Essex Insurance Company v. J & J Masonry LLC et al

Filing 24

MEMORANDUM OPINION. Signed by Judge Virginia Emerson Hopkins on 4/1/2015. (JLC)

FILED
2015 Apr-01 AM 09:04
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ESSEX INSURANCE COMPANY,
Plaintiff,
v.
J & J MASONRY LLC, HPH
PROPERTIES LLC, BONNIE
ADAMS, JOHN ADAMS, WENDY
COOK, and WILLIAM COOK,
Defendants.

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) Case No.: 2:14-CV-2138-VEH
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MEMORANDUM OPINION
This matter is before the court on plaintiff Essex Insurance Company’s
(“Essex”) Motion For Default Judgment Against Defendant J & J Masonry LLC (“J&J
Masonry”). (Doc. 19). Essex brought a Complaint for Declaratory Judgment on
November 4, 2014 against J&J Masonry and the other listed defendants to seek a
determination of its rights and obligations under five commercial liability insurance
policies issued by Essex to J&J Masonry. (Doc. 1). J&J Masonry failed to answer or
otherwise respond to the complaint, and so the clerk entered a default against J&J
Masonry on January 30, 2015. (Doc. 18).

J&J Masonry has not responded to the Motion, and the deadline to do so passed
on January 22, 2015. (See Doc. 3 at 23). Therefore, the Motion is under submission.
For the reasons discussed below, the Motion is due to be granted.
I.

STANDARDS
A.

Motions For Default Judgment

In 2007, Judge Steele in the Southern District of Alabama summarized the
appropriate standard for motions for default judgment:
In this Circuit, “there is a strong policy of determining cases on their
merits and we therefore view defaults with disfavor.” In re Worldwide
Web Systems, Inc., 328 F.3d 1291, 1295 (11th Cir. 2003). Nonetheless,
it is well established that a “district court has the authority to enter
default judgment for failure ... to comply with its orders or rules of
procedure.” Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985).
Where, as here, a defendant has failed to appear or otherwise
acknowledge the pendency of a lawsuit against her for nearly two
months after being served, entry of default judgment may be appropriate.
Indeed, Rule 55 itself provides for entry of default and default judgment
where a defendant “has failed to plead or otherwise defend as provided
by these rules.” Rule 55(a), Fed.R.Civ.P. In a variety of contexts, courts
have entered default judgments against defendants who have failed to
defend the claims against them following proper service of process. In
short, then, “[w)hile modern courts do not favor default judgments, they
are certainly appropriate when the adversary process has been halted
because of an essentially unresponsive party. Flynn v. Angelucci Bros.
& Sons, Inc., 448 F.Supp.2d 193, 195 (D.D.C.2006) (citation omitted).
The law is clear, however, that [the defendant’s) failure to appear and the
Clerk’s subsequent entry of default against her do not automatically
entitle [the plaintiff) to a default judgment. Indeed, a default is not “an
absolute confession by the defendant of his liability and of the plaintiff’s
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right to recover,” but is instead merely “an admission of the facts cited
in the Complaint, which by themselves may or may not be sufficient to
establish a defendant's liability.” Pitts ex rel. Pitts v. Seneca Sports, Inc.,
321 F.Supp.2d 1353, 1357 (S.D.Ga.2004); see also Descent v.
Kolitsidas, 396 F.Supp.2d 1315, 1316 (M.D.Fla.2005) (“the defendants’
default notwithstanding, the plaintiff is entitled to a default judgment
only if the complaint states a claim for relief”). Stated differently, “a
default judgment cannot stand on a complaint that fails to state a claim.”
Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1370 n. 41 (11th
Cir.1997).
Atl. Recording Corp. v. Carter, 508 F. Supp. 2d 1019, 1021-23 (S.D. Ala. 2007)
(internal citations omitted).
“The allegations must be well-pleaded in order to provide a sufficient basis for
the judgment entered.” De Lotta v. Dezenzo's Italian Rest., Inc., No.
6:08CV2033ORL22KRS, 2009 WL 4349806 at *2 (M.D. Fla. Nov. 24, 2009) (citing
Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1307 (11th
Cir.2009)). In making the determination as to whether the complaint is well pleaded,
the court notes that the “plaintiff’s obligation to provide the grounds of his entitlement
to relief requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
127 S. Ct. 1955, 1964–65, 167 L. Ed. 2d 929 (2007) (quotations omitted). “Factual
allegations must be enough to raise a right to relief above the speculative level.” Id.
at 1965. Mere conclusory statements in support of a threadbare recital of the elements
of a cause of action will not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937,
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1949, 173 L. Ed. 2d 868 (2009).
B.

