herrington yv. Johnson, Ross and

Hayes, Inc., 577 So.2d 537 (Ala.1991); Continental

Electric Co., et al, v. America Employers Insurance Co..,

518 So.2d 83 (Ala.1987); Taylor v. Moorman Manu-

facturing Co., 475 So.2d 1187 (Ala.1985); and Land

30a

and Associates, Inc. v. Simmons, 562 So.2d 140 (Ala.

1989).

26. For actions in fraud, the cause of action accrues

and the statute begins to run from the time the fraud-

ulent act is committed. Myers v. Geneva Life Ins. Co.,

495 So.2d 532 (Ala.1986); Garrett v. Raytheon Co.,

368 So.2d 516 (Ala.1979).

27. Facts which invoke inquiring in the mind of a

man of reasonable prudence and which when followed

up would have led to a discovery of the fraud, constitutes

sufficient evidence of discovery. Kelly v. Alexander, 554

So.2d 344 (Ala.1989) citing Willcutt v. Union Oil Co.

of California, 432 So.2d 1217, 1919-1220 (Ala.1983);

Johnson v. Shenandoah Life Ins. Co., 291 Ala. 389, 397;

281 So.2d 636 (Ala.1973); Butler v. Guaranty Savings

and Loan Association, 251 Ala. 449; 37 So.2d 638

(1948).

28. A fraud action must be commenced within two

years of the date of discovery of the alleged fraud.

Locker v. Phoenix City Investment Co., 488 So.2d 1353

(Ala.1988); Thompson v. Vaughn, 592 So.2d 585 (Ala.

1982).

29. The burden is on the Plaintiff to show that they

come within the “saving clause” under Section 6-2-3,

Code of Alabama 1975, (Supp. 1988); Miller v. Mobile

County Board of Health, 409 So.2d 420 (Ala.1981);

Lamplighter Dinner Treater, Inc. v. Liberty Mutual Ins.

Co., 792 F.2d 1036 (11th Cir., 1986).

ADDITIONAL AND SUPPLEMENTAL

CONCLUSIONS OF LAW BASED UPON

PLAINTIFFS’ SECOND AMENDED COMPLAINT

TIMELINESS

1. As of August 1, 1992, Amended Rule 15(a) ARCP

mandates that an amendment to a complaint within forty-

two days of the first trial setting requires leave of Court

3la

and that such leave shall only be given upon a showing

of good cause.

The Committee Comments to the amended Rule 15(a)

States:

“Because an amendment within the forty-two day

period will frequently force a continuance of the trial

of the case, the Committee anticipates that such an

amendment will not be allowed as a matter of course.

Consequently, the Rule requires a showing of good

cause for any amendment within this period.”

FRAUDULENT CONCEALMENT/BREACH OF

FIDUCIARY DUTY

2. The essential elements of fraud by silence are: (a.)

a duty to disclose the facts; (b.) concealment or non-

disclosure of material facts; (c.) inducement of the Plain-

tiff to act; and, (d.) action by the Plaintiff to his injury.

Bama Budweiser v. Anheuser-Busch, 611 So.2d 238 (Ala.

1992) (citing Wilson v. Brown, 496 So.2d 756 (Ala.

1986).

3. Whether that duty to disclose exists is a legal ques-

tion to be determined by the Court. Berkland Co. Con-

tractors v. Providence Hospital, 454 So.2d 496 (Ala.

1984); Dominick v. Dixie National Life Insurance Co.,

809 F.2d 1559 (11th Cir., 1987).

4. Mere silence is not a fraud, unless a confidential

relations or special circumstance exist. Section 6-5-102,

Code of Alabama (1975): Berkland Co. Contractors v.

Providence Hospital, 454 So.2d 496 ( Ala.1984); Ham-

mond v. City of Gadsden, 493 So.2d 1374 (Ala.1986);

Cary v. Kirkland, 514 So.2d 970 (Ala. 1987).

5. In situations where both parties are knowledge-

able, there is no duty of disclosure on behalf of one party

for the benefit of another party. Trio Broadcasters, Inc.

v. Ward, 495 So.2d 621. Dominick y. Dixie National

Life Insurance Co., 809 F.2d 1559 (11th Cir., 1987).

32a

6. Sellers of insurance have no fiduciary relationship

precipitating a duty to disclose while negotiating a con-

tract. Although an insurance salesman has been held to

be an agent of the insured, the insurer, or both, an in-

surance salesman is not an agent of the insured until the

insurence contract has been concluded. Boyette v. Wolf

Bay Associates, 568 So.2d 765 (Ala.1990); Washington

National Insurance Co. v. Strickland, 491 So.2d 872,

874-875 (Ala.1985); Highland Underwriters Ins. Co. v.

Elegant End, Inc., 361 So.2d 1016 (Ala.1978).

