Caitlin Speciality Insurance Co. v. Johnson et al

Filing 27

MEMORANDUM OPINION as more fully set out in order. Signed by Magistrate Judge Herman N Johnson, Jr on 08/03/18. (SPT )

FILED
2018 Aug-03 PM 01:20
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
CATLIN SPECIALTY
INSURANCE CO.,
Plaintiff
vs.
JOSEPH J. JOHNSON, et al.,
Defendants

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Case No. 5:17-cv-01432-HNJ

MEMORANDUM OPINION
This declaratory judgment action proceeds before the court on plaintiff’s Motion
for Summary Judgment and Amended Motion for Summary Judgment. (Docs. 19 &
22). For the reasons set out herein, the court GRANTS the summary judgment
motions.
SUMMARY JUDGMENT STANDARD
Pursuant to the Federal Rules of Civil Procedure, “[t]he court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
Rule 56(a). The party seeking summary judgment 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 demonstrates the absence of a genuine issue

of material fact. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991) (quoting
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)).
If the movant sustains its burden, a non-moving party demonstrates a genuine
issue of material fact by producing evidence by which a reasonable fact-finder could
return a verdict in its favor. Greenberg v. BellSouth Telecomms., Inc., 498 F.3d 1258, 1263
(11th Cir. 2007) (citation omitted).

The non-movant sustains this burden by

demonstrating “that the record in fact contains supporting evidence, sufficient to
withstand a directed verdict motion.” Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1116
(11th Cir. 1993).

In the alternative, the non-movant may “come forward with

additional evidence sufficient to withstand a directed verdict motion at trial based on
the alleged evidentiary deficiency.” Id. at 1116-17; see also Doe v Drummond Co., 782 F.3d
576, 603-04 (11th Cir. 2015), cert. denied, 136 S. Ct. 1168 (2016).
The “court must draw all reasonable inferences in favor of the nonmoving party,
and it may not make credibility determinations or weigh the evidence.” Reeves v.
Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000) (citations omitted).
“‘Credibility determinations, the weighing of the evidence, and the drawing of legitimate
inferences from the facts are jury functions, not those of a judge.’” Id. (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). “Thus, although the court
should review the record as a whole, it must disregard all evidence favorable to the
moving party that the jury is not required to believe.” Reeves, 530 U.S. at 151 (citation
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omitted). “That is, the court should give credence to the evidence favoring the
nonmovant as well as that ‘evidence supporting the moving party that is uncontradicted
and unimpeached, at least to the extent that that evidence comes from disinterested
witnesses.’” Id. (citation omitted).
Rule 56 “mandates the entry of summary judgment, after adequate time for
discovery and upon motion, against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party’s case, and on which that
party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322. “In such a
situation, there can be ‘no genuine issue as to any material fact,’ since a complete failure
of proof concerning an essential element of the nonmoving party’s case necessarily
renders all other facts immaterial.” Id. at 322-23. In addition, a movant may prevail
on summary judgment by submitting evidence “negating [an] opponent’s claim,” that is,
by producing materials disproving an essential element of a non-movant’s claim or
defense. Id. at 323 (emphasis in original).
Because the plaintiff bears the burden of proof on its claims, its status as the
summary-judgment movant requires it to establish there is no genuine dispute of
material fact as to all of the elements of its claim and, concomitantly, that it deserves
judgment as a matter of law on the claims. See Fitzpatrick v. City of Atlanta, 2 F.3d 1112,
1115 (11th Cir. 1993) (“The movant must show . . . on all the essential elements of its

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case on which it bears the burden of proof at trial, no reasonable jury could find for the
non-moving party.”).
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Catlin Specialty Insurance Company (Catlin) issued a commercial
general liability insurance policy to Joseph J. Johnson d/b/a JJ’s Fun & Recreational
Center (Johnson or JJ’s), effective May 25, 2014, through May 25, 2015. The named
insured on the policy is Joseph J. Johnson d/b/a JJ’s Fun & Recreational Center.
Johnson is a defendant in two actions pending in the Madison County Circuit Court:
Khloe Walker, by and through her mother and next friend, Tunishia Monique Armstrong v. Joseph J.
Johnson d/b/a JJ’s Fun & Recreation Center, et al., Civil Action No. CV-2016-902040, and
Larry Malone, as Administrator of the Estate of Larneal Donell McDonald v. Joseph J. Johnson
d/b/a JJ’s Fun & Recreation Center, et al., Civil Action No. 2017-900307.
The Walker action alleges JJ’s served Terrance Walker alcoholic beverages on
March 1, 2015, despite his visible intoxication. After Walker left the establishment, he
was involved in a motor vehicle accident which caused his death. The Walker action
asserts an Alabama Alcoholic Beverages Control Board Rule No. 20-X-6-.021 claim; a

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This rule provides that no ABC Board on-premises licensee, employee, or agent thereof shall serve
any person alcoholic beverages if such person appears, considering the totality of the circumstances, to
be intoxicated.
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Dram Shop Act 2 claim; negligent or wanton hiring, supervision, 3 and/or training;
negligent performance of a voluntary undertaking; and negligent/wanton security.
The McDonald action alleges that McDonald died in the same accident that
resulted in Walker’s death.