Substantive Law

Alabama courts apply a manifestation of damages rule for determining when
an insurance policy’s defense and coverage obligations are triggered. In U.S. Fidelity
& Guaranty Co. v. Warwick Development Co., 446 So. 2d 1021 (Ala. 1984), the
Alabama Supreme Court adopted “as a general rule the time of an ‘occurrence’ of an
accident within the meaning of an indemnity policy is not the time the wrongful act
is committed but the time the complaining party was actually damaged.” As a practical
matter, this general rule means “the insurance that is in force at the time of the
property damage … is applicable rather than insurance that was in force when the
work was performed.” Id.; see also Liberty Mut. Ins. Co. v. Wheelwright Trucking Co.,
Inc., 851 So. 2d 466 (Ala. 2002); American States Ins. Co. v. Martin, 662 So. 2d 245,
250 (Ala. 1995).
II.

FINDINGS OF FACT1
A.

The Underlying Lawsuits

Bonnie Adams and John Adams (“the Adamses”) are Alabama citizens and
residents. At all relevant times, the Adamses owned a house located in the at 2291

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Because J&J Masonry had a default entered against it by the clerk of court, these facts
are deemed admitted by default.
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Abbeyglen Circle, Hoover, Jefferson County, Alabama. On March 29, 2011, the
Adamses filed a lawsuit against HPH Properties LLC in the Circuit Court of Jefferson
County, Alabama in a case styled John and Bonnie Adams vs. HPH Properties, LLC
et al., Case No. 1-CV-2011-901068. (Doc.1-6). According to the complaint, they
closed on the purchase of the house located at 2291 Abbeyglen Circle, Hoover,
Jefferson County, Alabama in July 2006. The Adamses had bought the home as an
investment. During the first year of their ownership (i.e., July 2006 to July 2007), their
tenant reported problems with the air conditioning. The Adamses contacted HPH
Properties LLC, asked for that problem to be corrected, and were eventually told it
had been corrected. At some point thereafter, the Adamses learned there were still
problems with the air conditioning and that “Chinese drywall” had been used in the
construction. The Adamses hired a third-party inspector, who identified several
construction problems, including “the brick veneer is not installed properly; voids in
mortar; improper or omitted weepholes”. (Doc.1-6 ¶3, ¶¶13-17, 19)
Wendy and William Cook (“the Cooks”) are Alabama citizens and residents.
At the times relevant to this lawsuit, they owned a house located at 2279 Abbeyglen
Circle, Hoover, Alabama. On September 17, 2010, the Cooks filed a lawsuit against
HPH Properties LLC in the Circuit Court of Jefferson County, Alabama styled
William and Wendy Cook vs. HPH Properties, LLC et al., Case No.
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1-CV-2010-903410. (Doc. 1-7) According to the complaint, they closed on the
purchase of the house located at 2279 Abbeyglen Circle, Hoover, Alabama in August
2006. At some time after the Cooks moved into the home, they noticed some “issues”
with the home, reported these issues to HPH, and were later told these issues had been
fixed. According to the complaint, the Cooks “continued to have problems” including
a “roof leak.” Because they were “concerned,” the Cooks hired a third-party inspector
to examine the house. The inspector made them aware of several problems, including
“brick veneer was improperly installed; no proper through wall flashings or weepholes
observe; no proper flashings observed above lintels, below openings or at base of
brick veneer; brick rowlocks do not have the proper slope.” (Doc.1-7 ¶3, ¶¶15-20).
On June 26, 2014, HPH Properties LLC filed a third-party complaint against
J & J Masonry LLC in each lawsuit. (Docs. 1-8, 1-9). In each of these third
party-complaints, HPH Properties LLC essentially alleged J & J Masonry was
responsible for the defects in the houses arising from J & J Masonry’s brick masonry
work on the exterior of each house and the damages arising therefrom as alleged by
the underlying plaintiffs. (Docs. 1-8 and 1-9 ¶¶5-6, 10, 12, 15, 17-20, 22-23, 28,
31-32, and 34).
B.

The Insurance Policies

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Essex insured J & J Masonry (under the name J & J Masonry Inc.) under five
insurance policies issued and in effect between December 2009 and December 2014.
(Docs.1-1, 1-2, 1-3, 1-4, 1-5). Policy 3DC7370 had a policy period from 12/22/2009
to 12/22/2010. (Doc.1-1). Policy 3DE8489 had a policy period from 12/22/2010 to
12/22/2011. (Doc. 1-2). Policy 3DJ3073 had a policy period from 12/22/2011 to
12/22/2012. (Doc. 1-3). Policy 3DM6396 had a policy period from 12/22/2012 to
12/22/2013. (Doc. 1-4). Policy 3DS2057 had a policy period from 12/22/2013 to
12/22/2014. (Doc. 1-5).
The COMMERCIAL GENERAL LIABILITY COVERAGE FORM in all five
Policies states in relevant part as follows:
SECTION I – COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE
LIABILITY
…
1. Insuring Agreement
a.

