Markel American Insurance Company v. Norris et al (STAYED)
MEMORANDUM OPINION AND ORDER directing as follows: (1) The 32 Motion for Summary Judgment is GRANTED in part and DENIED in part, as further set out; (2) All of Markel's claims relating to a declaration concerning its duty to indemnify are DISMISSED without prejudice as premature. Signed by Honorable Judge Mark E. Fuller on 9/3/13. (scn, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
MARKEL AMERICAN INSURANCE
JOHN E. NORRIS, et al.,
CASE NO.: 2:12-cv-80-MEF
(WO – Do Not Publish)
MEMORANDUM OPINION AND ORDER
Plaintiff Markel American Insurance Company (“Markel”), who issued an insurance
policy on a motorboat to Defendants John E. Norris (“Norris”), and Norris’s law firm, Davis
& Norris, LLP (“Davis & Norris”) (collectively, “Defendants”), has filed suit seeking a
declaratory judgment that it has no duty to defend its insureds in a state-court action arising
out of a boating accident that happened in July 2011 while Norris was operating the boat.
It also seeks a declaration that it owes Defendants no duty to indemnify under the insurance
policy. Now before the Court is Markel’s Motion for Summary Judgment (Doc. #32). After
consideration of the arguments of the parties, the relevant case law, and the record as a
whole, the Court finds that Markel’s motion is due to be GRANTED IN PART and DENIED
IN PART for the reasons set forth below.
I. JURISDICTION AND VENUE
The Court has subject-matter jurisdiction over this lawsuit pursuant to 28 U.S.C. §
1332 (diversity).1 The parties do not contest personal jurisdiction or venue, and the Court
finds adequate allegations supporting both.
II. SUMMARY JUDGMENT STANDARD
Pursuant to Federal Rule of Civil Procedure 56(c), summary judgment is appropriate
“if the pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986). An issue of fact is genuine if the record as a whole could lead a
reasonable trier of fact to find for the non-moving party. An issue is material if it might
affect the outcome of the case under the governing law. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986).
The party asking for summary judgment “always bears the initial responsibility of
informing the district court of the basis for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a genuine issue of material fact.”
Celotex Corp., 477 U.S. at 323 (quotation omitted). The movant can meet this burden by
presenting evidence showing there is no dispute of material fact, or by showing the nonmoving party has failed to present evidence in support of some element of its case on which
it bears the ultimate burden of proof. Id. at 322–23.
After the movant satisfies this requirement, the burden shifts to “the adverse party
Plaintiff Markel is a Virginia company with its principal place of business in Virginia. All
Defendants are citizens of Alabama. (Compl. ¶ 1.) The Court is satisfied that the amount in
controversy in this case exceeds $75,000, exclusive of interest and costs.
[who] must set forth specific facts showing that there is a genuine issue for trial.” Anderson,
477 U.S. at 250 (quotation omitted). “[T]his standard provides that the mere existence of
some alleged factual dispute between the parties will not defeat an otherwise properly
supported motion for summary judgment. . . . .” Id. at 247–48. The non-moving party “must
do more than simply show that there is some metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “All
reasonable inferences arising from the undisputed facts should be made in favor of the nonmovant, but an inference based on speculation and conjecture is not reasonable.” Blackston
v. Shook & Fletcher Insulation Co., 764 F.2d 1480, 1482 (11th Cir. 1985) (citation omitted).
III. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Markel issued an insurance policy (the “Policy”) to Davis & Norris on March 29,
2011, that provided coverage for a 22-foot Chaparral sportboat that belonged to the firm.
The Policy was in force from March 29, 2011, through March 29, 2012. The Policy
contained the following exclusion from coverage:
No coverage is provided under this policy for loss or damage, liabilities
incurred by any person, injury or damages or expenses of any type for loss
caused by, resulting from or arising out of:
Willful or intentional misconduct or criminal act on the part of any insured or
during any illegal activity on the party of any insured. This exclusion
includes loss, damage, injury or liability occurring while an insured is
operating the insured watercraft with a blood or breath alcohol level equal
to or in excess of the legal limit applicable for the operation of motor vehicles
in the state where you reside.
(Doc. #32, Ex. “A”) (emphasis in original).
