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Birmingham Bar Association Spring 2014

Tort Law Stephen C. Jackson; Maynard, Cooper & Gale, PC Alabama Supreme Court Attempts to Clarify The Tort Law of Bad Faith In State Farm Fire and Cas. Co. v. Brechbill, _ So. 3d _, 2013 WL 5394444 (Ala. Sept. 27, 2013) (“Brechbill”), the Alabama Supreme Court waded into the murky waters of the tort of bad faith. It discussed “normal” bad faith refusal to pay and “abnormal” bad faith failure to investigate. This article addresses (1) what Brechbill actually held, and (2) what that may mean in future bad faith cases. In Brechbill, the Alabama Supreme Court attempted to clarify the law of bad faith by holding: “There is only one tort of bad-faith refusal to pay a claim, not two ‘types’ of bad faith or two separate torts”; and “The existence of an insurer’s lawful basis for denying a claim is a sufficient condition for defeating a claim that relies upon the . . . intentional or reckless failure to investigate.” Brechbill, 2013 WL 5394444, at *9- 10. Although Brechbill answered some questions, lingering issues remain. Brechbill Facts Shawn Brechbill owned a home in Lacey Springs, Alabama which was damaged in a wind storm that occurred on January 29, 2008. Brechbill submitted a claim to State Farm for exterior and interior wind damage to the home. State Farm’s adjuster inspected the house and concluded that the exterior damage to the roof shingles was covered by Brechbill’s insurance policy. State Farm retained an engineer to determine the cause of the interior damage. State Farm denied the interior damage claim and, based on the engineer’s findings, determined that the interior damage was not covered under the policy because the policy did not cover (1) ordinary wear and tear or (2) defective or unsound design, construction or maintenance. See generally id. at *1-3. Brechbill disputed State Farm’s decision and its engineer’s conclusions. He solicited and obtained his own inspection report from the same individual who had inspected the house when he purchased it. That report concluded that much of the interior damage had occurred after the original inspection. Id. at *3. State Farm’s engineer reviewed the report, completed a second inspection of the residence, and submitted a second report in which his findings and conclusions remained the same. Id. at *4. State Farm sent a second denial letter to Brechbill. Id. Brechbill hired a different inspector to conduct an investigation who opined that “the conclusions from the consulting engineers are based on questionable logic and incomplete research.” Id. at *5. This report, and a report Brechbill had prepared himself, were provided to State Farm. State Farm’s engineer prepared a third supplemental report in which his conclusions did not change, with the exception that he made a concession regarding wind speed. He concluded, however, that the wind event was not “unusual” and the resulting loads were not “excessive.” Id. Brechbill sued State Farm alleging breach of contract, “normal” bad faith failure to pay and “abnormal” bad faith failure to investigate. State Farm moved for partial summary judgment on the bad faith claims. The trial court granted summary judgment on the “normal” bad faith claim and denied summary judgment on the “abnormal” bad faith claim. Id. at *6. In granting summary judgment on the “normal” bad faith failure to pay claim, the trial court held that “Brechbill has created no genuine issue of material fact about whether or not State Farm had a reasonably legitimate or arguable reason for refusing to pay the claim on August 7, 2008.” Id. In the trial court’s order denying State Farm’s request for a permissive 22 Birmingham Bar Association


Birmingham Bar Association Spring 2014
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