We 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. We will
have the right and duty to defend the insured against any
“suit” seeking those damages. However, we will have no
duty to defend the insured against any “suit” seeking
damages for “bodily injury” or “property damage” to which
this insurance does not apply. We may, at our discretion,
investigate any “occurrence” and settle any claim or “suit”
that may result. …

b.

This insurance applies to “bodily injury” and “property
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damage” only if:
(1)

The “bodily injury” or “property damage” is caused
by an “occurrence” that takes place in the “coverage
territory”;

(2)

The “bodily injury” or “property damage” occurs
during the policy period; and

(3)

Prior to the policy period, no insured listed under
Paragraph 1. of Section II – Who Is An Insured and
no “employee” authorized by you to give or receive
notice of an “occurrence” or claim, knew that the
“bodily injury” or “property damage” had occurred,
in whole or in part. If such a listed insured or
authorized “employee” knew, prior to the policy
period, that the “bodily injury” or “property damage”
occurred, then any continuation, change or
resumption of such “bodily injury” or “property
damage” during or after the policy period will be
deemed to have been known prior to the policy
period.

c.

“Bodily injury” or “property damage” which occurs during
the policy period and was not, prior to the policy period,
known to have occurred by any insured listed under
Paragraph 1. of Section II – Who Is An Insured or any
“employee” authorized by you to give or receive notice of
an “occurrence” or claim, includes any continuation,
change or resumption of that “bodily injury” or “property
damage” after the end of the policy period.

d.

“Bodily injury” or “property damage” will be deemed to
have been known to have occurred at the earliest time when
any insured listed under Paragraph 1. Of Section II – Who
Is An Insured or any “employee” authorized by you to give
or receive notice of an “occurrence” or claim:
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(1)

Reports all, or any part, of the “bodily injury” or
“property damage” to us or any other insurer;

(2)

Receives a written or verbal demand or claim for
damages because of the “bodily injury” or “property
damage”; or

(3)

Becomes aware by any other means that “bodily
injury” or “property damage” has occurred or has
begun to occur.

…
SECTION V – DEFINITIONS
…
3. “Bodily injury” means bodily injury, sickness or disease sustained by
a person, including death resulting from any of these at any time.
…
13. “Occurrence” means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.
…
17. “Property damage” means:
a.

Physical injury to tangible property, including all resulting
loss of use of that property. All such loss of use shall be
deemed to occur at the time of the physical injury that
caused it; or

b.

Loss of use of tangible property that is not physically
injured. All such loss of use shall be deemed to occur at the
time of the “occurrence” that caused it.

(See, e.g., Doc. 1-1 p.4, 16-18).
Policy 3DC7370 (Doc. 1-1) and Policy 3DE8489 (Doc. 1-2) have a
COMBINATION CONSTRUCTION RELATED ENDORSEMENT which states in
relevant part as follows:
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The coverage under this policy does not apply to “bodily injury,”
“property damage,” or “personal and advertising injury” or any injury,
loss or damage:
(a) Which first occurred, began to occur, or is alleged to have
occurred prior to, or is alleged to be in the process of occurring to
any degree, as of the inception date of this policy;
(b) Which is caused by or alleged to have been caused by
incremental, continuous or progressive damage arising from an
“occurrence” which first occurred, began to occur, or is alleged to
have occurred prior to the inception date of this policy;
(Doc. 1-1 at 23, Doc. 1-2 at 10).
Policy 3DJ3073 (Doc. 1-3) has a COMBINATION CONSTRUCTION
RELATED ENDORSEMENT which states in relevant part as follows:
The coverage under this policy does not apply to “bodily injury,”
“property damage,” or “personal and advertising injury” or any injury,
loss or damage:
(a) Which first occurred, began to occur, or is alleged to have
occurred prior to, or is alleged to be in the process of occurring to
any degree, as of the inception date of this policy;
(b) Which is caused by or alleged to have been caused by
incremental, continuous or progressive damage arising from an
“occurrence” which first occurred, began to occur, or is alleged to
have occurred prior to the inception date of this policy;
(Doc. 1-3 at 13).
Policy 3DM6396 (Doc. 1-4) and Policy 3DS2507 (Doc. 1-5) each has a
PREEXISTING INJURY, LOSS OR DAMAGE EXCLUSION which states:
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The coverage under this policy does not apply to “bodily injury,”
“property damage,” or “personal and advertising injury” or any injury,
loss or damage:
(a) Which first occurred, began to occur, or is alleged to have occurred
prior to, or is alleged to be in the process of occurring to any degree, as
of the inception date of this policy;
(b) Which is caused by or alleged to have been caused by incremental,
continuous or progressive damage arising from an occurrence which first
occurred, began to occur, or is alleged to have occurred prior to the
inception date of this policy;
(Doc. 1-4 at 36, Doc. 1-5 at 39).
III.

