Reply Brief — Ford Life Insurance v. Miller

aes SEP 11 1995

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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.

On Petition for Writ of Certiorari to the

Supreme Court of Alabama

PETITIONER’S REPLY BRIEF

Of Counsel: WILLIAM L. HOWELL *

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

P.O. Box 832 P.O. Box 9458

Mobile, AL 36601 Mobile, AL 36695

(334) 484-0045 (334) 343-9510

* Counsel of Record for Petitioner,

Ford Life Insurance Company

WILSON - Eras Printinc Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001

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TABLE OF CONTENTS

ABLE OR AUT TIGII TING seinen So cctsisiscitasaeeshcicsciescstis ii

ABV SEPT RAO ahiichesctinnticcnbitleitii iain onees Nua 1

REASONS FOR GRANTING THE WRIT .................... 3

I. IRRESPECTIVE OF THE ULTIMATE FATE

OF RESPONDENT’S BAD FAITH CLAIM,

THE ALABAMA SUPREME COURT DE-

PRIVED FORD LIFE OF ITS RIGHT TO

DUE PROCESS WHEN IT REMANDED FOR

TRIAL RESPONDENT'S BAD FAITH CLAIM

DESPITE ESTABLISHED COMMON LAW

PROHIBITING SOLICITING AGENTS FROM

BINDING INSURERS IN CONTRACT AND

STATUTORY LAW PROHIBITING PREVARI-

CATORS FROM BINDING INSURERS IN

CONTRACT, AS SUCH, FORD LIFE IS EN-

TITLED TO AN IMMEDIATE APPEAL TO

RE SER TUE, 5 irsschcschdotisoiaipatics deta iatlacad ich osetia 3

GRETNA III vor viplanrdnctcnrss caretuonsnscndhy ibe dnediicesoedion ib cliciai ; R

ii

TABLE OF AUTHORITIES

Cases: Page '

Construction Laborers v. Curry, 871 U.S. 542, 83 |

S.Ct. 531, 9 L.Ed.2d 514 (1963) cake 7

Cox Broadcasting Corporation v. Cohn, 420 US.

SGD, SE Bac TI COD tinticccctictncccttinaninmitoncocis 7

Ford Life Insurance Co. v. Jones, 262 Ark. 881,

563 S.W. 2d 399 (Ark. 1978) 2

Gilliespi v. U.S. Steele Corp., 379 U.S. 148, 85 S.Ct.

SOG TB Rae BO COE cence nreetincnse 8

Hutto v. Bic Corp., 800 F.Supp. 1367 (E.D. Va.

Fe | pea RE EEG at Tan AARNE Sate RRS SRR 3,6

Miller v. Dobbs Mobile Bay, —— So. 24 ——, No.

1921552 (Ala. Feb. 24, 1995) -..2222...22....-ccccceeeceeeeee 4,5

Mills v. Alabama, 384 U.S. 214, 86 S.Ct. 1434, 16

L.Ed.2d 484 (1966) FLEE STRODE PE TE 6,7

Organization for a Better Austin v. Keefe, 402 U.S.

415, 91 S.Ct. 1575, 29 L.Ed.2d 1 (1971) -........... 7 |

Pope v. Atlantic C. L. R. Co., 345 U.S. 379, 73 S.Ct.

749, 97 L.Ed.2d 1094 (1968) ~.............02...2.0cc-c00-- 7

Powell v. Prudential Ins. Co. of America, 45 So.

ye. , 4 gee AMIE at tie em a aN EOS OO A 4

Radio Station WOW, Inc. v. Johnson, 326 U.S., at

396. GE Ce OO BAe oii eee ee 8

Richfield Oil Corp. v. State Board, 329 U.S. 69, 67

S.Ct. 156, 91 L.Ed. 80 (1946) .........2......cccccccmeeceeee 7

Transflock, Inc. v. United States, 765 F.Supp. 750

Se Wi RIN AE PEMAE 5 APPA pe OES RIO 3, 6

Constitutions and statutes:

§ 27-14-7 Code of Alabama (1975) .......................... 4, 5,6

In THE

Supreme Court of the United States

OCTOBER TERM, 1995

No. 95-67

Forp LIFE INSURANCE COMPANY,

- Petitioner,

JOYCE MILLER,

Administratrix for the ESTATE OF MEARL M. MILLER,

Respondent.

