State Farm Fire & Casualty Co. v. Slade

Summary

On rehearing, the Supreme Court of Alabama reversed a judgment awarding the Slades damages on bad-faith and fraud claims arising from State Farm's handling of their homeowner's claim for lightning-related damage to their home. The court held the term 'dwelling' ambiguous as applied to the attached retaining wall but the earth-movement exclusion unambiguous and enforceable, precluding the theory that lightning-caused soil movement was a covered loss. It further held that contractual liability remains a prerequisite to bad-faith liability even in abnormal failure-to-investigate cases, that the jury's verdict was inconsistent, and that the Slades were entitled to a new trial on the contract and bad-faith claims (excluding the soil-movement theory), while judgment was rendered for State Farm on the fraud-in-adjustment claims. The court affirmed the JMLs on fraud in the sale of the policy and on collapse coverage but reversed the trial court's pro tanto setoff ruling.