Liberty Corporate Capital Limited v. Club Exclusive, Inc.

Filing 37

MEMORANDUM OPINION AND ORDER GRANTING 29 33 MOTIONS to Dismiss. Club Exclusive's claims against Ms. Marian Washburn and Mr. Wesley Charles Duesenberg, Jr. for negligent procurement of insurance and breach of contract to procure insurance are hereby DISMISSED. Signed by Judge Virginia Emerson Hopkins on 10/24/2016. (JLC)

FILED
2016 Oct-24 PM 03:33
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
LIBERTY CORPORATE
CAPITAL LIMITED,
Plaintiff/Counterclaim
Defendant
v.
CLUB EXCLUSIVE, INC.,
Defendant/Counterclaimant
______________________________
CLUB EXCLUSIVE, INC.
Defendant/Counterclaimant
v.
WESLEY CHARLES
DUESENBERG, JR., et al.,
Counterclaim Defendants.

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CIVIL ACTION NO.:
1:16-CV-791-VEH

MEMORANDUM OPINION AND ORDER
I.

INTRODUCTION
Currently pending before the court are Marian Washburn (“Ms. Washburn”)

and Wesley Charles Duesenberg, Jr. (“Mr. Duesenberg”)’s Motions To Dismiss
claims brought against them by Club Exclusive, Inc. (“Club Exclusive”). (Docs.

29 and 33). For the reasons stated below, Ms. Washburn and Mr. Duesenberg’s
Motions To Dismiss are due to be GRANTED.
II.

PROCEDURAL HISTORY
Ms. Washburn is an insurance agent licensed in the state of Alabama. (Doc.

12 at 26, ¶ 3). Mr. Duesenberg is a surplus lines broker licensed in the state of
Alabama. (Doc. 12 at 26-27, ¶ 4). According to defendant and counter-claimant
Club Exclusive, both Ms. Washburn and Mr. Duesenberg are “Agent[s] or
Employee[s] working . . . within the scope of such agency and/or employment of
Counter-Defendant Liberty.” (Doc. 12 at 26, ¶ 3, 27, ¶ 4).
Club Exclusive purchased an insurance policy known as a Commercial
Building Policy from plaintiff Liberty Corporate Capital Limited (“Liberty”).
(Doc. 12 at 29, ¶ 7). The policy in question was “sold by Washburn who placed
coverage with surplus lines broker, Duesenberg.” (Id.). At some time between July
14, 2015, and July 16, 2015, the building covered by the insurance and its contents
caught fire and were destroyed. (Id. at 29, ¶ 7-8 and 31, ¶ 13). Club Exclusive
reported to Liberty the damages to and losses sustained by the property. (Id. at 31,
¶ 13).
Liberty initiated this insurance action against Club Exclusive on May 13,
2016, seeking a declaratory judgment of its rights and obligations under the
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insurance policy it issued to Club Exclusive. (Doc. 1). On June 22, 2016, Club
Exclusive filed counterclaims against Liberty for breach of contract, bad faith, and
negligent hiring, training, monitoring, and supervision of Ms. Washburn and Mr.
Duesenberg. (Doc. 12 at 47-52, ¶¶42-46; Id. at 52-61, ¶¶47-58; Id. at 68-70, ¶¶6972). In the same pleading, Club Exclusive also asserted claims against Ms.
Washburn and Mr. Duesenberg for negligent procurement of insurance and breach
of contract to procure insurance. (Doc. 12 at 35-41, ¶¶20-30; Id. at 61-65, ¶¶59-63;
Id. at 41-47, ¶¶31-41; Id. at 65-68, ¶¶ 64-68). On August 19, 2016, Mr.
Duesenberg filed a Motion To Dismiss all claims made by Club Exclusive against
him. (Doc. 29). On August 22, 2016, Ms. Washburn filed a Motion To Dismiss all
claims made by Club Exclusive against her. (Doc. 33). Club Exclusive has not
responded to either Motion, and the time to do so has expired. The Motions are
now ripe for disposition.
II.

STANDARD
A Rule 12(b)(6) motion attacks the legal sufficiency of a complaint. FED. R.

