Land & Associates, Inc. v. Simmons

" 'As we see it, the extent of the authority of . . . [the] agent to bind [the corporate] appellant in contract is not necessarily conclusive in proof of liability of appellant in tort. The liability of a corporation for the torts of its employees, whether agent or servant, is grounded upon the principle of "respondeat superior" not the principles of agency. 3 Am.Jur.2d, Agency, § 267. The factual question to be determined is whether or not the act complained of was done, either by agent or servant, while acting within the line and scope of his employment. The corporation or principal may be liable in tort for the acts of its servants or agents, done within the scope of employment, real or apparent, even though it did not authorize or ratify such acts or even expressly forbade them.' "

"The General Agent shall have no power with respect to any contract to which the Company is, or purports to be a party, to make, alter or discharge such contract, or to waive any forfeiture or the performance of any of the terms or conditions of such contract."

"Subject to all the terms and conditions of this contract, the General Agent [Land Associates] does hereby appoint the Agent for the purpose of procuring in person applications for all forms of Individual Life insurance, Fixed Annuities and Health Insurance listed in the applicable Schedule(s) appearing in the Company's [i.e., General American's] Agent's Contract Manual, hereinafter referred to as Manual, and offered by the Company, which the Agent is properly licensed to sell.

"None of the terms of this contract shall be deemed to create the relation of employer and employee between the General Agent and the Agent or between the Company and either the Agent or the General Agent; or to interfere with the freedom of the Agent's action as to the manner, time or place in which he conducts his business.

"The Agent shall have no power with respect to any contract to which the Company is, or purports to be a party, to make, alter or discharge such contract, or to waive any forfeiture or the performance of any of the terms or conditions of such contract. The Agent shall comply with all laws and regulations in effect within said territory relating to the business of insurance."

"A 'general agent' is one who has authority to transact all of the business of the principal, of a particular kind or in a particular case.Southern States Fire Insurance Co. v. Kronenberg,199 Ala. 164,170-71,74 So. 63,67(1917). The powers of such an agent are coextensive with the business entrusted to his care, authorizing him to act for the principal in all matters coming within the usual and ordinary scope and character of such business.Id.,199 Ala. at 171,74 So. at 67. A general agent has full power to bind the insurer to the agent's contract of insurance or to issue policies or toPage 144accept risks.McGhee v. Paramount Life InsuranceCo.,385 So.2d 969(Ala. 1980). In fact, a general agent 'stands in the shoes' of the principal for the purpose of transacting business entrusted to him. Since a general agent's powers are coextensive with the business entrusted to him, his fraudulent act is the fraudulent act of his insurer principal as well.

"An insurance company also has the right to employ agents with limited authority.Robinson v.Aetna Insurance Co.,128 Ala. 477,30 So. 665(1901). A 'special agent' as distinguished from a 'general agent,' is authorized to act for the principal only in a particular transaction, or in a particular way.Southern States Fire Insurance Co.,supra,199 Ala. at 171,74 So. 63. In the insurance context, the most prevalent type of special agent is the 'soliciting agent.'A soliciting agent isdifferent from a general agent in that he has nopower to bind his insurer principal in contract.Watson v. Prudential Insurance Co.,399 So.2d 285(Ala. 1981).However, when a soliciting agentcommits a fraud upon one who seeks insurancecoverage, his insurer principal will be liable forthat fraud, if the fraud was perpetrated by theagent within the scope of his employment. Theliability of an insurer for the fraudulent acts ofits soliciting agents is grounded in the doctrineof 'respondeat superior,' and not the doctrine ofagency. National States Insurance Co. v. Jones,393 So.2d 1361(Ala. 1980). Since a soliciting agent is regarded as the 'servant' of the insurer 'master,' the insurer has the full right of control over the agent's actions. A general agent, however, stands in the shoes of the principal; his actions are regarded as those of the principal. The law deems the principal to have 'participated' in the fraud of its general agent, and so subjects the principal to direct liability. Where a soliciting agent commits fraud the insurer's liability is vicarious, and the principal is liable in spite of the fact that he did not participate in the fraud, or even forbade it.National States Insurance Co. v. Jones,supra, at 1367.

"An independent agent or broker is usually not an agent for the insurer at all; rather, he is the agent of the insured. See Code 1975, §27-7-1. For example, this Court has held that when an independent agent or broker fails in his duty to obtain insurance coverage, the principal may sue either for a breach of contract, or, in tort, for breach of duty imposed on the agent or broker to [use] reasonable skill, care, and diligence in obtaining insurance.Highlands UnderwritersInsurance Co. v. Elegante Inns,361 So.2d 1060(Ala. 1978). InHighlands, the principal was the insured."

