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Somnus Mattress Corp. v. Hilson

Supreme Court of Alabama

December 21, 2018

Somnus Mattress Corporation d/b/a Posturecraft Mattress Company
v.
Stephen Hilson and Crutchfield & Graves Insurance Agency, LLC

          Appeal from Winston Circuit Court (CV-15-900038)

          MENDHEIM, JUSTICE.

         Somnus Mattress Corporation d/b/a Posturecraft Mattress Company ("Somnus") appeals from a summary judgment entered by the Winston Circuit Court in favor of Stephen Hilson and Crutchfield & Graves Insurance Agency, LLC ("CGIA"), on Somnus's claim that Hilson and CGIA were negligent in advising Somnus not to purchase insurance coverage for business interruption and loss of profits (hereinafter collectively referred to as "business-income coverage"). We affirm.

         I. Facts

         Somnus manufactured mattresses at a facility in Winston County. Charles Jones founded Somnus, served as its president, and made all the consequential business decisions for Somnus -- including decisions concerning business property insurance. Jones opened his first mattress store in 1981. By 1987, Jones had grown his business to include 15 stores, a warehouse in Ashridge, and his own mattress-manufacturing factory ("the factory") located in Double Springs. In 2006, a fire at the Ashridge warehouse facility resulted in a total loss of that property. Jones testified that the property was "severely underinsured" but that he had completely relied upon his insurance agent at the time "to keep me covered."[1]

         Hilson, on behalf of CGIA, first contacted Jones in 2009 about providing property-insurance coverage for the factory. Jones testified that during 2009 Hilson came out to the factory to inspect it and to talk to Jones about insurance coverage. Jones stated that during one of those trips the two men discussed business-income coverage.

"[Jones:] ... I remember Stephen [Hilson] and I, we used to -- we would walk out into the factory, and we'd just look around.
"And he would kind of look and see what all --what it looked like make sure that wasn't nobody smoking, no cigarette butts and stuff like that that, you know -- and I remember we were -- and I remember we were standing near the foundation department near a couple some overhead doors. And from what I remember, the subject did come up. I asked -- I asked Stephen -- 'What do you think about it?'
"And, Stephen, you -- you told me that 'It's pretty expensive, and it's hard to get because you've got to come up with a lot of records to verify whatever you're claiming; and so I don't think you need it.'"

         Hilson testified that their discussion about business-income coverage occurred during his first telephone call with Jones. Hilson testified that he told Jones that he needed such coverage.

"Q. Did you think Mr. Jones needed business income insurance?
"A. [Hilson:] Yes.
"Q. Did you advise him that?
"A. Yes.
"Q. All right. So you advised Mr. Jones to buy business insurance but he declined?
"A. Yes.
"Q. Do you have anything in writing on that?
"A. No, I did not. Other than he purchased and paid premiums on the amount without business income."

         Hilson noted in his testimony that the proposal he submitted to Jones for insurance coverage of the mattress factory in 2009 included a quote with business-income coverage and a quote without business-income coverage because Jones asked for both quotes.

"Q. Now, I notice that this one has -- in your quotes, you have two quotes. See if I can find what page they're on. It would be on the page that's called premium summary, which would be the --
"....
"Q. The fourth page. Sure, Crutchfield Graves [exhibit] 7. Is that what it is?
"A. [Hilson:] Yes.
"Q. And there are two premium quotes. Why are there two premium quotes?
"A. We had quoted -- we had quoted the [policy] with business income coverage, and then Mr. Jones wasn't sure if he wanted it. He asked to quote it with and without."

         Hilson testified that ultimately Jones elected not to pay for business-income coverage because he stated it was too expensive.

         Both Hilson and Jones agree that each year after 2009 when the insurance policy for the mattress factory came up for renewal, Hilson would visit Jones to discuss Somnus's insurance needs. Hilson testified that he told Jones at every renewal period that Somnus needed business-income coverage but that Jones always declined the business-income coverage because "[i]t was too expensive." Jones testified that he could not recall any discussion about business-income coverage at the renewal meetings between him and Hilson; the only conversation he remembered about business-income coverage was the one in 2009. It is undisputed that the written proposals for insurance Hilson submitted on behalf of CGIA to Jones for Somnus in 2010, 2011, and 2012 did not include business-income coverage.

         On April 12, 2013, a fire occurred at the factory. The fire rendered the factory a total loss. Somnus was forced to move its operation to a location in Mississippi in an attempt to stay in business. Somnus stayed in business for two more years. Ultimately, Somnus went out of business in 2015.

         During the period after the fire while Somnus remained in business, Somnus continued to get its insurance through Hilson and CGIA. Hilson testified that he continued to recommend business-income coverage to Jones but that Jones still declined it because he said it was too expensive.

"Q. Okay. And is that also true even after the fire [Jones] still declined the business interruption insurance?
"....
"A. [Hilson:] We offered him $1 million in business income the last year he was in business, and he made us take it off because it was too expensive."

         Jones testified that his decision not to purchase business-income coverage even after the fire at the factory was based on what Hilson had told him in 2009 about it being expensive and difficult to obtain.

"Q. So during that time, you never had business income insurance? Even after this fire?
"A. [Jones:] I don't believe I ...

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