ANALYSIS
Essex seeks a default judgment under Rule 55(b) against J & J Masonry LLC

declaring that it has no duty to defend or indemnify J & J Masonry in the underlying
state court litigation under the five policies of insurance issued by Essex to J & J
Masonry and in effect between December 2009 and December 2014. (Doc. 20).
Once the clerk has made an entry of default against a defendant who has failed
to answer or otherwise respond to the complaint, Rule 55 (b) allows for the court to
enter judgment by default:
(b) [Default] Judgment. Judgment by default may be entered as follows:
...
(2) By the Court. In all other cases the party entitled to a judgment by
default shall apply to the court therefor; but no judgment by default shall
be entered against an infant or incompetent person unless represented in
the action by a general guardian, committee, conservator, or other such
representative who has appeared therein. If the party against whom
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judgment by default is sought has appeared in the action, the party (or,
if appearing by representative, the party’s representative) shall be served
with written notice of the application for judgment at least 3 days prior
to the hearing on such application. If, in order to enable the court to enter
judgment or to carry it into effect, it is necessary to take an account or to
determine the amount of damages or to establish the truth of any
averment by evidence or to make an investigation of any other matter,
the court may conduct such hearings or order such references as it deems
necessary and proper and shall accord a right of trial by jury to the
parties when and as required by any statute of the United States.
Fed. R. Civ. P. 55(b)(2).
The court finds that entry of a default judgment in favor of Essex and against
Defendant J & J Masonry is appropriate under Rule 55(b). Essex has submitted
affidavit testimony evidencing that Defendant J & J Masonry was duly served with
a copy of the Summons and Complaint between November 6 and 10, 2014. (Doc. 17;
see Doc. 7). Over ninety days have elapsed since the date on which J & J Masonry
was served, and J & J Masonry has failed to answer or otherwise respond to Plaintiff’s
Complaint.
Judgment is also due to be granted under the insurance provisions. Accepting
the allegations made in the Adamses’ suit as true for purposes of this analysis, they
acquired ownership of their house in July, 2006. (Doc. 1-6 ¶ 3). They first discovered
the alleged property damage (which also, allegedly, caused their bodily injuries)
during the first year that they owned their home— that is, by July of 2007 at the latest.
(Doc. 1-6 ¶¶ 14-17). Similarly, according to the allegations in the Cooks’ suit, they
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closed on the purchase of their house in August, 2006 (Doc. 1-7 ¶ 3) and first
discovered the alleged property damage (which also, allegedly, caused their bodily
injuries) within a year of the purchase. (Id. at ¶¶14-19). Accordingly, both the
Adamses and the Cooks have alleged damages which first began manifesting before
the 12/22/2009 inception of Policy 3DC7370 and long before the 12/22/2010,
12/22/2011, 12/22/2012, and 12/22/2013 inception dates of the four other policies.
Each of the policies has exclusions for bodily injury and property damage
"[w]hich first occurred, began to occur, or is alleged to have occurred prior to, or is
alleged to be in the process of occurring to any degree, as of the inception date of this
policy." (See, e.g., Doc. 1-4 at 36). There are also exclusions for injury or damage that
"is caused by or alleged to have been caused by incremental, continuous or
progressive damage arising from an ‘occurrence’ which first occurred, began to occur,
or is alleged to have occurred prior to the inception date of this policy." (See, e.g.,
Doc. 1-1 at 23). Together, these exclusions clearly bar coverage under the policies for
the occurrences alleged in the state court lawsuits filed by the Adamses and the Cooks
against J&J Masonry. Therefore, Essex is entitled to a judgment holding that it has no
duty to indemnify or to defend J&J Masonry in both of these state cases.
IV.

CONCLUSION

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The Complaint does not seek money damages, but rather seeks only a
declaratory judgment. Because damages are not sought, an evidentiary hearing is
unnecessary and the court may adjudicate the matter of default “upon request of the
plaintiff and upon affidavit of the amount due.” Fed.R.Civ.P. 55(b)(1); see, e.g.,
United States Artist Corporation v. Freeman, 605 F.2d 854, 857 (5th Cir. 1979).
For the reasons outlined above, Essex’s Motion for Default Judgment is due to
be granted, and Essex is entitled to default judgment against J & J Masonry on its
Complaint for a declaratory judgment that it has no duty to defend and indemnify J
& J Masonry in the underlying lawsuits.
DONE and ORDERED this 1st day of April, 2015.

VIRGINIA EMERSON HOPKINS
United States District Judge

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