On the night of July 1, 2011, the boat, which was driven by Norris, collided with
another boat on Lake Martin in Elmore County, Alabama. Upon collision, Defendant
T.C.D., a minor, was allegedly thrown into the water and run over by Norris’s boat, which
lacerated his right leg and crushed his right ankle. Norris was later charged with two
felonies, boating under the influence of alcohol and first degree assault (for the injuries to
T.C.D.). Norris was also charged with a misdemeanor (third degree assault), as well as three
other boating violations.
On June 25, 2012, in the Circuit Court of Elmore County, Norris pled guilty to the
charge of boating under the influence and two charges of third degree assault. In his plea,
Norris certified to the court that he was guilty of the charges to which he was pleading, that
he desired to plead guilty, that he made up his own mind to plead guilty, and that he
knowingly, intelligently, and voluntarily waived his right to a trial in this case. Norris signed
an acknowledgment which read, in part, “I AM ENTERING A PLEA OF GUILT AND/OR
DISMISSING MY APPEAL BECAUSE I AM GUILTY OF THE OFFENSE(S) AND FOR
NO OTHER REASON.” (Doc. #37, Ex. A.)
Norris was sentenced to 24 months
unsupervised probation and fined $1,800.00.
On August 11, 2011, T.C.D. filed a lawsuit (the “underlying suit”) against Norris by
and through his father, Christopher Scott Damron (“Damron”), seeking damages for the
injuries caused by Norris’s operation of the boat “in an unsafe manner, in the dark and under
the influence of alcohol.” (Underlying Compl. ¶ 8, Doc. #32-2.).
Markel argues that the Policy expressly excludes from coverage any injuries that arise
out of an insured’s illegal or criminal acts. Specifically, the exclusion applies to any
“criminal act on the part of any insured or during any illegal activity on the party [sic] of any
insured,” (Pl.’s Ex. A, Doc. # 32-1), which Markel contends includes boating under the
influence. In Alabama, boating under the influence is a criminal act. See Ala. Code § 325A-191.3. Therefore, Markel argues that an individual charged with boating under the
influence in violation of § 32-5A-191.3 is excluded from coverage for any injuries that arise
out of or occur while the insured was engaged in such boating, and thus, Defendants are not
entitled to a defense or indemnification from Markel. The Court agrees.
The Exclusion for Liability Based on Criminal Activity
Generally, under Alabama law,2 the insured bears the burden of establishing coverage
by showing that his or her claim falls within the policy, see Colonial Life & Accident
Insurance Company v. Collins, 194 So. 2d 532, 535 (Ala. 1967), while the insurer bears the
burden of proving the applicability of any policy exclusion. See U.S. Fidelity & Guar. Co.
v. Armstrong, 479 So. 2d 1164, 1168 (Ala. 1985). If a policy is ambiguous, it must be
construed liberally in favor of the insured, and exceptions to coverage must be interpreted
as narrowly as possible in order to provide maximum coverage to the insured. The language
Because the Court has jurisdiction in this case based on diversity of citizenship, the Court
must apply the substantive law of the forum state–in this instance, Alabama. See Gasperini v.
Center of Humanities, Inc., 518 U.S. 415, 427 (1996).
in an exclusionary provision should be given the same meaning “that a person of ordinary
intelligence would reasonably give it.” Safeway Ins. Co. of Ala. v. Herrera, 912 So. 2d 1140,
1143 (Ala. 2005). However, if the policy is unambiguous, the insurance contract must be
enforced as written; courts should not defeat express provisions of the contract, including
exclusions from coverage, by making a new contract for the parties. Id.
Duty to Defend
“An insurance company’s duty to defend its insured is determined by the language of
the insurance policy and by the allegations in the complaint giving rise to the action against
the insured.” Ajdarondini v. State Auto Mut. Ins. Co., 628 So. 2d 312, 313 (Ala. 1993). The
plain, unambiguous language of the policy denies coverage for injuries that arise out of or
occur while an insured is engaged in illegal or criminal acts. The underlying complaint
alleges that T.C.D.’s injuries were caused by Norris’s operation of the boat under the
influence of alcohol—a criminal act. Moreover, it is undisputed that Norris pled guilty to
and was convicted of the crime of boating under the influence in connection with the boating
accident that allegedly caused T.C.D.’s injuries. Thus, the Court finds that Markel has no
duty to defend T.C.D.’s lawsuit.