CIV. P. 12(b)(6) (“[A] party may assert the following defenses by motion: (6)
failure to state a claim upon which relief can be granted[.]”). The complaint must
provide a short and plain statement of the claim that will “give the defendant fair
notice of what the plaintiff’s claim is and the grounds upon which it rests.” Conley
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v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 103, 2 L. Ed. 2d 80 (1957) (quoting FED.
R. CIV. P. 8(a)(2)), abrogated by Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
556, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007); see also FED. R. CIV. P. 8(a)
(requiring that general pleading in a complaint include “a short and plain
statement of the claim showing that the pleader is entitled to relief”).
While Rule 8 does not require that “detailed factual allegations” be included
within a complaint, a plaintiff must set forth grounds for entitlement to relief to
survive a motion to dismiss. Twombly, 550 U.S. at 555, 127 S. Ct. at 1964 (citing
Conley, 355 U.S. at 47, 78 S. Ct. at 103). Once a claim has been set forth
adequately, it may be “supported by showing any set of facts consistent with the
allegations in the complaint.” Twombly, 550 U.S. at 563, 127 S. Ct. at 1969.
If well-pleaded factual allegations support the complaint, a court “should
assume their veracity and then determine whether they plausibly give rise to an
entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S. Ct. 1937, 1950,
173 L. Ed. 2d 868 (2009). A claim is considered plausible when the plaintiff
“pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Id. at 678. The complaint must
establish “more than a sheer possibility that a defendant has acted unlawfully.” Id.
(quoting Twombly, 550 U.S. at 556, 127 S. Ct. at 1965).
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As Ms. Washburn and Mr. Duesenberg have filed Motions To Dismiss, the
court accepts all well-pleaded factual allegations by Club Exclusive as true. Iqbal,
556 U.S. at 678. However, legal conclusions drawn without the support of factual
allegations are not entitled to an assumption of truth. Id. at 665.
III.

ANALYSIS
Ms. Washburn moves to dismiss the two claims filed against her: Count I,

Negligent Procurement of Insurance, and Count VI, Breach of Contract To
Procure Adequate Insurance Coverage. Mr. Duesenberg similarly moves to
dismiss the two claims filed against him: Count II, Negligent Procurement of
Insurance, and Count VII, Breach of Contract To Procure Adequate Insurance
Coverage. Because both Negligent Procurement of Insurance Counts fail as matter
of law due to Club Exclusive’s own contributory negligence, those Counts are
discussed together below. Similarly, because both Breach of Contact To Procure
Insurance claims are barred by the merger doctrine, those Counts are discussed
together below.
A.

Club Exclusive’s Negligent Procurement Claims Are Barred by
its own Contributory Negligence

In Count I, Club Exclusive has brought a negligent procurement of
insurance claim against Ms. Washburn. (Doc. 12 at 35-41, ¶¶20-30). In Count II,

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Club Exclusive has brought a negligent procurement of insurance claim against
Mr. Duesenberg. (Doc 12 at 41-47, ¶¶31-41).
Under Alabama law, a “claim in tort alleging negligent failure of an
insurance agent to fulfill a voluntary undertaking to procure insurance . . . requires
demonstration of the classic elements of negligence, i.e., ‘(1) duty, (2) breach of
duty, (3) proximate cause, and (4) injury.’” Kanellis v. Pac. Indem. Co., 917 So.2d
149, 155 (Ala. Civ. App. 2005). Once an insurance agent “undertakes to procure
insurance for a client,” the agent owes a duty “to exercise reasonable skill, care
and diligence in effecting” the coverage. Highlands Underwriters Ins. Co. v.
Elegante Inns, Inc., 361 So. 2d 1060, 1065 (Ala. 1978).
However, contributory negligence is a complete defense to a negligence
claim under Alabama law. Alfa Life Ins. Corp. v. Colza, 159 So. 3d 1240, 1248
(Ala. 2014) (citing Mitchell v. Torrence Cablevision USA, Inc., 806 So.2d 1254,
1257 (Ala. Civ. App. 2000)). Applying Alabama’s strict contributory negligence
standard to procurement claims, the Alabama Supreme Court held that “any
negligent-procurement claim is barred by the doctrine of contributory negligence”
and judgment as a matter of law in favor of an agent is required “when documents
available to the insured clearly indicate that the insurance in fact procured for the
insured is not what the insured subsequently claims he or she requested the agent
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to procure.” Alfa, 159 So. 3d at 1255; see id. at 1252 (“By not reading the
documents, they took a risk and put themselves in danger’s way. We do not think
it unreasonable to conclude as a matter of law that, in this day and age, any adult
of sound mind capable of executing a contract necessarily has a conscious
appreciation of the risk associated with ignoring documents containing essential
terms and conditions related to the transaction that is the subject of the contract.”).
Club Exclusive concedes that insurance was procured by Liberty and that
the policy was in full force and effect at all times relevant to this case. (Doc. 12 at
30, ¶ 9). Therefore, this court finds as a matter of law that Club Exclusive had a
duty to read the policy and therefore cannot recover on its negligent procurement
of insurance claims against either Ms. Washburn or Mr. Duesenberg. The court
does not need to reach the merits of the other issues raised by Ms. Washburn and
Mr. Duesenberg in responding to Counts I and II because Club Exclusive’s
negligent procurement of insurance claims fail as a matter of law based on
Alabama’s contributory negligence standard as set out in Alfa.
B.