NEGLIGENCE

7. Negligence has three essential elements: (1) A

duty owed to the Plaintiff by the Defendant; (2) breach

of that duty; and, (3) injury proximately caused by the

breach. Beathea v. Escambia County, 514 So.2d 872

(Ala.1987).

CONSPIRACY

8. The statute of limitations on the claim for con-

spiracy begins to run at the same time as does the statute

for the underlying fraud claim. Johnson v. Life Insurance

Co., 581 So.2d 438 (Ala.1991); Kelly v. Alexander, 554

So.2d 343 (Ala.1989).

9. When no actionable wrong remains to support it,

all claims for conspiracy must fail. Betts v. McDonald's

Corp., 567 So.2d 1252 (Ala.1990); Massengill v. Malone

Freight Lines, 538 So.2d 784 (Ala.1988); Purcell Co. v.

Spriggs Enterprises, Inc., 431 So.2d 515 (Ala.1983).

RULINGS OF THE COURT

PROCEDURE

1. The Court finds that defendant, Ford Life, has sub-

mitted substantial evidence in support of its Motion for

Summary Judgment demonstrating that it was entitled to

summary judgment as a matter of law, and therefore,

33a

the burden shifted to the plaintiffs to rebut the evidence

submitted by defendants shifted to the plaintiffs. Maharry

v. City of Gadsden, 587 So.2d 966 (Ala. 1991).

2. The Court finds that the plaintiffs have failed to

meet their burden of rebutting, by substantial evidence,

such defendant’s evidence supporting and entitling it to a

summary judgment so as to create a genuine issue of ma-

terial fact. Duncan y. Auto Owners Insurance Co., 592

So.2d 568 (Ala. 1992).

3. The Court finds that both the affidavit of Paula

Goss and the affidavit of Alan Bishop filed in opposition

to the Motions for Summary Judgment are clearly un-

timely. First, the affidavit of Paula Goss was filed on the

same day that such defendant’s Motion for Summary Judg-

ment was argued, and thus violated ARCP 56(c)(2)

which requires that such affidavit be filed with the court

two days before oral argument. Next, the affidavit of

Alan Bishop was filed three days after the Court took

this defendant’s Motion for Summary Judgment under

submission. Garrison y. Stanford, 586 So.2d 1 (Ala. Civ.

App. (1991). Further, the Court did not order a con-

tinuance to permit the filing of additional evidence nor

did the Court order that the parties could further supple-

ment the evidence in the record before the Court as

allowed by Alabama Rules of Civil Procedure, Rule 56(f).

These items of evidence, are, therefore, barred from con-

sideration by the Court in rendering this Order.

4. Notwithstanding the untimely filing which bars the

affidavit of Paul Goss from the Court’s consideration, the

Court further finds that the affidavit of Paula Goss is sub-

Stantively barred, and entitled to no weight nor consid-

eration since it contains testimony, contradictory of pre-

vious deposition testimony of the affiant; hearsay; state-

ments not based upon personal knowledge; statements

that are not authenticated; and argumentative, specula-

tive, and conclusory allegations. Crawford v. Hall, 531

So.2d 874 (Ala. 1988); Murray v. Timberlake, 564 So.2d

885 (Ala. 1990).

34a

5. The Court finds that plaintiffs have failed to show

that any sought or/and outstanding discovery is crucial to

their case. Reeves v. Porter, 521 So.2d 963 (Ala. 1988).

CONTRACT CLAIMS OF RELIEF

6. The Court finds that neither plaintiffs, Paula Goss,

nor Joyce Miller, individually, has standing to assert a

claim for relief under the insurance policy against defend-

ant, Ford Life, because the only proper party to assert

a claim on the policy is the administratrix of Mearl M.

Miller’s estate. Cincinnati Insurance Co. v. Girod, 570

So.2d 595 (Ala. 1990).

7. The Court further finds that the claim for relief on

the policy by Joyce Miller as administratrix of Mearl

Miller’s estate fails because the decedent, Mearl Miller,

by signing the “good health” statement, knowing that he

had severe emphysema and was in bad health, categori-

cally made a fraudulent statement, or a false statement

that materially increased defendant, Ford Life’s, risk of

loss. Consequently, the insurance policy is unenforce-

able. Section 27-14-7, Code of Alabama (1975).

8. The Court finds that plaintiffs have not, and, by

their own admission, can not properly identify nor au-

thenticate the Treadwell Employee who made the alleged

misrepresentations.

9. The Court finds that Robert Wayne Sparks, even

if plaintiffs could have proved he was the Treadwell em-

ployee with whom they dealt, was, at the time that de-

cedent, Mearl Miller, purchased the Group Term Insur-

ance policy, a “soliciting agent” for Ford Life and as such

had no authority to alter the written contract. Coleman

v. Tabor, 572 So.2d 399 (Ala. 1990).