On Petition for Writ of Certiorari to the

Supreme Court of Alabama

-PETITIONER’S REPLY BRIEF

INTRODUCTION

Respondent’s Brief in Opposition to the Petition for

Writ of Certiorari is replete with allegations masquerad-

ing as facts. For example, Respondent proffers as a “key

fact” upon which the Alabama Supreme Court based its

decision: “Ford Life’s agents were told not to relay in-

formation they learned about an applicant's health to

Ford Life so that Ford Life could (theoretically) deny

such claims with impunity.”* Tellingly, Respondent

makes no reference to the Record to support this spurious

allegation. Respondent knows she has not presented a

1 Respondent’s Brief in Opposition to Petition for Writ of Cer-

tiorari, p. 2.

2

scintilla of evidence that would justify such a rash allega-

tion; instead, Respondent adopts “facts” which would pre-

sent her case in the most favorable light before this

Court.’

Yet, Respondent cannot be blamed for her misstate-

ment of the facts and issues before this Court—this same

tactic, when employed before the Alabama Supreme

Court, preserved an otherwise unmeritorious bad faith

claim.®

2 See Respondent’s Brief, p. 1:

“The Ford Life agent repeatedly assured Mr. Miller . . . that,

despite Mr. Miller’s emphysema, the Ford Life credit life insurance

policy would pay... .”

Paula and Harold Goss, who were present during portions of the

discussions between Mr. Miller and a Treadwell employee, claim

they could not recognize or identify the person who made the

alleged misrepresentations to Mr. Miller (C-570-71; 769; 787; 1113-

1114)—Respondent has never shown that the Gosses were present

during any conversations between Mr. Miller and a Ford Life

agent.

Respondent’s Brief, p. 2:

“(T lhe post-death or ‘reverse’ underwriting did not reveal any

facts which were not revealed by Mr. Miller prior to the issuance

of the policy.”

At best, Respondent has shown that Miller disclosed to a Tread-

well employee that he had emphysema, Paula and Harold Goss

admit Miller never disclosed he was receiving social security dis-

ability benefits, had retired from Ingalls Shipbuilding for medical

reasons, was suffering from disabling asthmatic bronchitis, various

other chronic obstructive pulmonary diseases, had a duodenal ulcer,

and had spent several weeks in the hospital immediately preceding

his signing the good health certificate verifying that to the best

of his knowledge he was in good health. (C-181; 188; 191; 222;

271-274; 299-300; 305-308; 584; 1084; 1129)—the testimony of

Respondent’s own witness impeach her representations that Miller

made a full disclosure of his ill health.

3In her brief before the Alabama Supreme Court, Respondent

habitually referred to Ford Life Insurance Co. v. Jones, 262 Ark.

881, 563 S.W. 2d 399 (Ark. 1978), not merely as supporting au-

3

REASONS FOR GRANTING THE WRIT

I, IRRESPECTIVE OF THE ULTIMATE FATE OF

RESPONDENT’S BAD FAITH CLAIM, THE ALA-

BAMA SUPREME COURT DEPRIVED FORD LIFE

OF ITS RIGHT TO DUE PROCESS WHEN IT RE-

MANDED FOR TRIAL RESPONDENT’S BAD

FAITH CLAIM DESPITE ESTABLISHED COM-

MON LAW PROHIBITING SOLICITING AGENTS

FROM BINDING INSURERS IN CONTRACT AND

STATUTORY LAW PROHIBITING PREVARICA-

TORS FROM BINDING INSURERS IN CONTRACT,

AS SUCH, FORD LIFE IS ENTITLED TO AN IM-

MEDIATE APPEAL TO THIS COURT.

Respondent claims the constitutional issues raised by

the Petitioner are not ripe for review because Petitioner

has suffered no punitive damages as a result of the Ala-

bama Supreme Court’s unconstitutional ruling. To sup-

port her argument, Respondent cites Hutto v. Bic Corp.,

880 F. Supp. 1367 (E.D. Va. 1992) and Transflock, Inc.

v. United States, 765 F. Supp. 750 (C.1.T. 1991).

In so doing, Respondent mischaracterizes both the is-

sues before this Court and the rulings in the cases she

cites. First, Respondent fails to acknowledge or address

that the Alabama Supreme Court, in reversing Summary

Judgment on Respondent’s breach of contract and bad

faith claims, implicitly overruled over one hundred years

of stare decisis which had prohibited soliciting agents

from binding insurers in contract. Second, Respondent

fails to acknowledge or address that the Alabama Su-

thority, but as evidence of wrongdoing in the case sub judice.

