Guinn v. American Integrity Ins. Co.

Citations: 568 So. 2d 760; 1990 Ala. LEXIS 716; 1990 WL 155127Docket: 89-470

Court: Supreme Court of Alabama; September 7, 1990; Alabama; State Supreme Court

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The case *Lucile Guinn v. American Integrity Insurance Company* involves an appeal by Lucile Guinn following a summary judgment favoring several defendants, including insurance agents Guy Martin and Roger McCollough, and insurance companies American Integrity and Providers Fidelity. Guinn's appeal challenges the dismissal of her fraud claims, a violation of Alabama Code § 27-12-6, breach of fiduciary duty, negligence, and the denial of a discovery motion.

At 88 years old, Guinn was approached by Martin and McCollough, who sought to sell her Medicare supplement insurance. Guinn, already having coverage with approximately five months remaining, expressed a desire for the best nursing home benefits without over-insurance. Despite her lack of insurance knowledge, she relied on the agents for guidance. The agents allegedly reviewed her existing policies and recommended a new package they claimed offered superior nursing home benefits, advising her to allow her old policies to lapse. They assured her she could cancel the new policies within specified timeframes if unsatisfied.

After purchasing the new policies for a total of $916.20, Guinn unsuccessfully attempted to cancel them three times before consulting another agent, who informed her that the new policies were not better, merely more expensive. This led Guinn to file a complaint alleging fraud due to the agents' misrepresentations.

The trial court granted summary judgment against Guinn, concluding she was unaware of being issued a policy by Providers Fidelity and that she had not demonstrated any damages resulting from the alleged misrepresentations by Martin and McCollough. The appellate court must review the evidence favorably towards Guinn when assessing the summary judgment.

A case filed on or before June 11, 1987, must be reversed if there is at least a scintilla of evidence supporting the plaintiff's claim, according to the "substantial evidence rule." In fraud claims, the elements include a misrepresentation of a material fact that the plaintiff relied upon, resulting in damage. Guinn alleged that agents Martin and McCollough misrepresented the necessity of purchasing both insurance policies, particularly the American Integrity policy, which they conceded provided either equivalent or inferior coverage to what Guinn already possessed. The American Integrity policy had a premium of $808.70, while the Providers Fidelity policy, which offered enhanced nursing home coverage that Guinn sought, had a premium of $107.50. Testimony from Marvin Watkins, Providers Fidelity's agency director, indicated that the American Integrity policy did not offer any additional benefits and that it was not in Guinn's best interests to buy both policies. The Court found evidence suggesting that Martin and McCollough misrepresented the necessity of the American Integrity policy, which Guinn relied upon to her detriment. The Court rejected the trial court's conclusion that Guinn was unaware she was purchasing from Providers Fidelity, noting that both agents had explained the benefits and that the application bore the Providers Fidelity logo. Reliance is assessed at the time of the transaction, not based on later confusion. The Court also found sufficient evidence of damage, as Guinn incurred unnecessary costs without gaining any advantage from the purchase.

The Court rejects the defendants' claim that Guinn suffered no damages due to her failure to file a claim while insured by American Integrity and Providers Fidelity, emphasizing that the case is not about breach of contract and noting the financial hardship caused by her expenditure exceeding $800. Guinn's original complaint contained 19 counts; the trial court dismissed claims for breach of fiduciary duty and violations of Alabama Code § 27-12-1 but allowed the misrepresentation and fraud claims to proceed. An amended complaint with 11 counts was later filed, which the trial court dismissed, reiterating that the allegations, while attempting to establish various claims including negligence and breach of fiduciary duty, effectively only supplemented the fraud claim previously permitted.

Guinn alleged that Martin and McCollough made false representations regarding her current and proposed policies, violating Ala. Code § 27-12-6, which prohibits "twisting." The defendants argued that this statute does not provide a private right of action, and the dismissal of that claim was upheld. Prior case law established that allegations under § 27-12-6 support fraud claims, and thus the trial court's dismissal of counts not materially different from fraud claims was deemed correct. Guinn's breach of fiduciary duty claim was based on her reliance on Martin and McCollough's advice, asserting that their acceptance of her trust created a fiduciary relationship. She claimed that her advanced age and lack of insurance knowledge constituted special circumstances necessitating such a duty. The Court noted that insurance agents can represent either the insured, the insurer, or both, as established in prior rulings.

An insurance agent does not become an agent of the insured until a formal insurance contract is established. Prior to this contract, the relationship is merely that of a salesperson and a prospective customer. If the agent misrepresents material facts to induce the customer to enter a contract, both the agent and the principal may be liable for damages, but this does not create a fiduciary relationship. The determination of a duty is a legal question for the trial court. In this case, Guinn failed to provide evidence of a fiduciary relationship with the agents Martin and McCollough, leading to the dismissal of her fiduciary duty claim. Guinn's allegations of negligence and wantonness against the insurance companies claimed they inadequately selected, trained, and monitored their agents, making wrongful acts more likely. However, since she did not cite violations of the relevant Alabama Code regarding insurance agent conduct, the court affirmed the dismissal of these claims. Conversely, Guinn successfully presented enough evidence to support her fraud claims, leading to the reversal of the summary judgment on those claims. The court did not address the discovery motion issue due to this reversal. The judgment is affirmed in part, reversed in part, and remanded.