10. The Court finds that defendant, Ford Life, has

not been shown to have held Robert Wayne Sparks out

to anyone as having the authority to alter the written

insurance agreement. On the contrary, the dealer agree-

ee

35a

ment between Treadwell Ford and Ford Life, and the

agency agreement between Ford Life and Mr. Sparks

declare that Mr. Sparks had no authority to alter the

contract. Consequently, plaintiffs are barred from en-

forcing the contract. Automotive Acceptance Corp. v.

Powell, 45 Ala. App. 596, 234 So.2d 593.

BAD FAITH CLAIMS OF RELIEF

11. Plaintiffs have not met the onerous burden re-

quired to recover on a bad faith claim, namely, that if

the contract had been tried on the date of denial the in-

sured would have been entitled to a directed verdict.

Smith v. NBL Assurance Corp., 589 So.2d 691 (Ala.

1991).

12. Because plaintiff Paula Goss and plaintiff Joyce

Miller, individually, lack Standing to assert a claim on

the contract, they lack standing to assert a claim for bad

faith; Joyce Miller, as administratrix of the estate of Mearl

Miller may not assert a claim on the contract because

of the fraudulent misrepresentations made by decedent,

Mearl Miller. Consequently, plaintiffs may not present a

claim of relief for bad faith. Cincinnati Insurance Co. y.

Girod, 570 So.2d 595 (Ala. 1990); Duren v. North-

western National Life Ins. Co., 581 So.2d 810 (Ala.

1991); Smith v. NBL Assurance Corp., 589 So.2d 691

(Ala. 1991).

13. Moreover, the Court finds that defendant, Ford

Life, had a legitimate reason for refusing to pay policy

benefits based upon the records of S.T. Guttman, M.D.,

Singing River Hospital, Ocean Springs Hospital, and Gary

Groff, M.D., which were reviewed by Ford Life prior to

denial of the claim form presented by Central Bank.

Thus, plaintiffs have not, and cannot meet their burden of

eliminating any “arguable reason” propounded by Ford

Life for refusing to pay the claim. Consequently, plain-

tiffs cannot be successful in their claim of relief for bad

faith. Aplin v. American Sec. Ins. Co., 568 So.2d 757

36a

(Ala. 1990); Burns v. Motors Ins. Corp., 530 So.2d 824

(Ala. Civ. App. 1987).

FRAUD CLAIMS OF RELIEF

14. The Court finds that plaintiffs do not have stand-

ing to sue on fraud based claims because fraud claims of

relief categorically do not survive in favor of the de-

ceased’s personal representative. Section 6-5-462, Code

of Alabama (1975); Herrington v. Johnson, Ross and

Hayes, Inc., 577 So.2d 537 (Ala. 1991).

15. The Court further finds that since the alleged mis-

representations of Treadwell Ford were made solely to

Mearl Miller and neither Joyce Miller nor Paula Goss

suffered legal detriment nor were they co-buyers of the

vehicle or credit life insurance, they have no standing to

sue for fraud. Dennis v. Magic City Dodge, Inc., 524

So.2d 616 (Ala. 1988).

16. Notwithstanding, plaintiffs’ inability to sue for

fraud due to their lack of standing, the Court finds that

even if plaintiffs had standing to sue, they are barred by

the Statute of Limitations since the statute began tolling

at the very latest on the first week of March, 1989, when

Joyce Miller discussed the necessity of the insurance policy

with decedent, Mearl M. Miller. Kelly v. Alexander, 554

So.2d 344 (Ala. 1989); Miller v. Mobile County Board

of Health, 409 So.2d 420 (Ala. 1981).

17. The Court finds that the proposed Second

Amended Complaint filed by plaintiffs on March 11,

1993, was filed ten months after the initial filing of this

law suit, without defendant’s prior consent and without

a showing of any justifiable reason for the delay in assert-

ing of same, and with sparse discovery having been con-

ducted by the plaintiffs during that time and after defend-

ants Ford Life and Treadwell Ford had filed their Mo-

tions For Summary Judgment on March 9, 1993. De-

fendant, Ford Life, timely objected to Plaintiffs’ Motion

37a

For Leave To Amend The complaint and timely filed a

motion to strike the same. Since the Amended Complaint

was filed without defendant, Ford Life’s consent, without

showing of justifiable reason for the delay in asserting

of same, and as the Amended Complaint added new

theories to the law suit after the filing of Motions For

Summary Judgment, the Court finds that allowance of

the Amended Complaint would unnecessarily delay this

action and would result in substantial, and undue preju-

dice to defendant, Ford Life. Haynes v. Ford Motor Co.,

Inc., 435 So.2d 1227 (Ala. 1983). Accordingly the mo-

tion of plaintiffs for leave to file the Amended Complaint

is DENIED and the Motion of defendant, Ford Life, to

Strike the Amended Complaint is GRANTED.

