USF Insurance Company v. Metcalf Realty Company Inc et al
MEMORANDUM OPINION AND ORDER The court finds that USF and Indian Harbor are not obligated to defend or indemnify Metcalf. Accordingly, Indian Harbor's and USF's motions, 20 and 31 , are GRANTED and that USF's second motion, 40 , is MOOT. This action is DISMISSED with prejudice. Signed by Judge Abdul K Kallon on 08/30/2013. (PSM)
2013 Aug-30 PM 01:34
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
USF INSURANCE COMPANY,
COMPANY, INC.; THOMAS
CANTONE, individually; and
INDIAN HARBOR INSURANCE
Civil Action Number
MEMORANDUM OPINION AND ORDER
This declaratory judgment action arises out of an underlying state court
lawsuit Metcalf Realty Company, Inc. (“Metcalf”), a property management
company, filed against Thomas Cantone (“Cantone”), a condominium owner. Doc.
1 at 1-3. When Cantone asserted counterclaims alleging improper leak repairs,
USF Insurance Company (“USF”), one of Metcalf’s insurers, defended Metcalf
under a reservation of rights and subsequently filed this action against all the
parties in the underlying lawsuit. Id. at 1-4, 8. USF also added one of Metcalf’s
insurers, Indian Harbor Insurance Company (“Indian Harbor”), as a defendant. Id.
at 2, 8. USF seeks a declaration that it has no duty to defend or indemnify Metcalf
against Cantone’s counterclaims because there is purportedly no coverage under
the terms of its policies or, alternatively, that its coverage, if any, is in excess to the
coverage provided by Indian Harbor, id. at 9, and has filed two motions for
summary judgment on these two grounds. Docs. 31, 40. Likewise, Indian Harbor
seeks a summary judgment declaring that its policy provides no coverage to
Metcalf for Cantone’s counterclaims. Doc. 20. The motions are fully briefed and
ripe for review. Docs. 20, 23-25, 27, 31, 33, 40, 43, 48-50. For the reasons stated
below, the court GRANTS Indian Harbor’s and USF’s motions and finds that their
policies do not provide coverage to Metcalf.1 Accordingly, the court MOOTS
USF’s motion regarding which policy is primary, doc. 40, and DISMISSES with
prejudice this action as to all parties.
SUMMARY JUDGMENT STANDARD OF REVIEW
Under Rule 56(a) of the Federal Rules of Civil Procedure, summary
judgment is proper “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
In its reply brief, USF asks the court to strike certain factual allegations asserted by
Metcalf in its response brief. Doc. 50 at 1-2. The court DENIES the motion since there is no
evidence of malicious intent or risk of prejudice to USF.
judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
“Rule 56 mandates the entry of summary judgment, after adequate time for
discovery and upon motion, against a party who fails to make a showing sufficient
to establish the existence of an element essential to that party’s case, and on which
that party will bear the burden of proof at trial.” Id. The moving party bears the
initial burden of proving the absence of a genuine issue of material fact. Id. at 323.
The burden then shifts to the nonmoving party, who is required to “go beyond the
pleadings” to establish that there is a “genuine issue for trial.” Id. at 324 (citation
and internal quotation marks omitted). A dispute about a material fact is genuine
“if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The court must construe the evidence and all reasonable inferences arising
from it in the light most favorable to the non-moving party. Adickes v. S. H. Kress
& Co., 398 U.S. 144, 157 (1970); see also Anderson, 477 U.S. at 255 (all justifiable
inferences must be drawn in the non-moving party’s favor). Any factual disputes
will be resolved in the non-moving party’s favor when sufficient competent
evidence supports the non-moving party’s version of the disputed facts. See Pace
v. Capobianco, 283 F.3d 1275, 1276, 1278 (11th Cir. 2002) (a court is not required
to resolve disputes in the non-moving party’s favor when that party’s version of
events is supported by insufficient evidence). However, “mere conclusions and
unsupported factual allegations are legally insufficient to defeat a summary
judgment motion.” Ellis v. England, 432 F.3d 1321, 1326 (11th Cir. 2005) (per
curiam) (citing Bald Mountain Park, Ltd. v. Oliver, 863 F.2d 1560, 1563 (11th Cir.
