Beddingfield v. Mullins Ins. Co.

Citation: 266 So. 3d 698Docket: 1170143

Court: Supreme Court of Alabama; June 15, 2018; Alabama; State Supreme Court

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The Beddingfields—Jimmy Larry Beddingfield, Rebecca M. Beddingfield, and their son, James Cody Beddingfield—appeal a summary judgment favoring defendants Mullins Insurance Company, Mullins Company Insurance, Rand Mullins, and David Mullins regarding claims of inadequate insurance coverage procurement. The trial court's decision is partially affirmed and partially reversed, with a remand.

In 1997, the Beddingfields purchased a $300,000 homeowners' liability policy through Rand Mullins, followed by a $100,000 policy for a rental property in Florence in 2001, and another $100,000 policy for a Guntersville house in 2003. Initially, all policies were from Vesta Insurance Corporation but were later replaced by The Shelby Insurance Company (SIC). In July 2003, Mullins canceled the Florence property's insurance, mistakenly believing it was a duplicate policy, which left the property uninsured without the Beddingfields' knowledge. Subsequently, after a refinancing transaction, the Beddingfields paid an annual premium for their residence, which was deposited into Mullins's account. However, in March 2004, the homeowners' policy was canceled due to nonpayment, with the Beddingfields unaware of the cancellation.

As a result, the Beddingfields had insurance coverage only on their Guntersville house. In July 2004, a minor guest at this property sustained a serious injury, leading to a lawsuit against the Beddingfields in 2008 (referred to as the Linam litigation). Due to SIC's receivership in 2006, the Alabama Insurance Guaranty Association (AIGA) provided legal defense for the Beddingfields, but coverage was limited to $100,000 rather than the $500,000 they assert should have been available. In February 2011, a $600,000 judgment was rendered against the Beddingfields in the Linam litigation, which they appealed; however, due to AIGA's failure to secure a necessary supersedeas bond and the Beddingfields' inability to obtain one, the judgment's execution was not stayed during the appeal process.

In July 2011, the Beddingfields initiated a lawsuit against Mullins in the Madison Circuit Court while their appeal was pending. The complaint included multiple counts of negligence and wantonness regarding Mullins's management of their insurance policies. Counts I and II pertained to the Florence house, asserting that Mullins negligently canceled a liability insurance policy worth $100,000, leaving the Beddingfields without coverage, which could have facilitated settlement or judgment payments in a separate litigation. Counts III and IV addressed the Beddingfields' residence, claiming Mullins failed to pay the homeowners' insurance premium, leading to policy cancellation and resulting in mental anguish and property loss. Counts V and VI criticized Mullins for procuring insurance from SIC without warning the Beddingfields about its financial instability and poor risk rating. Counts VII and VIII alleged that Mullins misappropriated the insurance premiums, causing the lapse of the homeowners' policy and diminishing liability coverage. Finally, Counts IX and X claimed Mullins failed to advise the Beddingfields on acquiring personal umbrella liability insurance to protect their assets. The Beddingfields sought unspecified damages for these claims. In response, Mullins denied liability and presented various affirmative defenses. In 2013, a decision was issued in the related Linam litigation, favoring the Beddingfields on several claims but remanding others against a co-defendant. By 2016, Mullins moved for summary judgment, including evidence of a cancellation notice for the Beddingfields' liability policy dated March 4, 2004, which was allegedly sent to their residence, along with a confirmation of cancellation dated March 31, 2004.

Mullins sought summary judgment on the Beddingfields' claims, arguing they were filed after the two-year statute of limitations and that the Beddingfields had not sustained damages. Mullins asserted that the Beddingfields were aware of potential insurance coverage gaps as early as 2008 and that their claims arose at least by May 2008, when they learned AIGA was providing their defense. Mullins contended that the statute of limitations expired in May 2010, prior to the Beddingfields' July 2011 filing. Additionally, Mullins claimed that since the Linam litigation settled without the Beddingfields incurring personal legal costs, they had not suffered actual damages.

In response, the Beddingfields sought to strike the cancellation notices attached to Mullins's motion and argued against summary judgment by demonstrating a material question regarding when their claims accrued. They contended that their negligent-procurement claims did not accrue until a denial of insurance benefits occurred, which they argued never happened. They asserted that their legal injury occurred either when a settlement offer was refused in October 2009 or when a jury verdict in February 2011 exceeded policy limits. The Beddingfields maintained that their claims were filed within the statute of limitations, emphasizing that they had not sustained damages prior to the verdict but incurred approximately $15,000 in legal fees during their appeal due to the Linams' attempts to seize assets.

