Auto-Owners Insurance Company v. Morris et al

Filing 54

MEMORANDUM OPINION Signed by Chief Judge Karon O Bowdre on 3/29/18. (SAC )

FILED
2018 Mar-29 AM 11:10
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
AUTO-OWNERS INS. CO.,
Plaintiff,
v.
BRIAN AND CHERISE MORRIS,
Defendants,
v.
THE PARNELL INS. AGENCY,
INC.,
Third-Party Defendant.

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CIVIL ACTION NO.
2:15-CV-2188-KOB

MEMORANDUM OPINION
This declaratory-judgment action involves the interpretation of policy
provisions related to uninsured motorist coverage. It comes before the court on
Plaintiff Auto-Owners Insurance Company’s “Motion for Summary Judgment”
(doc. 44) and Third-Party Defendant The Parnell Insurance Agency’s “Motion for
Summary Judgment” (doc. 43). The court will GRANT both motions.
In 2013, Brian Morris and his business, “B&C Industries,” obtained
automobile insurance with Auto-Owners through Parnell Insurance Agency. The
original named insured on that Policy was “B&C Industries,” the trade name of a
sole proprietorship run by Mr. Morris. In March 2014, Parnell Insurance changed
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the named insured on the Policy from B&C Industries to “BC Industries LLC,” a
limited liability company incorporated by Brian Morris’s wife, Cherise Morris.
In May 2014, the Morrises, while riding a motorcycle owned by Ms. Morris,
suffered injuries in a wreck. Because the at-fault motorist had insufficient
coverage to pay the Morrises’ bills and because the Morrises did not have their
own uninsured motorist coverage on the motorcycle, the Morrises claimed
uninsured motorist benefits from Auto-Owners based on the Policy’s uninsured
motorist coverage.
Auto-Owners asks for a declaratory judgment that the Policy does not
provide the Morrises uninsured motorist coverage for damage or injuries relating to
the motorcycle accident. Auto-Owners asserts that the Morrises are not entitled to
uninsured motorist coverage under the Policy because the first named insured on
the Policy was BC Industries LLC, a limited liability company, and, in this case,
the uninsured motorist coverage provision only covers the Morrises if the first
named insured is an “individual.”
The Morrises have filed counterclaims, asserting breach of the Policy and
contract reformation. The Morrises want the court to reform the Policy to the
original named insured, B&C Industries, a sole proprietorship. To that end, the
Morrises claim that both they and Auto-Owners understood and intended the
Policy to insure B&C Industries, a sole proprietorship; the Morrises say that
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Parnell Insurance unilaterally changed the named insured to BC Industries LLC
without their consent. Alternatively, the Morrises claim uninsured motorist
coverage under the Policy’s “Comprehensive Automobile Liability” endorsement,
which, they say, expands the scope of the Policy’s coverage.
Finally, the Morrises bring a claim against Parnell Insurance as a third-party
defendant, alleging that Parnell Insurance acted negligently or wantonly when it
told Auto-Owners to change the named insured on the Policy from B&C Industries
to BC Industries LLC.
Auto-Owners moves for summary judgment on all of its claims and all of the
Morrises’ counterclaims against it. Parnell Insurance moves for summary
judgment on the Morrises’ sole claim against it. For the reasons discussed below,
the court will GRANT both motions. The court will ENTER judgment in AutoOwners’s favor. The court finds that Auto-Owners does not owe the Morrises
uninsured motorist coverage under the Policy for the May 6, 2014, motorcycle
accident.
STANDARD OF REVIEW
Summary judgment is an integral part of the Federal Rules of Civil
Procedure. Summary judgment allows a trial court to decide cases when no
genuine issues of material fact are present and the moving party is entitled to
judgment as a matter of law. See Fed. R. Civ. P. 56. When a district court reviews
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a motion for summary judgment, it must determine two things: (1) whether any
genuine issues of material fact exist; and if not, (2) whether the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).
The moving party “always bears the initial responsibility of informing the
district court of the basis for its motion, and identifying those portions of ‘the
pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any,’ which it believes demonstrate the absence of a genuine
issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)
(quoting Fed. R. Civ. P. 56). The moving party can meet this burden by offering
evidence showing no dispute of material fact or by showing that the non-moving
party’s evidence fails to prove an essential element of its case on which it bears the
ultimate burden of proof. Id. at 322-23.
Once the moving party meets its burden of showing the district court that no
genuine issues of material fact exist, the burden then shifts to the non-moving party
