Southern Pioneer Property & Casualty Insurance Company v. Bennett et al

Filing 23

MEMORANDUM OPINION AND ORDER; that 1) Southern Pioneer's motion for entry of a default judgment pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure 19 is GRANTED; 2) The provisions raised in Southern Pioneer's complaint for declaratory judgment 1 are unambiguous as a matter of law, and there is no coverage for the claims in the state court action; 3) Southern Pioneer has no duty to defend in the state court action; 4) The Court declines to provide declaratory relief with regards to any duty to indemnify; and 5) The Court will enter a separate final judgment consistent with this Memorandum Opinion and Order. Signed by Hon. Chief Judge Mark E. Fuller on 7/27/2010. (jg, )

S o u t h e r n Pioneer Property & Casualty Insurance Company v. Bennett et al

D o c . 23

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA N O R T H E R N DIVISION S O U T H E R N PIONEER PROPERTY & C A S U A L T Y INSURANCE COMPANY, Plaintiff, v. J E F F R E Y BENNETT, et al., D e f e n d a n ts . ) ) ) ) ) CASE NO. 2:09-cv-903-MEF-SRW ) ) (WO - DO NOT PUBLISH) ) )

MEMORANDUM OPINION AND ORDER S o u th e rn Pioneer Property & Casualty Insurance Company ("Southern Pioneer") b r o u g h t this case against Jeffery Bennett ("Bennett"), Joseph Russell ("Russell"), and F ra n k lin Mount and Novella Mount (collectively, the "Mounts"), doing business as Little H a rle m Club ("Little Harlem"). (Doc. #1). Southern Pioneer seeks a declaratory judgment th a t it does not owe a duty to defend and/or indemnify its insureds, the Mounts, in a state co u rt action brought by Bennett (the "state court action"). On March 4, 2010, the Clerk is s u e d an entry of default against Russell and the Mounts for failing to answer or otherwise d e f en d this action. (Doc. #18). The Court dismissed Bennett's counterclaim and denied B e n n e t t' s motion to stay in an order issued on April 7, 2010. (Doc. #20). Now pending b e f o re the Court is Southern Pioneer's motion for entry of a default judgment against Russell a n d the Mounts pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure. (Doc. # 1 9 ). As part of this motion, Southern Pioneer asks the Court to issue a declaratory

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ju d g m e n t. For the reasons set forth in this Memorandum Opinion and Order, this motion is d u e to be GRANTED. B e n n e tt filed the state court action on February 10, 2009 in the Circuit Court of C o v in g to n County, Alabama.1 He alleges that on November 1, 2008, both he and Russell p a tro n iz e d Little Harlem, a business owned and/or operated by the Mounts. Bennett further a lle g e s that Russell, though visibly intoxicated, was served alcohol at Little Harlem, which le d to a physical attack committed by Russell resulting in injuries to Bennett. Bennett brings th re e claims against the defendants in the state court action. In Count I, Bennett seeks d a m a g e s from the Mounts pursuant to Alabama's Dram Shop Act, claiming they sold alcohol to Russell contrary to the provisions of the law, proximately resulting in harm from Russell's a l l e g e d attack. Ala. Code § 6-5-71 (1975). In Count II, Bennett claims that the Mounts f a ile d to provide proper security at Little Harlem, proximately resulting in harm from R u s s e ll's alleged attack. In Count III, Bennett claims that Russell assaulted and battered him. F r o m August 12, 2008 to August 12, 2009, Southern Pioneer insured Little Harlem u n d e r a liquor liability insurance policy, bearing policy number LL-10192-08-01 (the "liquor p o lic y" ) . Relevant language from the policy is given as follows: 1. In su rin g Agreement. a. W e will pay those sums that the insured becomes legally o b lig a ted to pay as damages because of injury to which this in s u ra n c e applies if liability for such injury is imposed on the in s u re d by reason of selling, serving or furnishing of any

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The suit is styled Jeffery Bennett v. Joseph Russell, et al., Civil Action No. CV-09-25. -2-

a lc o h o lic beverage. We will have the right and duty to defend th e insured against any suit seeking those damages. However, w e will have no duty to defend the insured against any suit s e e k in g damages for injury to which this insurance does not a p p ly. . . . ... 2. E x c l u s io n s . T h is insurance does not apply to: a. A s s a u lt and Battery. In ju ry arising from the following: (1 ) (2 ) (3 ) A s s a u lt of any kind, with or without a weapon; B a tte ry of any kind, with or without a weapon; H a r m f u l or offensive contact between or among two or m o r e persons; A p p re h e n sio n of harmful or offensive contact between or a m o n g two or more persons;

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... reg ard less of degree of culpability or intent and without regard to : . . . (b) any alleged negligence whatsoever, including but not lim ite d to the alleged failure of the insured, or his officers, e m p l o ye e s, agents, or servants, in the hiring, supervision, reten tio n or control of any person whether or not an officer, a g e n t or servant of the insured; or (c) the alleged failure of the in s u re d or his officers, employees, agents or servants to attempt to prevent, bar or halt any such conduct. ... ... -3-

e.

