Owners Insurance Company v. Alabama Powersport Auction, LLC et al

Filing 32

MEMORANDUM OPINION and ORDER DISMISSING CASE that plaintiff's motion for summary judgment is DENIED; defendant's Wiese's motion for summary judgment is GRANTED IN PART AND DENIED IN PART; it is ORDERED that Owners Insurance Company owe s a duty under the terms of the commercial general liability insurance policy bearing Policy Number 054617-38227830-07, and issued to defendant Alabama Powersport Auction, LLC, to provide a defense for that defendant in connection with the claims ass erted against it in the state court action pending in the Circuit Court of Limestone County, Alabama, as Civil Action No. 10-CV-900146; costs are taxed to plaintiff as more fully set out in order. Signed by Judge C Lynwood Smith, Jr on 5/28/2015. (AHI )

FILED
2015 May-28 AM 10:38
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
OWNERS INSURANCE
COMPANY,
Plaintiff,
vs.
ALABAMA POWERSPORT
AUCTION, LLC, and JAMES
WIESE, as natural father of
Matthew Hunter Wiese,
deceased,
Defendants.

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Civil Action No. 5:14-cv-00147-CLS

MEMORANDUM OPINION AND ORDERS
Plaintiff, Owners Insurance Company, seeks a judgment declaring that it has
no duty to either defend or indemnify defendant Alabama Powersport Auction, LLC,
for claims asserted against that entity by defendant James Wiese in the lawsuit
pending in the Circuit Court of Limestone County, Alabama, as Civil Action No. 10CV-900146, and styled “James Wiese, as natural Father of Matthew Hunter Wiese,
a Minor, Deceased v. Alabama Powersport Auction, LLC.”1 The action presently is
before the court on cross-motions for summary judgment filed by Owners Insurance
Company and James Wiese.2 Following consideration of the pleadings, briefs,
1

See doc. no. 1 (Federal Complaint); doc. no. 20-7 (State Court Complaint and Amended
Complaint).
2

See doc nos. 17, 18.

evidentiary submissions, and oral arguments of counsel, this court concludes that
Owners’s motion should be denied, and Weise’s motion should be granted in part and
denied in part.
I. FACTUAL BACKGROUND
The following facts are not disputed.3 The Alabama Supreme Court found in
an opinion entered on an interlocutory appeal from the underlying state-court action
that defendant Alabama Powersport Auction, LLC (“APA”), was an entity engaged
in the business of selling at auction
various consumer goods including, but not limited to, go-carts [.] APA
regularly auctioned motorcycles and golf carts, among other recreational
vehicles. In fact, the word “Powersport” in APA’s name was because
“the main things that [APA] sold were four-wheelers, boats,
motorcycles, that type of thing.” Generally, all the goods APA sold
were on consignment to APA from the owners of the goods; the owners
of the goods agreed to pay APA a commission of 10% to 15% of the
price APA was able to acquire at auction from a purchaser of the goods.
Alabama Powersport Auction, LLC v. Wiese, 143 So. 3d 713, 714 (Ala. 2013)
(plurality opinion) (first alteration supplied, second alteration in original).
Defendant James Wiese attended an auction conducted by APA on August 27,
2005, and purchased a Model 3206 “Yerf Dog Go-Cart” that had been consigned to
APA by non-party “FF Acquisition Corp., doing business as Flexible Flyer.”
However, “Wiese was not aware that FF Acquisition had manufactured the go cart.”
3

Compare doc. no. 17-1 (Owners’s Summary Judgment Brief), at 2–7, with doc. no. 23
(Wiese’s Response to Owners’s Summary Judgment Motion), at 3.
2

Id. at 714-15.4
Soon after purchasing the go-cart, Wiese discovered that the
engine would not operate for more than a few minutes at a time. After
several failed attempts to repair the go-cart, Wiese stored the go-cart in
his garage for almost two years. In September 2007, Wiese repaired the
go-cart. On September 17, 2007, [James Wiese’s minor son, Matthew
Hunter Wiese,] was riding the go-cart and had an accident in which
Matthew hit his head on the ground causing a brain injury that resulted
in his death on March 6, 2010[, some two years and five months later].
Id. at 715 (alterations supplied).
James Wiese commenced a wrongful death action in the Circuit Court for
Limestone County, Alabama, on August 19, 2010.5 By that date, however, FF
Acquisition Corp., doing business as Flexible Flyer, had sought bankruptcy

4

On June 21, 2005, prior to the date of the auction at which James Wiese purchased the gocart leading to the underlying state-court action and the present controversy, the United States
Consumer Products Safety Commission announced a recall of Model 3206 “Yerf Dog Go-Carts”
(among other models listed). According to the announcement (“Release # 05-205”), the
manufacturer had “received five reports of the suspension assembly cracking and causing the rider
to lose control, including reports of bruises and head and back injuries.” Consumers were directed
to cease using the recalled products immediately, and the announcement stated: “It is illegal to resell
or attempt to resell a recalled consumer product.” The announcement concluded with this statement:
“The company is out of business and contact information is no longer available.” See
www.cpsc.gov/en/Recalls/2005 (emphasis supplied) (last visited May 19, 2015).
5

See doc. no. 20-7 (State Court Complaint and Amended Complaint), at ECF 2-3. “ECF”
is the acronym for “Electronic Case Filing,” a system that allows parties to file and serve documents
electronically. See Atterbury v. Foulk, No. C-07-6256 MHP, 2009 WL 4723547, at *6 n.6 (N.D. Cal.
Dec. 8, 2009). Bluebook Rule 7.1.4 permits citations to the “page numbers generated by the ECF
header.” Wilson v. Fullwood, 772 F. Supp. 2d 246, 257 n.5 (D. D.C. 2011) (citing The Bluebook:
A Uniform System of Citation R. B. 7.1.4, at 21 (Columbia Law Review Ass’n et al., 19th ed. 2010)).
Even so, The Bluebook recommends “against citation to ECF pagination in lieu of original
pagination.” Wilson, 772 F. Supp. 2d at 257 n.5. Thus, unless stated otherwise, this court will cite
the original pagination in the parties’ pleadings. When the court cites to pagination generated by the
ECF header, however, it will, as here, precede the page number with the acronym “ECF.”
3

protection.6 Consequently, Wiese’s claims were asserted against only APA.
Wiese’s amended state-court complaint contained two counts. Count One was
based on Alabama’s Wrongful Death statutes, Ala. Code §§ 6-5-391 and 6-5-410
(1975),7 and alleged that the wrongful act giving rise to the cause of action8 was
APA’s breach of an implied warranty of merchantability that arose from the sale of
6

FF Acquisition Corp., doing business as Flexible Flyer, experienced significant financial
problems in 2005. Not only were its go-carts subjected to a substantial recall due to defective ball
joints, see supra note 4, but three of its major customers deferred purchasing $5,000,000 in swing
sets. Another important customer withheld payments for merchandise that had already shipped. As
a result, the company was compelled to file for bankruptcy protection on September 9, 2005, in the
United States Bankruptcy Court for the Northern District of Mississippi. See In re Flexible-Flyer
Liquidating Trust f/k/a FF Acquisition Corp. d/b/a Flexible-Flyer, No. 05-16187-JDW (Bankr. N.D.
Miss. Aug. 7, 2013) (slip op. doc. no. 1672 closing Chapter 11 case); see also In re FF Acquisition
Corp. d/b/a Flexible-Flyer, 423 B.R. 502, 503-504 (Bankr. N.D. Miss. 2010).
7

