AMERICAN BUILDERS INSURANCE COMPANY v. RIVERWOOD CONSTRUCTION, LLC, et al.
Case No. 2:19-cv-01757-SGC
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION
September 21, 2022
Plaintiff American Builders Insurance Company (“Builders“) seeks a declaratory judgment that it owes no duty to defend or indemnify defendants Riverwood Construction, LLC, and David Null in connection with separate lawsuits filed by defendants David and Brenda Riggs (the “Riggses“) and defendants Courtney and Yolanda Merriweather (the “Merriweathers“). (Doc. 1).2 The Riggses and Merriweathers sued Riverwood and Null in state court, alleging defects in Riverwood‘s construction of their respective homes. In this action, Builders asserts
Presently pending is Builders’ motion for summary judgment, which is fully briefed and ripe for adjudication.3 (Docs. 36-38, 42, 43). As explained below, Builders’ motion for summary judgment is due to be granted.
I. Standard of Review
Under
II. Material Facts
Riverwood is a construction company operated, managed, and indirectly owned by Null. (Doc. 36-1 at 12, 16). Null is Riverwood‘s sole employee, and he handles Riverwood‘s insurance matters. (Doc. 36-1 at 22). During the period relevant to this lawsuit, Sergie Kampakis with Mikos/Kampakis Insurance Services, Inc., was Riverwood‘s insurance agent. (Doc. 36-1 at 22).
Builders issued Riverwood several commercial general liability package policies from February 2016 to February 2019 (policy numbers PKG 0213614 00, PKG 0213614 01, PKG 0213614 02, and PKG 0213614 03). (Doc. 36-3). The policies required Riverwood to notify Builders “as soon as practicable” of any
Relevant to this action, Riverwood constructed two houses—one for the Riggses and one for the Merriweathers—that later became the subject of separate lawsuits. (Doc. 36-1 at 60, 104). During and after construction, both the Riggses and the Merriweathers complained about unrepaired construction defects, and both couples ultimately filed suit. (Doc. 36-1 at 60; 100).
Riverwood and Null were served with the Riggses’ lawsuit in April 2017 and quickly hired counsel, who appeared in the litigation by the end of April. (Doc. 36-1 at 62; Doc. 36-6 at 2). The Merriweathers first sent a March 2017 demand letter threatening to sue Riverwood and Null; Riverwood and Null received the letter by
The record contains no document suggesting Riverwood provided written notice to Builders before May 2019. Null admitted he never submitted notice directly to Builders of either underlying lawsuit; any notice would have been submitted through his insurance agent, Mr. Kampakis. (Doc. 36-1 at 113). Null also testified he generally discussed litigation with Mr. Kampakis, but he could not state when he informed Mr. Kampakis of either the Riggs or Merriweather lawsuit—“. . . I cannot answer when I sent or what I sent on a specific time frame with Mr. Kampakis.” (Doc. 36-1 at 131; see also Doc. 36-1 at 83, 16, 120).
According to Mr. Kampakis, he first learned about the two lawsuits in April 2019 via an email from Riverwood and Null‘s defense counsel.5 (Doc. 36-9 at 9). The April email stated, “I discovered these additional cases6 against Riverwood while conducting our investigation and preparation of discovery in the two cases we are presently defending for Riverwood. . . . WE RECOMMEND THIS CASE BE IMMEDIATELY TURNED INTO BUILDERS AND/OR OTHER CARRIERS.”
Builders received notice of both lawsuits in May 2019. (Doc. 36-3 at 3). When asked at his deposition about the reason for delay in notice, Null testified multiple times he did not have a reason for the delay:
Q: You were sued in March of 2017, served April 2017, and Builders did not receive notice until 2019, until May of 2019 in fact. I‘m trying to figure out why that is.
A: And I would – I would love to be able to shed light on that, but I honestly don‘t know why that is.
Q: I‘m just asking you why it is – look, if we have to get in front of the Court, the question is, what‘s your reason for the notice being over two years after the filing of the Riggs lawsuit and over one year after the filing and service of the Merriweather lawsuit? I‘m asking you, what‘s your reason for that? Is your reason, “I just don‘t know“?
A: I don‘t have a reason. That‘s what I‘m trying to get you to understand, sir, I don‘t know of any reason why. I don‘t know how I can answer it any clearer than I don‘t have an explanation for that.
...