Respondent, in her brief before this Court, has not strayed from

this routine. See Respondent’s Brief, pp. 12-13.

Respondent, perhaps mindful of the frailties of her legal and

factual argument, attempts further to confuse this Court by com-

menting that Ford Life has, in the past, settled lawsuits filed

against it. This, Respondent is “evidence” of Ford Life’s miscon-

duct in this case, however, Respondent is bound by the facts of

her own case.

4

preme Court, in refusing to enforce § 27-14-7 Code of

Alabama (1975), relied upon an exception limited to

instances wherein the applicant in no way participated in,

or was made aware of, the fraud perpetrated upon the

insurer,

That the Alabama Supreme Court departed from es-

tablished common law regarding the authority of soliciting

agents to bind their insurers is inescapable. In two fac-

tually identical cases, the Alabama Supreme Court reached

directly opposite conclusions:

“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 conditions

specified as grounds of forfeiture. ... [To do other-

wise] would be against the plainest dictates of reason

and justice.”

Powell v. Prudential Ins. Co. of America, 45 So. 208

(1907).

“We disagree with the trial court’s conclusion that

the Ford Life representative, a soliciting agent, could

not legally bind the company.”

Miller v. Dobbs Mobile Bay, ——— So. 2d ——, No.

1921552 (Ala. Feb. 24, 1995) (Appendix A of Peti-

tioner’s Brief, p. 7(a)) (emphasis added).

Likewise, the Court’s ruling materially departed from

Alabama statutory law:

“(a). . . . misrepresentations, omissions, concealment

of facts and incorrect statements shall not prevent a re-

covery 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 insurer; or

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

issued the policy or contract, or would not have

5

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 known to the insurer as required either by

the application for the policy or contract or oth-

erwise.”

Excerpts of § 27-14-7 Code of Alabama (1975)

Yet, the Alabama Supreme Court still held:

“The jury could find that the only misrepresentation made

by Mr. Miller came when he signed a good health certifi-

cate.”

Miller v. Dobbs Mobile Bay, —— So. 2d ——, No.

1921552 (Ala. Feb. 24, 1995) (Appendix A of Peti-

tioner’s Brief, p. 7(a)) (emphasis added).

As thoroughly discussed in Petitioner’s preceding Brief

before this Court, the cases upon which the Alabama

Supreme Court relied in refusing to enforce § 27-14-7

Code of Alabama (1975) are, by the Court’s own admis-

sion, distinguishable from the case sub judice.

At the caprice of the Alabama Supreme Court, Ford

Life, although it neither violated the law, nor committed

an actionable tort at the time it denied Respondent’s

claim, now finds itself exposed to a jury trial on Respond-

ent’s bad faith claim. It is this retroactive liability upon

a claim requesting assessment of quasi-criminal penalties

that deprives Ford Life of its right to due process—irre-

spective of the ultimate jury verdict.

Respondent has reviewed Petitioner’s survey of Ala-

bama’s punitive damages (which documents the inequity

of Alabama’s punitive damage system) and has concluded

that Petitioner’s due process issue is premised upon Peti-

tioner’s objection to an unspecified amount of an unren-

dered verdict. Respondent’s conclusion is wrong. Peti-

6

tioner was denied its right to due process when the Ala-

bama Supreme Court ignored over a century of Alabama

common law regarding the limited authority of soliciting

agents and then refused to enforce § 27-14-7 Code of

Alabama (1975). Petitioner’s survey regarding the exces-

sive verdicts and procedural abuses suffered by out-of-

state defendants in Alabama courts merely indicates the

degree to which those rights were violated.

Despite Respondent’s representations, neither of the

cases cited by her are responsive to the due process issues

before this Court. Respondent’s first case, Hutto v. Bic

Corp., 800 F. Supp. 1367 (E.D. Va. 1992), does not

address the constitutional quagmire of retroactively ren-

dering conduct susceptible to quasi-criminal damages.

In Hutto, the court neither refused to recognize the de-

fendant’s affirmative defenses nor created a new basis for

punitive damages after commencement of the suit, and,

as such, is distinguishable from the case at hand.

At least Hutto discussed the issue of punitive damages;

Respondent’s second case, Transflock, Inc. v. United

States, 765 F. Supp. 750 (C.1.T. 1991) never discusses

punitive damages and is wholly inapplicable to the topic

for which it was cited.

