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Birmingham Bar Association Spring 2014

Tort Law What Does This Mean? In light of Brechbill, it is clear that there is only one tort of bad faith refusal to pay a claim. The tort has four elements, with a conditional fifth element if there is an allegation that the insurer failed to investigate the claim. If there is a legitimate debatable reason to deny the claim at the time the claim was denied, even if the claim includes bad faith refusal to investigate, summary judgment is appropriate. Brechbill certainly may influence the way courts analyze bad faith claims. Post- Brechbill, “normal” and “abnormal” bad faith claims should not be treated as separate torts. By stating unequivocally that bad faith is a single tort, the Court reaffirmed the original concept of the tort and the elements necessary to prove it. This ultimately may be more form than substance because there are two ways to prove the “one” tort. Id. at * 9 (“recognizing the singularity of the tort, albeit with different options of proof ” – i.e. bad faith failure to pay and bad faith failure to investigate). Brechbill may also be important in subsequent bad faith failure to investigate cases. After Brechbill, that analysis should consider the elements of bad faith as set out in Bowen, 417 So. 2d at 183. If the plaintiff cannot satisfy each element, the case will not survive summary judgment. With regard to the third element – the absence of an arguable reason to deny the claim – the court in Brechbill emphasized that even an imperfect or incomplete investigation can provide the debatable reason for denying the claim. Brechbill, 2013 WL 5394444, at * 11. One area of the law that still needs clarifying after Brechbill is the use, and more important, the meaning of the “normal” and “abnormal” terms so often used in bad faith cases. Although a “failure to investigate” bad faith claim is “abnormal,” it is not the only type of abnormal bad faith case. A failure to investigate claim is not synonymous with “abnormal,” it is a subset in the category of “abnormal” bad faith cases.8 The “abnormal” cases are the exceptions to the general (or “normal”) rule that the plaintiff ’s underlying contract claim must be so strong that he would be entitled to a preverdict judgment as a matter of law.9 The exceptions, correctly called “abnormal” cases, include instances in which the insurer: “(1) intentionally or recklessly failed to investigate the plaintiff ’s claim; (2) intentionally or recklessly failed to properly subject the plaintiff ’s claim to a cognitive evaluation or review; (3) created its own debatable reason for denying the plaintiff ’s claim; or (4) relied on an ambiguous portion of the policy as a lawful basis to deny the plaintiff ’s claim.”10 A recent case illustrating the point is Phillips v. National Union Fire Ins. Co., 2013 U.S. Dist. LEXIS 155327 (N.D. Ala. Oct. 30, 2013) (“Phillips”). Phillips did not involve a failure to investigate claim, but it was an “abnormal” case. Phillips presented the question of whether the insurer had relied upon an ambiguous term in the policy to deny the claim.11 Because the Court found that it had, the Court denied summary judgment on the “abnormal” bad faith claim.12 More To Come? In his special concurrence, Chief Justice Moore opined that the creation of the tort of bad faith was a job for the Legislature, not the courts. Id. at *11-16. Chief Justice Moore “urged the Court to re-examine Chavers, to overrule it in an appropriate case, and to abolish this judicially legislated tort, leaving to the legisla- tive branch the right to determine policy questions such as the intentional breach of an insurance contract by an insurance company.” Id. at *16. Not only will it be interesting to follow the impact of Brechbill in the courts, Brechbill may lead to legislative action on the tort of bad faith. G 1 Citing Shelter Mut. Ins. Co. v. Barton, 822 So. 2d 1149 (Ala. 2001). 2 Citing White v. State Farm Fire & Cas. Co., 953 So. 2d 340 (Ala. 2006); Employees’ Benefit Ass’n v. Grissett, 732 So. 2d 968 (Ala. 1998); Jones v. Alfa Mut. Ins. Co., 1 So. 3d 23 (Ala. 2008). 3 Citing National SEC Fire & Cas. Co. v. Bowen, 417 So. 2d 179, 183 (Ala. 1982) (“Bowen”). 4 Citing Gulf Atlantic Life Ins. Co. v. Barnes, 405 So. 2d 916, 924 (Ala.1981). 5 The Brechbill court further held that “the trial court’s summary judgment on the third element of bad faith established the law of the case and should have foreclosed further litigation of that claim.” Brechbill, 2013 WL 5394444, at *10 (citing Belcher v. Queen, 39 So. 3d 1023, 1038 (Ala. 2009)). 6 Jones v. Alfa Mut. Ins. Co., 1 So. 3d 23 (Ala. 2008). 7 Citing Weaver v. Allstate Insurance Co., 574 So. 2d 771, 775 (Ala. 1990) (quoting State Farm Fire & Cas. Co. v. Balmer, 891 F.2d 874, 877 (11th Cir. 1990)). 8 See State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 303-307 (Ala. 1999) (discussing the evolution of the tort of bad faith, including the “unusual or extraordinary” a/k/a “abnormal” bad faith cases). 9 Id. at 306-307. 10 Id. 11 Phillips, 2013 U.S. Dist. LEXIS 155327, at *18. 12 Id. at *18-19. The Phillips court stated that “Alabama courts have repeatedly stressed that insurers may not rely on an ambiguous policy term to deny coverage. See e.g. Blackburn v. Fid. & Deposity Co., 667 So. 2d 661, 669 (Ala. 1995); Employees’ Benefit Ass’n v. Grissett, 732 So. 2d 968, 976-77 (Ala. 1998).” Id. at *18. Contributor Stephen C. Jackson 24 Birmingham Bar Association


Birmingham Bar Association Spring 2014
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