Norris contends that he was not boating under the influence at the time of the July 1,
2011 accident even though he pled guilty to and was convicted of that crime in the Circuit
Court of Elmore County, Alabama. In essence, Norris asks the Court to ignore his guilty plea
and conviction for the crime of boating under the influence for purposes of this action and
find that a genuine issue of material fact exists as to whether he was actually under the
influence of alcohol the night of the accident.
The Court will not do so. Norris’s argument ignores the rule that “[w]here a guilty
plea is accepted and entered by the court, it is a conviction of the highest order, and is an
admission, of record, of the truth of whatever is sufficiently charged in the indictment.” Ex
parte Howard, 710 So. 2d 460, 465 (Ala. 1997) (internal quotations omitted). Thus, “[a]
guilty plea is as conclusive as a verdict of a jury; it admits all material fact averments of the
accusation, leaving no issue for the jury.” Id. (citations omitted). Indeed, in Boykin v.
Alabama, 395 U.S. 238, 242 (1969), the United States Supreme Court stated: “A plea of
guilty is more than a confession which admits that the accused did various acts; it is itself a
conviction; nothing remains but to give judgment and determine punishment.” In other
words, “[i]t supplies both evidence and verdict, ending controversy.” Woodard v. State, 171
So. 2d 462, 469 (Ala. 1965) (citations omitted). Thus, Mr. Norris’s criminal conviction for
boating under the influence on July 1, 2011, sufficiently establishes that Norris was engaged
in a criminal act at the time of the accident, and under the exclusions of the Policy, Markel
has no duty to defend him for any injuries arising out of this criminal act.
Duty to Indemnify
While the existence of a duty to defend may be established by the allegations made
in the underlying state court complaint, the insurer’s duty to indemnify cannot be determined
at a preliminary stage in the proceedings. “[T]he duty to indemnify is not ripe for
adjudication until the insured is in fact held liable in the underlying suit.” Nationwide Ins.
v. Zavalis, 52 F.3d 689, 693 (7th Cir. 1995); State Farm Fire & Cas. Co. v. Middleton, 65
F. Supp. 2d 1240, 1248 (M.D. Ala. 1999); State Auto Property & Cas. Ins. Co. v. Calhoun,
No. 2:05-cv-122-F, 2005 WL 2406055, at *6–7 (M.D. Ala. Sept. 29, 2005); Allstate Indem.
Co. v. Lewis, 985 F. Supp. 1341, 1349–50 (M.D. Ala. 1997); Auto-Owners Ins. Co. v. Toole,
947 F. Supp. 1557, 1565–66 (M.D. Ala. 1996); Guaranty Nat’l Ins. Co. v. Beeline Stores,
Inc., 945 F. Supp. 1510, 1514–15 (M.D. Ala. 1996). This is because the plaintiff in the
underlying suit may still change the theory of liability and assert a claim that is covered by
the policy at issue. Ladner & Co. v. Southern Guar. Ins. Co., 347 So. 2d 100, 104 (Ala.
As this lawsuit has been brought in federal court pursuant to the Declaratory Judgment
Act,3 the issue of ripeness must be decided in view of the Constitution’s restriction on the
exercise of federal judicial power to “cases” and “controversies.” U.S. Const. art. III § 2.
The Declaratory Judgment Act, “in its limitation to ‘cases of actual controversy,’ manifestly
The Declaratory Judgment Act provides:
(a) In a case of actual controversy within its jurisdiction, except with respect to
Federal taxes other than actions brought under section 7428 of the Internal Revenue
Code of 1986, a proceeding under section 505 or 1146 of title 11, or in any civil
action involving an antidumping or countervailing duty proceeding regarding a class
or kind of merchandise of a free trade area country (as defined in section 516A(f)(10)
of the Tariff Act of 1930), as determined by the administering authority, any court
of the United States, upon the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested party seeking such declaration,
whether or not further relief is or could be sought. Any such declaration shall have
the force and effect of a final judgment or decree and shall be reviewable as such.
(b) For limitations on actions brought with respect to drug patents see section 505 or
512 of the Federal Food, Drug, and Cosmetic Act.