See doc. no. 20-7 (State Court Complaint and Amended Complaint), at ECF 7-8; Alabama
Powersport Auction, LLC v. Wiese, 143 So. 3d 713, 714 (Ala. 2013) (Parker, J., plurality opinion).
8

Section 6-5-410 defines Alabama’s general cause of action for the wrongful killing of an
individual, and provides, in pertinent part, that:
(a)
A personal representative may commence an action and recover such
damages as the jury may assess in a court of competent jurisdiction within the State
of Alabama . . . for the wrongful act, omission, or negligence of any . . . corporation
. . . whereby the death of the testator or intestate was caused, provided the testator
or intestate could have commenced an action for the wrongful act, omission, or
negligence if it had not caused death.
Ala. Code § 6-5-410(a) (emphasis supplied). Section 6-5-391 specifically defines a cause of action
that accrues upon the wrongful killing of a minor, and its pertinent provisions read as follows:
(a)
When the death of a minor child is caused by the wrongful act,
omission, or negligence of any person, persons, or corporation . . . the father . . . may
commence an action.
(b)
An action under subsection (a) for the wrongful death of the minor
shall be a bar to another action either under this section or under Section 6-5-410.
Ala. Code § 6-5-391 (emphasis supplied).
4

the go-cart.9 See, e.g., Ala. Code § 7-2-314 (1975).10
Count Two of the amended complaint also asserted a claim for breach of an
implied warranty of merchantability independent of Weise’s wrongful-death claim,
and sought compensatory damages. Specifically, Weise alleged that APA
is liable for the injuries and damages sustained by Plaintiff’s decedent
based on a breach of the implied warranty of merchantability.
18. The Plaintiff claims compensatory damages for the injuries
suffered by the Plaintiff’s decedent, Matthew Hunter Wiese, between the
time of his injury and his death pursuant to Benefield v. Aquaslide ‘N’
Drive Corp., 406 So. 2d 873 (Ala. 1981).[11]
9

See doc. no. 20-7 (State Court Complaint and Amended Complaint), at ECF 7-8; see also
Alabama Powersport, 143 So. 3d at 716.
10

Alabama Code § 7-2-314 is part of Alabama’s version of the Uniform Commercial Code,
and provides, in pertinent part, that:
(1)
Unless excluded or modified (Section 7-2-316), a warranty that the
goods shall be merchantable is implied in a contract for their sale if the seller is a
merchant with respect to goods of that kind. Under this section the serving for value
of food or drink to be consumed either on the premises or elsewhere is a sale.
(2)
Goods to be merchantable must be at least such as: . . . (c) Are fit for
the ordinary purposes for which such goods are used; . . . .
Ala. Code § 7-2-314 (1975).
11

At common law, both a cause of action (the right of a person to commence a suit against
another party) and an action then pending in a court of law ended upon the death of the plaintiff.
Alabama Code § 6-5-42 allows for revival of an action commenced prior to the plaintiff’s death,
and, survival of certain causes of action in favor of and against personal representatives of a
deceased person: i.e.,
In all proceedings not of an equitable nature, all claims upon which an action
has been filed and all claims upon which no action has been filed on a contract,
express or implied, and all personal claims upon which an action has been filed,
except for injuries to the reputation, survive in favor of and against personal
representatives; and all personal claims upon which no action has been filed survive
against the personal representative of a deceased tort-feasor.
5

19. Defendant’s breach proximately caused the Plaintiff’s
decedent, Matthew Hunter Wiese, a Minor, to suffer the following
injuries and damages, to-wit:
(a)

Plaintiff’s decedent suffered permanent physical injuries;

(b)

Plaintiff’s decedent suffered physical pain and mental
anguish; and

(c)

Plaintiff’s decedent has been caused to incur medical,
doctor and drug expenses in the treatment of his injuries[.]

Doc. no. 20-7 (State Court Complaint and Amended Complaint), at ECF 8 (footnote
and alteration supplied).
APA’s motion for summary judgment on both counts of Weise’s amended
complaint was denied by the state trial court. APA’s petition for interlocutory appeal
from the trial court’s adverse ruling was granted by the Alabama Supreme Court,
which unanimously concluded that “a breach of warranty claim cannot be maintained
under Alabama’s wrongful-death statute.” Alabama Powersport, 143 So. 3d at 716.12
Ala. Code § 6-5-462 (1975) (emphasis supplied). The case cited in paragraph 18 of James Wiese’s
amended state-court complaint, Benefield v. Aquaslide ‘N’ Drive Corp., 406 So. 2d 873 (Ala. 1981),
turned upon the foregoing statute, and held that the personal representative of a deceased person’s
estate could recover compensatory damages for the injuries suffered by the decedent prior to death
under a breach of warranty (contract) claim. See, e.g., id. at 876; Alabama Powersport, 143 So. 3d
at 720 n.3. Specifically, the Court held that “[t]he breach of warranty (contract) claim is a separate
and distinct claim from the wrongful death (tort) claim and seeks compensatory damages only, not
for the wrongful death of the decedent but for the injuries suffered before his death.” Benefield, 406
So. 2d at 876. See generally Note, Recovery for Personal Injuries Causing Death After Benefield
v. Aquaslide ‘N’ Drive Corp., 34 Ala. L. Rev. 339 (1983).
12

That conclusion was dictated by the Court’s opinion in Geohagan v. General Motors
Corp., 291 Ala. 167, 279 So. 2d 436 (Ala.1973), which held that
“no contractual cause of action for wrongful death is created by our Uniform
6

Consequently, the Court reversed the trial court’s denial of summary judgment on the
claim alleged in Count One of Wiese’s amended complaint, and remanded the case
with directions to dismiss the wrongful-death claim. Id. at 720.
On the other hand, a majority of the members of the State’s highest court
affirmed the trial judge’s denial of summary judgment on the claim alleged in Count
Two, but could not agree upon the rationale for doing so.13 The plurality opinion held
that an auctioneer (such as APA) selling consigned goods on behalf of another (here,
FF Acquisition Corp. d/b/a Flexible Flyer) may be held liable as “a merchant-seller”
under Alabama Code § 7–2–314 for breach of an implied warranty of
merchantability,14 if the auctioneer failed to disclose the principal for whom it sold
Commercial Code arising from a breach of warranty, and that actions for wrongful
death can arise in this state and be processed only under our wrongful death acts.”
291 Ala. at 172, 279 So. 2d at 440. In so reaching this conclusion, this Court
explained:
“So far as can be determined from a reading of our Uniform
Commercial Code, there is not one word, sentence, paragraph, clause,
or section which in anywise even suggests that for the breach of an
express or implied warranty in a contract any person is given a right
to maintain an action for a wrongful death. On the other hand, the
precision with which the legislature has defined the purpose and
policy of the act, limiting the same to commercial transactions,
clearly demonstrates that it was not the intent of the legislature in
enacting the Uniform Commercial Code to create a wrongful death
action in case of a breach of warranty of the contract involved.”
Alabama Powersport, 143 So. 3d at 716-17 (quoting Geohagan, 291 Ala. at 171, 279 So. 2d at 439).
13

Justice Shaw concurred in the result, but did not join the rationale of the plurality opinion
authored by Justice Parker for himself and Justices Murdock, Main, and Wise that is discussed in
the remainder of this textual paragraph. See Alabama Powersport, 143 So. 3d at 725.
14

