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Beddingfield v. Mullins Insurance Co.

Supreme Court of Alabama

June 15, 2018

Jimmy Larry Beddingfield et al.
Mullins Insurance Company et al.

          Appeal from Madison Circuit Court (CV-11-900877)

          SHAW, JUSTICE.

         The plaintiffs below, Jimmy Larry Beddingfield ("Larry"), his wife, Rebecca M. Beddingfield ("Rebecca"), and their adult son, James Cody Beddingfield ("Cody") (hereinafter referred to collectively as "the Beddingfields"), appeal from a summary judgment in favor of the defendants below, Mullins Insurance Company, Mullins & Company Insurance, Rand Mullins, and David Mullins (hereinafter referred to collectively as "Mullins"), on the Beddingfields' claims stemming from Mullins's alleged failure to properly procure insurance coverage. We affirm the trial court's judgment in part, reverse it in part, and remand.

         Facts and Procedural History

         Mullins Insurance Company and Mullins & Company Insurance are "licensed insurance brokerage[s] or agenc[ies]" operating in Huntsville; Rand Mullins and David Mullins are licensed insurance or brokerage agents employed by those entities. In 1997, Larry and Rebecca purchased a $300, 000 homeowners' liability-insurance policy from Rand Mullins that protected Larry and Rebecca's primary residence. In 2001, Larry and Rebecca purchased a second liability-insurance policy in the amount of $100, 000 that provided coverage for a rental house located in Florence; they later constructed another house in Guntersville and, in 2003, purchased an additional $100, 000 liability-insurance policy from Rand Mullins for that property. All three policies Rand Mullins procured for Larry and Rebecca were initially obtained from Vesta Insurance Corporation; they were later replaced by policies issued by The Shelby Insurance Company ("SIC").

         In July 2003, Mullins canceled the insurance policy on the Florence house allegedly based on a belief that "the policy was issued in duplicate." Allegedly unbeknownst to Larry and Rebecca, however, the requested cancellation left the Florence house uninsured. One month later, pursuant to a mortgage refinance on the Beddingfields' residence, Larry and Rebecca paid $1, 629 to Mullins, representing one year's insurance premium on that residence; the check was endorsed and deposited into Mullins's account. In March 2004, the policy on the Beddingfields' residence was canceled because of nonpayment of the premium; neither Larry nor Rebecca, however, was able to recall receiving notice of the cancellation. After those two events, Larry and Rebecca were without insurance on their residence and the Florence house, leaving them with liability insurance only on their Guntersville house in the amount of $100, 000.

         In July 2004, a minor guest at the Beddingfields' Guntersville house, Trace Rex Linam, suffered a serious eye injury in a fireworks-related incident. In 2008, Linam and his father, Charles Gary Linam, sued the Beddingfields, alleging that they, and particularly Cody, who was a minor at the time, were responsible for the injury (this action is hereinafter referred to as "the Linam litigation"). Because SIC had been placed into receivership in Texas in 2006, the Alabama Insurance Guaranty Association ("AIGA") covered the Beddingfields' legal-defense costs in the Linam litigation; however, the maximum amount of liability coverage available was limited to $100, 000 -- the amount of the liability-insurance policy Larry and Rebecca had obtained from Mullins to insure that property -- and not $500, 000, the amount they say would have been available had the other two policies not been canceled. See § 27-42-8(a)(1), Ala. Code 1975 (obligating AIGA to cover "claims existing prior to the determination of [an insurer's] insolvency and arising within 30 days after the determination of insolvency, or before the policy expiration date if less than 30 days after the determination" but limiting AIGA's obligation to the amount of "the obligation of the insolvent insurer under the policy from which the claim arises"). In February 2011, a judgment was entered on a $600, 000 jury verdict against the Beddingfields in the Linam litigation. The Beddingfields appealed that decision to this Court. Because, however, AIGA did not post the requisite supersedeas bond -- allegedly because SIC was in receivership -- and the Beddingfields were allegedly unable to obtain a bond, execution of the judgment was not stayed during the pendency of the appeal.