"A plaintiff, given the particular facts of his knowledge, understanding, and present ability to fully comprehend the nature of the subject transaction and its ramifications, has not justifiably relied on the defendant's representation if that representation is 'one so patently and obviously false that he must have closed his eyes to avoid the discovery of the truth.' "

"(6) Our underwriters must formally determine that on the latest of:

"(b) the date of the latest Application Part II, or

"(c) the date of the latest medical examination or test we require, each proposed insured was acceptable to us under our rules, limits and standards. Each person must qualify for the exact plan and amount of insurance and for all supplemental riders applied for. Each person must also be insurable at least at our standard premium rates.

"(7) No interim insurance will be in effect if any incorrect or untrue or incomplete statement of material fact is made on:

"(b) any report of any examination or medical test submitted to us.

"Interim insurance shall terminate automaticallywithout notice to anyone on the earliest of thefollowing dates:

"(1) The date we formally approve the exact policy(ies) applied for.

"(2)The date we determine that you do not qualifyas a standard risk and elect to terminate theinterim insurance.

"(4) The date we formally determine not to offer any policy.

"(5) The beginning of the 90th day after the date of this Receipt." (Emphasis added.)

"Since, in the absence of a specific agreement, the payment of the first premium and the delivery of the policy are concurrent acts, a period intervenes between the signing of the application by the applicant and the delivery of the policy. During this period no money has been advanced to the insurance company, and no insurance is in effect. This interval, of a few days to several weeks, depending upon the time consumed in investigation and physical examination of the applicant, in passing upon his application at the home office, is highly undesirable from the point of view of the insurer as well as of the applicant. The disadvantage to the applicant consists in the fact that he is not covered by insurance during this period, while the disadvantage to the insurer consists in the fact that during this period the applicant possesses the power to revoke the offer made in his application. This disadvantage is a very real one as far as the insurer is concerned, since if the applicant decides to exercise his power, either because he chooses not to carry any insurance at all, or because he chooses to purchase it of a rival company, the company suffers a loss of what it has expended for the investigation and medical examination for the applicant, aside from the loss of business itself.

"To obtain some measure of protection against the applicant's arbitrary withdrawal of his offer during the company's extensive investigation of his insurability, the insurance companies have hit upon the idea of issuing so-called binding receipts to the applicant upon the payment of the first premium. These binding receipts, or conditional binding receipts, as these instruments are sometimes, though less frequently, called, usually contain a provision which, in some instances, is duplicated in the application itself, to the effect that the insurance shall be considered as in force from the date of the receipt, or the date of the medical examination, provided the application is approved and accepted at the home office of the insurer. Sometimes the date of approval or of issuance of the policy is chosen as the date the policy shall become effective, and in some instances no condition is imposed upon the applicant. The exact language of these provisions varies greatly.

"The issuance of these binding receipts effectively does away with the disadvantage threatening the insurer. They protect it in two ways: The applicant to whom the binding receipt is issued feels, as a rule, contractually obliged to perform and, should he withdraw his application, he is unlikely to resort to a lawsuit to recover the relatively small sum paid. In addition to achieving this primary object, the issuance of a binding receipt has the incidental advantage forPage 147the insurer that it serves to give the insurer the use of the premium money at the earliest possible date and that it offers a selling point of which no agent fails to make the utmost in his talks with prospective customers."

"Are any of you on the panel or any member of your immediate family ever been either a plaintiff — that is a claimant bringing a suit — or a defendant — that is a person against whom a suit is brought? Anybody fall in that category?"

"With respect to the former, the defendant General American has filed original and amended motions establishing that three persons eventually seated as jurors did not fully answer, or did not make any response to, certain voir dire questions. General American requested that these jurors be summoned to an evidentiary hearing. The Court has considered the matters contained in and the materials submitted with General American's motions and finds 'substantial temporal remoteness of the previous litigation to the present case, inadvertence on the part of these venire persons, or a misunderstanding — at least on their part — of the questions as they related to them personally.'Ensor v. Wilson,519 So.2d 1244(Ala. 1987).

"Jurors make substantial sacrifices to perform their duty, and the Court is not disposed to further impose on them where, as here, there has been no showing of probable prejudice. Therefore, General American's motion to have the jurors summoned to court and examined is denied. Plaintiff has filed affidavits of these jurors. The Court does not condone the taking of these statements, has not considered them in connection with the instant motions and grants General American's motion to strike them."

