Fire Insurance Exchange v. McCoy et al
MEMORANDUM OPINION. Signed by Honorable William Keith Watkins on 7/1/09. (djy, )
IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA NORTHERN DIVISION F IR E INSURANCE EXCHANGE, ) ) ) ) ) ) ) ) ) ) ) )
P la in tif f , v. J E F F R E Y McCOY; LISA BLEDSOE; a n d J.J., a Minor by and through his M o th e r and Next Friend, Lisa Bledsoe, D e f e n d a n ts.
C A S E NO. 2:08-CV-475-WKW[WO]
M E M O R A N D U M OPINION P la in tif f Fire Insurance Exchange ("FIE") brings this action pursuant to the Federal D e c la ra to ry Judgment Act, 28 U.S.C. §§ 2201-2202, seeking a determination of its duty to d e f e n d and/or indemnify Defendant Jeffrey McCoy ("McCoy") under its insured's H o m e o w n e rs policy bearing Policy Number 0915034569 (Doc. # 1). Lisa Bledsoe
(" B le d s o e " ), on behalf of her minor son, J.J., sued McCoy in Montgomery County Circuit C o u rt after her son was bitten by one of McCoy's dogs while staying at McCoy's house.1 M c C o y responded by filing a counterclaim alleging bad-faith breach of contract and seeking p u n itiv e damages (Doc. # 6-2). F o llo w in g a bench trial held on June 17, 2009, this cause is before the court for a d e c is io n on FIE's declaratory judgment action and McCoy's counterclaim. After careful
Bledsoe v. McCoy, No. CV-2007-900348 (Ala. Cir., Montgomery County).
consideration of the arguments of counsel, the evidence and the applicable law, the court m a k e s the following findings of fact and conclusions of law, in accordance with Rule 52 of th e Federal Rules of Civil Procedure. I. JURISDICTION AND VENUE J u ris d ic tio n is exercised pursuant to 28 U.S.C. § 1332 (diversity jurisdiction) and 28 U .S .C . § 2201. The parties do not contest personal jurisdiction or venue, and the court finds a lle g a tio n s sufficient to support both. I I. STANDARD OF REVIEW In a civil case, the same burden of proof applies "regardless of whether the finder of f a c t is a judge in a bench trial or a jury." Prickett v. United States, 111 F. Supp.2d 1191, 1 1 9 2 (M.D. Ala. 2000). A plaintiff has the burden of proving each element of his claim by a preponderance of the evidence. As succinctly stated by the Supreme Court of the United S ta te s, "[t]he burden of showing something by a `preponderance of the evidence,' the m o s t common standard in the civil law, `simply requires the trier of fact to b e lie v e that the existence of a fact is more probable than its nonexistence b e f o re [he] may find in favor of the party who has the burden to persuade the [ ju d g e ] of the fact's existence.'" Concrete Pipe & Prod. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 6 0 2 , 622 (1993) (citations omitted). Moreover, in a bench trial, the judge's "function in c lu d e s weighing the evidence, evaluating the credibility of witnesses, and deciding q u e s tio n s of fact, as well as issues of law." Prickett, 111 F. Supp. 2d at 1192 (citing Childrey
v. Bennett, 997 F.2d 830, 834 (11th Cir. 1993) (holding that "it is the exclusive province of th e judge in non-jury trials to assess the credibility of witnesses and to assign weight to their t e s t i m o n y" ) ) . II I . FINDINGS OF FACT B a se d on the testimony and evidence presented at the bench trial, the court finds the f o llo w in g facts. McCoy and Bledsoe are first cousins. J.J. is Bledsoe's son and was 12 years o ld at the time of the incident. On June 24, 2005, J.J. was a guest at McCoy's home when o n e of McCoy's Rottweilers attacked J.J. in McCoy's backyard, causing lacerations to his rig h t leg from the mid-calf area up to the knee and to his left leg near the Achilles tendon. McCoy, realizing that the wounds were serious, immediately transported J.J. to the hospital. J.J. received twelve stitches for his injuries. After departing from the emergency room, McCoy and Bledsoe had a conversation w h e re in McCoy mentioned that he was contemplating reporting the incident to FIE. Bledsoe to ld McCoy not to worry about it. Relying on the amicability of familial ties, the
re p re se n ta tio n s of his cousin, and his own perception of the finality of the incident, McCoy c h o s e not to report the attack to FIE. McCoy lost contact with Bledsoe soon thereafter. In August 2006, McCoy received a letter from an attorney retained by Bledsoe, informing him of an impending state-court