1989)). Moreover, “[a] mere ‘scintilla’ of evidence supporting the opposing party’s
position will not suffice; there must be enough of a showing that the jury could
reasonably find for that party.” Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir.
1990) (citing Anderson, 477 U.S. at 251-52).
The USF Policy
USF provided coverage to Metcalf under a commercial general liability policy,
which states, in relevant part, that it “will pay those sums that the insured becomes
legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’
to which this insurance applies.” Docs. 31-5 at 10; 31-6 at 10. In exchange, the policy
requires that Metcalf “see to it that we are notified as soon as practicable of an
‘occurrence’ or an offense which may result in a claim” and that “[i]f a claim is made
or ‘suit’ is brought against any insured, you must: . . . [n]otify us as soon as
practicable.” Docs. 31-5 at 19-20; 31-6 at 19-20.
The Indian Harbor Policy
Indian Harbor provided coverage to the Woodside Condominium Association,
Inc. (“the Association”), as an additional named insured, through an endorsement to
a commercial general liability policy Indian Harbor issued to Nations Asset
Management LP - Core Multi Family (“Nations”) in Texas. Doc. 21-1 at 1-2, 4.
Indian Harbor issued a separate policy number and delivered the policy to the
Association at its Alabama address. Id. at 2. Metcalf is an “insured” under the policy
as the “real estate manager” of Woodside Condominiums. Docs. 21-1 at 21-22; 31-2
at 6; see also docs. 20 at 5; 23 at 8. The policy states, in relevant part, that Indian
Harbor “will pay those sums that the insured becomes legally obligated to pay as
damages because of ‘bodily injury’ or ‘property damage’ to which this insurance
applies” and “those sums that the insured becomes legally obligated to pay as damages
because of ‘personal and advertising injury’ to which this insurance applies.” Doc.
21-1 at 14, 18. However, relevant to this lawsuit, the policy contained a fungi or
This insurance does not apply to:
Fungi Or Bacteria
“Bodily injury” or “property damage” which would not
have occurred, in whole or in part, but for the actual, alleged
or threatened inhalation of, ingestion of, contact with,
exposure to, existence of, or presence of, any “fungi” or
bacteria on or within a building or structure, including its
contents, regardless of whether any other cause, event,
material or product contributed concurrently or in any
sequence to such injury or damage.
Any loss, cost or expense arising out of the abating,
testing for, monitoring, cleaning up, removing, containing,
treating, detoxifying, neutralizing, remediating or disposing
of, or in any way responding to, or assessing the effects of,
“fungi” or bacteria, by any insured or by any other person
Doc. 21-2 at 13. The policy defined “fungi” as “any type or form of fungus, including
mold or mildew and any mycotoxins, spores, scents or byproducts produced or
released by fungi.” Id.
The Underlying Incident and Complaint
Cantone is the owner of a Woodside Condominiums unit. Doc. 31-3 at 4.
The state court lawsuit that triggered this action stems from a problem Cantone had
with his unit. See doc. 1. Metcalf received notice of the problem on October 29,
2009, when Cantone reported leaks in his bedroom and living room ceilings. Doc.
31-2 at 11. Although a Metcalf maintenance employee attempted to repair the roof,
Cantone subsequently stopped paying his Association dues, presumably because of
displeasure with the repairs. Id. at 11, 13. The wet conditions apparently caused
The same exclusion for fungi and bacteria also applies to damage caused by “personal
and advertising” injury. See doc. 21-2 at 13.
Cantone additional problems because on January 28, 2010, he informed the
president of the Association’s Board that he was having breathing problems. Id. at
11. The president relayed the complaint to Metcalf. Id.
On February 22, 2010, Cantone attended the Association’s Board meeting
and asked for reimbursement of $2,500 he paid a contractor to repair his ceiling.
Id. at 11, 13. The Board responded that it “would settle to avoid a possible legal
fee and lawsuit” if Cantone provided an invoice and paid his dues. Id. at 11. In the
meantime, in March and April of 2010, Metcalf made further repairs to Cantone’s
roof. Id. at 13, 15-18. The additional repairs apparently also proved inadequate
because on May 3, 2010, Cantone complained to Metcalf that his roof still leaked.
