Employers Mutual Casualty Company v. Carl Hobbs Construction Company, Inc. et al

Filing 68

MEMORANDUM OPINION AND ORDER the Court finds Defendants' 54 Motion to Amend/Correct Answer is due to be and hereby is DENIED, and accordingly, EMC's Opposition to Defendants' Motion to Amended [sic] Answer and 55 Motion to Strike is due to be and hereby is DENIED as moot. Signed by Honorable Judge Mark E. Fuller on 10/17/2012. (Attachments: # 1 Civil Appeals Checklist)(jg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
SOUTHERN DIVISION
EMPLOYERS MUTUAL CASUALTY
COMPANY,
Plaintiff,
v.
CARL HOBBS CONSTRUCTION
COMPANY, INC., et al.,
Defendants.

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) CASE NO. 1:11-cv-00643-MEF
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) (WO – Do Not Publish)
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MEMORANDUM OPINION AND ORDER
I. Introduction
This cause is before the Court on Defendants Carl Hobbs Construction Company, Inc.,
Carl Hobbs, Donald Trawick, and Hobbs & Trawick d/b/a Carl Hobbs Construction
Company, Inc.’s (collectively, the “Construction Company Defendants”) Motion to Amend
Answer (Doc. #54) and Plaintiff Employers Mutual Casualty Company’s (“EMC”)
Opposition to Defendants’ Motion to Amended [sic] Answer and Motion to Strike (Doc.
#55). Upon consideration of the record as a whole, the Court finds that the Construction
Company Defendants’ motion to amend is due to be DENIED and EMC’s motion to strike
is due to be DENIED as moot.
II. Background
This suit began when EMC filed a declaratory judgment action against the
Construction Company Defendants and the Alfords on August 11, 2011. (Doc. #1.) The
Alfords are the homeowner–plaintiffs in the underlying state action, which commenced on

May 5, 2009; the Construction Company Defendants are the contractor–defendants in the
underlying action. In this Court, EMC seeks a declaration that it owes no duties to defend
or to indemnify the Construction Company Defendants under the commercial general
liability policy (the “Policy”) at issue in the underlying action.1
Since April 2010, EMC has provided counsel to the Construction Company
Defendants for the defense of the underlying action under a reservation of rights, and in
exchange, EMC has required them to hand over exclusive control of the defense. As a result,
and in reliance on EMC’s defense and exclusive control of the underlying action, the
Construction Company Defendants terminated Buddy Williams, their original defense lawyer
in the underlying action.
When this declaratory judgment action got underway in August 2011, about 15
months had passed since the Construction Company Defendants gave up their choice of
counsel in reliance on EMC’s defense of the matter under a reservation of rights. The
Uniform Scheduling Order in this suit, entered on November 15, 2011, set the deadline to
amend pleadings for November 30, 2011. (Doc. #16.)
On January 23, 2012, EMC filed its first Motion for Summary Judgment (Doc. #19),
which prompted the Construction Company Defendants to file their Motion to Deny or Defer
Ruling on Plaintiff’s Motion for Summary Judgment on February 2, 2012. (Doc. #23.) On
February 3, 2012, this Court denied EMC’s first Motion for Summary Judgment, finding it

