## Facts

- Betty Sanders sought life insurance on her son, David Ogle, through Liberty National’s agent, Keith Mahone.
- Sanders testified that Mahone represented the policy would provide $10,000 in life-insurance benefits payable to her upon Ogle’s death.
- Ogle disclosed a brain disease on the application; the issued policy was a graded-benefit policy that limited benefits for natural death within the first three years to a return of premiums plus 10% interest, rather than the $10,000 face amount.
- Evidence indicated Liberty National also offered a different product that would have provided immediate $2,500 coverage, which Sanders contended she would have purchased (or sought other coverage) if accurately informed.
- Ogle died of natural causes a few days after issuance; Liberty National paid only the premium plus 10% interest under the graded-benefit terms and refused to pay $10,000.
- Sanders sued Liberty National and Mahone for fraud-based claims and negligent hiring/training/supervision; she dismissed a bad-faith claim before submission to the jury.
- A jury awarded Sanders $10,000 in compensatory damages and $135,000 in punitive damages against both defendants; the trial court denied defendants’ motions for judgment as a matter of law (JML), new trial, remittitur, and reconsideration of an attorney-fee discovery sanction.

## Issues

1. Whether substantial evidence supported liability for fraud-based claims and the $10,000 compensatory-damages award, including causation and proof of loss.
2. Whether clear and convincing evidence supported punitive damages for intentional, reckless, or conscious fraud, and whether $135,000 was excessive.
3. Whether the trial court committed reversible error in jury instructions, including spoliation and fraud-related charges, and in refusing certain defense-requested instructions.
4. Whether evidentiary rulings and allegedly improper closing argument warranted reversal.
5. Whether the trial court abused its discretion in taxing attorney’s fees as a discovery sanction.

## Decision

- The Alabama Supreme Court affirmed the judgment for Sanders in all respects.
- The court held that Sanders presented substantial evidence that Mahone misrepresented the policy’s coverage and that she relied on the misrepresentation.
- The court upheld the compensatory award on a “lost opportunity” theory: Sanders could recover for the insurance protection she was led to believe she obtained and the opportunity to obtain meaningful immediate coverage she lost.
- The court held that clear and convincing evidence supported punitive damages based on intentional or reckless misrepresentation, and it upheld the $135,000 punitive award as not unconstitutionally excessive.
- The court found no reversible error in the challenged jury instructions (including spoliation), evidentiary rulings, or closing argument.
- The court held the trial court acted within its discretion in imposing and maintaining an attorney-fee discovery sanction.

## Legal Principles

- A plaintiff may prove actionable fraud in insurance sales when an agent materially misrepresents the nature or immediacy of coverage and the purchaser reasonably relies to her detriment.
- Compensatory damages for insurance-sales fraud may be measured by the purchaser’s lost opportunity to obtain meaningful coverage, including the value of the protection the purchaser was led to believe would be in force.
- Punitive damages in fraud actions require clear and convincing evidence of intentional, reckless, or conscious wrongdoing; such damages may be upheld when supported by evidence of knowing or reckless misrepresentation and are not excessive under constitutional and state-law review standards.
- A spoliation instruction may be given when the evidence supports an inference that a party failed to preserve relevant evidence; the decision is generally reviewed for abuse of discretion.
- Trial courts have broad discretion over evidentiary rulings, control of closing argument, and discovery sanctions, including attorney-fee awards, and appellate relief requires a showing of prejudicial error or abuse of discretion.

## Conclusion

The court affirmed a fraud verdict against an insurer and its agent for selling a graded-benefit life policy through representations implying immediate $10,000 coverage, approving compensatory damages based on the purchaser’s lost opportunity to obtain meaningful coverage and sustaining punitive damages and related trial rulings.


Liberty Nat’l Life Ins. Co. v. Sanders, 792 So. 2d 1069 (Ala. 2000)