Notwithstanding the immateriality of plaintiffs’ Second

Amended Complaint because it was filed without defend-

ant, Ford Life’s consent, without a showing of justifiable

reason for the delay in asserting of same, and its addi-

tion of new theories, as completely addressed hereinabove,

the Court further finds that the new claims for relief pro-

posed in the Second Amended Complaint, like plaintiffs’

initial four claims for relief, are wholly without merit as

follows:

INTENTIONAL FAILURE TO INVESTIGATE

CLAIM OF RELIEF

18. The Court finds, based upon the records of S.T.

Guttman, M.D., Singing River Hospital, Ocean Springs

Hospital, and Gary Groff, M.D., which were received by

Ford Life Insurance Company prior to its denial of the

claim form sent it by Central Bank of the South, that

defendants c’. not intentionally fail to investigate plain-

tiffs’ claim for relief. Consequently, plaintiffs claim for

intentional failure to investigate must fail. Alpin v.

American Sec. Ins. Co., 568 So.2d 757 (Ala. 1990).

19. Moreover, to be successful against Defendant,

Ford Life, on this bad faith cause of action, Plaintiffs

38a

must show that if the contract had been tried on the date

of denial they would have been entitled to a directed ver-

dict. Plaintiff Paula Goss and Plaintiff Joyce Miller, in-

dividually, lack standing to assert a bad faith cause of

action because they lack standing to assert a claim on the

contract; Joyce Miller, as administratrix of the estate of

Mearl Miller may not assert a claim on the contract

because of the fraudulent misrepresentations made by

decedent, Mearl Miller. Consequently, Plaintiffs cannot

recover on a claim for relief for bad faith failure to in-

vestigate. Smith v. NBL Assurance Corp., 589 So.2d

691 (Ala. 1991).

FRAUDULENT CONCEALMENT/BREACH OF

FIDUCIARY DUTY

CLAIMS OF RELIEF

20. The Court finds that neither defendant Treadwell

Ford through its employee, nor defendant Ford Life

through its agent had a fiduciary relationship precipitat-

ing a duty of disclosure to Mearl M. Miller. Conse-

quently, defendant, Ford Life cannot be liable for fraud-

ulent concealment. Boyette v. Wolf Bay Associates, 568

So.2d 765 (Ala. 1990).

NEGLIGENCE CLAIM OF RELIEF

21. The Court, based upon the claims for relief pre-

sented by the plaintiffs, finds that defendant, Ford Life

had no conceivable duty to plaintiffs which they could

have breached. Hence, the claim for negligence must

fail. Bethea v. Escambia County, 514 So.2d 872 (Ala.

1987).

CONSPIRACY CLAIM OF RELIEF

22. The Court finds that since no actionable wrong

remains to support it, the claim for conspiracy must fail.

Betts v. Mcdonald’s Corp., 567 So.2d 1252 (Ala. 1990).

39a

FINAL ORDER

Upon consideration it is therefore Ordered, Adjudged,

and Decreed by the Court that:

1. The Motion of the Plaintiffs for leave to Amend

this Complaint filed March 11, 1993, is DENIED and the

Motion of Defendant, Ford Life to Strike such Amended

Complaint is GRANTED, and

2. The Motion of Defendant, Ford Life for Summary

Judgment is GRANTED and

3. The Court finds that there is no just reason for the

delay of this action and certifies this as a Final Order,

under Alabama Rules of Civil Procedure, Rule 54(b);

accordingly, this action is DISMISSED WITH PREJU-

DICE as to Defendant, Ford Life with costs taxed to the

Plaintiffs.

Dated: 3/29/93

/s/ Ferrill D. McRae

FERRILL D. MCRAE

Circuit Judge

40a

APPENDIX D

IN THE SUPREME COURT OF ALABAMA

Case No. 1921552

Joyce MILLER, Administratrix for the ESTATE OF

MEARL M. MILLER, Deceased; PAULA Goss,

Appellant,

VS.

Dosss MoBILE Bay, INc., d/b/a TREADWELL Forp,

Forp LIFE INSURANCE COMPANY, et al.,

Appellee.

DEFENDANT/APPELLEE FORD LIFE INSURANCE

COMPANY’S BRIEF IN SUPPORT OF ITS

APPLICATION FOR REHEARING

INTRODUCTION

This Honorable Court’s opinion regading Plaintiff/Ap-

pellant’s breach of contract and bad faith claims is a

cataclysmic and irreconcilable departure from established

Alabama law which, unless modified, will violate: (1)

the Due Process Clause of the Fourteenth Amendment,

(2) the Contracts Clause of Article 1, § 10, and (3)

the separation of as powers set forth in §§ 41 and 43

of the Alabama Constitution of 1901, as amended.