Q: Just so I‘m clear, I‘m trying to figure out, we hit on this a little bit earlier, I want to know the reason why there was such a long delay between the filing of those suits or your receiving demand letters, and any notice being provided to Builders in 2019. Do you have any reason for that?
A: I do not.
Q: You have no reason? All I‘m getting at, we‘re going to be arguing in front of the Court about the impact of the delay in notice, and one thing that could go into that is what the reasons were. I just want to make sure I know what you‘re going to stay if we ever get in front of the Court. I understand that to be you don‘t know why there was a delay, correct?
A: Correct.
Q: So there‘s not some other reason, in your mind – you have no idea why there was a delay?
A: No, sir.
(Doc. 36-1 at 87, 119).
Builders is defending Riverwood and Null in both the Riggs and Merriweather lawsuits under a reservation of rights. (Doc. 36-3 at 4). Builders filed this lawsuit in October 2019, seeking a declaratory judgment that it owes no duty to defend or indemnify Riverwood and Null in either lawsuit because (1) Riverwood‘s policy does not provide coverage for the claims brought by the Riggses and the Merriweathers, and (2) Riverwood did not notify Builders “as soon as practicable” of either lawsuit, which violates the conditions of Riverwood‘s policy. (Doc. 1).
Builders’ argument is straightforward: Riverwood‘s policies required it to provide notice “as soon as practicable” of any occurrence, claim, or lawsuit; because Riverwood delayed unreasonably in giving notice, Alabama law relieves Builders of its obligations under the policies.
Alabama courts interpret the phrase “as soon as practicable” to require an insured to give notice “within a reasonable time in view of the facts and circumstances of the case.” See Arrowood Indem. Co. v. Macon Cty. Greyhound Park, Inc., 757 F. Supp. 2d 1219, 1224 (M.D. Ala. 2010). In Alabama, only the length of the delay and the reasons for the delay are considered in determining whether a delay in notice is reasonable. See id.
Here, because of the length of the delay and the absence of any excuse for the delay, Builders argues it is entitled to summary judgment on its claim it owes no duty to defend and indemnify Riverwood and Null in the underlying lawsuits. In response, Riverwood and Null reassert the arguments made in their motion to dismiss—that this court lacks jurisdiction to hear this case because Builders’ claims are not ripe and do not satisfy the amount in controversy requirement for diversity cases. They also suggest Null “may reasonably have believed that the matters were not covered under the Builders policy” which justifies the delay.
Riverwood and Null argue Builders’ action is not ripe because the duty to indemnify depends on whether they are found liable in the underlying lawsuits. They also argue Builders has not established the requisite amount in controversy for diversity jurisdiction. The court has already rejected these arguments in its ruling on Riverwood and Null‘s motion to dismiss. (Doc. 27).
First, Builders has properly satisfied the amount in controversy threshold by establishing it potentially faces more than $75,000 in indemnification costs in the underlying lawsuits. (Doc. 27 at 7). The policies Builders issued to Riverwood provide $1,000,000 in coverage per occurrence. (Doc. 36-3 at 22). The Riggses seek $283,872 to repair their home, as well as punitive damages and compensation for pain, suffering, and mental anguish. (Doc. 13 at 20). It has long been established that multiple claims from a single plaintiff may be aggregated for jurisdictional purposes. See, e.g., Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 585 (2005) (Ginsburg, J., dissenting) (“This Court has long held that, in determining whether the amount-in-controversy requirement has been satisfied, a single plaintiff may aggregate two or more claims against a single defendant, even if the claims are unrelated.“) (citing Edwards v. Bates Cty., 163 U.S. 269, 273 (1896)); see also Snyder v. Harris, 394 U.S. 332, 335 (1969). Therefore, the amount-in-controversy threshold is satisfied. See Scottsdale Ins. Co. v. Calhoun Hunting Club & Lounge, 360 F. Supp. 3d 1262, 1266 (M.D. Ala. 2018) (“When the issue is the applicability of an insurance policy to a particular occurrence, the jurisdictional amount in controversy is measured by the value of the underlying claim—not the face amount of the policy.“) (quotation marks omitted).
