FRAUD - FARMERS INSURANCE EXCHANGE V. MORRIS
Farmers Insurance Exchange v. Morris, [Ms. 1121091, Feb. 12, 2016] __ So.3d __ (Ala. 2016). In a Cunningham Bounds case, and despite amicus support for the appellants from the Business Council of Alabama and the Alabama Civil Justice Reform Committee, the Supreme Court of Alabama affirms a judgment on a fraud verdict and affirms the award of compensatory damages, but remands for a hearing on punitive damages because the time expired before such a hearing was held on Farmers' remittitur motion. Kyle Morris sued Farmers for fraudulently inducing him to become a Farmers agent. He was already an insurance agent in his father's Morris Insurance Agency, and Farmers agents assured him that continuing this relationship was not prohibited by any Farmers rules. After he worked successfully for Farmers for more than two years, Farmers terminated him for a conflict of interest, which caused him to lose the value of the work he did over that time. On appeal, Farmers made three arguments for judgment as a matter of law on the fraud claim. First, it argued that Morris was only an employee at will and so could not have any injury from reasonable reliance on the misrepresentation that he could become a Farmers agent while continuing in his father's agency. The Court holds that Morris's status as an employee at will did not prevent him from asserting that he reasonably relied by altering his relationship with his father's business (i.e., by concentrating instead on selling Farmers policies). Second, the Court rejects an argument that the merger and integration clause precluded reliance on earlier oral misrepresentations – a statement in a contract that no other representations have been made does not bar a fraud action alleging that oral misrepresentations fraudulently induced the plaintiff to enter into the contract. Third, the Court rejects Farmers' argument that a statement available to Mr. Morris in its training materials should have alerted him to a Farmers rule against maintaining an office in another insurance agency; that rule was buried deep within training materials and both Mr. Morris and the Farmers agents who trained him testified that they had never seen it and were not aware of it, so a jury question was presented on whether it precluded reasonable reliance. (This JML holding on the merits of the fraud claim is a plurality opinion, with four Justices concurring in the Per Curiam opinion and one Justice concurring in the result.)
On compensatory damages, Farmers argued that Mr. Morris was improperly allowed to recover the commissions he would have continued to earn from the Farmers policies he wrote if he had not been terminated, but the Court agrees with Morris (1) that he presented a fact question on his theory that he could have written the same policies while working for his father's agency over that period and (2) that the amount of commissions that would have been earned on the Farmers policies presented the best evidence of what he would have earned on policies he otherwise could have written through his father's agency. The Court thus affirms the award of $600,000 in compensatory damages, but remands for a Hammond hearing on remittitur of punitive damages, because the 90-day period of Rule 59.1, Ala. R. Civ. P., expired before the trial court held such a hearing (Note: Farmers resisted Mr. Morris's post-judgment discovery despite trial court orders requiring production, and it was those discovery disputes that caused the 90 days to lapse before a hearing could be held on the remittitur motion).
Related Documents: Farmers Insurance v Morris 2-12-16