Back in January of 2005, our law firm tried a case in Escambia County, Alabama, for Willie Hudson and Betty Jo Phillips against Alfa Mutual Insurance Company. We were fortunate enough to receive a $500,000 verdict for these Plaintiffs. The thrust of the fraud allegation was that Alfa denied a total loss fire claim on the home of Mr. Hudson, a fire that was believed to have been caused by lightning. Alfa took the position in this case that Mr. Hudson had misrepresented information on his application for the policy of insurance and used that so-called reason as a basis for denying the total fire loss claim. Alfa appealed the jury’s decision and the case has been pending in the Alabama Supreme Court since January of 2005.
Some four years later, on January 9, 2009, the Alabama Supreme Court affirmed the Escambia County jury verdict of $500,000. By law, verdicts that are appealed and later affirmed by the Alabama Supreme Court are to receive 12% simple interest per year while the case is pending. Therefore, the Plaintiffs in this case, Willie Hudson and Betty Jo Phillips, will now receive over $740,000 from Alfa.
Alfa’s assertion concerned a petty crime conviction that occurred over 30 years ago against Mr. Hudson, a fact he disclosed to the agent, in response to the Alfa agents’ inquiry — “Have you ever been arrested?” – on the homeowners policy application. The agent told Mr. Hudson that the arrest was “too long ago” and “did not matter.” The agent then marked the application “no.” There were approximately seven other errors contained on the application that Mr. Hudson was asked to sign.
Approximately a year after Mr. Hudson purchased the Alfa homeowners insurance policy, he experienced a total loss fire of his home, but Alfa denied his claim and accused its policyholder of lying on his application about his 30-year-old arrest. In April 2001, Alfa sued Mr. Hudson asking for the Court to declare that his policy be rescinded and that they, Alfa, be declared to have no obligation to pay any of the fire claim. In response, our law firm, on behalf of Mr. Hudson, filed a counter-claim alleging fraud against Alfa because its own agent had misrepresented the information on the Alfa application. Since November 2001, Mr. Hudson and his companion, Ms. Phillips, have been forced to live in a “converted barn” that was located next to the home that had burned in the fire.
During the three-day trial, several witnesses were called by the Plaintiff to testify that their Alfa agent had also failed to either ask the same “arrest” question on the application or that Alfa provided them coverage despite their own prior arrest, with two witnesses having convictions over 25 years old. As Mr. Hudson’s lawyers, we were able to prove to the jury that Alfa had a flawed system of underwriting which allowed agents to abuse the application process with those same abuses subsequently used to deny large claims when losses occurred. A jury deliberated approximately two hours before returning with the $500,000 verdict. It took the Supreme Court much longer to come down with their decision. I might add that it was the correct result without any question.
While it’s unfortunate that Mr. Hudson and Ms. Phillips had to wait almost eight years after experiencing a fire to the home, they finally received justice. Fortunately, they stayed the course – never gave up – and ultimately received the justice that was deserved. Hopefully, Alfa has learned its lesson from this case and changed its agents’ sales practices regarding the application process.
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