ALABAMA SUPREME COURT FINDS NO REASONABLE RELIANCE ON ALLEGED MISREPRESENTATIONS OF AN AGENT

ALABAMA SUPREME COURT FINDS NO REASONABLE RELIANCE
ON ALLEGED MISREPRESENTATIONS OF AN AGENT

In 1989, Plaintiff John Maloof replaced existing life insurance policies with two new policies in order to pay estate taxes, which would come due years down the road. Mr. Maloof purchased a third policy three years later for this same estate planning purpose. Mr. Maloof believed his last premium payment was due in 2007. However, after making this payment, he received notice that additional premiums were required to continue the policies. Mr. Maloof failed to make these payments and was notified that the life insurance policies were terminated. The Maloofs sued for fraud claiming their insurance agent had misrepresented that the policies would be available to pay the estate taxes when instead, they would likely lapse when Mr. Maloof was 78 years of age unless Mr. Maloof increased the premiums he paid.

The Alabama Supreme Court pointed to the fact that the Maloofs had 20 days to review the insurance policies and could have canceled the policies at any time during that review period with a full refund. The Court also noted the Maloofs received documents summarizing the contract and the expected life of the policy based on the premiums paid, and those documents contained disclaimers explaining the insurance policies could change. These documents and the policy itself would have conflicted with the alleged misrepresentations.

In light of this conflict, the Court held that the Maloofs could not have reasonably relied on the insurance agent’s representations. The Court further held that a plaintiff’s right of reliance is accompanied by an attendant duty to exercise precaution to safeguard the plaintiff’s interests. Maloof v. John Hancock Life Ins. Co., 2010 Ala. LEXIS 196 (Sept. 30, 2010).

Maloof is an excellent new decision upholding the principals in Alabama that purchasers have a duty to review their policies and will be held to the expense language of the policy and accompanying documents. Hopefully, this trend will continue.