         In July 2011, while their appeal was pending, the Beddingfields sued Mullins in the Madison Circuit Court. The complaint alleged numerous counts of negligence and wantonness with relation to Mullins's handling of the various insurance policies. Specifically, Counts I and II, which related to the Florence house, alleged that Mullins had negligently and/or wantonly "failed to reasonably review coverages provided by" the insurance policy on that property. More specifically, it alleged:

"[Mullins] negligently cancelled the insurance policy which provided liability insurance coverage in the amount of $100, 000.00, and instead continued in force and effect an insurance policy providing no liability insurance coverage.
"... Had said coverage been in force and effect it would have provided additional insurance monies for settlement on behalf of the Beddingfields, or payment of a judgment against the Beddingfields [in the Linam litigation]."

         Counts III and IV of the complaint, which related to the Beddingfields' residence, alleged that Mullins had negligently and/or wantonly failed to pay the premium for the homeowners' insurance coverage despite having received the premium and that, as a result, the policy had been canceled, resulting in alleged mental anguish and property loss. Counts V and VI related to Mullins's decision to procure the Beddingfields' coverage from SIC and alleged that Mullins had negligently and/or wantonly failed to warn the Beddingfields of SIC's precarious financial situation, its poor risk rating, and the potential consequences of obtaining insurance from such an insurance company. Counts VII and VIII alleged that Mullins had negligently and/or wantonly "appropriated the insurance premiums provided by the Beddingfields for their residence, " resulting in the lapse of the Beddingfields' homeowners' policy and a corresponding reduction in available liability-insurance coverage. Finally, Counts IX and X of the complaint alleged that Mullins had negligently and/or wantonly "failed to advise the Beddingfields of their need to obtain personal umbrella liability insurance coverage to protect their substantial assets from potential risks of loss." The Beddingfields sought unspecified damages in connection with each of the above-described claims. Mullins filed an initial answer generally denying liability and asserting numerous affirmative defenses to the Beddingfields' claims.

         In 2013, this Court issued its decision in the appeal in the Linam litigation. See Beddingfield v. Linam, 127 So.3d 1178 (Ala. 2013). Specifically, this Court reversed the trial court's judgment and, as to the Linams' claims of negligent entrustment, negligent supervision, and wanton supervision, rendered a judgment in favor of Larry and Rebecca. 127 So.3d at 1191. Thus the claims against Larry and Rebecca in the Linam litigation were concluded in their favor. The Court also rendered judgment in favor of Cody on the Linams' strict-liability claim, but remanded the matter for a new trial on their negligence, wantonness, and assault claims against him. Id. Following that remand, the remaining claims were apparently settled and the action was ultimately dismissed.

         In 2016, Mullins filed a motion for a summary judgment. Mullins attached to its motion, among other things, a notice dated March 4, 2004, which reflected the cancellation of the liability policy on the Beddingfields' residence effective March 19, 2004, and which was allegedly mailed to Larry and Rebecca at the address of their residence. Also attached was a follow-up "confirmation of cancellation, " which was allegedly mailed to Larry and Rebecca on March 31, 2004.

         In its motion, Mullins argued that it was entitled to a summary judgment on all of the Beddingfields' claims, both because the claims were allegedly filed after the expiration of the applicable two-year limitations period[1] and because the Beddingfields had allegedly "sustained no damages." More specifically, Mullins alleged:

"1. The Beddingfields knew as early as at least 2008, that there were potential coverage gaps in their insurance because the AIGA, and not [SIC], provided the[ir] defense. ...
"2. Following an appeal by the Beddingfields ... [in the Linam litigation], the Alabama Supreme Court on March 8, 2013 reversed and rendered the verdict as to [Larry and Rebecca] and remanded the claims against Cody back to the trial court for a retrial.
"3. In April 2016, all of [the] remaining claims against Cody [in the Linam litigation] were settled and there is no longer any threat of any Judgement against ...

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