“to demonstrate that there is indeed a material issue of fact that precludes summary
judgment.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). In
reviewing the evidence submitted, the court must “view the evidence presented
through the prism of the substantive evidentiary burden,” to determine whether the
nonmoving party presented sufficient evidence on which a jury could reasonably
find for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254
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(1986); Cottle v. Storer Commc’n, Inc., 849 F.2d 570, 575 (11th Cir. 1988).
Furthermore, all evidence and inferences drawn from the underlying facts must be
viewed in the light most favorable to the non-moving party. Graham v. State Farm
Mut. Ins. Co., 193 F.3d 1274, 1282 (11th Cir. 1999).
FACTS
Cherise and Brian Morris are entrepreneurs. Brian Morris is the sole
proprietor of a business that he calls “B&C Industries.” 1 Cherise Morris filed
articles of organization for a limited liability corporation in Alabama called “BC
Industries LLC” in October 2013. According to the Morrises, their businesses are
separate and conduct different operations. BC Industries LLC employed both
Morrises.
In 2013, Brian Morris obtained insurance for his business, B&C Industries,
through an agent, third-party defendant Parnell Insurance. Although he ran B&C
Industries as a sole proprietor, the Morrises do not dispute that Brian Morris
represented to Parnell Insurance that B&C Industries was a partnership. In
response to Parnell Insurance’s subsequent inquiry, Auto-Owners provided two
“New Business Proposals,” dated May 23 and 24, 2013, to provide automobile
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For the purposes of this Opinion, the court assumes, arguendo, that B&C Industries was
a sole proprietorship. Auto-Owners and the Morrises dispute whether B&C Industries in fact
was run as a partnership or sole proprietorship, and a genuine dispute of fact exists about
whether Brian Morris had a partner in B&C Industries. But that dispute is not material because,
as the court explains below, the issue in this case revolves around the intent of the parties in
forming the Policy, which is undisputed.
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insurance coverage to B&C Industries. Auto-Owners noted in both proposals that
it understood B&C Industries to be a partnership.
B&C Industries accepted Auto-Owners’s proposal for auto insurance. The
named insured on the Policy was B&C Industries. The Policy itself does not
indicate whether B&C Industries was a partnership or sole proprietorship.
In March 2014, Parnell Insurance sent an e-mail to Auto-Owners requesting
an update for the Policy’s mailing address. The parties dispute whether the
Morrises requested any updates to the Policy. Auto-Owners changed the Policy’s
mailing address to the address of BC Industries LLC, the limited liability company
incorporated by Cherise Morris.
A few days later, Parnell Insurance sent another e-mail to Auto-Owners
requesting that the insurer change the named insured on the Policy to “BC
Industries LLC.” Parnell Insurance claimed that “[t]here has been no ownership
change just the name.” (Doc. 44-6 at 144). Auto-Owners confirmed the name
change to Parnell Insurance, but the parties dispute whether Parnell Insurance or
Auto-Owners successfully or sufficiently notified the Morrises about the change in
the named insured on the Policy.
On May 6, 2014, Brian and Cherise Morris were injured in an accident when
the motorcycle they were driving collided with another vehicle. At the time of the
accident, the motorcycle was owned by Cherise Morris and being used in the
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business of BC Industries LLC. The Morrises accrued damages exceeding the atfault driver’s own insurance coverage, and the Morrises did not have uninsured
motorist coverage for Ms. Morris’s motorcycle under any policy of their own. The
Morrises thus claimed uninsured motorist benefits under the Policy with AutoOwners. Auto-Owners denies that it owes the Morrises such coverage.
Relevant to the issues in this case, the Policy contains two provisions each of
which the Morrises say independently covers the May 6, 2014, accident: the
Policy’s standard uninsured motorist coverage and the “Comprehensive
Automobile Liability” endorsement coverage.
As a general rule, the Morrises may be entitled to uninsured motorist
coverage under two scenarios. First, if the Policy provides liability coverage for
the motorcycle, then Alabama law requires that the Policy provide uninsured
motorist coverage in an equal amount unless the insured rejects uninsured motorist
coverage. See Ala. Code § 32-7-23. Second, if the motorcycle was not covered by
the Policy, then the uninsured motorist coverage section extends coverage to
persons insured under the Policy; but the Auto-Owners policy only provides
uninsured motorist coverage for an automobile not covered by the Policy if the first
named insured is an individual. The precise language of the Policy governs
coverage.