See supra note 10 for the pertinent provisions of Ala. Code § 7-2-314.
7

the goods. See id. at 720, 723-24 (plurality opinion). The considerations that framed
the plurality’s analysis were stated as follows:
An implied warranty of merchantability exists only if there is a
“seller,” as that term is defined in § 7–2–103, Ala. Code 1975, who is a
“merchant with respect to goods of that kind.” § 7–2–314(1), Ala. Code
1975. Section 7–2–103(1)(d) defines a “seller” as “a person who sells
or contracts to sell goods”; [and] § 7–2–104(1), Ala.Code 1975, defines
“merchant” as follows:
“‘Merchant’ means a person who deals in goods of
the kind or otherwise by his occupation holds himself out
as having knowledge or skill peculiar to the practices or
goods involved in the transaction or to whom such
knowledge or skill may be attributed by his employment of
an agent or broker or other intermediary who by his
occupation holds himself out as having such knowledge or
skill.”
It is well settled that under Alabama law an auctioneer may be
considered a merchant under Alabama’s version of the UCC. See
Bradford v. Northwest Alabama Livestock Ass’n, 379 So. 2d 609, 611
(Ala. Civ. App. 1980) (holding that a livestock auctioneer was a
merchant because it “was in the business of selling cattle to prospective
buyers and had been so engaged for a number of years and held itself out
as having the knowledge and skill to conduct such sales”). However, the
parties have not directed this Court’s attention to any Alabama
precedent concerning whether an auctioneer selling goods on behalf of
a consignor — and, thus, not holding title to the goods being sold, see
Bischoff v. Thomasson, 400 So. 2d 359 (Ala. 1981) (noting that a
consignee does not hold title to the goods consigned to it by a
consignor; title passes from the consignor to the buyer) — may be
considered a seller under Alabama’s version of the UCC and held liable
as a merchant-seller for a breach of an implied warranty of
merchantability.
Alabama Powersport, 143 So. 3d at 721 (alteration and emphasis supplied).
8

Addressing that question of first impression under Alabama law, the plurality found
the rationale for the decision of the Tenth Circuit Court of Appeals in Powers v.
Coffeyville Livestock Sales Co., 665 F.2d 311 (10th Cir. 1981), to be persuasive. The
opinion in that case turned upon Kansas’s version of the Uniform Commercial Code,
which is identical to Alabama’s enactment, and held that:
“Under traditional agency law, an agent [such as an auctioneer
selling goods on consignment for another] is liable as if it were the
principal when the agent acts for an undisclosed principal. This rule
applies whether the agent holds itself out as principal or only as agent
but does not disclose the identity of its principal. Bruce v. Smith, 204
Kan. 473, 464 P.2d 224 (1970); Restatement (Second) of Agency §§
321–22 (1958). Applying this common law rule to auctioneers, courts
in other jurisdictions have held that an auctioneer is liable as a seller if
the auctioneer fails to disclose to the buyer the identity of the principal.
E.g., Universal C.I.T. Credit Corp. v. State Farm Mutual Automobile
Insurance Co., 493 S.W.2d 385, 390 (Mo. Ct. App. 1973); Itoh v. Kimi
Sales, Ltd., 74 Misc. 2d 402, 345 N.Y.S. 2d 416, 420 (Civ. Ct. N.Y.
1973); Hagen v. Brzozowski, 336 S.W.2d 213, 215–16 (Tex. Civ. App.
1960). The UCC did not alter the common law application of agency
principles to sales made by an auctioneer. See Kan. Stat. Ann. §
84–1–103. We believe the Kansas courts would hold that an auctioneer
who fails to disclose the identity of its principal and who regularly
auctions merchandise of a particular kind is, with regard to those goods,
a merchant seller within the coverage of section 84–2–314.”
Alabama Powersport, 143 So. 3d at 722-23 (quoting Powers, 665 F.2d at 312-13)
(alteration supplied, footnote omitted).15
15

The omitted footnote reads as follows:

Accord Lary Lawrence, Lawrence’s Anderson on the Uniform Commercial
Code § 2–103:37 (3d ed. 2012) (citing Powers, supra) (“If the auctioneer does not
disclose the identity of the principal, the auctioneer is the seller. Although the
9

Based upon the common-law agency principles recited in the foregoing
opinion, as well as those set forth by the Alabama Supreme Court in Abercrombie v.
Nashville Auto Auction, Inc., 541 So. 2d 516, 518 (Ala. 1989) (observing that an
auctioneer may be liable as a seller under Ala. Code § 7–2–312 for a breach of the
warranty of title if the auctioneer fails to disclose to the buyer the identity of the
principal), the plurality opinion on interlocutory appeal from the underlying state
court action held that “an auctioneer may be held liable as a merchant-seller for the
implied warranty of merchantability under § 7–2–314 if the auctioneer fails to
disclose the principal for whom the auctioneer is selling the goods.” Alabama
Powersport, 143 So. 3d at 723-24.16 Cf., e.g., Welch v. Mitchell, 351 So. 2d 911, 915
(Ala. Civ. App. 1977) (holding that “an auctioneer who acts for a disclosed principal
will not be deemed liable for a defect in the title of the property sold”) (emphasis
supplied). The present action followed.
auctioneer does not transfer title, he or she makes a contract of sale and, thus, comes
within the definition of ‘seller.’ ”); §§ 2–314:580 and 2–314:581 (“A sale by auction
is a sale and consequently the same warranties arise when the sale is made through
an auctioneer as when a sale is made directly by the principal. . . . When the
auctioneer sells without identifying the principal on whose behalf it is selling, the
auctioneer has the status of a partially-disclosed agent, and is deemed the seller and
is liable for any warranty, express or implied, that is involved in the sale.”); and 12
Richard A. Lord, Williston on Contracts § 35:43, at 555 (4th ed. 2007) (“The rule of
liability which ensues from a nondisclosure of the principal has been applied to hold
a selling agent who does not disclose the principal to all the general liabilities of any
other seller.”).
Alabama Powersport, 143 So. 3d at 723 n.6.
16

See supra note 10 for the pertinent language of Ala. Code § 7-2-314.
10

II. DISCUSSION
Owners founded the jurisdiction of this court upon the parties’ complete
diversity of citizenship and the requisite amount in controversy. See doc. no. 1
(Federal Complaint) ¶¶ 1-5; 28 U.S.C. § 1332.17 Consequently, considerations of
comity and the Erie doctrine compel this court to apply state substantive law, and
federal procedural and evidentiary rules. Erie Railroad Co. v. Tompkins, 304 U.S. 64
(1938); see also, e.g., Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S.
487, 496-97 (1941); National Distillers and Chemical Corp. v. Brad’s Machine
Products, Inc., 666 F.2d 492, 494-95 (11th Cir. 1982).
A.

The Insured’s and Insurer’s Respective Burdens of Persuasion
Under Alabama law, the insured (here, APA) normally bears the burden of

establishing that a claim falls within the coverage of the policy. See, e.g., Chandler
v. Alabama Mutual Insurance Co., 585 So. 2d 1365, 1367 (Ala.1991); Employers
Mutual Casualty Co. v. Mallard, 309 F.3d 1305, 1307 (11th Cir. 2002) (citing Life
& Casualty Insurance Company of Tennessee v. Garrett, 35 So. 2d 109, 111 (Ala.
1948)). During oral argument, however, counsel represented that APA is no longer
a viable entity. Even though this court’s internet research casts some doubt upon that

17

Even though it is nowhere mentioned in the complaint, this court presumes that Owners
seeks relief pursuant to the federal Declaratory Judgment Act, 28 U.S.C. § 2201.
11

assertion,18 the Clerk’s docket entries establish that APA was not served; and, but for
the fact that Owners is providing a defense under reservation of rights, APA has not
otherwise appeared by way of counsel or pleadings in this action. Hence, the burden
of proving that coverage existed under the terms of Owners’s policy shifts to James
Wiese, the party seeking to establish coverage.