Id. at 12. In response, a Metcalf property manager informed Cantone that the
Board would reimburse him the $2,500 if Cantone paid his dues and late charges,
and signed a release of obligations of Metcalf, its employees, and the Board. Id. at
19. Cantone rejected the offer and, as a result, received notice on December 20,
2010 that his “unit was foreclosed on December 1, 2010 for non-payment of the
common and special expense assessments.” See doc. 31-3 at 5.
Thereafter, Metcalf foreclosed on Cantone’s unit, which the Association
purchased at the foreclosure sale. Id. at 3-5. When Cantone refused to vacate his
unit, Metcalf filed a lawsuit for ejectment and damages for waste and fair rental
value. Id. at 1-2. In his June 9, 2011 Answer and Counterclaim, Cantone alleged
(1) that his roof “continuously leaked” and “was not repaired [by Metcalf] in a
timely fashion or workman like manner,” (2) that the unsatisfactory repairs
“allow[ed] mold and mildew to grow between the walls,” (3) that he
“unsuccessfully tried to fix his condominium . . . but was not refunded [the]
$2,500 that he [had] spent for [the] repairs,” (4) that “he was forced to abandon
part of his condominium” because “[t]he mold and mildew problem continued to
grow,” (5) that the Association and Metcalf “failed or refused to fix” the problem,
and (6) that he had “to seek medical attention and take prescribed drugs.” Doc. 311 at 1-2. Based on these allegations, Cantone asserted counterclaims against
Metcalf for breach of contract, negligence, conspiracy, and breach of the “general
warranty of covenant of quiet enjoyment” and constructive eviction. Id. at 2-4.
The issue before this court is whether Indian Harbor and USF are obligated
to defend or indemnify Metcalf for Cantone’s counter-claim. Indian Harbor and
USF have both moved for summary judgment, alleging that Metcalf is not entitled
to coverage under their respective policies. Docs. 20, 31. The court addresses their
contentions below beginning with Indian Harbor in section III.A and then USF in
section III.B. For the reasons outlined below, the court agrees with Indian Harbor
and USF that their respective policies do not obligate them to provide coverage to
Metcalf for the claims Cantone raised in his counterclaim.
Indian Harbor’s Motion for Summary Judgment
To analyze Indian Harbor’s assertion that it has no duty to defend or
indemnify Metcalf against Cantone’s counterclaims in the underlying lawsuit, doc.
20 at 3, the court will first review the applicable choice of law and then discuss the
Choice of Law
“In determining which law applies [to the interpretation of an insurance
policy], a federal district court sitting in diversity must apply the choice of law
rules of the forum state.” Clanton v. Inter.Net Global, L.L.C., 435 F.3d 1319, 1323
(11th Cir. 2005) (quoting Trumpet Vine Invs., N.V. v. Union Capital Partners I,
Inc., 92 F.3d 1110, 1115 (11th Cir. 1996)); see Klaxon Co. v. Stentor Elec. Mfg.
Co., 313 U.S. 487, 496 (1941) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64,
74-77 (1938)). Absent a contractual provision specifying which law governs,
Alabama follows the principle of lex loci contractus, applying the law of the state
where the contract was formed. Cherokee Ins. Co. v. Sanches, 975 So. 2d 287, 292
(Ala. 2007) (quoting Stovall v. Universal Constr. Co., 893 So. 2d 1090, 1102 (Ala.
2004)). That state’s law governs unless it is contrary to Alabama’s fundamental
public policy. Id.; Cherry, Bekaert & Holland v. Brown, 582 So. 2d 502, 506-07
(Ala. 1991). For an insurance policy, the place of contract is where the policy was
“issued and delivered.” Cherokee, 975 So. 2d at 293 (citing Cincinnati Ins. Co. v.
Girod, 570 So. 2d 595, 597 (Ala. 1990)); see also Ailey v. Nationwide Mut. Ins.
Co., 570 So. 2d 598, 599 (Ala. 1990) (applying the law of the state where the
policy was “issued”).
Indian Harbor contends that Texas law applies because it issued the policy to
Nations in Texas and because another Texas company brokered the transaction.
Doc. 20 at 15. However, the evidence shows that Indian Harbor actually issued a
new policy number and delivered the policy directly to the Association in Alabama.
