Employers Mutual Casualty Co. v. Smith Construction & Development, LLC
2013 U.S. Dist. LEXIS 82441
N.D. Ala.2013Background
- EMC seeks declaratory judgment that it owes no insurance coverage to the Smith Defendants under a CGL policy for the Waldrips’ underlying action.
- Waldrips sued the Smith Defendants for negligence, breach of contract, misrepresentation, deceptive practices, among other claims, regarding home construction.
- EMC issued the policy on Feb 1, 2007; it was renewed and in force through Feb 2, 2011.
- Smith Defendants were served in the underlying action on Oct 29, 2010 and notified EMC of the suit on Jan 6, 2011.
- Alabama law governs; the policy excludes misrepresentation and covers only property damage or bodily injury caused by an occurrence.
- The court grants in part and denies in part EMC’s summary judgment request and abstains from ruling on indemnification pending the state court action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does EMC have a duty to defend against the Waldrips’ claims? | EMC argues no duty for faulty workmanship, negligence, or misrepresentation; misrepresentation excluded. | Smith Defendants and Waldrips contend some claims fall within coverage. | EMC has no duty to defend for negligence or faulty workmanship; misrepresentation excluded; DTP claim undecided. |
| Is the delay in notice by the Smith Defendants reasonable as a matter of law? | Delay until Jan 6, 2011 (10 weeks) is unreasonable. | Delay is disputed; reasonable as a fact issue with justifications possible. | Not unreasonable as a matter of law; factual question remains. |
| Do the Waldrips’ breach of contract and faulty workmanship claims constitute an occurrence? | Such claims are not accidental and do not constitute occurrences. | Some argue Texas-like interpretation could treat defects as occurrences. | Contract breach not an occurrence; faulty workmanship not an occurrence under Alabama law; no duty to defend for contract/faulty workmanship. |
| Do misrepresentation claims fall within coverage due to exclusions? | Policy excludes misrepresentation; coverage not triggered. | Same; misrepresentation not within coverage. | No duty to defend for misrepresentation to the extent exclusion applies. |
| Is the duty to indemnify ripe for decision? | Ripe none; underlying action pending; court abstains from indemnification ruling. |
Key Cases Cited
- Moss v. Champion Ins. Co., 442 So.2d 26 (Ala. 1983) (accident requires unintended injury; foreseeability matters for coverage)
- Hartford Cas. Ins. Co. v. Merchants & Farmers Bank, 928 So.2d 1006 (Ala. 2005) (accident/occurrence definition governing insurance coverage)
- Town & Country Prop., LLC v. Amerisure Ins. Co., 111 So.3d 699 (Ala.2011) (faulty workmanship may be an occurrence if exposure to a general harmful condition occurs)
- U.S. Fid. & Guar. Co. v. Warwick Dev. Co., Inc., 446 So.2d 1021 (Ala.1984) (necessity of examining exposure to conditions for occurrence)
- Reliance Ins. Co. v. Gary C. Wyatt, Inc., 540 So.2d 688 (Ala.1988) (breach of contract not an occurrence under CGL)
- Auto-Owners Ins. Co. v. Toole, 947 F. Supp. 1557 (M.D. Ala. 1996) (limited Alabama authority on when contract disputes fall within occurrence)
- Thomas (South Alabama Supreme Court case referenced), 334 So.2d 879 (Ala. 1976) (reasonableness of notice; time for notifying insurer)