This Court has ruled on a number of occasions that

when a party shows it has been deprived of a fundamental

constitutional right, appeal to this Court is warranted

even if an entire trial remains pending. Mills v. Alabama,

384 U.S. 214, 86 S.Ct. 1434, 16 L.Ed.2d 484 (1966).

In Mills, the trial Court granted that defendant’s de-

murrer to a criminal complaint on federal constitutional

grounds. The Alabama Supreme Court reversed and re-

manded the case for jury trial. This Court took jurisdic-

tion because the defendant made a showing that the Ala-

bama Supreme Court had deprived him of his consti-

tutionally mandated defense. In refusing to withhold

ruling on that issue until after defendant had undergone

a jury trial], this Court held that to dismiss the defendant’s

7

appeal “would not only be an inexcusable delay of the

benefits Congress intended to grant by providing for ap-

peal to this Court, but it would also result in a completely

unnecessary waste of time and energy in judicial systems

already troubled by delays due to congested dockets’.

Mills v. Alabama, at 217-218, 86 S.Ct. at 1436 (footnote

omitted ) .*

Petitioner’s due process issue is ripe for hearing by this

Court. Although Ford Life may prevail on Respondent’s

breach of contract and bad faith claims at trial, absent

this Court’s intervention, there would remain, unreviewed

by this Court, the Alabama Supreme Court’s ruling that

at its whimsy the laws of Alabama may be modified and

applied retroactively—even if retroactive application of

the Court’s departure from established law exposes a de-

fendant to punitive damages. Refusing to grant Petition-

er’s request for Writ of Certiorari would leave the ques-

tion as to whether the Alabama Supreme Court has such

authority to arbitrarily change the law in an uneasy and

unsettled constitutional posture that can only further harm

the operation of business in Alabama. The Alabama Su-

preme Court’s self-proclaimed independence from stare

decisis and statutory law cannot help but have a chilling

effect upon all business in Alabama because these busi-

nesses and their counsel are now left guessing as to what

the Alabama Supreme Court will recognize as binding

authority.

Finally, when a Petitioner shows that this Court’s re-

fusal to extend a Writ of Certiorari would leave unan-

swered important constitutional issues, and, at the same

4 See also Cox Broadcasting Corporation v. Cohn, 420 U.S. 469,

95 S.Ct. 1029 (1975); Organization for a Better Austin v. Keefe,

402 U.S. 415, 418 n., 91 S.Ct. 1575, 1577, 29 L.Ed.2d 1 (1971);

Construction Laborers v. Curry, 371 U.S. 542, 550-551, 83 S.Ct.

531, 536-537, 9 L.Ed.2d 514 (1963); Pope v. Atlantic C. L. R. Co.,

845 U.S. 379, 382, 73 S.Ct. 749, 750, 97 L.Ed. 1094 (1953);

Richfield Oil Corp. v. State Board, 329 U.S. 69, 73-74, 67 S.Ct

156, 158-159, 91 L.Ed. 80 (1946).

time, shows this Court’s ruling thereon could be disposi-

tive of the Petitioner’s case, this Court has customarily

granted Certiorari.° This is such a case—a finding by this

Court that the Alabama Supreme Court cannot arbitrarily

depart from stare decisis, ignore statutory law, and make

its decision retroactive, would be dispositive of Respond-

ent’s Complaint.

CONCLUSION

The issues brought before this Court in Petitioner’s Re-

quest for Writ of Certiorari are ripe for this Court’s re-

view and denial of Petitioner’s request for Writ of Cer-

tiorari would have a chilling effect on all commerce in

Alabama because such a ruling would leave unaddressed

the Alabama Supreme Court’s capricious decision to retro-

actively modify Alabama law so as to expose a defend-

ant to punitive/quasi-criminal damages. If this Court were

to refuse Petitioner’s Request for Certiorari, Alabama

businesses and their counsel would be left wondering

whether the Alabama Supreme Court will deem any ex-

isting common law or statutory law as binding upon it.

Respectfully submitted,

Of Counsel: WILLIAM L. HOWELL *

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

P.O. Box 832 P.O. Box 9458

Mobile, AL 36601 Mobile, AL 36695

(334) 434-0045 (334) 348-9510

* Counsel of Record for Petitioner,

Ford Life Insurance Company

5 See Gilliespi v. U.S. Steele Corp., 379 U.S. 148, 85 S.Ct. 308,

13 L.Ed.2d 199 (1964); Radio Station WOW, Inc. v. Johnson, 326

U.S., at 124, 65 S.Ct. at 1478.