Doc. 21-1 at 2. Since Metcalf’s potential coverage from Indian Harbor arises
through the Association’s policy and that policy was issued and delivered to the
Association in Alabama, the court finds that Alabama law applies in this instance.3
The Duty to Defend or Indemnify
Indian Harbor asserts that it has no duty to defend or indemnify Metcalf
against Cantone’s counterclaims because the conduct alleged in Cantone’s
The result is the same even if Texas law applies. Under Texas law, the duty to defend is
determined by “the petition’s allegations and the policy’s language” and the court must focus on
“the factual allegations rather than the legal theories asserted.” Farmers Tex. Cnty. Mut. Ins. Co.
v. Griffin, 955 S.W.2d 81, 82 (Tex. 1997). Moreover, like in Alabama, where there is no duty to
defend, there is likewise no duty to indemnify under Texas law. Id. at 82, 84. In other words, as
discussed infra, Indian Harbor has no duty to defend or indemnify Metcalf even under Texas law.
counterclaim is excluded from coverage by the policy’s language. Doc. 20 at
18-23. Liability insurance policies impose two separate duties on the insurer: (1)
the duty to defend and (2) the duty to indemnify. Tanner v. State Farm Fire & Cas.
Co., 874 So. 2d 1058, 1063 (Ala. 2003) (citing Porterfield v. Audubon Indem. Co.,
856 So. 2d 789, 791-92 (Ala. 2002)). While ordinarily the two duties “must be
analyzed separately,” id. at 1066 (quoting U.S. Fid. & Guar. Co. v. Armstrong, 479
So. 2d 1164, 1167 (Ala. 1985)), because the duty to defend is broader, no duty to
indemnify exists where there is no duty to defend, id. at 1063. For this reason, the
court begins by analyzing Indian Harbor’s purported duty to defend.
“Whether an insurance company owes its insured a duty to provide a defense
in proceedings instituted against the insured is determined primarily by the
allegations contained in the complaint.” Hartford Cas. Ins. Co. v. Merchs. &
Farmers Bank, 928 So. 2d 1006, 1009 (Ala. 2005) (quoting Acceptance Ins. Co. v.
Brown, 832 So. 2d 1, 14 (Ala. 2001) (citing Armstrong, 479 So. 2d at 1168)). “If
the allegations of the injured party’s complaint show an accident or an occurrence
within the coverage of the policy, then the insurer is obligated to defend, regardless
of the ultimate liability of the insured.” Id. (quoting Acceptance, 832 So. 2d at 14
(citing Ladner & Co. v. S. Guar. Ins. Co., 347 So. 2d 100, 102 (Ala. 1977)));
Tanner, 874 So. 2d at 1065. To determine whether a claim is covered by the
policy, a court must initially engage in a three-step inquiry: (1) the insured must
show first that the claim is covered under the policy’s initial grant of coverage; (2)
the insurer may then show that a policy exclusion bars coverage; and (3) the
insured may thereafter establish that the excluded claim falls under an exception to
the exclusion. Ala. Gas Corp. v. Travelers Cas. & Sur. Co., No. CV-10-J-1840-S,
2013 WL 3766531, at *4 (N.D. Ala. July 16, 2013) (citing Ala. Hosp. Ass’n Trust
v. Mut. Assur. Soc. of Am., 538 So. 2d 1209, 1216 (Ala. 1989), and Colonial Life &
Accident Ins. Co. v. Collins, 194 So. 2d 532, 535 (Ala. 1967)); Town &Country
Prop., L.L.C. v. Amerisure Ins. Co., 111 So. 3d 699, 703 (Ala. 2011). If the
allegations in the complaint do not constitute a covered accident or occurrence, the
court may look to admissible evidence to establish a duty to defend. Hartford, 928
So. 2d at 1009-1010; Tanner, 874 So. 2d at 1064. Further, “[i]f there is any
uncertainty as to whether the complaint alleges facts that would invoke the duty to
defend, the insurer must investigate the facts surrounding the incident that gave rise
to the complaint in order to determine whether it has a duty to defend the insured.”
Hartford, 928 So. 2d at 1010 (quoting Blackburn v. Fid. & Deposit Co. of Md., 667
So. 2d 661, 668 (Ala. 1995)). Finally, if the allegations in the complaint or the
evidence presented include both covered and uncovered acts, the insurer must
defend at least the claims covered by the policy. Id. (citing Blackburn, 667 So. 2d
at 670 (citing Tapscott v. Allstate Ins. Co., 526 So. 2d 570, 574 (Ala. 1988))).