lawsuit, filed on behalf of J.J., seeking compensatory and punitive damages.2 On August 29, 2 0 0 6 , McCoy contacted FIE for the first time about the dog biting occurrence (Pl.'s Ex. 9 & 1 0 ). In a letter dated September 7, 2006, FIE declined to extend coverage to McCoy, c la im in g he had failed to provide notice of the occurrence within a reasonable amount of tim e (Pl.'s Ex. 2). Nevertheless, upon a reservation of rights, FIE appointed counsel who re p re se n te d McCoy's interests for nearly eight months before withdrawing. FIE had also m a d e at least one medical payment to J.J. under the policy. I V . DISCUSSION A. N o tific a tio n T h e insurance contract between McCoy and FIE provides that prompt notification is a condition precedent to any duty on the part of FIE to provide coverage, indemnify, or d e f e n d McCoy in any lawsuit. Specifically, the policy states: "[i]n case of an occurrence the in s u re d will . . . give written notice to us or our agent as soon as possible . . . " (Pl.'s Ex. 2). Under Alabama law, such a notice requirement in an insurance policy is a condition p re c e d e n t to the insured's coverage under that policy. Pharr v. Cont'l Cas. Co., 429 So. 2d 1 0 1 8 , 1019 (Ala. 1983); Martin v. Auto-Owners Ins., 329 So. 2d 547, 550 (Ala. Civ. App. 1 9 7 6 ). Notice must be given "within a reasonable time under all the circumstances." U.S. F id . & Guar. Co. v. Baldwin County Home Builders Assoc., Inc., 770 So. 2d 72, 75 (Ala.
The reason J.J. and Bledsoe ultimately decided to file suit was because of complications involving J.J.'s scar tissue. In order to play high school football, J.J. needs plastic surgery to add layers of skin to his scars; otherwise, they would be in danger of splitting open. As a "cosmetic" surgery, Bledsoe's and J.J.'s health insurance would not cover the procedure.
2000) (quoting Am. Liberty Ins. v. Soules, 258 So. 2d 872, 879 (Ala. 1972)). In determining w h e th e r an insured has satisfied the reasonable notice requirement, courts consider: (1) the le n g th of the delay, and (2) the existence of a reasonable excuse for the delay. S. Guar. Ins. C o . v. Thomas, 334 So. 2d 879, 883 (Ala. 1976). 1. L e n g th of the Delay
T h e length of delay between the incident and McCoy's notification of FIE of that in c id e n t was a little over fourteen months. The Alabama Supreme Court has held that s im ila r, even less substantial, delays without excuse are unreasonable as a matter of law. See P h a r r, 429 So. 2d at 1019-20 (holding that an eight-month delay without excuse was u n re a s o n a b le as a matter of law); Thomas, 334 So. 2d at 883 (holding that a six-month delay w ith o u t a showing of a reasonable excuse was unreasonable as a matter of law); Correll v. F ir e m a n 's Fund Ins. Cos., 529 So. 2d 1006, 1009 (Ala. 1988) (affirming trial court's j u d g m e n t that one year delay is unreasonable without sufficient "reasons for that delay"). Based on these Alabama Supreme Court cases, the court finds that the fourteen months that la p s e d between the occurrence of the attack and the date on which McCoy notified FIE is u n re a s o n a b le as a matter of law unless McCoy can present a reasonable excuse for that delay. 2. R e a s o n a b le Excuse for Delay
E v e n if the delay is unreasonable as a matter of law, the notice may still be timely if th e re exists an objectively reasonable excuse for the delay. Thomas, 334 So. 2d at 883. The
Alabama Supreme Court has identified a few limited sets of circumstances where otherwise u n re a s o n a b le delay is excusable: G e n e ra lly, delay is excusable in the case of an accident which is trivial and re s u lts in no apparent harm or which furnishes no ground for [the] insured, a c tin g as a reasonable and prudent man, to believe at the time that a claim for d a m a g e s will arise or that the injury is one insured against. In such case n o tic e is not required until some claim within the coverage of the policy has b e e n presented or is reasonably to be anticipated, in which event the re q u ire m e n t as to notice is satisfied if notice is given within a reasonable time a f te r the situation assumes an aspect suggestive of a possible claim for d a m a g e s . Clearly, notice is necessary when there has been such an o c c u rre n c e as would lead a reasonable and prudent man to believe that it m ig h t give rise to a claim for damages. Progressive Specialty Ins. Co. v. Steele, 985 So. 2d 932, 939 (Ala. Civ. App. 2007) (quoting P a n Am. Fire & Cas. Co. v. DeKalb-Cherokee Counties Gas Dist., 266 So. 2d 763, 771 (Ala. 1 9 7 2 ) (quoting 45 C.J.S. Insurance § 1056)). McCoy argues that his fourteen-month delay is excusable for two reasons: (1) his p e rc e p tio n that J.J.'s injuries were de minimis; and (2) his belief, after Bledsoe told him "not to worry about it," that no claim would arise from the incident. Based on McCoy's response to J.J.'s accident and based on the enduring scars from the attack, McCoy's argument that the accident was trivial and resulted in no apparent harm d o e s not withstand scrutiny. McCoy testified at trial that he immediately determined, after lo o k in g at J.J.'s leg, that his (J.J.'s) injuries required medical attention and that he would p ro b a b ly need stitches. McCoy also testified that he was concerned about a possible injury to J.J.'s Achilles tendon. Furthermore, the lasting and pronounced scars on J.J.'s legs bear