See, e.g., Alabama Hospital

Association Trust v. MASA, 538 So. 2d 1209, 1216 (Ala. 1989).
On the other hand, the insurer (Owners) “bears the burden of proving the
applicability of any policy exclusion.” Acceptance Insurance Company v. Brown,
832 So. 2d 1, 12 (Ala. 2001).
B.

The Duties Arising Under a Policy of Liability Insurance

18

A Google® search disclosed several listings for an entity named “Alabama Powersport
Auction, LLC” in Athens, Alabama. One website contained the following information:
Alabama Powersport Auction, LLC
Alabama Powersport Auction is one of the fastest growing auction Houses in the
Southeast, and we invite you to join us for our next exciting event! Convenient to
all areas in North & Central Alabama, South & Central Tennessee, as well as
Northeastern Mississippi, Alabama Powersport Auction is located only minutes west
of Interstate 65 off Hwy. 72 in Athens. Offering a HUGE selection of boats, ATV’s,
tools, cars, trucks, recreational vehicles, motorcycles, utility vehicles, jewelry,
antiques and other furniture, Alabama Powersport Auction is your connection for a
wide array of items to fill personal, business, and recreational needs. During your
visit to Alabama Powersport Auction, you will find plenty of restaurants, fueling
stations, and hotel rooms in Athens and the immediate area. Our facility features
public restrooms, concessions, free parking, and 7:00 am early viewing on the day
of sale. Our auctions are held monthly, and we always have something NEW! Don’t
miss a single event!
http://www.liveauctioneers.com/alabama-powersport-auction-llc (last visited May 19, 2015). See
also http://www.auctionzip.com/AL-Auctioneers/10724.html.
12

Liability insurance coverage includes separate duties: the duty to defend; and,
the duty to indemnify. See, e.g., Porterfield v. Audubon Indemnity Co., 856 So. 2d
789, 791 (Ala. 2002). An insurance company’s duty to defend is more extensive than
its duty to indemnify. See, e.g., United States Fidelity & Guaranty Co. v. Armstrong,
479 So. 2d 1164, 1168 (Ala. 1985).
1.

The duty to defend

The question of whether an insurance company owes a duty to defend its
insured from suit is determined by the language of the company’s policy, and by the
allegations in the complaint filed against the insured. See, e.g., Alfa Mutual
Insurance Co. v. Morrison, 613 So. 2d 381, 382 (Ala. 1993). Moreover, it is the
factual allegations of the complaint, and not the “legal phraseology” or remedial
theories undergirding those allegations, that is controlling. Hartford Casualty
Insurance Co. v. Merchants & Farmers Bank, 928 So. 2d 1006, 1012 (Ala. 2005)
(“Where facts are alleged in the complaint to support a cause of action, it is the facts,
not the legal phraseology, that determine whether an insurer has a duty to defend its
insured in the action.”). See also, e.g., Cotton States Mutual Insurance Co. v. Daniel,
No. 3:07–CV–843–WKW, 2008 WL 4999097, at *18 (M.D. Ala. Nov. 20, 2008)
(Watkins, J.) (“To ascertain whether [an insurer] owes [its insured] a duty to defend,
the court focuses on the factual allegations in the complaint, not on the legal theories

13

asserted.”) (alterations supplied).
a.

Was the underlying event an insurable “occurrence”?

The following provisions from the commercial general liability insurance
policy issued by Owners to APA provide that coverage will be provided for “bodily
injury” or “property damage” that is caused by an “occurrence”: a term defined as
“an accident, including continuous or repeated exposure to substantially the same
general harmful conditions.”
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. . . . .
....
b.
This insurance applies to “bodily injury” and
“property damages” only if:
(1) The “bodily injury” or “property damage” is
caused by an “occurrence” that takes place in the “coverage
territory”;
....

SECTION V – DEFINITIONS
....
14

14. “Occurrence” means an accident, including continuous or
repeated exposure to substantially the same general harmful conditions.
Doc. no. 20-5 (Policy No. 054617-38227830-07), at 1, 19 (emphasis supplied).
(i)

Owners’s primary argument

Owners argues that the remedial theory supporting James Wiese’s remaining
claim in the underlying state-court action — breach of an implied warranty of
merchantability — is a “contract claim”; and, therefore, that it is not covered by the
terms of APA’s policy which provides insurance only for an “occurrence,” meaning
“an accident”: i.e.,
Wiese’s sole claim against Powersport Auction is that it breached
the implied warranty of merchantability with regards to a go-cart he
purchased at an auction held by Powersport Auction. A claim of breach
of warranty is a contract claim. Geohagen v. General Motors Corp., 279
So.2d 436 (Ala. 1973).
Matthew Wiese passed away prior to the filing of the underlying
suit. Therefore, the breach of warranty claim being made by Wiese must
be purely contractual because an unfiled tort claim does not survive the
death of the injured party. Benefield v. Aquaslide ‘N’ Dive Corp., 406
So.2d 873 (Ala. 1981). In fact, Wiese acknowledged this is in a brief he
submitted to the Alabama Supreme Court in the underlying suit, stating:
A breach of implied warranty is a contract claim. While
an unfiled claim sounding in tort will not survive the death
of the person with the claim, a claim on a contract does
survive the death of the injured party. (Wiese’s Brief at
page 14).
The insurance policy issued to Powersport Auction contains the
following language:
15

I.

Insuring Agreement
b. This insurance applies to “bodily injury” and “property
damage” only if:
(1) The “bodily injury” or “property damage” is caused by an
“occurrence” that takes place in the “coverage territory”.

The policy defines the term, “occurrence”, as meaning, “an accident,
including continuous or repeated exposure to substantially the same
general harmful conditions”. Breach of warranty / contract is not an
“occurrence” because it is not an accident. Prudential Property and
Cas. Ins. Co. v. Boyle, 305 Fed. Appx. 35 (3rd Cir. 2008) (Breach of an
implied warranty is not an accident); Nationwide Mut. Ins. Co. v. CPB
International, Inc., 2007 WL 4198173 (M.D. Penn. 2007) (Breach of
contract is not an occurrence). There is no coverage for Wiese’s claim
because breach of warranty is not an accident, and therefore, not an
occurrence.
Doc. no. 17-1 (Owners’s Summary Judgment Brief), at 8-10 (emphasis in original).
(ii)

The Alabama Supreme Court’s opinion in Reliance
Insurance Co. v. Gary C. Wyatt, Inc.