The McDonald action asserts claims under Alabama

Alcoholic Beverages Control Board Rule No. 20-X-6-.02 and the Dram Shop Act,
negligence, and wantonness.
Catlin seeks a declaration it owes no duty to defend or indemnify Johnson in the
underlying state court actions based on the Total Liquor Liability exclusion in the
pertinent policy. Catlin indicates that Johnson does not oppose its summary judgment
motion, and only Walker and Armstrong filed an opposition to Catlin’s summary
judgment motion. Further, in answer to the complaint, Johnson admitted Catlin has

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The Dram Shop Act, Ala. Code § 6-5-71, provides:
(a) Every wife, child, parent, or other person who shall be injured in person, property,
or means of support by any intoxicated person or in consequence of the intoxication
of any person shall have a right of action against any person who shall, by selling,
giving, or otherwise disposing of to another, contrary to the provisions of law, any
liquors or beverages, cause the intoxication of such person for all damages actually
sustained, as well as exemplary damages.
(b) Upon the death of any party, the action or right of action will survive to or against
his executor or administrator.
(c) The party injured, or his legal representative, may commence a joint or separate
action against the person intoxicated or the person who furnished the liquor, and all
such claims shall be by civil action in any court having jurisdiction thereof.

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This count alleges JJ’s “knew or should have known that [its] personnel . . . were not adequately
responding to known dangers to an intoxicated patron and/or were otherwise incompetently
performing their duties.” (Doc. 22-1 at ¶ 26).
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no duty to defend or indemnify because of the Total Liquor Liability Exclusion. (Doc.
1 at ¶ 16; Doc. 3 at ¶ 16).
The policy at issue obligates Catlin to pay “those sums that the insured becomes
legally obligated to pay as damages because of ‘bodily injury’…to which this insurance
applies”; Catlin “will have the right and duty to defend the insured against any ‘suit’
seeking those damages”; and Catlin “will have no duty to defend the insured against any
‘suit’ seeking damages for ‘bodily injury’…to which this insurance does not apply.”
(Doc. 19-1 at § I.A.1.a.).
Part “2. Exclusions,” under Coverage A in Section I, states that “[t]his insurance
does not apply to” the types of claims and damages described in the exclusions.” (Id. at
§ I.A.2). An endorsement to the Policy, titled “Total Liquor Liability Exclusion,”
replaces the exclusion in 2.c. with one stating that the insurance does not apply to:
c. Liquor Liability
“Bodily injury” or “property damage” for which any insured may
be held liable by reason of:
(1) Causing or contributing to, or responsibility for, the intoxication
of any person;
(2) The furnishing or sale of alcoholic beverages to a person under
the legal drinking age and/or under the influence of alcohol; or
(3) Any statute, ordinance, regulation or law relating to the sale, gift,
distribution or use of alcoholic beverages.
(Doc. 19-1 at 35).