In this case, the parties do not dispute that Cantone’s counterclaims fall
under the initial grant of coverage provided by Indian Harbor’s policy. Docs. 20,
23, 27; see also docs. 20-2 at 2-4; 21-1 at 14, 18-19, 25, 27-28. Instead, Indian
Harbor is contending that a policy exclusion regarding fungi or bacteria precludes
coverage.4 Docs. 20 at 17-23; 27 at 10; 21-2 at 13. Policy exclusions “must be
interpreted narrowly as possible in order to provide maximum coverage for the
insured, and must be construed most strongly against the company that drew the
policy and issued it.” Nationwide Mut. Ins. Co. v. Thomas, 103 So. 3d 795, 805
USF challenges Indian Harbor’s contention on two fronts. First, USF contends that
Indian Harbor cannot rely on the fungi or bacteria exclusion because Indian Harbor purportedly
failed to conduct “a full and complete investigation” of Metcalf’s insurance claim. Doc. 23 at 910; see also doc. 48 at 4. The court agrees with Indian Harbor that this assertion has “no
bearing” on the issues before the court. Doc. 27 at 5. Further, an insurer is not required to
investigate the facts surrounding an incident, unless there is uncertainty as to whether the
complaint on its face alleges facts that would invoke the duty to defend. Hartford, 928 So. 2d at
1010. No such uncertainty exists here because Cantone’s pleading plainly asserts that Metcalf
injured him by failing to adequately repair the roof leak and thereby permitting mold and mildew
to proliferate in his condominium unit. Doc. 20-2 at 2.
Next, USF contends that Indian Harbor is barred from relying on its policy exclusions
under Alabama Code § 27-14-19 if it failed to deliver a copy of its policy to the Association.
Doc. 23 at 17; see also doc. 40 at 17. Indeed, § 27-14-19 provides that “every policy shall be
mailed or delivered to the insured or to the person entitled thereto within a reasonable period of
time after its issuance.” ALA. CODE § 27-14-19(a). Moreover, the Alabama Supreme Court has
held that “when an insurer has not complied with § 27-14-19 and its failure to comply has
prejudiced the insured, the insurer may be estopped from asserting an otherwise valid coverage
exclusion.” Brown Mach. Works & Supply Co. v. Ins. Co. of N. Am., 659 So. 2d 51, 58 (Ala.
1995). USF’s argument is unavailing, however, because USF failed to submit any evidence
indicating that Indian Harbor failed to properly deliver its policy. In fact, the evidence shows that
Indian Harbor properly delivered the applicable policy to the Association in Alabama. See
section III.A.1, supra.
(Ala. 2012) (quoting Porterfield, 856 So. 2d at 806). However, where there is no
ambiguity in the terms of an insurance policy, the court must enforce the policy
language “as written” and “cannot defeat express provisions in a policy, including
exclusions from coverage, by making a new contract for the parties.” Id.
In the underlying state case, Cantone’s counterclaim alleges injuries from a
“mold and mildew problem” created by a roof leak that Metcalf unsatisfactorily
repaired. Doc. 20-2 at 2. Allegedly, as a result of the mold and mildew, Cantone
had to abandon a part of his condominium, seek medical attention, take
prescription drugs, and spend $2,500 on repairs. Id. This alleged conduct falls
squarely within the exclusion since Indian Harbor’s policy precludes coverage for
“bodily injury,” “property damage,” and “personal and advertising injury” that
“would not have taken place, in whole or in part, but for the . . . alleged . . .
inhalation of, . . . contact with, exposure to, existence of, or presence of any ‘fungi’
. . . on or within a building or structure, including its contents, regardless of
whether any other cause, event, material or product contributed concurrently or in
any sequence to such injury.” Doc. 21-2 at 13. The policy also excludes coverage
for “[a]ny loss, cost or expense arising out of the . . . cleaning up, removing, . . .