The Alabama Supreme Court’s opinion in Reliance Insurance Co. v. Gary C.
Wyatt, Inc., 540 So. 2d 688 (Ala. 1988), appears to be the only binding precedent that
addresses the question of whether a “contract claim” can be included within the
standard definition of an “occurrence” in a commercial general liability insurance
policy.19 In that case, a construction company, Gary C. Wyatt, Inc. (“Wyatt”),

19

Accord Auto-Owners Insurance Co. v. Toole, 947 F. Supp. 1557, 1563 (M.D. Ala. 1996)
(Thompson, J.) (observing that “[t]here is almost no Alabama law addressing if and when events
giving rise to a contract dispute fall within the standard definition of [an] occurrence,” and then
proceeding to discuss the holding in Reliance) (alterations supplied).
16

engaged in a project that necessitated the rental of a crane from the Essex Crane
Rental Corporation (“Essex”). One clause of the lease agreement required Wyatt to
include Essex as an additional insured under Wyatt’s general liability insurance
policies. Two days after Wyatt and Essex executed the lease agreement, Reliance
Insurance Company (“Reliance”) issued a general liability insurance policy to Wyatt,
but “Essex was not included as an additional insured under [that] policy, nor did
Wyatt request that Essex be listed as an additional insured. . . .” Id. at 689 (alteration
supplied). Five months after leasing the crane and procuring insurance from
Reliance, one of Wyatt’s employees, Robert Batson, was injured when the crane’s
boom fell and struck him. Batson sued both Essex and Wyatt. Essex then filed
a third-party complaint, asserting a claim for breach of contract for
Wyatt’s failure to include Essex as an additional insured under its
liability insurance policy as required by the lease. Essex claimed
Wyatt’s failure to procure such insurance caused Essex to suffer
damages as a “direct, foreseeable and proximate result of the breach of
contract.”
Id.20 When Wyatt subsequently made a demand for Reliance to provide a defense to
(and indemnity for) Essex’s third-party complaint, Reliance instituted a declaratory
judgment proceeding in the Circuit Court for Jefferson County, Alabama.21 Reliance
20

There is no explanation in the Alabama Supreme Court’s opinion for Essex’s decision to
file a “third-party complaint” — as opposed to a cross-claim — against Wyatt for breach of the lease
agreement.
21

Interestingly, the suit filed by Robert Batson against Essex and Wyatt, and Essex’s thirdparty complaint asserting a claim for breach of the lease agreement against Wyatt, were commenced
in the United States District Court for the Northern District of Florida, and that court ultimately
17

argued that there was no coverage under its policy because “the claim against Wyatt
is based on breach of contract, not an ‘occurrence’ resulting in bodily injury or
property damage, and . . . Reliance did not undertake to insure Wyatt against breach
of contract.” Id. The state trial court entered judgment in favor of Wyatt, and
Reliance appealed. The Alabama Supreme Court reversed, saying that:
The portion of Essex’s complaint with which we are concerned in
this appeal is predicated upon the following alleged breach of contract:
“Wyatt failed to procure liability insurance as required . . . [and this]
failure constitutes a breach of the lease agreement, and Essex has, and
will, suffer damages as a direct, foreseeable, and proximate result of said
breach.” The breach of contract was the failure to procure liability
insurance. This is not an “occurrence” that results in bodily injury or
property damage. Batson’s injury may go to the issue of damages
sustained by this breach of contract, but it is not the “occurrence” that
causes the breach of contract. The contract had been breached, with or
without Batson’s injury. The “occurrence” in this case is the breach of
contract rather than the bodily injury to Batson. We conclude that no
coverage exists for the breach of contract, because the breach did not
constitute an “occurrence” that resulted in bodily injury or property
damage under the definitions within the policy, which was necessary to
bring such claim within the policy coverage. . . .
Reliance Ins. Co., 540 So. 2d at 690-91 (citations omitted, alteration in original,
emphasis supplied). As another judge in the Eleventh Circuit observed in a case that
also required construction of the Reliance holding, it is difficult to lift from the
foregoing statements “any overall principle or principles that might guide the court
in resolving the issue presented in the instant case.” Auto-Owners Insurance Co. v.
“granted summary judgment in favor of Essex against Wyatt on the breach of contract claim.”
Reliance Insurance Co. v. Gary C. Wyatt, Inc., 540 So. 2d 688, 689 (Ala. 1988).
18

Toole, 947 F. Supp. 1557, 1564 (M.D. Ala. 1996) (Thompson, J.).
In addition, this court finds that Reliance is distinguishable. That case turned
upon the fact that the insured, Wyatt, had breached an express contractual promise,
whereas the claim in the present action is predicated upon an obligation imposed by
the law in the absence of an express representation or promise that the thing sold to
James Wiese was fit for the ordinary purposes for which such goods are used.22
(iii)

The Alabama Supreme Court’s plurality opinion in
Benefield v. Aquaslide ‘N’ Dive Corp.

The binding authority that ultimately provides the most guidance for a decision
in the present action is the one upon which James Wiese’s remaining claim was
founded: Benefield v. Aquaslide ‘N’ Dive Corp., 406 So. 2d 873 (Ala. 1981). The
plaintiff’s decedent in that case died nine days after suffering a spinal cord injury on
a swimming pool sliding board manufactured by the defendant, Aquaslide. Neither
the deceased, nor anyone acting on his behalf, filed an action prior to his death. The
suit subsequently filed against Aquaslide by the personal representative of the
decedent’s estate contained a claim for wrongful death under the Alabama Extended
Manufacturer’s Doctrine and the wrongful death statute, as well as a separate count
setting forth “a claim for breach of warranties, seeking recovery not for the death of
22

See, e.g., Black’s Law Dictionary 1725 (9th ed. 2009) (defining implied warranty as: “An
obligation imposed by the law when there has been no representation or promise; esp., a warranty
arising by operation of la because of the circumstances of a sale, rather than by the seller’s express
promise.”).
19

the decedent, but for the pain and medical expenses suffered by him between the date
of his injury and the date of his death.” Id. at 874. The trial court dismissed the claim
for “breach of warranties” (presumably, the implied warranties of merchantability and
fitness for a particular purpose). See id.; Ala. R. Civ. P. 12(b)(6). The Alabama
Supreme Court accepted an interlocutory appeal from that ruling, and a majority of
the Court reversed — even though, as in the opinion entered following interlocutory
appeal from the underlying state-court action, the Justices could not agree on the
rationale for doing so.23
The plurality opinion turned upon Alabama Code § 6-5-462, providing that “all
claims upon which no action has been filed on a contract, express or implied, . . .
survive in favor of . . . personal representatives,”24 and held that:
A contract action pursuant to § 6-5-462 survives in favor of the
personal representative regardless of whether the decedent filed the
action before his death. The fact that the decedent dies as a result of the
23

Justice Beatty authored the plurality’s opinion for himself and Justices Faulkner, Embry,
and Adams. Justice Jones concurred specially, and filed a separate opinion. Justice Shores dissented
in an opinion joined by Chief Justice Torbert and Justice Maddox. Justice Almon dissented without
opinion. See Benefield v. Aquaslide ‘N' Dive Corp., 406 So. 2d 873, 876 (Ala. 1981).
24

The full text of the quoted statute reads as follows:

In all proceedings not of an equitable nature, all claims upon which an action
has been filed and all claims upon which no action has been filed on a contract,
express or implied, and all personal claims upon which an action has been filed,
except for injuries to the reputation, survive in favor of and against personal
representatives; and all personal claims upon which no action has been filed survive
against the personal representative of a deceased tort-feasor.
Ala. Code § 6-5-462 (1975) (emphasis supplied).
20

injuries sued upon does not change this general rule. Simmons [v.
Clemco Industries, 368 So.2d 509, 516 (1979) (holding, among other
things, that “[o]rdinarily, contract actions do survive in favor of the
personal representative, and the fact that plaintiff died as a result of the
injuries sued upon does not change the general rule”) (citation omitted)].
Aquaslide argues further that, even if the breach of warranty claim
survives, plaintiff’s exclusive remedy is under the wrongful death
statute, § 6-5-410, Code of 1975. That is, Aquaslide appears to argue
that the breach of warranty claim merges into the extended
manufacturer’s liability claim for wrongful death. The fallacy of that
argument is that this plaintiff as well as future plaintiffs would then be
barred from seeking any damages other than punitive damages for the
death of the decedent. Should breaching manufacturers be allowed to
escape liability for compensatory contract damages sustained by the
decedent before his death merely because he dies as a result of the
breach? We think not. The breach of warranty (contract) claim is a
separate and distinct claim from the wrongful death (tort) claim and
seeks compensatory damages only, not for the wrongful death of the
decedent but for the injuries suffered before his death. It would be
illogical to merge the two claims. We hold that it was error for the trial
court to dismiss count three. That count does state a claim for which
relief can be granted. The judgment therefore, must be, and is, reversed
and this cause is remanded for further proceedings not inconsistent with
this opinion.
Benefield, 406 So. 2d at 875-76 (alteration supplied).
There are obvious distinctions between the facts of Benefield and those of the
present controversy. The defendant in Benefield was the manufacturer of the
allegedly defective product that injured and ultimately caused the death of the
plaintiff’s decedent, while the defendant in the underlying state-court action (APA)
was the intermediate seller between the manufacturer (FF Acquisition Corp. d/b/a

21

Flexible Flyer) and purchaser (James Wiese). Even so, that difference is of no
moment, because APA failed to disclose that it was acting as a consignment agent for
its undisclosed principal; and, as a matter of well-settled principles of agency law, it
thereby stepped into the liability shoes of the manufacturer of the allegedly nonmerchantable go-cart.
Indeed, it is the similarities between the Benefield case and this one that are
dispositive. The breach of implied warranty (“contract”) claims asserted in both cases
arose from events that were classic “accidents” involving “bodily injury” to each
state-court plaintiff’s decedent. In both cases, “breach of implied warranty” was
merely “the legal phraseology,” or remedial theory, under which each state-court
plaintiff alleged that the insured party should be held liable for compensatory
damages for the “bodily injuries” inflicted upon the personal representative’s
decedent. See, e.g., Hartford Casualty Insurance Co. v. Merchants & Farmers Bank,
928 So. 2d 1006, 1012 (Ala. 2005) (“Where facts are alleged in the complaint to
support a cause of action, it is the facts, not the legal phraseology, that determine
whether an insurer has a duty to defend its insured in the action.”). See also, e.g.,
Cotton States Mutual Insurance Co. v. Daniel, No. 3:07–CV–843–WKW, 2008 WL
4999097, at *18 (M.D. Ala. Nov. 20, 2008) (Watkins, J.) (“To ascertain whether [an
insurer] owes [its insured] a duty to defend, the court focuses on the factual

22

allegations in the complaint, not on the legal theories asserted.”) (alterations
supplied).
Consequently, this court looks through “the legal phraseology” to the events
forming the basis of the underlying state-court action, and concludes that the claim
is based upon an insured “occurrence.” See, e.g., Auto-Owners Insurance Co. v.
Toole, 947 F. Supp. at 1564 (holding that, when “determining whether there is
coverage, the court should look to the specific kind of . . . claim being asserted,
regardless [of] whether it is labeled a contract claim, a tort claim, or whatever, and
the purpose of the general liability policy from which coverage is sought”) (alteration
and emphasis supplied). Cf. Employers Mutual Casualty Co. v. Smith Construction
& Development, LLC, 949 F. Supp. 2d 1159, 1173-74 (N.D. Ala. 2013).
Further, James Wiese’s claim in the state-court action — that APA is liable for
the bodily injuries suffered by his son as a result of the accidental wreck of the nonmerchantable go-cart sold by APA to Wiese — falls within the purpose of general
commercial liability insurance policies in Alabama: that is, protecting “an insured
from bearing financial responsibility for unexpected and accidental damage to people
or property.” Town & Country Property, L.L.C. v. Amerisure Insurance Co., 111 So.
3d 699, 707 (Ala. 2011).
Accordingly, this court finds that the complaint in the underlying, state-court

23

action alleges an “occurrence” that was the result of an “accident” that caused “bodily
injury” and, therefore, the claim is covered by the terms of Owners’s policy.
b.

Does the contractual liability exclusion apply?

In addition to arguing that James Wiese’s breach of implied warranty claim is
not a covered “occurrence,” Owners contends that the claim is excluded by the
policy’s “Contractual Liability” provision,25 which states that the policy does not
cover: “‘Bodily injury’ or ‘property damage’ for which the insured is obligated to pay
damages by reason of the assumption of liability in a contract or agreement.” Doc.
no. 20-5 (Policy No. 054617-38227830-07), at 2 (emphasis supplied).
Owners argues that claims for breach of an implied warranty of
merchantability, which sound in contract rather than tort, fall within the contractual
exclusions typical of commercial general liability insurance policies.26 Once again,
Owners confuses the issue.
Under Alabama law, the purpose of contractual exclusions such as the present
one is not to exclude liability for claims sounding in contract but, instead, to exclude
an insured’s liability to a third party that the insured expressly assumed in an
indemnity, or hold-harmless agreement. As the Fifth Circuit stated in a persuasive
opinion, Ingalls Shipbuilding v. Federal Insurance Co., 410 F.3d 214 (5th Cir. 2005),
25

Doc. no. 17-1 (Owners’s Summary Judgment Brief), at 13.

26

Id. at 13–14.
24

courts “have consistently interpreted the phrase ‘liability assumed by the insured
under any contract’ to apply only to indemnification and hold-harmless agreements,
whereby the insured agrees to ‘assume’ the tort liability of another. This phrase does
not refer to the insured’s breaches of its own contracts.” Id. at 222 (quoting 1 Barry
R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes §
7.05, at 460 (12th ed. 2004)).
The Alabama Supreme Court reached the same conclusion in Townsend Ford,
Inc. v. Auto-Owners Insurance, Co., 656 So. 2d 360 (Ala. 1995), holding that a
contractual exclusion clause identical to the one at issue here
“traditionally serve[s] to exclude ‘indemnity’ types of liability, whereby
the liability itself was assumed, rather than warranty situations.” The
specific express warranty alleged to have been breached is that
“[Townsend Ford] warrant[ed] that said automobile had in fact only
been driven by a Ford manager” and the plaintiff alleged that
“[Townsend Ford] breached said warranty by failing to deliver a
conforming automobile.” This warranty does not involve “the
assumption of liability,” but rather merely a representation. Insurers can
plainly provide in their policies that coverage for breach of warranty
claims is excluded if they so choose.
Id. at 364–65 (alterations in original) (quoting trial court opinion).
In like manner, the claim for breach of an implied warranty of merchantability
asserted in the underlying state-court action “does not involve the ‘assumption of
liability’” under an express agreement. Id. at 365. Accordingly, the policy’s
“Contractual Liability” exclusion does not apply.
25

Cf., e.g., Dreis & Krump

Manufacturing Co. v. Phoenix Insurance Co., 548 F.2d 681, 684 (7th Cir. 1977)
(“[T]his circuit has construed the coverage language in the endorsement ‘liability
assumed by him under any written contract’ to mean a specific written agreement
between the insured and some third party whereby the insured agrees to ‘indemnify’
the third party.”) (alteration and emphasis supplied); Smithway Motor Xpress, Inc. v.
Liberty Mutual Insurance Co., 484 N.W. 2d 192, 196 (Iowa 1992) (“Liability
assumed by an insured under [a contract] refers to the assumption of another’s
liability, such as an agreement to indemnify or hold another harmless.”) (alteration
supplied).
Owners cites several district court opinions interpreting Alabama law that reach
a different conclusion. For example, the Southern District of Alabama found in
Assurance Company of America v. Admiral Insurance Co., No. 10-0117-CG-C, 2011
WL 1897589 (S.D. Ala. May 18, 2011) (Granade, J.), that a breach of implied
warranty claim fell within a policy’s contractual exclusion because such actions
“sound in contract as opposed to tort,” and because the warranty at issue “would not
exist were it not for” a construction contract. Id. at *8. That holding is not
persuasive, however, because the district court did not address either the holding in
Townsend Ford, or the assumption of liability language found in the contractual
exclusion at issue here.