Second, because this case involves both the duty to defend and indemnify because of an alleged late notice, it is a sufficiently ripe controversy. The duty to defend is more extensive than the duty to indemnify; if there is no duty to defend, there is necessarily no duty to indemnify. See Hartford Cas. Ins. Co. v. Merchants & Farmers Bank, 928 So. 2d 1006, 1009 (Ala. 2005). Accordingly, where an insurer seeks a declaratory judgment regarding its duty to defend, “the jurisdictional ripeness requirements are met” as to claims regarding the duty to indemnify. Tuskegee Univ. v. Nat‘l Union Fire Ins. Co. of Pittsburgh, PA, No. 3:18-CV-34-WKW, 2018 WL 3873584, at *2 (M.D. Ala. Aug. 15, 2018); see also Grange Mut. Cas. Co. v. Indian Summer Carpet Mills, Inc., No. 4:17-CV-01263-ACA, 2018 WL 3536625 (N.D. Ala. July 23, 2018) (“[I]f an insurer has no duty to defend an insured, a declaratory judgment claim regarding the insurer‘s duty to indemnify is ripe even if the underlying action is still pending.“).
Here, the central question is whether the delayed notice to Builders relieves it of the duty to defend and indemnify Riverwood and Null in the underlying litigation. This question can be resolved now because it does not depend on facts concerning
Finally, Riverwood and Null suggest this dispute could and should be handled in the underlying state court proceedings or in a separate state court lawsuit and that this court should exercise its discretion and decline to decide this matter. (Doc. 42 at 10). As support for their argument, they cite Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942), and Wilton v. Seven Falls Co., 515 U.S. 277 (1995). In Brillhart, the Supreme Court addressed abstention “where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties.” 316 U.S. at 495 (emphasis added). In Ameritas Variable Life Ins. Co. v. Roach, the Eleventh Circuit set forth several factors for district courts in considering whether to exercise their Wilton/Brillhart discretion under the Declaratory Judgment Act where there are parallel state proceedings. 411 F.3d 1328 (11th Cir. 2005).
Riverwood and Null do not address any of the Ameritas guideposts, nor do they explain how the underlying state court lawsuits will fully resolve their controversy with Builders. Moreover, they have not established the Riggs and Merriweather lawsuits are “parallel” to this action—a threshold question when
Where a “declaratory judgment action is brought by an insurer against an insured, there are no parallel proceedings if (1) the insurer was not a party to the suit pending in state court; and (2) the state court actions involved issues regarding the insured‘s liability, whereas the federal suit involved matters of insurance coverage.” Id. (internal citations and quotations omitted). The question in this action—whether Riverwood and Null timely notified Builders of the claims against them—is factually distinct from the issue in the underlying state court litigation, i.e., Riverwood and Null‘s liability for their allegedly faulty construction of the Riggses’ and Merriweathers’ homes. “What exists here are not parallel state court proceedings, but merely related state court proceedings.” Id.
Even considering the Ameritas factors, the court finds abstention is unnecessary here. There do not appear to be common facts or legal issues between this case and the Riggs and Merriweather lawsuits. The court‘s adjudication of Builders’ obligation to defend and indemnify Riverwood and Null does not in any way encroach on the underlying litigation or cause friction between federal and state judiciaries. Instead, a definitive ruling by this court concerning Builders’ obligations may eliminate some uncertainty in the underlying litigation by clarifying the legal relationship between Builders and Riverwood and Null—a question not present in
B. Notice
If a claim was made or suit brought against Riverwood, its policies required it to ensure Builders was notified in writing “as soon as practicable.” Under Alabama law, “as soon as practicable” means notice must be given “within a reasonable time in view of the facts and circumstances of the case.” See Travelers Indem. Co. of Conn. v. Miller, 86 So. 3d 338, 342 (Ala. 2011).8 Courts consider only two factors when evaluating whether a delayed notice was reasonable under Alabama law: the length of the delay and the reasons for the delay. See id. (citing U.S. Fid. & Guar. Co. v. Baldwin Cty. Home Builders Ass‘n, Inc., 770 So. 2d 72, 75 (Ala. 2000)). The insurer does not have to demonstrate prejudice from the delay. See id. If an insured does not give notice of its claim within a reasonable time, the insurer is released
1. Timeliness
Builders has shown Riverwood and Null (1) did not notify it of the Riggs lawsuit for more than two years after being served; (2) did not notify it of the Merriweathers’ demand letter for more than two years after receiving it; and (3) did not notify it of the Merriweather lawsuit for more than a year after being served. In a single sentence, with no citation to the record or other argument, Riverwood and Null state they dispute Builders was first notified of the underlying lawsuits in May 2019; they admit, however, “the only written notification that is of record, at this time,” was dated May 2019. (Doc. 42 at 2). Notably, Riverwood and Null do not argue they provided earlier written notice—instead, they complain Builders did not show no other notices were provided and therefore did not “eliminat[e] all material issues of fact.” (Doc. 42 at 2).