Club Exclusive’s Breach of Contract To Procure Insurance
Claims Are Barred by the Merger Doctrine

In Count VI, Club Exclusive filed a claim against Ms. Washburn for Breach
of Contract To Procure Insurance. (Doc. 12 at 61-65, ¶¶59-63). In Count VII, Club

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Exclusive filed an almost identical claim against Mr. Duesenberg. (Doc. 12 at 6568, ¶¶ 64-68).
Once parties have come to an agreement on the procurement of insurance,
“the agent or broker must exercise reasonable skill, care, and diligence in effecting
coverage.” Cornett v. Johnson, 578 So.2d 1259, 1262 (Ala. 1991) (citing Waldon
v. Commercial Bank, 281 So.2d 279, 282 (Ala. Civ. App. 1973)). Under Alabama
law, “when an insurance agent or broker, with a view to compensation, undertakes
to procure insurance for a client, and unjustifiably or negligently fails to do so, he
becomes liable for any damage resulting therefrom.” Timmerman Ins. Agency v.
Miller, 285 Ala. 82, 85, 229 So. 2d 475, 477 (1969). When an insurance broker or
agent fails in the fiduciary duty he assumes, he can be sued either for breach of
contract or in tort. Highlands Underwriters Ins. Co. v. Elegante Inns, Inc., 361
So.2d 1060, 1065 (Ala. 1978).
However, under Alabama law, “[i]t is the rule that if the policy is accepted
by the insured, he is bound thereby even though the policy does not correspond to
the preliminary negotiations. The oral negotiations for the policy are merged into
the accepted policy.” Langley v. Mut. Fire, Marine & Inland Ins. Co., 512 So. 2d
752, 766 (Ala. 1987)(citing Smith v. Protective Life Ins. Co., Inc., 355 So.2d 728,
730 (Ala. Civ. App. 1978)), overruled on other grounds by Hickox v. Stover, 551
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So. 2d 259 (Ala. 1989)(applying the merger doctrine to a breach of contract to
procure insurance claim).
The principle of the merger doctrine is “well embedded in our law.” Smith,
355 So.2d at 728. “It is familiar law that a contract of insurance is essentially like
all other contracts, and governed by general rules of contract . . . all parol
negotiations, understandings, and agreements are merged into the written policy.”
Farmers & Merchants Bank v. Home Ins. Co., 514 So.2d 825, 831 (Ala.
1987)(citing Hartford Fire Insurance Co. v. Shapiro, 270 Ala. 149, 153-55 (Ala.
1960)).
The merger doctrine has been applied to breach of contract to procure
insurance claims by the Alabama Supreme Court. Langley, 512 So.2d at 766. As a
district court within this Circuit has summarized,
[D]ecisions issued by the Alabama Supreme Court and by the
Court of Appeals for the Eleventh Circuit applying Alabama law have
consistently applied the merger doctrine. See, e.g., Sexton v. Liberty
Nat. Life Ins. Co., 405 So.2d 18, 22 (Ala.1981) (“It is the rule that if the
policy is accepted by the insured, he is bound thereby even though the
policy does not correspond to the preliminary negotiations. The oral
negotiations for the policy are merged in the accepted policy.... This
principle is well embodied in our law.”) (quoting Smith v. Protective
Life Ins. Co., 355 So.2d 728, 730 (Ala. Civ. App.1978)) (relying on
Hartford Fire) (other citations omitted); Farmers & Merchants Bank v.
Home Ins. Co., 514 So.2d 825, 830–31 (Ala.1987) (“Here, however, the
written policy of insurance was issued subsequent to the agent's
allegedly making oral representations that were contrary to the
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provisions of the written insurance contract. The instant facts, therefore,
do invoke the application of the doctrine of merger, thereby precluding
any consideration of the alleged prior representations of [the insurance
agent] as to coverage.”) (relying on Hartford Fire); Langley v. Mut. Fire,
Marine, and Inland Ins. Co., 512 So.2d 752, 766 (Ala.1987) (same)
(overruled on other grounds); First Ala. Bank of Montgomery N.A., v.
First State Ins. Co ., 899 F.2d 1045, 1069–70 (11 th Cir.1990) (applying
Alabama law) (same).
Concrete Metal Forms, Inc. v. Cole-Farley & Associates, Inc., 2000 WL 1848162,
at *5 (S.D. Ala. Dec. 6, 2000).
However, an insurance broker or agent can assume additional duties by an
express agreement. First Alabama Bank of Montgomery, N.A. v. First State Ins.
Co., 899 F.2d 1045, 1068-69 (11th Cir. 1990). Whether an agent or broker
“assumes additional responsibilities depends on the relationship between the
parties.” Id.
In First Alabama, the broker assumed additional express duties after giving
an oral presentation and submitting a written proposal in order to become the
insured’s exclusive insurance broker. First Alabama, 899 F.2d at 1068. The
Eleventh Circuit held that the merger doctrine did not bar the insured’s breach of
contract claim against the broker because “this was not merely a contract to
procure insurance. [The broker] agreed to ‘provide the expertise necessary to meet
[the insured]’s needs’” by shopping the market and making the insured aware of