26

Another judge on this same court held, in Owners Insurance Co. v. Shep Jones
Construction, Inc., No. 08-AR-514-S, 2012 WL 1642169 (N.D. Ala. May 3, 2012)
(Acker, J.), that
Alabama courts have recognized that contractual liability exclusions
identical to the one here operate to deny liability for “property damage”
and “bodily injury” resulting from breach of contract. See Carter v.
Cincinnati Ins. Co., 435 So. 2d 42, 45 (Ala. 1983) (holding that there is
no insurance coverage pursuant to a commercial general liability policy
with a contractual liability exclusion, when the plaintiff only sought to
recover for breach of an implied contract, because the claim “falls
squarely within the clear and unambiguous terms of the exclusionary
provision [ ]”); Am. Nat. Prop. & Cas. Co. v. Blocker, 165 F. Supp. 2d
1288, 1296–97 (S.D. Ala. 2001) (discussing Carter and holding same);
Ajdarondinni v. State Auto Mut. Ins. Co., 628 So. 2d 312, 313 (Ala.
1993) (equivalent contractual liability exclusion in commercial general
liability policy; jury in underlying suit returned verdict solely on the
claims for breach of contract; court held that because the policy “clearly
excludes breach of contract claims from its coverage, insurer has no duty
to pay the judgment”).
Shep Jones, 2012 WL 1642169, at *6 (alteration in original). Judge Acker’s opinion
in Shep Jones accurately describes the holdings in Carter and Ajdarondinni: two
cases in which the Alabama Supreme Court held that contractual exclusions in
commercial general liability insurance policies exclude liability for breach of contract
claims. Even so, the Townsend Ford decision was handed down after both Carter
and Ajdarondinni, and represents the State Supreme Court’s most recent statement
of Alabama law governing the interpretation of such contractual exclusions.27
27

In the same opinion, Judge Acker called into question the validity of the Alabama Supreme
Court’s holding in Townsend Ford, when observing that
27

The Southern District of Alabama’s opinion in Pennsylvania National Mutual
Casualty Insurance Co. v. Saint Catherine of Siena Parish, 16 F. Supp. 3d 1370 (S.D.
Ala. 2014) (DuBose, J.), also sought to limit the holding in Townsend Ford. In Saint
Catherine, Judge DuBose essentially dismissed the “indemnity” language in the
Townsend Ford holding as dicta, stating that the “ultimate conclusion” in Townsend
was merely that the claim for breach of an express warranty at issue in that case did
not fall within the insurance policy’s contractual exclusion. See id. at 1381.
Accordingly, Judge DuBose held that, because the plaintiff in Saint Catherine did not
rely on an express warranty claim as the basis for her claimed coverage, but instead
upon an implied warranty claim, “the holding in Townsend [was] inapplicable.” Id.
at 1381–82 (alteration supplied). This court does not agree. The indemnity language
in Townsend Ford is not dicta, because it was “essential to the judgment” of the
Court. See Ex parte Williams, 838 So. 2d 1028, 1031 (Ala. 2002) (defining “dicta”
under Alabama law). More importantly, it is readily apparent that the holding in

ALLEN’S ALABAMA LIABILITY INSURANCE HANDBOOK notes that the court
in Townsend Ford did not cite any authority for its refusal to extend the contractual
liability exclusion to claims for breach of express warranty. § 10.02 at 215. No other
Alabama case has cited Townsend Ford for its interpretation of the contractual
liability exclusion.
Shep Jones, 2012 WL 1642169 at *6. Neither of those considerations is relevant, however, because
“the Alabama Supreme Court is the final arbiter of Alabama law.” Ex parte James, 836 So. 2d 813,
834 (Ala. 2002) (emphasis in original). Until that Court revisits the issue, its holding in Townsend
Ford remains the final statement of Alabama law governing the interpretation of contractual
exclusions found in commercial general liability insurance policies.
28

Townsend Ford is not so limited as to apply only to claims for breach of an express
warranty, and not implied warranties. In Townsend Ford, the Alabama Supreme
Court avoided the express/implied distinction when it held that contractual exclusions
in commercial general liability insurance policies traditionally do not apply to
“warranty situations.” Townsend Ford, 656 So. 2d at 364. The Court further held
that insurers “can plainly provide in their policies that coverage for breach of
warranty claims is excluded if they so choose.” Id. at 364–65 (emphasis supplied).
The fact that the Court’s judgment in Townsend Ford was limited to the express
warranty before it does not undermine the Court’s holding in support of that
judgment. To read Townsend Ford as applying only to express warranties is to ignore
the crux of the Court’s holding: that is, that contractual exclusions traditionally apply
to express indemnity and hold-harmless agreements, “whereby the liability itself was
assumed.” Id. at 364. As in the case of express warranties, implied warranties do not
involve the assumption of liability. Accordingly, this court declines to follow Judge
DuBose’s limitation of the holding of Townsend Ford.
At oral argument, the parties discussed the Alabama Supreme Court’s
characterization of the express warranty in Townsend Ford as “merely a
representation.” See id. It was argued that such a characterization indicates that the
Court viewed the breach of express warranty claim in Townsend Ford as an action ex

29

delicto, closely resembling the tort of fraud, rather than an action ex contractu. That
argument is unavailing. Justice Maddox, who authored the Townsend Ford opinion,
stated in a prior opinion that breach of warranty claims, regardless of whether they
be based upon express or implied warranties, are actions ex contractu. For example,
in his concurring opinion in Geohagen v. General Motors Corp., 279 So. 2d 436, 440
(1973) (Maddox, J., concurring), Justice Maddox wrote:
Unquestionably, by adoption of the Uniform Commercial Code,
the Legislature intended to provide, and did provide, consumer
protection which was unavailable before in instances where products
were not reasonably safe. However, in granting this consumer
protection the Legislature used the word ‘warranty,’ which had acquired
a special meaning in the field of products liability. While the
Legislature knocked out the requirement of privity in product liability
cases, horizontally and vertically, in my opinion, I do not think it
changed the nature of the action for breach of warranty from ex
contractu to ex delicto. In arriving at this belief, I recognize that there
are decisions which hold that in products liability cases, regardless of
the Form of the action, that the tort aspects of warranty call for the
application of a tort rather than a contract rule in allowing recovery for
wrongful death. But many cases have held to the contrary, on the
ground that the gist of warranty has become contract, and it is not
included within the wrongful death statutes. W. Prosser, Law of Torts
635, s 95 (4th ed. 1971). See also, Annotation: Action ex contractu for
damages caused by death, 86 A.L.R.2d 316, 317 (1962), where it is
stated:
‘While there is some authority to the contrary, it
appears to be generally recognized that in absence of
statute an action ex contractu is not the appropriate remedy
to recover damages resulting from the death of another.’
I believe Alabama has consistently recognized an action for
30