This argument requires Builders to prove a negative and is unpersuasive. Builders submitted evidence to establish it was first notified of both lawsuits in May 2019. Thus, the burden shifted to Riverwood and Null to provide evidence demonstrating a genuine dispute of fact regarding the timing of notice. Their bare
First, in their responses to Builders’ requests for admission, Riverwood and Null admitted the underlying lawsuits were provided to Builders on or about May 15, 2019, and they did not recall any other specific event whereby notice of the lawsuits was given to Builders. (Doc. 36-4 at 36, 39). Therefore, this fact is conclusively established. See
Second, Riverwood and Null have not sufficiently supported their “fact dispute” as required by the Federal Rules of Civil Procedure. If they did provide earlier written notice to Builders, they were required to submit or cite to evidence of that notice to rebut Builders’ summary judgment motion. See
Finally, Null‘s testimony that he spoke at some point with Mr. Kampakis about any pending litigation is insufficient to show there is a dispute of material fact. The policies required Riverwood to ensure Builders received written notice of the underlying lawsuits. Notice to Mr. Kampakis did not relieve Riverwood of its obligation to ensure Builders received written notice as required by the policies. See Sharp Realty & Mgmt., LLC v. Capitol Specialty Ins. Corp., No. CV-10-AR-3180-S, 2012 WL 2049817, at *16 (N.D. Ala. May 31, 2012) (“When an insured reports a claim to his own insurance agent, but the agent fails to report it promptly to the insurer, the insured is not relieved of his notice obligation, and the agent‘s undue delay vitiates coverage.“), aff‘d, 503 F. App‘x 704 (11th Cir. 2013). Additionally, they must demonstrate more than simply notice before May 2019; they must demonstrate timely written notice to Builders. Thus, to show a genuine issue of material fact, Riverwood and Null were required to present evidence of written notice to Builders within a reasonable time after (1) receipt of the Riggs lawsuit in
Thus, there is no genuine issue of material fact that Builders was first notified of the underlying lawsuits in May 2019—two years after Riverwood was served with the Riggs lawsuit and received the Merriweathers’ demand letter and one year after it was served with the Merriweather lawsuit. Alabama courts have found delays much shorter than the ones here require the insured to state a reasonable excuse for the delay. See Nationwide Mut. Fire Ins. Co. v. Est. of Files, 10 So. 3d 533, 536 (Ala. 2008) (five-month delay requires insured to offer reasonable excuse); Arrowood Indem. Co., 757 F. Supp. 2d at 1226 (five-month delay requires reasonable excuse); Sharp Realty & Mgmt., LLC, 2012 WL 2049817, at *14 (eight-month delay); Commc‘ns Unlimited Contracting Servs., Inc. v. Liberty Mut. Ins. Co., No. 2:18-CV-00613-CLM, 2020 WL 5016820, at *6 (N.D. Ala. Aug. 25, 2020) (two-year delay). Because of the length of the delay, Riverwood and Null must provide a reasonable excuse for the delay.
2. Reason for delay
The reasonableness of an excuse for delayed notice is normally a question for the factfinder, but when an insured does not offer a reasonable excuse for its delay in notifying its insurer of a claim, the issue may be decided as a matter of law. See
Riverwood and Null testified they “don‘t have a reason” for the delay in notifying Builders of the underlying lawsuits. In their opposition to summary judgment, they state they were working with the Riggses and Merriweathers to address punch list items and only learned of the alleged defects after the lawsuits were filed. (Doc. 42 at 17). They also suggest Null “may reasonably have believed that the matters were not covered under the Builders” policy, but they neither explain why Null may have thought there was no coverage nor do they cite any evidence to support this new assertion. (Doc. 42 at 17).
Riverwood and Null have not offered a reasonable excuse for the delay. First, Null already testified he did not have a reason for the delayed notice. While he now suggests he “may” have believed the lawsuits were not covered under the policy, the
Riverwood and Null did not provide notice of the underlying lawsuits within a reasonable time, and they offer no excuse to justify their delayed notice.
IV. Conclusion
For the foregoing reasons, there are no genuine issues of material fact, and Builders is entitled to judgment as a matter of law. Accordingly, American Builders’ motion for summary judgment will be granted in its entirety. (Doc. 37). A separate order will be entered.
DONE this 21st day of September, 2022.
STACI G. CORNELIUS
UNITED STATES MAGISTRATE JUDGE