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all alternatives. Id. at 1068-9 (emphasis added).
Unlike in First Alabama, Club Exclusive has not pled any facts to show that
either Ms. Washburn or Mr. Duesenberg expressly assumed any additional duties.
Club Exclusive concedes that it purchased and accepted the policy and that the
policy was in full force and effect at all times relevant to this action. (Doc. 12 at
30, ¶ 9). Club Exclusive claims that it “purchased the subject policy for the
express and primary purpose of insuring against any and all risks of property
damage to its building and contents,” (doc. 12 at 30, ¶11), and only asserts that
Ms. Washburn and Mr. Duesenberg agreed “to exercise reasonable skill, care, and
diligence in effecting the coverage needed by Plaintiff.” (Id. at 62, ¶60 and 65,
¶65). In so alleging, Club Exclusive merely reiterated the standard set out in
Cornett v. Johnson, 578 So.2d 1259, 1262 (Ala. 1991). Club Exclusive’s only
evidence that Ms. Washburn and Mr. Duesenberg failed to procure adequate
insurance coverage is “Defendant Liberty’s failure to pay for damages caused by
fire.” (Doc. 12 at 62, ¶ 62 and 66, ¶67).
Club Exclusive merely claims that Ms. Washburn and Mr. Duesenberg
breached a contract to procure insurance, not that Ms. Washburn or Mr.
Duesenberg assumed any additional duties by express agreement. Therefore,
Alabama’s merger doctrine bars the breach of contract to procure insurance claims
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made by Club Exclusive against Ms. Washburn and Mr. Duesenberg.
IV.

CONCLUSION
Accordingly, Ms. Washburn’s and Mr. Duesenberg’s Motions To Dismiss

are hereby GRANTED. Club Exclusive’s claims against Ms. Washburn and Mr.
Duesenberg for negligent procurement of insurance and breach of contract to
procure insurance are hereby DISMISSED.
DONE and ORDERED this the 24th day of October, 2016.

VIRGINIA EMERSON HOPKINS
United States District Judge

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