neutralizing, remediating or disposing of, or in any way responding to . . . ‘fungi’
or bacteria, by any insured or by any other person or entity.” Id. Since Cantone
alleges that his claims arise out of a mold and mildew problem, both of which the
policy includes in its definition of “fungi,” doc. 21-2 at 13, Cantone’s pleading
precludes coverage to Metcalf under the plain language of the policy’s fungi or
bacteria exclusion. Accordingly, the court finds that Indian Harbor has no duty to
defend or indemnify Metcalf, see Tanner, 874 So. 2d at 1063, and GRANTS
Indian Harbor’s motion.5
USF’s Motions for Summary Judgment
In light of the court’s ruling that Indian Harbor’s policy does not provide
coverage to Metcalf, USF’s second motion regarding whether its policy is
secondary to Indian Harbor’s, doc. 40, is MOOT. See section III.A.2, supra. As it
relates then to USF’s primary motion that its policy also does not provide coverage
to Metcalf, the court notes that the parties do not dispute that USF delivered and
issued the policy to Metcalf in Alabama. Docs. 31, 49, 50; see also docs. 31-5 at 4;
31-6 at 4. Therefore, Alabama law applies in determining the extent of coverage
available, if any. See also section III.A.1, supra.
The result is the same even if the court looks beyond the four corners of Cantone’s
counterclaim. See Armstrong, 479 So. 2d at 1167 (“If the complaint suggests that the injury
alleged may not be within the coverage of the policy, then other facts outside the complaint may
be taken into consideration.” (citation omitted)). The facts here consistently reference the alleged
mold and mildew problem caused by the roof leak as the source of Cantone’s purported injuries.
See, e.g., doc. 1. Therefore, the alleged conduct falls squarely within the policy’s fungi and
bacteria exclusion provision.
The Duty to Defend or Indemnify
The parties do not dispute that Cantone’s counterclaims fall under the initial
grant of coverage under USF’s policy. Docs. 31, 49, 50; see also docs. 31-1 at 2-4;
31-5 at 10, 15, 22-24; 31-6 at 10, 15, 22-24. Instead, USF contends that it has no
duty to defend because Metcalf violated the policy by failing to provide notice of
an “occurrence,” “offense,” “claim,” or “suit” “as soon as practicable.” Doc. 31 at
16-28. Under Alabama law, “[t]he failure of an insured to comply within a
reasonable time with [a] conditions precedent in an insurance policy requiring the
insured to give notice of an accident or occurrence releases the insurer from
obligations imposed by the insurance contract.” Travelers Indem. Co. of Conn. v.
Miller, 86 So. 3d 338, 342 (Ala. 2011) (quoting Reeves v. State Farm Fire & Cas.
Co., 539 So. 2d 252, 254 (Ala. 1989)). The Alabama Supreme Court construes the
term “as soon as practicable” in insurance contracts “to mean that ‘notice must be
given within a reasonable time in view of the facts and circumstances of the case.’”
Id. (quoting Haston v. Transamerica Ins. Servs., 662 So. 2d 1138, 1141 (Ala. 1995)
(quoting Pharr v. Cont’l Cas. Co., 429 So. 2d 1018, 1019 (Ala. 1983))). “Only two
factors are to be considered in determining the reasonableness of a delay in giving
notice to the insurer: the length of the delay and the reasons for the delay.” Id.
(citing U.S. Fid. & Guar. Co. v. Baldwin Cnty. Home Builders Ass’n, 770 So. 2d
72, 75 (Ala. 2000)). Prejudice to the insurer is not a factor. Id.
Without identifying a particular “occurrence”or “offense,” USF argues that
Metcalf failed to notify it “as soon as practicable” because Metcalf’s notice came
(1) “twenty-[three] months after Cantone first reported the leaks,” (2) “twenty
months after Cantone reported that the leaks were causing him breathing
problems,” (3) “nineteen months after Cantone demanded reimbursement for
monies paid for repairs,” (4) “[eighteen] months after Metcalf started repairing
Cantone’s condominium and the roof,” (5) “seventeen months after Metcalf offered
to pay Cantone $2,500 to settle Cantone’s claims in exchange for a release of all
claims against Metcalf and its employees,” (6) “[four] months after the
counterclaim was filed,” and (7) “[four] months after counsel for Metcalf filed an
answer to Cantone’s counterclaim.” Doc. 31 at 20-21. The record before this court
supports USF’s contention that Metcalf failed to provide timely notice.