28 U.S.C. § 2201.
has regard to the constitutional provision.” Auto-Owners Ins. Co., 947 F. Supp. at 1565
(citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937)). “[T]he question in
each case is whether the facts alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment.” Id. at 1566 (citing
Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)).
Additionally, the Declaratory Judgment Act states that a court “may declare the rights
and other legal relations of any interested party seeking this declaration.” 28 U.S.C. § 2201
(emphasis added). The Supreme Court has characterized the Declaratory Judgment Act as
conferring “a discretion on the courts rather than an absolute right upon the litigant.” Wilton
v. Seven Falls Co., 515 U.S. 277, 287 (1995).
There is . . . nothing automatic or obligatory about 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 adjudicate claims within their jurisdiction yields to considerations of
practicality and wise judicial administration.
Wilton, 515 U.S. at 288 (quoting E. Borchard, Declaratory Judgments 313 (2d ed. 1941)).
District courts are vested with such broad discretion “because facts bearing on the usefulness
of the declaratory judgment remedy, and the fitness of the case for resolution, are peculiarly
within their grasp.” Id. at 289.
Here, if Norris were to prevail in the underlying lawsuit, which is still pending in state
court, the issue of whether Markel must indemnify Norris would be moot, thus the Court
would never have to reach the issue. Moreover, the claims are not ripe because until the
plaintiff in the underlying suit’s claims against Norris are resolved, it cannot be known on
what grounds Norris was found to be liable to the plaintiff in the underlying suit, and this
impairs this Court’s ability to determine whether Markel’s duty to indemnify Norris under
the Policy has been triggered. Therefore, the Court holds that the issue of indemnification
is not sufficiently ripe to present a “case” or “controversy,” and consequently, will not be
considered at this stage of the proceedings.
Finally, Norris claims that Markel, while not expressly mentioning collateral estoppel,
relies on this legal principle in its summary judgment motion in an attempt to give preclusive
effect to Norris’s prior plea of guilt and subsequent conviction of boating under the
influence. The Court disagrees. It is true that the law is well-established that “the conviction
of a criminal charge . . . is not to be conclusive of the facts of which [the defendant] was
convicted when such fact is an issue in a civil case, in which the state or government securing
the conviction is not a party.” Fidelity Phenix Ins. Co. of N.Y. v. Murphy, 146 So. 387, 393
(Ala. 1933). However, there is no wolf in sheep’s clothing here. Nowhere within Markel’s
summary judgment motion is the collateral estoppel principle being disguised. Markel is not
attempting to prove that Norris was in fact boating under the influence on July 1, 2011.
Instead, Markel relies on the allegations in the underlying action and Norris’s guilty plea and
conviction to establish its legal right to remove itself from defending the underlying litigation
based on an exclusionary clause in the Policy.4 Therefore, the doctrine of collateral estoppel
does not prevent the Court from determining Markel’s duty to defend and indemnify.
Courts consistently rely on previous convictions to determine questions of an insurer’s duty
to defend and indemnify the insured in subsequent civil proceedings. See Horace Mann Ins. Co. v.
Fore, 785 F. Supp 947 (M.D. Ala. 1992) (relying on criminal conviction of the insured to grant
summary judgement); Hooper v. Allstate Ins. Co., 571 So. 2d 1001, 1003 (Ala. 1990) (same); Alfa
Specialty Ins. Co. v. Jennings, 906 So. 2d 195, 202-03 (Ala. Civ. App. 2005 (same).
For the reasons set forth above, it is hereby ORDERED as follows:
1. The Motion for Summary Judgment (Doc. # 32) filed on September 21, 2012, by
Markel is GRANTED in part and DENIED in part. As to the declaratory judgment Markel
seeks with respect to its duty to defend under the insurance policy, the motion for summary
judgment is GRANTED, and Markel has no duty to defend the underlying litigation. With
respect to the declaratory judgment Markel seeks with respect to its duty to indemnify, the
motion for summary judgment is DENIED, as this claim is not yet ripe of adjudication.
2. All of Markel’s claims relating to a declaration concerning its duty to indemnify
are DISMISSED without prejudice as premature.
DONE this the 3rd day of September, 2013.
/s/ Mark E. Fuller
UNITED STATES DISTRICT JUDGE
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