breach of warranty to be contractual in nature. Consequently, I cannot
interpret Section 2-318 of the Commercial Code to state that the breach
of an express or implied warranty is an action ex delicto and therefore
a ‘wrongful act’ under Alabama’s Wrongful Death Statute.
Geohagen, 279 So. 2d at 441 (Maddox, J., concurring).
Owners also cites to Gilbert Texas Construction v. Underwriters at Lloyd’s
London, 327 S.W. 3d 118 (Tex. 2010), a case in which the Texas Supreme Court held
that contractual exclusions in commercial general liability insurance policies are not
limited to cases in which the insured expressly assumed the liability of a third party.
Id. at 127–28 (abrogating Lamar Homes, Inc. v. Mid-Continent Casualty Co., 242
S.W. 3d 1 (Tex. 2007)). This court acknowledges that there is a complicated split of
authority among various state and federal courts on the interpretation of the
“assumption of liability” language in contractual exclusions. See North Star Mutual
Insurance Co. v. Rose, 27 F. Supp. 3d 1250, 1253 (E.D. Okl. 2014) (“There appears
to be a split of authority on this issue, and Oklahoma law is not certain”). Even so,
this court must apply Alabama law, as interpreted by the Alabama Supreme Court.
Accordingly, this court declines to follow the Texas Supreme Court’s holding in
Gilbert.
Even so, Owners contends that APA did assume the liability of another entity
in a contract, and that APA’s liability to Wiese is predicated upon that contractual
assumption of liability. Specifically, Owners contends that APA “entered into [a
31

consignment] agreement to serve as auctioneer for [FF Acquisition Corp. doing
business as] Flexible Flyer, the seller [sic] [i.e., manufacturer] of the go-cart at issue.
Any liability that [APA] may have arises solely out of [that agreement].”28 In other
words, Owners contends that Wiese’s claim falls within the policy’s contractual
liability exclusion because APA may be held liable in the underlying action only
because it entered into a consignment agreement with FF Acquisition Corp. doing
business as Flexible Flyer. Owners further contends that the Alabama Supreme
Court’s plurality opinion in Alabama Powersport Auction, LLC v. Wiese, 143 So. 3d
713 (Ala. 2013) (Parker, J., plurality opinion), necessitates a finding that APA
assumed the liability of Flexible Flyer in the consignment agreement.29 That
argument is not correct.
APA’s assumption of the alleged liability of FF Acquisition Corp. doing
business as Flexible Flyer arises as a matter of law, and not as the result of express
language in the consignment agreement. The contractual liability exclusion contained
in Owners’s policy states that Owners will not cover damages that the insured is
obligated to pay “by reason of the assumption of liability in a contract or agreement.”
Doc. no. 20-5 (Policy No. 054617-38227830-07), at 2 (emphasis supplied). To fall

28

Doc. no. 17-1 (Owners’s Reply Brief), at 5 (alterations supplied).

29

Id. at 5–6. At oral argument in the present action, counsel for Owners stated that the
consignment agreement itself had not been discovered, because Alabama Powersport and Flexible
Flyer were both in bankruptcy during discovery in the underlying action.
32

within that exclusion, APA’s liability would have to be predicated upon the language
of a contract or agreement expressly stating that APA assumed the liability of FF
Acquisition Corp., or agreed to indemnify and hold that entity harmless. There is no
evidence that the consignment agreement between APA and FF Acquisition Corp.
contained such language.
In Alabama Powersport, the plurality opinion applied common law principles
of agency in reaching the conclusion that, “in the eyes of the law,” an auctioneer who
fails to disclose its principal is liable under the UCC as a merchant-seller. 143 So.
3d at 723 (quoting Abercrombie, 541 So. 2d at 518). Significantly, the Court did not
hold that an auctioneer, by entering into a consignment agreement with a seller,
assumes the liability of that seller, as Owners contends. Instead, the Court held that
an auctioneer’s liability on a contract for the sale of goods at auction is predicated
upon the auctioneer’s behavior towards the buyer — i.e., the auctioneer’s failure to
disclose its principal. The consignment agreement between APA and Flexible Flyer,
therefore, is not the type of indemnity or hold-harmless agreement that traditionally
falls within contractual exclusions found in commercial general liability insurance
policies like the one at issue here. Accordingly, and absent any evidence to the
contrary, this court concludes that APA’s potential liability to James Wiese for breach
of an implied warranty of merchantability is not predicated upon the company’s

33

contractual assumption of Flexible Flyer’s liability. Stated differently, Owners has
not met its burden of showing that the breach of implied warranty claim asserted in
the underlying, state-court action falls within the Policy’s “Contractual Liability”
exclusion. Accordingly, this court finds that Owners owes a duty to provide a
defense for its insured, APA, in the underlying action.
2.

The duty to indemnify

The duty to defend is broader than the duty to indemnify, and the question of
“[w]hether there is a duty to indemnify under the policy will depend on the facts
adduced at the trial” in the underlying state-court action. Hartford Casualty
Insurance Co. v. Merchants & Farmers Bank, 928 So. 2d 1006, 1013 (Ala. 2005)
(alteration supplied). That case has not yet been tried. Accordingly, this court cannot
determine whether Owners owes a duty to indemnify APA. For that reason, this court
abstains from reaching the issue of Owners’s duty to indemnify. Cf. Employers
Mutual Casualty Co. v. Smith Construction & Development, LLC, 949 F. Supp. 2d
1159, 1176 (N.D. Ala. 2013) (Hopkins, J.) (“abstain[ing] from reaching the duty to
indemnify question, as the underlying action is still pending in state court”)
(alteration supplied).
III. CONCLUSION AND ORDERS
For all of the foregoing reasons, the motion for summary judgment filed by

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plaintiff is DENIED, but the motion for summary judgment filed by defendant James
Wiese is GRANTED in part and DENIED in part. It is ORDERED, ADJUDGED,
and DECREED pursuant to 28 U.S.C. § 2201 that Owners Insurance Company owes
a duty under the terms of the commercial general liability insurance policy bearing
Policy Number 054617-38227830-07, and issued to defendant Alabama Powersport
Auction, LLC, to provide a defense for that defendant in connection with the claims
asserted against it in the state court action pending in the Circuit Court of Limestone
County, Alabama, as Civil Action No. 10-CV-900146 and styled “James Wiese, as
natural Father of Matthew Hunter Wiese, a Minor, Deceased v. Alabama Powersport
Auction, LLC.” The claim of defendant James Wiese seeking a declaration that
plaintiff also owes a duty to indemnify Alabama Powersport Auction, LLC, in that
state-court action is DISMISSED, but without prejudice to any party’s right to
reassert a similar claim in another action filed in a court of appropriate jurisdiction
following the conclusion of trial in the underlying state-court suit and the expiration
of all appeals, if any, from the trial court’s judgment.
The costs of this action are taxed to plaintiff, Owners Insurance Company. The
Clerk is directed to close this file.

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DONE and ORDERED this 28th day of May, 2015.

______________________________
United States District Judge

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