Again, the policy required Metcalf to notify USF “as soon as practicable” of
an “occurrence” or “offense” that “may result in a claim.” Docs. 31-5 at 19; 31-6 at
19. While the parties did not identify a specific “occurrence” or “offense” in their
briefs, see docs. 31, 49, 50, it is clear on the face of Cantone’s pleading that the
“occurrence”—which the policy defines as an “accident,” docs. 31-5 at 23 and 31-6
at 23—is the roof leak reported by Cantone and that the “offense” is Metcalf’s
alleged failure to repair the roof in a “workman like manner,” doc. 31-1 at 2.
Metcalf asserts that it “first learned that there was a potential claim against it” only
when Cantone filed his counterclaims in the underlying state action in June 2011,
that prior to that Cantone complained only to the Association, and that its notice to
USF in October 2011 was reasonable. Doc. 49 at 6. However, the record before
this court establishes instead that Meltcalf received notice well before the June
2011 counterclaim. Doc. 31-2 at 11-15, 17-19. Specifically, the evidence shows
that Metcalf first learned of the leaks in Cantone’s unit in October 2009 and that
Cantone complained to Metcalf that it had not properly repaired the leaks in March
and May of 2010. Doc. 31-2 at 11. Moreover, in response, on May 3, 2010,
Metcalf sent a letter to Cantone, on behalf of the Association, offering to reimburse
the $2,500 Cantone spent for repairs if Cantone agreed, among other things, to sign
a “release of obligations of Metcalf Realty, Metcalf Realty Employees [and] the . . .
Board . . . .” Doc. 31-2 at 19 (emphasis added). These facts establish that Metcalf
knew about Cantone’s problems as early as October 2009 and certainly had
reasonably anticipated by May 2010, when it sought a release from Cantone, that
Cantone may have intended to hold Metcalf liable for any potential damages
arising out of the roof leak and Metcalf’s repairs. See Fire Ins. Exch. v. McCoy,
637 F. Supp. 2d 991, 994 (M.D. Ala. 2009) (“[N]otice is not required until some
claim within the coverage of the policy has been presented or is reasonably to be
anticipated, in which event the requirement as to notice is satisfied if notice is
given within a reasonable time after the situation assumes an aspect suggestive of a
possible claim for damages.”) (citations omitted). Based on these facts, the court
finds that Metcalf breached a condition of USF’s policy by failing to provide notice
“as soon as practicable” of an “occurrence” or “offense.”
Alternatively, even if Metcalf is correct that it only received notice when
Cantone filed a counterclaim against it in June 2010, the four-month delay between
the counterclaim and notice to USF is still unreasonable based on the record before
this court. As the Alabama Supreme Court has held, “[a] five-month delay in
giving notice is sufficiently protracted as to require the insured to offer evidence of
a reasonable excuse for the delay.” Travelers, 86 So. 3d at 343 (quoting
Nationwide Mut. Fire Ins. Co. v. Estate of Files, 10 So. 3d 533, 536 (Ala. 2008));
see also Pharr, 429 So. 2d at 1019-20 (holding that an eight-month delay without
excuse is “unreasonable as a matter of law”); S. Guar. Ins. Co., 334 So. 2d at
883-85 (concluding that a six-month delay is “unreasonable as a matter of law”
without a reasonable excuse). According to Metcalf, it delayed providing notice to
USF because its President “was out of the office for several weeks due to knee
surgery and only later discovered that his staff had mistakenly failed to send notice
to the insurance agent.” Doc. 49 at 3; see also doc. 31-2 at 14. This excuse is
unreasonable because other Metcalf employees could have submitted the claim.
Moreover, “several weeks” do not account for the full four months delay in
notifying USF. In short, by failing to notify USF “as soon as practicable” of an
“occurrence” or “offense,” Metcalf breached a condition of USF’s policy.
Therefore, USF has no duty to defend and likewise no duty to indemnify Metcalf
against Cantone’s counterclaims in the underlying lawsuit. Accordingly, USF’s
motion is also GRANTED.
Based on the foregoing, the court finds that USF and Indian Harbor are not
obligated to defend or indemnify Metcalf. Accordingly, Indian Harbor’s and
USF’s motions, docs. 20 and 31, are GRANTED and that USF’s second motion,
doc. 40, is MOOT. This action is DISMISSED with prejudice.
DONE this 30th day of August, 2013.
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE
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