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First, the Policy’s standard uninsured motorist coverage provision states:
[Auto-Owners] will pay compensatory damages, including but not
limited to loss of consortium, [for] any person [who] is legally entitled
to recover from the owner or operator of an uninsured automobile
because of bodily injury sustained by an injured person while
occupying an automobile that is covered by SECTION II –
LIABILITY COVERAGE
But, the Policy continues, “[i]f the first named insured in the
Declarations is an individual,” the Policy’s uninsured motorist coverage
extends to injuries the insured sustained when occupying an automobile not
covered by “SECTION II – LIABILITY COVERAGE.”
The Policy does not define the term “individual.” The first named insured at
the time of the accident was “BC Industries LLC”; prior to March 2014, the first
named insured was “B&C Industries.” Neither of these first named insureds was
an individual.
The section of the Policy titled “SECTION II – LIABILITY COVERAGE”
states:
[Auto-Owners] will pay damages for bodily injury and property
damage for which you [meaning the first named insured] become
legally responsible because of or arising out of the ownership,
maintenance or use of your automobile [meaning the automobile
listed in the Declarations] as an automobile.
The motorcycle involved in the May 6, 2014, accident is not listed in the
Declarations.

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Second and alternatively, the Morrises claim coverage under the Policy’s
“Comprehensive Automobile Liability” endorsement, which says that “SECTION
II – LIABILITY COVERAGE is extended to any automobile.” The endorsement
adds several exclusions narrowing the scope of that extension of coverage. Most
relevant to this case, the “comprehensive” endorsement excludes the insured’s
employees, “if the automobile is owned by such employee or any member of the
employee’s household.” Here, the motorcycle was owned by Cherise Morris, a
member of Brian Morris’s household.
DISCUSSION
This case comes down to two issues: first, whether the Morrises can reform
the Policy such that the first named insured refers to an individual, thus covering
them under the Policy’s standard uninsured motorist coverage; and, second,
whether the Morrises have coverage under the Policy’s Comprehensive
Automobile Liability endorsement regardless of the named insured.
Auto-Owners argues that the Morrises cannot obtain coverage under either
theory; the Morrises say the opposite. Auto-Owners is correct. The Morrises’
motorcycle is not covered under the uninsured motorist provision under either of
the Morrises’ theories. Auto-Owners is entitled to summary judgment in its favor
on every claim asserted by or against it. And, because the court’s findings as to
Auto-Owners’s motion for summary judgment preclude the Morrises’ third-party
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claim against Parnell Insurance, Parnell Insurance is also entitled to summary
judgment in its favor on the Morrises’ claim against it.
This case is about contract interpretation. The court enforces unambiguous
insurance contracts as they are written. Progressive Specialty Ins. Co. v. Green,
934 So. 2d 364, 367 (Ala. 2006). Whether a contract is ambiguous is a question of
law for the court. Universal Underwriters Ins. Co. v. Thompson, 776 So. 2d 81, 84
(Ala. 2000) (citing General Aviation, Inc. v. Aerial Services, Inc., 700 So. 2d 1385
(Ala. Civ. App. 1997)). The court may find that ambiguity exists if a contract
provision is “capable of more than one meaning.” Voyager Life Ins. Co. v.
Whitson, 703 So. 2d 944, 948 (Ala. 1997). But courts do not have the power to
rewrite contract language to provide coverage when not intended by the parties.
Am. Nat’l Prop. & Cas. Ins. Co. v. Blocker, 165 F. Supp. 2d 1288, 1295 (S.D. Ala.
2001).
A. Reformation of the Policy & Standard Uninsured Motorist Coverage
In response to Auto-Owners’s motion for summary judgment (and as part of
their counterclaim), the Morrises argue that they are entitled to coverage under the
Policy through the standard uninsured motorist provision if the court reforms the
Policy to reflect an “individual” as the named insured. The court, however, cannot
reform the Policy to favor the Morrises’ position.