In its original opinion, this Court correctly affirmed the

trial court’s summary judgment on all claims for fraud

because none of the Plaintiffs suffered a legal detriment

in connection with the purchase of the credit life insur-

ance. Also, this Court correctly affirmed the trial court’s

4la

discretionary denial of Plaintiff's request to amend the

Complaint and add numerous new claims.

However, this Honorable Court, by reversing summary

judgment in favor of Ford Life on Plaintiff’s breach of

contract claim, so egregiously strayed from established

Alabama law that it, in effect, overruled fundamental

principles of agency law which prohibit soliciting agents

from binding insurers when the explicit and unambigu-

ous language of the insurance application and policy ex-

pressly forbid modification or waiver without the express,

written consent of the insurer. Moreover, by reversing

summary judgment in favor of Ford Life on Plaintiff’s

breach of contract claim, this Court violated the clear

and unambiguous language of § 27-14-7 Code of Alabama

(1975) which afforded insurer’s limited protection against

fraudulent claims by allowing them to deny the existence

of a contract when the insured made misrepresentations

in the application for insurance.

To support its departure from established law, this

Court was forced to manipulate a remedy, the use of

which, prior to this Court’s decision in the case sub

judice, was limited to innocent insurance applicants who

in no way participated in the fraud perpetrated by the

soliciting agent upon the insurer. However, the undis-

puted evidence before this Court reveals that Mr. Miller,

at the very least, committed a misdemeanor when he

applied for credit life insurance and signed a Certificate

of Good Health knowing that in fact, he was in bad

health. Prior to the ruling sub judice, such an action

would support, rather than belie, an insurer’s denial of a

claim under § 27-14-7 Code of Alabama (1975 ), and,

prior to the ruling sub judice, such a criminal act would

preclude this Court from fashioning a remedy to accom-

modate the wrongdoer at the expense of the innocent

insurer.

After implicitly overruling a century’s worth of Ala-

bama law regarding a soliciting agent’s lack of authority

42a

to bind an insurer in contract, and after creating a here-

tofore unrecognized exception to § 27-14-7 Code of Ala-

bama (1975) (which emasculates the statute and violates

the Alabama legislature’s right to legislate) the accom-

modating one who committed, at the very least, a mis-

demeanor, this Honorable Court, without even discussing

the merits (or lack thereof) of Plaintiff's bad faith claim,

reversed summary judgment thereon.

This Court, by implicitly overruling established Ala-

bama common law, fashioning a new and expansive ex-

ception to § 27-14-7 Code of Alabama (1975), and,

remanding the case for trial on Plaintiff's bad faith claim,

without even acknowledging that Plaintiff's burden for

presenting a primae facie case on her bad faith claim

at the summary judgment stage was substantially more

onerous than that required to present a primae facie case

on her breach of contract claim, and, further without

even counterbalancing this Court’s rationale for remand-

ing Plaintiff's bad faith claim against the substantially and

undeniably adverse affect such a retrospective decision

would impose upon Ford Life, so offends tradtional no-

tions of fair play and substantial justice as to deny Ford

Life Due Process of law under the Fourteenth Amend-

ment of the United States Constitution, so denies Ford

Life its freedom to contract as to violate the Contract’s

Clause of Article 1, § 10 of the United States Constitu-

tion, and so impedes upon the Alabama Legislature’s

clear and unambiguous rules and regulations regarding

insurance contracts as to violate §§ 41 and 43 of the

Constitution of Alabama 1901, as amended.

I. SOLICITING AGENT'S AUTHORITY TO

BIND INSURER

“We disagree with the trial court’s conclusion that the

Ford Life representative, as a soliciting agent, could not

legally bind the company.” Miller at 9. This Honorable

Court’s ruling regarding Appellant’s breach of contract

claim is a serious and irreconcilable departure from es-

43a

tablished Alabama law. Heretofore, the settled law in

Alabama has been that soliciting agents do not have the

authority to bind insurers in the face of explicit con-

tractual language to the contrary '.

In Security Life and Trust Co. v. Galin, 280 Ala. 325,

193 So.2d 766 (1967) this Court stated:

“An agent whose authority is limited to soliciting

insurance, delivering policies and collecting pre-

miums has no power to change stipulations in a con-

tract of insurance, to do so he must either be a gen-

eral agent or be specifically authorized or his course

of dealing to that extent have been ratified expressly

or impliedly. United Insurance Co. v. Headrick,

275 Ala. 594, 157 So.2d 19; Liberty National Life

Insurance Co. v. Staggs, 242 Ala. 363, 6 So.2d

432.”

Id. at 768.

In Powell v. Prudential Insurance Co., 45 So. 208

(1907), Claude Powell filed an application for life in-

1 See, Powell v. Prudential Insurance Co. of America, 45 So.

208 (1907); North Carolina Mutual Life Ins. Co. v. Kerley, 109

So. 755, 215 Ala. 100 (1926); Globe & Rutgers Fire Ins. Co. v.