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The underlying action is pending in the Circuit Court of Houston County,
Alabama, and is captioned Alford v. Hobbs, et al., No. 09-cv-229-M. The Court will
simply refer to it as the underlying action.
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to be premature. (Doc. #31.)
In their Motion to Deny or Defer, the Construction Company Defendants raised the
issue of EMC’s failure to meet its enhanced obligation of good faith while defending under
a reservation of rights, arguing that discovery was needed on the matter. (Doc. #23, at p.
5–6.) The Construction Company Defendants did not at that time move for leave to amend
their answer to plead as an affirmative defense that EMC failed to meet its enhanced
obligation of good faith. However, in its response to the Construction Company Defendants’
Motion to Deny or Defer, EMC acknowledged its enhanced obligation and claimed to have
met it, quoting L&S Roofing Supply Company v. St. Paul Fire & Marine Insurance
Company. 521 So. 2d 1298, 1304 (Ala. 1987) (explaining when an insurer meets its
enhanced obligation of good faith when defending an insured under a reservation of rights);
(Doc. #26, at p. 5) (asserting that EMC acted in good faith in its selection of defense counsel
for the insured).
In the most recent cross-motions for summary judgment filed by EMC and the
Construction Company Defendants, the parties advanced arguments for and against coverage
under the Policy. In the brief in support of its Motion for Summary Judgment, EMC
contends that it owes no duties to defend or to indemnify under the Policy for the following
reasons: (1) the insured’s breach of the Policy’s notice requirements; (2) the lack of an
“occurrence” that would trigger coverage; (3) the application of enumerated exclusions to
coverage; and (4) the fact that some of the Construction Company Defendants are not
explicitly named as insureds in the Policy. (Doc. #37, at p. 2.) In the brief in support of their

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Motion for Partial Summary Judgment, the Construction Company Defendants contend that:
(1) the underlying action is covered—at least in part—by the insurance policy; and (2) EMC
owes the Construction Company Defendants coverage because it breached its enhanced
duties of good faith while defending the underlying action under a reservation of rights.
(Doc. #41, at p. 2–3.)
In the summary judgment briefs, each party responded at length to the other’s
arguments. Notably, in responding to the Construction Company Defendants’ Motion for
Partial Summary Judgment, EMC responded to the contention that it did not comply with its
enhanced obligation of good faith while providing the defense of the Alford claim under a
reservation of rights. (Doc. #49, at p. 43–47.) It should also be noted, however, that EMC
further argued that the Construction Company Defendants failed to properly raise EMC’s
alleged failure to meet its enhanced obligation of good faith, characterizing it as an
affirmative defense that was not timely pled. (Doc. #49, at p. 42.)
III. Discussion
The Federal Rules of Civil Procedure provide that a schedule, such as the Uniform
Scheduling Order in this case, “may be modified only for good cause and with the judge’s
consent.” Fed. R. Civ. P. 16(b)(4). This means that in moving for leave to amend an answer
after the deadline set by this Court’s scheduling order, Defendants must show good cause
exists for their untimely attempt to amend their Answer. See Sosa v. Airprint Sys., Inc., 133
F.3d 1417, 1419 (11th Cir. 1998) (applying the Rule 16(b)(4) good cause standard rather than
the more liberal standard of Rule 15(a) when ruling on an attempt to amend a pleading after

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the deadline was set by the court’s scheduling order).
Here, the Construction Company Defendants have not shown good cause for failing
to amend their Answer at this late date—they have not shown any new information received
that would have reasonably been unknown at earlier points in the litigation. Consequently,
their Motion to Amend/Correct Answer must be denied. However, the argument that the
Construction Company Defendants would advance as an affirmative defense is, in essence,
an argument for coverage. In light of the potential ambiguity as to whether the Construction
Company Defendants’ argument is either one for coverage or an affirmative defense, as well
as the fact that clear notice was given to EMC of the Construction Company Defendants’
reliance on the argument both before and throughout discovery, the Court is satisfied that the
Construction Company Defendants have properly brought before the Court their coverage
argument based on the enhanced obligation of good faith. In other words, it is not necessary
that they amend their Answer for the Court to consider their argument based on the enhanced
obligation of good faith.
IV. Conclusion
Therefore, the Court finds Defendants’ Motion to Amend/Correct Answer is due to
be and hereby is DENIED, and accordingly, EMC’s Opposition to Defendants’ Motion to
Amended [sic] Answer and Motion to Strike is due to be and hereby is DENIED as moot.
DONE this the 17th day of October, 2012.
/s/ Mark E. Fuller
UNITED STATES DISTRICT JUDGE

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