"We hold that the proper inquiry for the trial court on motion for new trial, grounded on allegedly improper responses or lack of responses by prospective jurors on voir dire, is whether this has resulted inprobable prejudiceto the movant. This appears to be the general rule throughout the country [see Annotations, 38 A.L.R.2d 624, and 63 A.L.R.2d 1061]. InLeach v.State,31 Ala. App. 390,18 So.2d 285(1944), the then Court of Appeals said:

" ' "* * * the fact that a juror answered falsely as to his qualifications is a recognized ground for a new trial" * * * — we would say, of coursewhere there was probable prejudice to thedefendantby such juror's conduct. * * *' [Emphasis supplied.]

"There is broad support for the proposition that the trial court's application of the probable prejudice test is subject to review only for abuse of discretion. See Annotation, Effect of juror's false or erroneous answer on voir dire as to previous claims or actions against himself or his family, 63 A.L.R.2d 1061, 1063, where it is said:

" 'It has been recognized by those courts considering the question that whether or not the complaining party is or may have been prejudiced by the juror's failure to answer properly the question addressed to him is a matter primarily for the trial court's discretion any [sic] power, not subject to reversal unless abused.'

" '* * * [T]he question as to whether or not the complaining party was prejudiced by the juror's failure to answer properly is a matter primarily within the discretion of the trial court. In the absence of a showing of an abuse of discretion the ruling of the trial court thereon will not be reversed. * * *'

" 'The trial judge was present in court when the voir dire examinations took place; he was in position to observe the lawyers for both parties during their respective questions to the jurors on voir dire; he heard the tone of their voices and the time given between the questions that elicited answers from the jurors. The clarity of the questions propounded was also addressed to his judgment.' "

"Punitive damages cannot be excessive as a matter of law. The question here, then, is whether the award is the result of 'bias, passion, corruption, or other improper motive' on the part of the jurors. The Court will immediately reject bias and corruption, leaving passion or other improper motive. One of the defendants suggests passion, citing the fact that several jurors wept and hugged plaintiff after rendition of their verdict. However, this could as readily reflect sympathy for the manner in which plaintiff was treated on the stand as a passion to givePage 150him excessive amounts of defendants' money.

"The problem here is that $2,500,000 is simply too much for the conduct of which defendants were guilty. The Supreme Court has said that if the amount of a verdict is greatly out of line, 'it is fair to infer, in the absence of extraordinary features, that some improper motive has led the jury astray.'Alabama Power Co. v. Smith,273 Ala. 599[509],142 So.2d 228(1962). The court makes that inference, recognizing full well that such improper motive is not 'established and reflected in the record,' as apparently required byHammond.

"In any event, after careful and thoughtful consideration, taking into account the gravity of the wrong, the nature and extent of the injury inflicted upon plaintiff, and upon making comparative analysis with other awards in similar cases, defendants' motions for a new trial or other relief are denied on the condition that plaintiff file with this court within 14 days a remittitur of damages in the sum of $1,900,000; otherwise, the motions will be granted."

"What amount is sufficient to punish [the defendant] and to deter it, and others similarly situated, from committing similar acts in the future? Traditionally, the jury has been afforded a great deal of discretion in assessing punitive damages.Roberson v. Ammons, [477 So.2d 957(Ala. 1985)]. The exercise of that discretion is, of course, subject to judicial review to insure that it is not the result of bias, passion, prejudice, corruption, or other improper motive.City Bank ofAlabama v. Eskridge, [521 So.2d 931(Ala. 1988)]. The trial court in the case at issue found that the verdicts were in no way affected by bias, passion, prejudice, corruption, or other improper motive or conduct.This Court has recognized, however, thateven though a jury verdict may not be excessivebecause it is the result of an improperlyfunctioning jury, it is possible for a verdict tobe excessive even when it is the result of aproperly functioning jury. See City Bank of Alabamav. Eskridge, supra. For example, in assessing punitive damages, the jury is not allowed to consider the financial position of the defendant,Southern Life Health Ins. Co. v. Whitman,358 So.2d 1025(Ala. 1978). The defendant's financial position is, however, a consideration essential to a post-judgment critique of a punitive damages award.City Bank of Alabama v. Eskridge, supra; see, also,Hammond v. City of Gadsden, [493 So.2d 1374(Ala. 1986)]. Bearing in mind that punitive damages must not exceed an amount that will accomplish society's goals of punishment and deterrence, it is possible for a jury to hear the evidence in the case, make findings of fact, correctly apply the law, and still, albeit unwittingly, assess damages that bear no reasonable relationship to the accomplishment of those goals."