Pappas, 219 Ala. 382, 122 So. 846; Banker’s Credit Life Ins. Co.

v. Ayers, 228 Ala. 407, 187 So. 23; Life Ins. Co. of Virginia v.

Newell, 228 Ala. 401, 187 So. 16; City Mortgage and Discount Co.

v. Palatine Ins. Co., 226 Ala. 179, 145 So. 490; Tutton v. Liverpool

and London and Globe Ins. Co., 237 Ala. 280, 186 So. 551; First

National Life Insurance Co. of America v. Rector, 225 Ala. 116,

142 So. 392 (1932); Jones v. Liberty National Life Ins. Co., 35

Ala. App. 52, 47 So. 2d 222, aff'd 254 Ala. 111, 47 So. 2d 227;

Jefferson Life & Casualty Co. v. Williams, 87 Ala. App. 718, 76

So. 2d 185 (1954); Herricks v. Mutual Life Ins. Co. of New York,

294 Ala. 446 818 So. 2d 6838 ( 1975) ; Watson v. Prudential Ins. Co.,

399 So. 2d 285 (Ala. 1981) ; Washington National Ins. Co. v. Strick-

land, 491 So. 2d 872 ( 1985) ; Land & Associates, Inc. v. Simmons,

562 So. 2d 140 (Ala. 1989) (cert. denied U.S. ——, 111 S. Ct.

1305, 113 L. Ed. 2d 240 (1991)): Todd v. Woodmen, 620 So. 2d 591

(Ala. 1993). =

44a

surance with Prudential. In so doing, Mr. Powell signed

a good health certificate indicating that he was in good

health. Powell also signed an acknowledgment that he

understood the policy would not take effect until it was

issued and delivered to him, with the first premium thereon

paid in full, all while he remained in good health. Powell,

at 209.

Prudential’s insurance policy expressly stated that

Powell’s application was made a part of the contract.

The policy further stated:

“No condition, provision or privilege of this policy

can be waived or modified in any case except by in

endorsement hereon signed by the President, one of

the Vice-Presidents, the Secretary, the Assistant Sec-

retary or the Actuary. No agent has power in behalf

of the company to make or modify this or any other

contract of insurance... .”

Id. at 209.

Approximately one month after applying for insurance

Mr. Powell became ill, and, approximately one month

thereafter (two months after applying for insurance), be-

fore the insurance policy was issued or the first premium

paid, Mr. Powell died. When Prudential denied a claim

tendered by Mr. Powell’s estate, the estate filed suit.

Witnesses for Mr. Powell testified that Prudential’s so-

liciting agent had assured them that Mr. Powell’s life in-

surance policy would still be good even though he was

sick. Id. at 209-210.

In rejecting the Plaintiff's claim that Prudential’s so-

liciting agent waived the policy pre-requisite, this Court

held that the insured could not be held to have been ig-

norant of the terms of his own policy, and, based upon

the language of the policy, no agent had any right to

waive them. “No conclusion can be indulged that the

agent, under such circumstances had, or could have acted

on, any real or supposed authority, for waiving any con-

45a

ditions specified as ground for forfeiture.” Jd. at 211.

To do otherwise, the Court held, “would be against the

plainest dictates of reason and justice.” Jd. at 211.

Likewise, in North Carolina Mutual Life Ins. Co. v.

Kerley, 109 So. 755, 215 Ala. 100 (1926), the life in-

surance applicant signed a “good health” statement which

was a pre-condition to issuance of the policy. The ap-

plicant paid the first month’s premium,.and the insurer

issued a policy. Subsequently, the applicant died, and the

insured denied a claim on the grounds that the applicant

in fact was in bad health when the policy was issued.

Id. at 100.

The applicant’s estate alleged, however, that the insur-

er’s soliciting agent retained the first premium paid on the

policy and delivered the policy with full knowledge of

the fact of the applicant’s poor health. The policy pro-

vided: .

“{O]nly the officers at the home office—have au-

thority to determine whether or not a policy shall

issue upon this application [which became a part

of the policy], . . . no statements, promises, or in-

formation made or given by or to the person solicit-

ing or taking this application for a policy . . . shall

be binding on the company or in any manner affect

its rights, unless such statements, . . . be reduced to

writing and presented to the officers of the company

at the home office.”

North Carolina Mutual Life Ins. v. Kerley, at 101.

In reviewing the above language of the insurance policy,

the Court held the insurer could not be bound by any in-

formation its local agent was provided, if this informa-

tion was not communicated in any manner to the officers

of the company at the home office. /d. at 101.

