Alfa Life Insurance Corp. v. Colza
2014 Ala. LEXIS 64
| Ala. | 2014Background
- Dante applied for a $150,000 life policy through agent Brandon Morris; application process required Part 1 (application), a medical exam, and underwriting review; Dante named Kimberly (his widow) beneficiary.
- Morris entered a “No” answer to a question about recent moving-traffic violations and selected a Preferred Tobacco rate; disputed whether Dante signed or saw the full application or conditional receipt.
- A conditional receipt stated: no insurance becomes effective unless every listed condition is met, limited pre-policy coverage to $100,000, and expressly disclaimed agent authority to waive conditions.
- Dante had a medical exam on Oct. 15; he disclosed family heart disease, high cholesterol, and prior moving violations; he died Oct. 16; underwriting received the exam report two days later and denied coverage because conditions were unmet and Preferred rate was not warranted.
- Kimberly sued Alfa (breach of contract, bad faith) and Morris (negligent procurement); a jury returned verdicts for Kimberly; trial court entered judgment against Alfa and Morris; Alabama Supreme Court reversed and rendered judgment for defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of enforceable contract/coverage under the conditional receipt | Kimberly: conditional receipt created temporary coverage (up to $100,000) that Alfa breached by denying payment | Alfa: conditions in the conditional receipt and application were not met at death, so no contract obliged Alfa to pay | Held for Alfa — conditions precedent were not satisfied, so no contract obligation arose under the receipt |
| Bad-faith refusal to pay | Kimberly: Alfa acted in bad faith by denying benefits | Alfa: bad-faith claim requires an underlying insurance contract; none existed here | Held for Alfa — without an enforceable contract, bad-faith claim fails |
| Negligent procurement against agent Morris — causation / proximate cause | Kimberly: Morris negligently completed the application, which prevented coverage | Morris: underwriting alone determines insurability/rate-up, so agent’s mistakes did not proximately cause lack of coverage (argument waived) | Held: causation argument waived because not timely raised; court did not decide its merits |
| Contributory negligence as defense to negligent procurement | Morris: the application and conditional receipt warned that immediate coverage was not guaranteed; Dante/Kimberly failed to read documents and thus were contributorily negligent as a matter of law | Kimberly: contributory negligence is normally a jury question; failure-to-read should not bar negligent-procurement as matter of law | Held for Morris — based on Foremost and related precedent, failure to read clearly worded documents that disclose the risk can constitute contributory negligence as a matter of law and bar negligent-procurement claim |
Key Cases Cited
- Waddell & Reed, Inc. v. United Investors Life Ins. Co., 875 So.2d 1143 (Ala. 2003) (standard for reviewing JML motions; substantial-evidence requirement)
- State Farm Fire & Cas. Co. v. Slade, 747 So.2d 293 (Ala. 1999) (bad-faith refusal claim requires proof of an insurance contract and its breach)
- Kanellis v. Pacific Indemnity Co., 917 So.2d 149 (Ala. Civ. App. 2005) (contributory negligence may bar negligent-procurement where documents plainly disclose limits of coverage)
- Foremost Ins. Co. v. Parham, 693 So.2d 409 (Ala. 1997) (a party who can read and understand documents but deliberately ignores clear written terms may be barred from relief)
- Hickox v. Stover, 551 So.2d 259 (Ala. 1989) (reversed earlier contributory-negligence dismissal; discussed in relation to later overruling and standards)
- AmerUs Life Ins. Co. v. Smith, 5 So.3d 1200 (Ala. 2008) (applying Foremost: reasonable reliance can be unreasonable when clear written terms should prompt inquiry)