This section contains the nature of the case and procedural background.

On January 15, 1981, Palmer met with P and members of her family to discuss medical insurance. P was five feet, two inches tall, and weighed 180 pounds. Palmer described plans for medical insurance with four different companies, including a plan with D which Mrs. Strickland and her husband chose. P completed an application for insurance; Palmer tore from the application a detachable form called a 'conditional receipt' and gave it to P. He took a check from P for $100. The receipt stated that the effective date of coverage was January 15, 1981. P and members of her family testified that Palmer told them at the meeting that Pd's insurance coverage would be effective as of that date, January 15, 1981, and that she would be covered if she had an accident going home from that meeting. P canceled an application for hospitalization insurance with another company. At trial, Palmer testified that he told P she would be covered as of that date only 'if everything was in order.' The application for insurance and a statement in the conditional receipt given to Mrs. Strickland provided that no agent was authorized to make or modify contracts, to waive any of the company's rights or requirements, or to bind the company by making or receiving representations. Just 4 days later, P fell and hurt her ankle. Palmer had not yet submitted P's application for medical insurance to D. Palmer testified that he submitted the application to John Martin, a general agent for D, on January 22, 1981. D declined to issue a policy of coverage for P on the grounds that she was physically unfit. P sued Palmer and D for fraud and misrepresentation. Palmer testified that his authority with D was limited to the solicitation of applications and the collection of initial premiums. Martin testified that Palmer could solicit applications, but had no authority to bind D. Palmer was a broker for Mutual of New York, and was not an agent for D. The record shows that Palmer was a licensed agent for D in the State of Alabama. The jury awarded P $22,500. The amount of compensatory damages involved in the case was $1,369.14, so $21,130.86 of the verdict constituted punitive damages. D argued that there was insufficient evidence to support P's allegations of fraud and to support an award of punitive damages. D appealed.

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