Y o u r Product. In ju ry arising out of your product. T h is exclusion does not apply to injury for which the insured or th e insured's indemnities may be held liable by reason of: (1 ) ... (3 ) A n y statute, ordinance or regulation relating to the sale, g i f t, distribution or use of alcoholic beverages. C a u sin g or contributing to the intoxication of any person;

U n d e r section V of the liquor policy, "your product" is defined as "[a]ny goods or products, o th e r than real property, manufactured, sold, handled, distributed or disposed of by" the n a m e d insured. In general, under Alabama law, the insured bears the burden of establishing coverage b y showing that his or her claim falls within the policy. See Colonial Life & Accident Ins. C o . v. Collins, 194 So. 2d 532, 535 (Ala. 1967). By contrast, the insurer bears the burden of p ro v in g the applicability of any policy exclusion. See U.S. Fid. & Guar. Co. v. Armstrong, 4 7 9 So. 2d 1164, 1168 (Ala. 1985). A court should give the language in an exclusionary p ro v is io n the same meaning "that a person of ordinary intelligence would reasonably give it." W. World Ins. Co. v. City of Tuscumbia, 612 So. 2d 1159, 1161 (Ala. 1992). A court m u s t construe an ambiguous policy liberally in favor of the insured and interpret exceptions to coverage as narrowly as possible in order to provide maximum coverage to the insured. A ltie re v. Blue Cross & Blue Shield, 551 So. 2d 290, 292 (Ala. 1989). However, a court must -4-

e n f o rc e an unambiguous policy as written and should not defeat express provisions of the c o n tra c t, including exclusions from coverage, by making a new contract. W. World Ins. Co., 6 1 2 So. 2d at 1161. T h e liquor policy unambiguously excludes coverage for injuries arising from assaults a n d batteries. The policy expressly excludes assaults and batteries "of any kind, with or w i th o u t a weapon." It also excludes conduct, and apprehension of that conduct, of a type re s e m b lin g the elements of assault and battery. See, e.g., Ex parte Atmore Cmty. Hosp., 719 S o . 2d 1190, 1193 (Ala. 1998) defining battery); Wright v. Wright, 654 So. 2d 542, 544 (Ala. 1 9 9 5 ) (defining assault). Enforcing these unambiguous policy provisions as written, the C o u rt finds that the liquor policy does not cover Bennett's Count III claim for assault and b a t t e r y. 2 F u r th e rm o re , the liquor policy expressly excludes coverage for injuries resulting from a ss a u lts and batteries "without regard to . . . any negligence whatsoever." Bennett's Count II claim for failure to provide proper security, proximately resulting in harm from the alleged a ss a u lt and battery, appears to be a negligence claim, which is unambiguously excluded by th e liquor policy. However, even if not a negligence claim, the liquor policy excludes c o v e ra g e for assaults and batteries "without regard to . . . the alleged failure of the insured o r his officers, employees, agents or servants to attempt to prevent, bar or halt any such c o n d u c t." Therefore, the liquor policy unambiguously excludes coverage for damages Additionally, Bennett only asserts this claim against Russell, who is not a named insured on the liquor policy. -52

re su ltin g from the insured's alleged failure to protect Bennett, via security or otherwise, from assa u lts and batteries. Enforcing these unambiguous policy provisions as written, the Court f in d s that the liquor policy does not cover Bennett's Count II claim that he was injured due to the Mounts alleged failure to provide proper security at Little Harlem. T h e liquor policy also excludes coverage for injuries arising from Little Harlem's p ro d u c t. As a bar, Little Harlem's products include alcoholic beverages. However, the liq u o r policy also provides an exclusion from this exclusion. The contract language states th a t the "your product" exclusion does not apply to the insured's liability for "[c]ausing or c o n trib u tin g to the intoxication of any person" or violating "[a]ny statute . . . relating to the s a le . . . of alcoholic beverages," clearly implicating the Dram Shop Act. This provision m ig h t appear to show that the liquor policy covers Bennett's Count I claim of a Dram Shop A ct violation. However, the injuries asserted in Count I are assault and battery, which are e x p re s s ly excluded in the liquor policy. T h e Alabama Supreme Court has determined the proper resolution in a situation such a s this where a party brings a Dram Shop claim--which is covered under an insurance p o lic y-- f o r an injury which is excluded from coverage. In Gregory v. Western World In s u r a n c e Company, Inc., Gregory brought claims alleging that he had been assaulted and b a ttere d at Big Daddy's Lounge, including as one count a Dram Shop action against Big D a d d y's Lounge. 481 So. 2d 878, 878­79 (Ala. 1985). Western World Insurance Company, In c . ("Western World") filed a declaratory judgment action, seeking a determination that its