Larry Beddingfield's inability to obtain liability insurance due to credit damage from garnishment efforts has hindered his capacity to maintain his general contractor's license. An economist's affidavit estimated his lost business income at $795,223.71. Following a hearing, the trial court granted Mullins's summary judgment motion without detailing its findings, prompting the Beddingfields to appeal. The appellate review is de novo, adhering to the same standard as the trial court, assessing whether the movant demonstrated no genuine issue of material fact and is entitled to judgment as a matter of law. The review favors the nonmovant, who must provide substantial evidence to indicate a genuine issue exists. The Beddingfields argue the trial court erred by ruling on the summary judgment, asserting their negligence and wantonness claims against Mullins began accruing in October 2009, following a settlement offer refusal, and they filed timely within two years. They contend they presented adequate evidence of damages to counter the summary judgment. Damage is critical to their tort claims, with legal precedent indicating that merely failing to procure insurance is not actionable unless actual harm is demonstrated. Courts maintain that legal injury occurs only when the insured suffers an unprotected loss.

In negligence actions, plaintiffs must demonstrate appreciable harm, typically through incurred expenses linked to hiring new legal representation due to the defendant-attorney's negligence. Courts are cautious about recognizing potential future harm as sufficient damage; tangible losses, like out-of-pocket costs, are required. For instance, in *International Mobiles Corp. v. Corroon, Black/Fairfield, Ellis, Inc.*, the court underscored that mere awareness of liability isn't enough unless it results in measurable damages. Similarly, in *Campbell v. Naman's Catering, Inc.*, summary judgment was affirmed because the insured had not shown damages from the employer's failure to pay insurance premiums.

The Beddingfields presented substantial evidence of damages, including attorneys' fees and business losses from litigation, countering Mullins's argument that they were not damaged. The statute of limitations for their negligence claims is two years, with the key issue being the claims' accrual date. The court referenced *Weninegar v. S.S. Steele Co.*, where legal injury was deemed to occur only when the loss happened and the insurer denied coverage. This precedent applies to negligent procurement cases, indicating that such claims accrue upon the occurrence of a loss. The Beddingfields argued that SIC's receivership did not equate to a denial of their insurance claim, reinforcing their position that their claims were not time-barred.

The incident central to the Linam litigation occurred on July 2, 2004, following the alleged erroneous cancellation of the Florence rental house insurance policy by Mullins in 2003 and the cancellation of the Beddingfields' residence policy in 2004 due to Mullins's alleged misconduct regarding premium payments. The Beddingfields did not file suit against Trace Linam until May 23, 2008. At that time, they received a defense limited to a $100,000 policy for the Guntersville house, while being denied access to an additional $400,000 in coverage that would have been available had it not been for Mullins's actions. This denial of additional policy proceeds effectively constituted a denial of the Beddingfields' claims for benefits.

In Alabama, an insurance claim denial can be 'express, actual,' or 'constructive.' A constructive denial can be established by demonstrating excessive delay or wrongful intent from the insurer. Larry acknowledged that shortly after the Linam litigation began, he learned about the lack of expected insurance coverage, indicating a shortfall of $400,000. Though the Beddingfields had insurance during the litigation, they lacked the coverage they believed they had due to Mullins's actions. The Beddingfields filed their negligent-procurement action on July 17, 2011, over three years after they had learned of their coverage shortfall, making their negligence claims untimely under Alabama's two-year statute of limitations. Consequently, the trial court correctly granted summary judgment in favor of Mullins on these claims.

In contrast, the Beddingfields' wantonness claims were deemed timely. Based on the precedent set in Ex parte Capstone Building Corp., the court ruled that as long as the claims were filed before June 2013, they were acceptable if they accrued before June 3, 2011. The court clarified that wantonness claims are governed by a two-year limitations period, despite earlier confusion regarding a six-year period. The court reaffirmed that litigants with claims accrued before the June 3, 2011 decision are granted two years from that date to file their actions unless the six-year period would expire sooner.

The Beddingfields' claims began when the Linam litigation was initiated in May 2008, resulting in their denial of insurance benefits procured by Mullins. Under Ex parte Capstone, since their claims accrued before June 3, 2011, they had until June 3, 2013, to file suit, which was not affected by an earlier expiration of the six-year statute of limitations under Alabama law. Their wantonness claims were filed in July 2011, well within the two-year period allowed by Ex parte Capstone, making them timely and not time-barred. The court affirmed the summary judgment on the negligence claims, reversed it on the wantonness claims, and remanded the case. Following the appeal, Mullins's counsel sought to withdraw due to the rescission of the insurance policy, which was granted. Mullins indicated an inability to secure replacement counsel and did not file a brief on appeal. The Beddingfields argued their claims did not accrue until February 2011, following a judgment in the Linam litigation, but their reliance on Jones v. Alfa Mutual Insurance Co. was deemed irrelevant, as it addressed bad-faith claims, not negligent procurement. They also stated they notified Mullins of their claim immediately upon the incident and after receiving initial process in the Linam litigation.