$35 Million Verdict Against American General Life & Accident Company
Barnes V. American General, Et Al.
A jury slammed American General Life and Accident Insurance Co. on Friday
afternoon with what may be Mobile County's largest-ever punitive damages
verdict: $35 million.
Earlier Friday, another Mobile County jury delivered a $5 million blow
against Liberty National Life Insurance Co. Attempts late Friday afternoon
to reach attorneys for Liberty National and American General were unsuccessful.
The plaintiffs' attorneys in both cases said they expect the companies
Virtually all cases involving large verdicts are appealed. Verdicts are
often decreased – sometimes significantly – when both sides agree to settle
rather than go through the appeals process.
Friday's verdicts are likely to provide more ammunition for supporters
of tort reform, the movement to rewrite Alabama's civil justice laws to
limit the size of punitive-damage verdicts.
"The other side will say the jury went wild, but they didn't,"
said Mobile attorney George W. "Skipper" Finkbohner, who represented
plaintiff Lillie Barnes in her case against American General.
The case focused on Ms. Barnes' allegations that American General hired
agents the company know had been fired from other companies for defrauding
customers, and then sent those agents "into the poor neighborhoods
of Mobile," Finkbohner said after the verdict.
According to Finkbohner, one such agent sold Ms. Barnes' mother, Annie,
a life insurance policy in 1989, then intentionally allowed the policy
to lapse while he continued to collect the premiums. A second policy was
secretly issued later, Finkbohner said.
Annie Barnes, who was confined to a wheelchair from a stroke, died in 1993,
said the Mobile lawyer.
"There was evidence that the sales manager and two agents collected
money after the first policy lapsed, and put it on what they said was
a policy owned by a relative, but it was a documented forged policy,"
American General disputed the plaintiff's claim, Finkbohner said. The agent
and another involved in handling the Barnes policy were later fired by
American General, but given good recommendations when they applied at
other companies and were hired, he said. Finkbohner declined to name the agents.
The $35 million verdict was broken down into $20 million in compensatory
damages and $15 million in punitive damages, he said.
Last July, Liberty National filed an affidavit acknowledging that the company
had paid out $20.3 million in settlements to 126 Mobile County plaintiffs.
The affidavit was filed with the $2.9 million settlement the company reached
with Ruby Coram, a Mobile County woman who was awarded $4.6 million by
a Mobile County jury in 1994.
The affidavit was unusual because in most settlements both sides sign promises
"We've been punished enough," said Birmingham attorney Edgar
Elliott shortly after filing the affidavit for Liberty National.
Friday's verdict indicated the punishment may not be over.
Mike McGlothren, who tried the case with partner Steve Olen, said the jury
believed his clients, James and Betty Strickland, who alleged that Liberty
National agent John Carlisle understated the value of their life insurance
policies to get them to trade for a smaller policy.
By inducing the Stricklands to switch policies, Carlisle was able to get
a new sales commission, the plaintiffs alleged. McGlothren said evidence
was presented during the Strickland trial showing it was a corporate policy
to get customers to switch policies.
In other lawsuits, Liberty National lawyers have asserted that switching
policies is often the best thing for policyholders. The seven policies
the Stricklands exchanged provided $28,000 worth of coverage, McGlothren
said, while the new policy sold by Carlisle provided $10,000 in coverage.
The case involved many of the same allegations made in a class-action lawsuit
filed earlier this year against Liberty National in Jefferson County,
That suit alleges that in the 1980s and early 1990s, Liberty National persuaded
customers to exchange policies for new coverage, thereby lowering the
cash value of the policy while also reducing the level of coverage.
The alleged fraud against the Stricklands occurred in 1987, though his
clients only learned about it in 1994, McGlothren said.
In the same affidavit in which Liberty National released the figures that
it has paid out in Mobile, the company – without admitting wrongdoing
– listed the names of several former agents whose actions resulted in
many of the legal problems. Carlisle was one of those.
Testimony in previous trials had revealed allegations of forgery and widespread
fraud by Liberty National agents and managers at one of the company's
Mobile offices in the late 1980s and early 1990s.
Last year, Liberty National sent notices to policyholders listing improvements
and controls instituted to avoid problems like those named in more than
250 lawsuits filed against the company in Mobile County.
Houston-based American General is the largest home-service company in the
nation, followed by Torchmark Corp., the Birmingham-based parent company
of Liberty National.
Home-service insurance, which dominated the industry earlier in the century,
is insurance sold the old-fashioned way. Company employees – not independent
agents – call on customers who often live in low-income neighborhoods.
The policies they sell are usually small, commonly with $10,000 to $20,000
in coverage. Critics of the industry charge that the policies are a bad
bargain. Defenders say home-service companies serve a low-income population
that most insurance companies aren't interested in.