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11/18/94 PEDER EMANUELSEN v. STATE FARM AUTOMOBILE

November 18, 1994

PEDER EMANUELSEN
v.
STATE FARM AUTOMOBILE INSURANCE COMPANY



Appeal from Etowah Circuit Court. (CV-87-565). William W. Cardwell, Jr., TRIAL JUDGE.

Released for Publication March 10, 1995.

Thigpen, Judge. Robertson, P.j., and Yates, J., concur.

The opinion of the court was delivered by: Thigpen

THIGPEN, Judge

This is an appeal from a directed verdict in favor of State Farm Automobile Insurance Company (State Farm) on a complaint alleging a bad faith refusal to pay an insurance claim.

In July 1987, Peder Emanuelsen filed a complaint against State Farm, alleging a breach of contract and a bad faith refusal to pay an insurance claim. Emanuelsen sought compensatory and punitive damages, plus interest and costs. Emanuelsen amended his complaint to allege that State Farm had engaged in a pattern and/or practice of failing or refusing to pay the proper amounts due on its insurance policies, and requested $1,000,000 in punitive and compensatory damages, plus interest and costs. State Farm's motion for directed verdict was granted as to the bad faith claim; however, ultimately, the jury awarded Emanuelsen $1,056.24 on the contract claim, plus $412.03 in accrued interest. Emanuelsen's post-judgment motion was denied; hence, this appeal.

Emanuelsen's only issue on appeal is whether the trial court erred in directing a directed verdict in favor of State Farm on his claim alleging bad faith refusal to pay an insurance claim.

A motion for a directed verdict tests the sufficiency of the opponent's evidence, and the "party seeking a directed verdict must demonstrate that there is no genuine issue of material fact and that it is entitled to a judgment as a matter of law." Danford v. Arnold, 582 So. 2d 545, 546 (Ala. 1991). Furthermore, the trial court must view the evidence in a light favoring the nonmovant. Danford, (supra) . This action was initiated several weeks after the "scintilla rule" was abolished, and therefore, the "substantial evidence rule" applies. Ala. Code 1975, § 12-21-12. Substantial evidence is "evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So. 2d 870, 871 (Ala. 1989).

The elements a plaintiff must prove in a claim of "bad faith refusal" to pay a valid insurance claim were clearly announced by our Supreme Court as follows:

"(a) an insurance contract between the parties and a breach thereof by the defendant;

"(b) an intentional refusal to pay the insured's claim;

"(c) the absence of any reasonably legitimate or arguable reason for that refusal (the absence of a debatable reason);

"(d) the insurer's actual knowledge of the absence of any legitimate or arguable reason;

"(e) if the intentional failure to determine the existence of a lawful basis is relied upon, the plaintiff must prove the insurer's intentional failure to determine whether there is a ...


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