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ANALYSIS
Liability insurance policies impose two separate duties on the insurer: (1) the duty
to defend and (2) the duty to indemnify. Tanner v. State Farm Fire & Cas. Co., 874 So.2d
1058, 1063 (Ala. 2003) (citing Porterfield v. Audubon Indem. Co., 856 So.2d 789, 791-92
(Ala. 2002)). While ordinarily the two duties “must be analyzed separately,” Tanner,
874 So.2d at 1066 (quoting U.S. Fid. & Guar. Co. v. Armstrong, 479 So.2d 1164, 1167 (Ala.
1985)), the duty to indemnify does not exist in the absence of a duty to defend because
the duty to defend is broader. Tanner, 874 So.2d at 1063.
“Whether an insurance company owes its insured a duty to provide a defense in
proceedings instituted against the insured is determined primarily by the allegations
contained in the complaint.” Hartford Cas. Ins. Co. v. Merchs. & Farmers Bank, 928 So.2d
1006, 1009 (Ala. 2005). “If the allegations of the injured party’s complaint show an
accident or an occurrence within the coverage of the policy, then the insurer is obligated
to defend, regardless of the ultimate liability of the insured.” Id.; see also Tanner, 874
So.2d at 1065. To determine whether a policy covers a claim, a court must initially
engage in a three-step inquiry: (1) the insured must show first that the claim is covered
under the policy’s initial grant of coverage; (2) the insurer may then show that a policy
exclusion bars coverage; and (3) the insured may thereafter establish that the excluded
claim falls under an exception to the exclusion. Ala. Gas Corp. v. Travelers Cas. & Sur.
Co., No. CV–10–J–1840–S, 2013 WL 3766531, at *4 (N.D. Ala. July 16, 2013) (citing
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Ala. Hosp. Ass’n Trust v. Mut. Assur. Soc. of Am., 538 So.2d 1209, 1216 (Ala. 1989), and
Colonial Life & Accident Ins. Co. v. Collins, 194 So.2d 532, 535 (Ala. 1967)); Town & Country
Prop., L.L.C. v. Amerisure Ins. Co., 111 So.3d 699, 703 (Ala. 2011).
If the allegations in the complaint do not constitute a covered accident or
occurrence, the court may look to admissible evidence to establish a duty to defend.
Hartford, 928 So.2d at 1009-10; Tanner, 874 So.2d at 1064. Further, “[i]f there is any
uncertainty as to whether the complaint alleges facts that would invoke the duty to
defend, the insurer must investigate the facts surrounding the incident that gave rise to
the complaint in order to determine whether it has a duty to defend the insured.”
Hartford, 928 So.2d at 1010 (quoting Blackburn v. Fid. & Deposit Co. of Md., 667 So.2d 661,
668 (Ala. 1995)).
The three-step inquiry changes to some extent in this declaratory judgment
action, inasmuch as the insured does not contend the policy provides coverage.
Rather, one of the injured parties, Walker, urges the court to find Catlin’s policy
provides coverage for the underlying state court claims. Therefore, if Catlin establishes
the existence of a policy exclusion, the injured party must establish the excluded claim
falls within an exception.
In this case, Catlin contends the Total Liquor Liability exclusion precludes
coverage. Policy exclusions “must be interpreted as narrowly as possible in order to
provide maximum coverage for the insured, and must be construed most strongly
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against the company that drew the policy and issued it.’” Nationwide Mut. Ins. Co. v.
Thomas, 103 So.3d 795, 805 (Ala. 2012) (quoting Alliance Ins. Co. v. Reynolds, 494 So.2d
609, 612 (Ala. 1986)). However, where there is no ambiguity in the terms of an
insurance policy, the court must enforce the policy language “as written” and “cannot
defeat express provisions in a policy, including exclusions from coverage, by making a
new contract for the parties.” Id.
I.

Catlin Proves the Policy Exclusion Applies
As reviewed previously, Alabama law generally imposes the burden of proof on

policy coverage issues on the insured, while the burden of proving applicability of a
policy exclusion rests with the insurer. Compare Jordan v. National Acc. Ins. Underwriters
Inc., 922 F.2d 732, 735 (11th Cir. 1991) (“Under Alabama law the general rule is that the
insured bears the burden of proving coverage.”) with Acceptance Ins. Co. v. Brown, 832
So.2d 1, 12 (Ala. 2001) (“In general, the insurer bears the burden of proving the
applicability of any policy exclusion.”).
In this case, Catlin referred the court to applicable provisions pertinent to
whether the policy provides coverage for the claims in the underlying actions. Upon
review, the Total Liquor Liability Exclusion bars coverage for all claims against JJ’s in
the Walker and McDonald actions. The exclusion applies not just to Dram Shop claims
but to all claims that “are inextricably intertwined with . . . alcohol claims,” Robinson v.
Hudson Spec. Ins. Co., 984 F. Supp. 2d 1199, 1207 (S.D. Ala. 2013), or that “have a direct
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nexus to the sale or service of alcohol or the causing or contributing to any person’s
intoxication.” Catlin Spec. Ins. Co. v. Philon, No. 12-00296-CB-M, 2013 WL 12123743, *2
(S.D. Ala. Feb. 20, 2013).
Courts analyzing similar or identical liquor liability provisions have barred claims
that “directly involve alcohol.” See VP Props. & Devs., LLLP v. Seneca Specialty Ins. Co.,
645 F. App’x 912, 916-17 (11th Cir. 2016); Robinson v. Hudson Specialty Ins. Grp., 984 F.
Supp. 2d 1199, 1207 (S.D. Ala. 2013) (finding plaintiff’s negligence claims “inextricably
intertwined with his alcohol claims, which fall under what are clear and unambiguous
terms of the Colony liquor liability exclusion”); Philon, 2013 WL 12123743, at *2. The
state court claims against JJ’s essentially contend that the bar negligently served
Terrance Walker alcohol even when he was noticeably intoxicated, which directly
contributed to the accident that killed Walker and McDonald. Thus, the claims in the
underlying state court actions inextricably intertwine with the purportedly negligent sale
of alcohol and the intoxication that resulted, bringing them within the purview of the
liquor liability exclusion. See, e.g., Robinson, 984 F. Supp. 2d at 1207.
The clear and unambiguous language of the policy at issue precludes coverage for
the claims asserted in the Walker and McDonald actions. Therefore, Catlin owes no
duty under the insurance policy to defend JJ’s in the underlying state court actions.
Further, Catlin possesses no obligation to indemnify JJ’s for any judgment which might
be entered against it in the underlying litigation because there exists no coverage under
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Catlin’s insurance contract for the claims alleged by any plaintiff in the underlying state
court actions.
II.