The language in the application and insurance policy

sub judice which prohibited the soliciting agent from in

any way modifying the application or policy and/or bind-

or

46a

ing Ford Life in contract is indistinguishable from that

contained in Powell, Kerley, and the numerous cases over

the past century wherein this Court has consistently held

that soliciting agents do not have the authority to bind

insurers in contract. Accordingly, absent a clear excep-

tion to this general principle of agency law, this Court, in

reversing the trial court’s summary judgment on Plain-

tiff’s breach of contract claim, so deviated from estab-

lished Alabama law as to, in effect, overrule over a cen-

tury’s worth of law, the existence of which, insurers, when

drafting their insurance policies and applications, have

greatly relied upon.

II. LIMITED "EXCEPTION TO A SOLICITING

AGENT’S LACK OF AUTHORITY TO BIND

AN INSURER

This Honorable Court in reversing Summary Judgment

in favor of Ford Life on Plaintiff's breach of contract

claim, relies upon a few cases that have created what

may be deemed as a “limited exception” to the law re-

garding soliciting agents. This Court recites this exception

as: “an insurance company cannot defend its refusal to

pay benefits on grounds that the insured made a misrep-

resentation in the application if the misrepresentation was

the fault of the agent and that fault was without partici-

pation by the insured.” Miller at 8.

A. The Facts of the Case Sub Judice are Distin-

guishable from Those in Which This Court has

Applied the “Limited Exception”.

To support its finding that Ford Life, because of the

alleged misrepresentation of an alleged soliciting agent,

cannot deny the existence of a contract, this Court cites

National Life & Accident Ins. Co. v. Allen, 285 Ala. 551,

234 So. 2d 567 (1970). However, the preeminent dis-

tinguishing fact of Allen and its progeny is that the insured

did not in any way participate in the misrepresentation

47a

to the insurer. In fact, in Allen and every case citing

this “limited exception” the soliciting agent, rather than

the insured, completed the insurance application. And,

in so doing, the soliciting agent either willfully failed to

illicit responses to every question of the application, or

fraudulently altered the applicant’s truthful responses

thereto. In every case, the applicant was excusably ignor-

ant of the agent’s fraud upon the insurer.

For example, in National Life & Accident Ins. Co. v.

Allen, 285 Ala. 551, 234 So. 2d 567 (1970), the life

insurance applicant was a highly unsophisticated blind

man. The soliciting agent completed the entire application

for the applicant, and, in doing so, falsely indicated the

applicant had not been treated for any condition within

the last ten years, except for his blindness. However, the

applicant in fact had been suffering from cirrhosis of the

liver, a peptic ulcer, a heart condition, and had been

treated by a physician and hospitalized within the pre-

ceding year. Allen at 553. The undisputed evidence in-

dicated that the applicant made known to the soliciting

agent the extent of his physical ailments, and, further,

because of his blindness and lack of sophistication, the

applicant was completely unaware of the soliciting agent’s

failure to adequately disclose this information on the in-

surance application. /d. at 553-554.

That the Court in Allen, before applying the limited

exception to the law that soliciting agents are prohibited

from binding insurers in contract, first expressly deter-

mined that the applicant did not in any way participate

in the fraud perpetrated upon the insurer, is not a coinci-

dence or mere convenience, rather, it is a necessity, the

absence of which precludes a remedy.”

2 See for example: First National Life insurance Co. v. Rector,

225 Ala. 116, 142 So. 392 (1932) (Applicant was unaware that

soliciting agent fraudulently failed to write down applicants dis-

closure regarding previous medical treatment); American Life

Insurance v. Buntyn, 148 So. 617 (Ala. 1933) (Soliciting agent,

48a

Unlike the innocent applicant cases wherein this Court

properly applied the limited exception to the law for-

bidding soliciting agents from modifying insurance con-

tracts, Mr. Miller actively participated in the misrepre-

sentation perpetrated upon Ford Life. As this Court

properly recognized in its opinion, irrespective of any

oral statements allegedly made by Ford Life’s alleged

soliciting agent, it is undisputed that Mr. Miller read the

insurance application containing a Certificate of Good

Health, understood purchasing the insurance was optional

(Mr. Miller later told his wife that he knew, irrespective

of the alleged mistatements by the alleged Ford Life solic-

iting agent, that purchase of the insurance was not a

mandatory) (C 1085-1086), and knew that purchasing

credit life insurance while in bad health precluded pay-

ment thereon (C 1103), however, Mr. Miller still signed

the good health certificate knowing that he was in fact,

in bad health.

while filling out application, fraudulently failed to record appli-

cant’s truthful response to insurer’s application question regarding

any prior surgical operations that insured had had his right testicle

removed) ; Interocean Casualty Co. v. Irvin, 229 Ala. 312, 156 So.