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p o lic y did not provide coverage to its insured, Big Daddy's Lounge, on Gregory's claims. Id . at 879. The policy at issue, using language substantially identical to the language in the liq u o r policy, included both an assault and battery exclusion and a "your product" exclusion w h ic h is stated to not apply to Dram Shop actions. Id. at 880­81. The Alabama Supreme C o u rt, affirming summary judgment in favor of Western World, found that the unambiguous e x c lu s io n of coverage for assaults and batteries also excluded coverage for Dram Shop a c tio n s stemming from an injury from an assault and battery. Id. at 881. Based on this e sta b lis h e d Alabama law, and enforcing the unambiguous policy provisions as written, the C o u rt finds that the liquor policy does not cover Bennett's Count I Dram Shop claim. B e c au s e the liquor policy does not cover any of the counts in the state court action, S o u th e rn Pioneer has no duty to defends its insured in the state court action. While the existence of a duty to defend may be established by the allegations made in the state court action complaint, the insurer's duty to indemnify cannot be determined at a preliminary stage in the proceedings. The duty to indemnify does not become ripe for a d ju d ic a tio n until the insured is in fact held liable in the state court action. Nationwide Ins. v . Zavalis, 52 F.3d 689, 693 (7th Cir. 1995). This is because the plaintiff in the state court a c tio n may still change the theory of liability and assert a claim that is covered by the policy a t issue. Ladner & Co. v. S. Guar. Ins. Co., 347 So. 2d 100, 104 (Ala. 1977). A s this lawsuit has been brought in federal court under the Declaratory Judgment Act, th e Court must decide the issue of ripeness in view of the Constitution's restriction on the

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e x e rc is e of federal judicial power to "cases" and "controversies." U.S. Const. art. III, § 2. T h e Declaratory Judgment Act, "in its limitation to `cases of actual controversy,' manifestly h a s regard to the constitutional provision." Auto-Owners Ins. Co. v. Toole, 947 F. Supp. 1 5 5 7 , 1565 (M.D. Ala. 1996) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240­41 (1 9 3 7 )). "[T]he question in each case is whether the facts alleged, under all the

c ir c u m s ta n c e s , show that there is a substantial controversy, between parties having adverse lega l interests, of sufficient immediacy and reality to warrant the issuance of a declaratory ju d g m e n t." Id. at 1566 (citing Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (19 4 1 )). A d d itio n a lly, the Declaratory Judgment Act states that a court "may declare the rights a n d other legal relations of any interested party seeking this declaration." 28 U.S.C. § 2201 (e m p h a s is added). The Supreme Court has characterized the Declaratory Judgment Act as c o n f errin g "a discretion on the courts rather than an absolute right upon the litigants." Wilton v . Seven Falls Co., 515 U.S. 277, 287 (1995). "There is . . . nothing automatic or obligatory a b o u t the assumption of `jurisdiction' by a federal court to hear a declaratory judgment action . . . . In the declaratory judgment context, the normal principle that federal courts should a d j u d i c a t e claims within their jurisdiction yields to consideration of particularity and wise ju d ic ia l administration." Id. at 288 (quoting E. Borchard, Declaratory Judgments 313 (2d ed. 1 9 4 1 )). District courts are vested with such broad discretion "because facts bearing on the u sef u lnes s of the declaratory judgment remedy, and the fitness of the case for resolution, are

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p e c u lia rly within their grasp." Id. at 289. H e re , if the relevant defendants were to prevail in the underlying state court action, the issue of whether Southern Pioneer must indemnify them would be moot, thus the court w o u ld never have to reach the issue. Therefore, the Court holds that the issue of

ind em n ifica tio n is not sufficiently ripe to present a "case" or "controversy." Even if it were rip e , the Court would still, in its discretion, decline to provide declaratory relief. F o r the foregoing reasons, it is hereby ORDERED that: 1 ) Southern Pioneer's motion for entry of a default judgment pursuant to Rule 5 5 (b )(2 ) of the Federal Rules of Civil Procedure (Doc. #19) is GRANTED; 2 ) The provisions raised in Southern Pioneer's complaint for declaratory judgment (D o c . #1) are unambiguous as a matter of law, and there is no coverage for the claims in the s ta te court action; 3 ) Southern Pioneer has no duty to defend in the state court action; 4 ) The Court declines to provide declaratory relief with regards to any duty to in d e m n if y; and 5 ) The Court will enter a separate final judgment consistent with this Memorandum O p inion and Order. D O N E this the 27th day of July, 2010. /s/ Mark E. Fuller CHIEF UNITED STATES DISTRICT JUDGE

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