Defendants Cannot Sustain an Estoppel Defense
Defendants Walker and Armstrong claim Catlin is estopped from denying

coverage. More succinctly, Defendants Walker and Armstrong contend a genuine
issue of material fact exists regarding Catlin’s compliance with the defense contained in
Alabama Code § 27-14-19, which requires an insurer to mail or deliver a policy to the
purchaser and named insured within a reasonable time after its issuance. In Brown
Mach. Works & Supply Co. v. Insurance Co. of N. Am., 659 So. 2d 51 (Ala. 1995), the
Alabama Supreme Court held that Ҥ 27-14-19 requires that the insurance policy be
‘mailed or delivered’ to the purchaser of a policy and to the named insured,” and “an
insurer may be estopped from asserting conditions of, or exclusions from, coverage
where such a purchaser or insured is prejudiced by the insurer’s failure to comply with”
§ 24-14-19. 659 So. 2d at 61. Based on the interpretation of § 24-14-19, the
Defendants maintain that the court should estop Catlin from prevailing on summary
judgment at this stage because it has not demonstrated that it delivered the policy to JJ’s.
Federal Rule of Civil Procedure 8(c)(1) lists estoppel as an affirmative defense.
Fed. R. Civ. P. 8(c)(1); see also E.E.O.C. v. Joe Ryan Enters., Inc., No. 3:11–cv–0795–MEF,
2013 WL 1294696, at *7 (M.D. Ala. March 28, 2013); In re Cottrell, 213 B.R. 33, 38 (M.D.
Ala. 1997); Kimbrell v. City of Bessemer, 380 So.2d 838, 839 (Ala. 1980). The party
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asserting an affirmative defense bears the burden of proof regarding the defense. Taul
ex rel. United States v. Nagel Enters., Inc., No.: 2:14-CV-0061-VEH, 2016 WL 304581, at *6
(N.D. Ala. Jan. 25, 2016); Lloyd Noland Found., Inc. v. HealthSouth Corp., 979 So.2d 784,
791 (Ala. 2007); BSI Rentals, Inc. v. Wendt, 893 So.2d 1184, 1187 (Ala. Civ. App. 2004).
As a result, when a plaintiff moves for summary judgment and a defendant
asserts an affirmative defense thereto, the defendant bears the initial burden of
demonstrating that the affirmative defense applies. Wells Fargo Bank, N.A. v. Trotman,
940 F. Supp. 2d 1359, 1368 n. 8 (M.D. Ala. 2013); Office of Thrift Supervision v. Paul, 985 F.
Supp. 1465, 1470 (S.D. Fla. 1997) (citing Blue Cross and Blue Shield v. Weitz, 913 F.2d 1544,
1552 (11th Cir.1990)). Upon demonstrating the applicability of an affirmative defense,
the burden shifts to the plaintiff to refute the affirmative defense with appropriate
evidence. Paul, 985 F. Supp. at 1470 (citing Weitz, 913 F.2d at 1552 n. 13). Hence, a
court may grant a plaintiff’s summary judgment motion if the defendant fails to muster
evidence supporting an affirmative defense. Paul, 985 F. Supp. at 1470; Amoco Oil Co. v.
Gomez, 125 F. Supp. 2d 492, 499 (S.D. Fla. 2000).
Therefore, Walker and Armstrong bear the burden of creating a genuine issue of
material fact as to the mailing or delivery of the policy at issue. However, Walker and
Armstrong submitted no evidence regarding the mailing or delivery of the policy or lack
thereof. See also USF Ins. Co. v. Metcalf Realty Co., Inc., No. 2:12–cv–02529–AKK, 2013
WL 4679833, at *5 n. 4 (N.D. Ala. Aug. 30, 2013) (court rejected argument of party
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urging estoppel under § 27–14–19(a) for failure to submit any evidence indicating
insurer failed to properly deliver its policy). Therefore, their unsupported argument
creates no genuine issue of material fact.
CONCLUSION
Based on the foregoing analysis, the court GRANTS Catlin’s summary judgment
motion. The court will enter a separate order in conformity with this Memorandum
Opinion.
DONE and ORDERED this 3rd day of August, 2018.

____________________________________
HERMAN N. JOHNSON, JR.
UNITED STATES MAGISTRATE JUDGE

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