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Under Alabama law, a business run as a sole proprietorship is legally no
different than the individual to whom the business belongs. Carolina Cas. Ins. Co.
v. Williams, 945 So. 2d 1030, 1035 (Ala. 2006) (“Alabama law makes no
distinction between an individual and a sole proprietorship operated by the
individual. They are considered the same for legal purposes.”). A partnership,
however, is a legally distinct entity from its individual owners. See Ala. Code
§ 10A-8-2.01 (“A partnership is an entity distinct from its partners.”). Likewise,
an Alabama limited liability company is a separate legal entity from its owners. Id.
§ 10A-5A-1.04.
In this case, the parties appear to agree that if the Policy named a sole
proprietor as the first named insured, it named an “individual,” but if the Policy
named a partnership or limited liability corporation, it did not name an
“individual.” And the parties do not dispute that, at the time of the accident, the
Policy, in fact, named a limited liability corporation, BC Industries LLC, which is
not an individual.
So the only way the Morrises can recover through the Policy’s standard
uninsured motorist coverage provision is through reformation. Reformation is
available to reflect the real intent of the parties and establish the “true agreement”
between parties. Highlands Underwriters Ins. Co. v. Elegante Inns, Inc., 361 So.

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2d 1060, 1064 (Ala. 1978). At the same time, reformation is not available to make
a new agreement. Id.
The Morrises ask for reformation of the contract based on what they call a
“mutual mistake.” They claim that both B&C Industries (i.e., Brian Morris) and
Auto-Owners understood the Policy at the time they formed it to cover B&C
Industries, a sole proprietorship and thus Brian Morris individually. The Morrises
thus assert that the court can and should reform the Policy to reflect that mutual
understanding.
The undisputed facts betray that position. The Morrises show no evidence
that Auto-Owners understood or intended the Policy, when formed, to cover B&C
Industries, a sole proprietorship. And, on the other hand, Auto-Owners shows that
Brian Morris told Parnell Insurance that B&C Industries was a partnership, a fact
that the Morrises do not dispute. Parnell Insurance originally asked Auto-Owners
to provide an insurance policy for B&C Industries, a partnership.
Consequently, Auto-Owners’s actions showed it intended to insure a
partnership. The “New Business Proposals” Auto-Owners generated in issuing the
Policy referred to B&C Industries as a partnership. The record contains no
evidence that Auto-Owners at any point knew or thought that B&C Industries was
a sole proprietorship; rather, Auto-Owners intended to insure and understood that it
was insuring a partnership.
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Presented these facts, a reasonable jury would be unable to conclude that
Auto-Owners intended to enter into an insurance contract with a sole proprietor or
individual. Both parties acted as if they were entering into a contract for a
partnership, a non-individual.
Stated another way, a reasonable jury would be unable to conclude that B&C
Industries and Auto-Owners had a meeting of the minds to enter into a contract to
insure a sole proprietorship or an “individual.” And a claim for reformation fails
where the claimant “fail[s] to prove that the parties had a meeting of the minds at
the time of the contract on the version of the contract” urged by that claimant.
Nationwide Mut. Fire Ins. Co. v. Guster Law Firm, LLC, 568 F. App’x 884, 885
(11th Cir. 2014) (applying Alabama law) (unpublished decision).
If the court were to reform the Policy, it would have to reform it to the
version on which the parties had a meeting of the minds, that is, with B&C
Industries, a partnership, as the named insured. But such a reformation provides
no help to the Morrises because neither limited liability corporations nor
partnerships are “individuals.”
That B&C Industries was really a sole proprietorship or that Mr. Morris may
have intended to obtain a policy to insure a sole proprietorship does not matter.
The only intent that Mr. Morris actually manifested was to insure B&C Industries
as a partnership. The court cannot reform the Policy to mean anything other than
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the expressed intent of the parties, and the undisputed facts show only that the
parties intended and understood to insure B&C Industries, a partnership, a nonindividual.
Because the court cannot reform the Policy to both reflect the expressed
intent of the parties and refer to the first named insured as an “individual,” the
Policy does not provide uninsured motorist coverage to the Morrises unless the
motorcycle was covered under the Policy.
B. Coverage Under the “Comprehensive Automobile Liability” Endorsement
The Morrises’ second point in response to Auto-Owners’s motion for
summary judgment—that the “Comprehensive Automobile Liability” endorsement
extends the Policy’s uninsured motorist coverage to them—also fails.
The Morrises argue that, because the endorsement extends the scope of
Section II, which defines the Policy’s liability coverage, to “any automobile,” the
uninsured motorist provision’s scope, which references “an automobile that is
covered by” Section II, must likewise extend to “any automobile where there is
liability coverage” as defined in “SECTION II – LIABILITY COVERAGE.”
(Doc. 51 at 13).
But even if the Morrises correctly interpret the effect of the “Comprehensive
Automobile Liability” endorsement to provide liability coverage for the
motorcycle to BC Industries LLC, the endorsement excludes the Morrises for
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uninsured motorist coverage because they were BC Industries LLC’s employees
and Cherise Morris, a member of Brian Morris’s household, owned the
motorcycle. So even assuming that the endorsement’s extension of liability
coverage also extends the Policy’s uninsured motorist coverage (which normally
covers only the automobiles listed in the declarations) to the motorcycle, the
exclusions eliminate the Morrises from the category of people who can recover
uninsured motorist benefits.
In other words, assuming the endorsement provides BC Industries LLC with
coverage for any liability it may face because of an accident caused by an
employee operating the employee’s automobile while on business for BC
Industries LLC, the protection does not extend to the employee for liability or
uninsured motorist coverage. The owner of the automobile is expected to carry
insurance on that automobile that would protect the owner and occupants of the
vehicle.
The Morrises’ last resort is their argument that the endorsement’s exclusions
merely leave out people, not automobiles. The Morrises seem to say that if the
endorsement covers the automobile they were driving, the endorsement covers its
occupants even if those occupants fall into one of the excluded categories.
However, the Morrises do not appreciate the unambiguous text of the endorsement,
which states that “this coverage extension” does not apply to people covered by an
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exclusion. While the coverage endorsement provides liability coverage to BC
Industries LLC, because the Morrises fall into at least one of the excluded
categories they are not covered for liability or uninsured motorist coverage because
of the employee exclusion in the endorsement, and the named insured is not an
individual. The exclusions are pointless interpreted any other way. See Ex Parte
Homes of Legend, Inc., 831 So. 2d 13, 16 (Ala. 2002) (holding that courts should
give effect to all provisions to best uphold the contract’s terms). Because the
Policy does not provide uninsured motorist coverage to the Morrises, the court will
GRANT Auto-Owners’s motion for summary judgment.
C. Third-Party Negligence Claim Against Parnell Insurance
The court briefly concludes with the Morrises’ third-party negligence claim
against Parnell Insurance and Parnell Insurance’s motion for summary judgment
on that claim. The Morrises allege that Parnell Insurance negligently changed the
named insured on the Policy from B&C Industries to BC Industries LLC. They
say that “[a]s a proximate and direct result” of Parnell’s negligence, “Brian and
Cherise Morris were allegedly without the uninsured/underinsured motorist
coverage bargained for under the policy and instead were immediately harmed and
left exposed to tremendous medical expenses and damages.” (Doc. 25 ¶ 61). That
claim must fail given the above findings.

