22 F.4th 1246
11th Cir.2022Background:
- A catastrophic pyrotechnic explosion at Ultratec HSV’s Alabama plant killed two employees and severely injured a third; the employees (or their reps) sued Ultratec HSV, Ultratec (parent), employee Mike Thouin, MST Properties, and others.
- James River insured Ultratec HSV under a Commercial General Liability policy that named both Ultratec entities; it filed a declaratory-judgment action seeking to avoid duty to defend or indemnify the insureds based on an Employer’s Liability Exclusion.
- The Policy excluded coverage for bodily injury to “any employee of any Insured arising out of and in the course of employment by any insured,” but also contained a Separation of Insureds (severability) provision treating each named insured as if it were the only named insured.
- Parties agreed the injured workers were employed only by Ultratec HSV; James River conceded no duty to defend Ultratec HSV but argued the exclusion barred coverage for claims against the other insureds (Ultratec, MST, Thouin).
- The district court granted summary judgment for the insureds on the duty-to-defend claim (staying indemnity), holding the exclusion ambiguous when read with the severability clause and therefore requiring James River to defend Ultratec, MST, and Thouin; James River appealed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has jurisdiction to hear the interlocutory appeal of the duty-to-defend ruling | No final order; interlocutory, so not appealable | Order granting insureds declaratory relief requiring defense has injunctive qualities and is immediately appealable under §1292(a)(1) | Court had jurisdiction: decree was akin to an injunction (citing Sahlen) and thus appealable |
| Whether James River has a duty to defend the non-employer insureds under the Policy | Employer’s Liability Exclusion unambiguously bars coverage for bodily injury to any employee of any insured — so no duty to defend any insured for these claims | Exclusion is ambiguous; read with the Separation of Insureds Provision it applies only when an insured is sued by its own employee, so Ultratec, MST, Thouin are covered and must be defended | Exclusion is ambiguous (particularly when read with severability); construed for benefit of insureds; James River has a duty to defend Ultratec, MST, and Thouin |
Key Cases Cited
- Transp. Indem. Co. v. Wyatt, 417 So. 2d 568 (Ala. 1982) (phrase “any insured” in employer’s-liability exclusion is ambiguous and construed for insured)
- Wilson v. State Farm Mut. Auto. Ins. Co., 540 So. 2d 749 (Ala. 1989) (same ambiguity where injured party was employee of some but not all insureds)
- U.S. Fire Ins. Co. v. McCormick, 243 So. 2d 367 (Ala.) (severability-of-interests provision requires reading policy separately for each insured)
- Twin City Fire Ins. Co. v. Alfa Mut. Ins. Co., 817 So. 2d 687 (Ala. 2001) (insurance policies governed by general contract rules; read provisions in context)
- Hartford Cas. Ins. Co. v. Merch. & Farmers Bank, 928 So. 2d 1006 (Ala. 2005) (duty to defend assessed from underlying complaint; duty to indemnify may be unripe pretrial)
- Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Sahlen, 999 F.2d 1532 (11th Cir. 1993) (district court order requiring insurer to pay defense costs is appealable as an injunction)