evidence of the seriousness of his injuries. From this testimony and the court's inspection o f J.J.'s scars, the court concludes that the injuries were not trivial and that their gravity was im m e d ia te ly apparent to McCoy. McCoy also argues that he did not believe a claim would arise from the accident. He b a s e s his belief on the familial ties he has to Bledsoe and J.J. and on Bledsoe's re p re se n ta tio n s to him following the incident. While it is understandable that McCoy chose to rely on a family member's promise not to file a claim, this would require subjective i n q u i r y as opposed to the requisite objective inquiry set forth in Pan American Fire & C a s u a lty Co., 266 So. 2d at 771. The relevant inquiry is whether McCoy, acting as a " r e a s o n a b le and prudent" man, would have believed that no claim would arise from the o c c u rre n c e . Id. T h e court answers this question in the negative. McCoy's conversation with Bledsoe, in which he told her that he was contemplating notifying FIE, demonstrates McCoy's k n o w le d g e that a claim could and might very well arise from the accident. Although McCoy a n d Bledsoe had a close relationship when they were younger, they both acknowledged in th e ir testimony that they had been distant for a number of years prior to the incident. In some c irc u m s ta n c e s , a person may be acting reasonably and prudently by relying on a close family m e m b e r's promise that he or she would not file a claim. However, McCoy's admittedly d is ta n t relationship with Bledsoe at the time of the accident does not rise to a level of familial c o n f id e n c e that would justify relying on her promise not to file a claim. McCoy's subjective
belief that no claim would arise was objectively unreasonable. Because McCoy has proffered n o reasonable excuse for his delay, notice, as required by the contract under Alabama law as a condition precedent to coverage, was lacking. Therefore, FIE is absolved of its duties to M c C o y under the insurance policy. B. M c C o y 's Counterclaim M c C o y alleges a counterclaim for bad-faith breach of contract and seeks punitive d a m a g e s . Because the court finds that FIE is absolved of its contractual obligations to M c C o y due to his failure to give notice to FIE within a reasonable time, the court's e x a m i n a t i o n of McCoy's counterclaim will be cursory. In order to prevail on a bad-faith b re a c h of contract claim in the insurance context, a court must make the threshold finding t h a t there was, in fact, a breach of contract. See McDole v. Alfa Mut. Ins. Co., 875 So. 2d 2 7 9 , 285 (Ala. 2003) (holding that a bad faith refusal-to-pay claim fails as a matter of law w h e n the underlying breach-of-contract claim fails as a matter of law); Nat'l Sec. Fire & Cas. C o . v. Bowen, 417 So. 2d 179, 183 (Ala. 1982) (an essential element of a claim alleging a b a d -f a ith refusal to pay is that the insurer has breached the insurance contract). Since McCoy f a ile d to provide timely notice, FIE was relieved from the obligations of the contract and thus d id not breach it. Therefore, McCoy's claims for bad-faith breach of contract and punitive d a m a g e s fail as a matter of law.
V. CONCLUSION F o r the foregoing reasons, judgment is due to be entered in favor of Plaintiff Fire In s u ra n c e Exchange, and against Defendants McCoy, Bledsoe, and J.J., and Fire Insurance E x c h a n g e is entitled to a declaratory judgment that under its insured's Homeowners policy b e a ri n g Policy Number 0915034569, it has no duty to defend or indemnify McCoy in B le d s o e v. McCoy, No. CV-2007-900348 (Cir. Ct. Montgomery County). Judgment is also due to be entered in favor of Counterclaim Defendant Fire Insurance E x c h a n g e , and against Counterclaim Plaintiff Jeffrey McCoy, on the bad-faith breach of c o n tra c t claim. An appropriate judgment will be entered. DONE this 1st day of July, 2009. /s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE
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