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Even if the court were to reform the Policy and undo Parnell Insurance’s
actions, it would have to find, as discussed above, that the parties mutually agreed
to insure B&C Industries as a partnership. And so even if Parnell Insurance had
not changed the Policy, the Morrises would still lack uninsured motorist coverage
under the Policy for the May 6, 2014, motorcycle accident. Because Parnell
Insurance’s actions, negligent or not, make no difference as to whether the
Morrises can recover uninsured motorist benefits under the Policy, Parnell
Insurance did not proximately cause any injury claimed by the Morrises. See
Lemley v. Wilson, 178 So. 3d 834, 842 (quoting Martin v. Arnold, 643 So. 2d 564,
567 (Ala. 1994), and stating that “[p]roximate cause is an act or omission that in a
natural and continuous sequence, unbroken by any new independent causes,
produces the injury and without which the injury would not have occurred.”).
The court will therefore GRANT Parnell Insurance’s motion for summary
judgment and ENTER SUMMARY JUDGMENT in Parnell Insurance’s favor on
the Morrises’s third-party claim against it.
CONCLUSION
No matter how the Morrises slice it, the Policy does not provide them
coverage for the May 6, 2014, accident. For the reasons stated, the court will
GRANT Auto-Owners’s motion for summary judgment. The court will also
GRANT third-party defendant Parnell Insurance’s motion for summary judgment.
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The court will ENTER SUMMARY JUDGMENT in Auto-Owners’s favor
on the Morrises’ counterclaims against it and ENTER SUMMARY JUDGMENT
in Parnell Insurance’s favor on the Morrises’ third-party claims against it. The
court will DECLARE that Auto-Owners does not owe Brian or Cherise Morris
uninsured motorist coverage under the Policy for the May 6, 2014, motorcycle
accident.
Because this Opinion resolves all claims involved in this case, the court will
issue a Final Order and enter Judgment in Auto-Owners’s favor.
DONE and ORDERED this 29th day of March, 2018.

____________________________________
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT
JUDGE

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