844 (1934) (Soliciting agent filled out an application for accident

and health insurance on behalf of a deaf and dumb applicant who

could neither read nor write and fraudulently misrepresented that

neither the applicant’s hearing nor vision was impaired); Com-

mercial Casualty Insurance v. Hudgens, 160 So. 106 (Ala. 1935)

(Soliciting agent while filling out the application, fraudulently

failed to record Plaintiff’s truthful responses to insurer’s applica-

tion questions) ; Coastal States Life Insurance Co. v. Leonard, 279

Ala. 171, 182 So.2d 913 (1966) (Soliciting agent filled out applica-

tion for accidental death benefits by recording applicants oral re-

sponses to the application questions, however, instead of asking

applicant all the questions contained in the application, agent

fraudently inserted his own answers to the questions). See also

Williamson v. New Orleans Inc., 84 Ala. 106 (1887); United Se-

curity Life Insurance Co. v. St. Claire, 180 So.2d 218 (Ala. 1961) ;

Alabama Farm Bureau Mutual Ins. v. Davis, 354 So.2d 15 (Ala.

Civ. App. 1978).

49a

This Court, in compliance with its obligation to con-

strue the evidence in a fashion most favorable to the

Plaintiff, found, that, at best, “the jury could find that

the only misrepresentation made by Mr. Miller came when

he signed a good health certificate.” Miller at 8. Prior

to this Court’s ruling, such evidence would have mandated

Summary Judgment in favor of Ford Life on Plaintiff's

breach of contract claim.

Moreover, Mr. Miller, in signing the good health state-

ment violated § 27-12-23 Code of Alabama, (1975)

which states:

§ 27-12-23. False statements, etc., in insurance

application.

No agent, broker, solicitor, examining physician or

other person shall knowingly make a false or fraudu-

lent statement or representation in, or relative to, an

application for insurance. Violations of this section

shall be punishable under section 27-1-12.

§ 27-1-12 Code of Alabama, (1975) provides that such

a misrepresentation constitutes a misdemeanor, punish-

able by a maximum fine of $1,000 and/or up to one year

in jail.

This Honorable Court has never before extended the

innocent applicant limited exception to the law regarding

soliciting agents to accommodate one who, in applying

for insurance, knowingly participated in the misrepre-

sentation, and, in doing so, committed a misdemeanor.

50a

B. The Court’s Unfettered Judicial Expansion Of

the “Common Law Limited Exception” to

§ 27-14-7 Code of Alabama (1975), Violates

the Principle of Separation of Powers Em-

bodied in the United States and Alabama

Constitution.

§ 27-14-7 Code of Alabama, (1975) states in part:

“(a) All statements and descriptions in any appli-

cation for an insurance policy or annuity contract,

or in negotiations therefor, by, or in behalf of, the

insured or annuitant shall be deemed to be repre-

sentations and not warranties. Misrepresentations,

omissions, concealment of facts and incorrect state-

ments shall not prevent a recovery under the policy

or contract unless either:

(1) Fraudulent;

(2) Material either to the acceptance of the

risk or to the hazard assumed by the in-

surer; Or

(3) The insurer in good faith would either not

have issued the policy or contract, or

would not have issued a policy or contract

at the premium rate as applied for, or

would not have issued a policy or contract

in as large an amount or would not have

provided coverage with respect to the haz-

ard resulting in the loss if the true facts

had been make known to the insurer as

require either by the application for the

policy or contract or otherwise.”

The Alabama Constitution of 1901, as amended, Sec-

tions 42 and 43 provide:

“Section 42. Legislative, executive and judicial de-

partments established.

S5la

The powers of the government of the State of

Alabama shall be divided into three distinct depart-

ments, each of which shall be confined to a separate

body of magistracy, to wit: Those which are legis-

lative, to one; those which are executive, to another,

and those which are judicial, to another.”

Section 43 provides in part:

“Sec. 43. Separation of powers.

. . the judicial shall never exercise the legislative

or executive powers, or either of them”.

As this Court ably recognized in Folsom v. Wynn, 631

So.2d 890, 896 (Ala. 1993), “[t]he judiciary is a sepa-

rate, independent, and co-equal branch of government.

... Judicial and legislative powers are coordinate, and

neither can encroach upon the other. Smith v. State, 581

So.2d 497 (Ala. Crim. App. 1990); see also Sparks v.

Parker, 368 So.2d 528, 531 (Ala. 1979) (Holding that

“[{w]ithin their respective spheres, each branch of govern-

ment is supreme”); Morgan County Comm'n. v. Powell,

293 So.2d 830 (Ala. 1974) (Holding that judicial power

and legislative power are coordinate, and neither can en-

croach upon the other); Ex Parte Hugaley Water Sys-

tem, 213 So.2d 799, 805 (Ala. 1968) (same).

When construing a statute, it is the duty of the court

to ascertain the legislative intent from the language used

in the enactment, and to abide thereby. Ex Parte Rodgers,

554 So.2d 1120 (Ala. 1989), and East Montgomery

Water, Sewer and Fire Protection Authority v. W

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