KRISTI K. DuBOSE, District Judge.
This matter is before the Court on Pennsylvania National Mutual Casualty Insurance Company (Pennsylvania National)'s Motion for Summary Judgment (Docs. 72, 74-1 to 74-10, 75-77, 89-90), Kiker Corporation ("Kiker")'s Response (Doc. 105), St. Catherine of Siena Parish ("St Catherine")'s Response (Doc. 102, 103), and Pennsylvania National's Replies (Docs. 107-108); and St. Catherine's Motion for Summary Judgment (Docs. 70-71, 73, 80), Pennsylvania National's Response (Doc. 104), and St. Catherine's Reply (Doc. 106).
This case has its origins in St. Catherine of Sienna Parish v. Kiker Corp., Thompson Eng'g, Inc., Thompson Eng'g Testing, Inc., and Damon Lett Roofing, filed in the Circuit Court of Mobile County, Alabama (CV 2010-900578). (Doc. 71-1 at 1-10, 40-44 (and as amended)). The state court case concerned a dispute stemming from a roofing construction contract between Pennsylvania National's insured, Kiker, and St. Catherine, for Kiker to re-roof two of St. Catherine's buildings (the main building and the "horseshoe" building). Kiker executed a May 14, 2003 written contract for the roofing work on the main building (Doc. 71-1 at 47), but did not for the horseshoe building. Kiker then sub-contracted the roofing work out to Damon Lett Roofing on May 22, 2003. (Doc. 71-1 at 35-37). The roofs were replaced with a "40 year roof" shingle, and the work was completed in March 2004 (main building) and February 2005 (horseshoe building). However, the roofs began leaking in April 2008 (main building) and February 2005 (horseshoe building). Despite 40-50 service visits, Kiker could neither diagnose nor fix the problem and the leaks continued.
As such, on March 10, 2010, St. Catherine sued Thompson Engineering, Thompson Engineering Testing, and Kiker in state court for negligence, wantonness, breach of contract, and misrepresentation/suppression. (Doc. 71-1 at 1-10, 40-44). Kiker filed a Third-Party Complaint against Damon Lett Roofing (its sub-contractor) for breach of contract, negligence, breach of implied/express warranties, breach of implied warranty of workmanship, common law indemnity, and breach of contract for failure to procure insurance. (Doc. 71-1 at 18-30).
At the time of the roofing project, Kiker had a commercial general liability ("CGL") policy with Pennsylvania National. (Doc. 76). As such, Pennsylvania National defended Kiker, against St. Catherine's claims, in the state court litigation under a reservation of rights. In doing so, however, Pennsylvania National advised Kiker that there was no coverage under the terms of the insurance policy for "[a]ny damage as a result of breach of warranty or breach of contract [as it] is not covered as it is not considered an occurrence." (Doc. 74-3 at 5).
Only St. Catherine's claims against Kiker proceeded to trial. During trial, the Court granted a motion for judgment as a matter of law as to St. Catherine's claims against Kiker for negligence, wantonness, and misrepresentation/suppression, stating that the only remaining claim for the jury was St. Catherine's breach of contract claim. (Doc. 75-1 at 56).
At trial, St. Catherine presented evidence that Kiker provided faulty and/or defective workmanship on the roofs for the main and horseshoe buildings. St. Catherine also presented evidence that this faulty workmanship resulted in the building's gypsum decking being water damaged and the main building's interior ceiling being damaged. (Doc. 71-2). Trial testimony indicated that the main building's interior ceiling repairs (in 10 areas) would cost $104,127.63 to repair. (Doc. 71-2 at 56).
The state court judge charged the jury, in relevant part, as follows:
(Doc. 75-2 at 3-5 (emphasis added)). (See also Doc. 75-1 at 56-58).
Following deliberations, the jury found in favor of St. Catherine and returned a general verdict — "find[ing] the issues in favor of the plaintiff and against the Kiker Corporation and assess the plaintiff's damages as follows: $350,000." (Doc. 71-1 at 45). The state court judge entered a "Jury and Verdict" Order stating St. Catherine had been awarded $350,000 in compensatory damages. (Id. at 46). Kiker and St. Catherine appealed the verdict, which remains pending before the Alabama Supreme Court.
As a result of the $350,000 verdict against Kiker, Pennsylvania National initiated this federal declaratory judgment action
"The 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. 56(a) (Dec. 2010). Rule 56(c) provides as follows:
FED.R.CIV.P. Rule 56(c) (Dec.2010).
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 demonstrate 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, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). If the nonmoving party fails to make "a sufficient showing on an essential element of her case with respect to which she has the burden of proof," the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. "In reviewing whether the nonmoving party has met its burden, the court must stop short of weighing the evidence and making credibility determinations of the truth of the matter. Instead, the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998-999 (11th Cir.1992) (internal citations and quotations omitted).
The applicable Rule 56 standard is not affected by the filing of cross-motions for summary judgment. See, e.g., Am. Bankers Ins. Group v. United States, 408 F.3d 1328, 1331 (11th Cir.2005); Gerling Global Reins. Corp. of Am. v. Gallagher, 267 F.3d 1228, 1233 (11th Cir.2001). "Cross-motions for summary judgment will not, in themselves, warrant the court in granting summary judgment unless one of the parties is entitled to judgment as a matter of law on facts that are not genuinely disputed." United States v. Oakley, 744 F.2d 1553, 1555 (11th Cir.1984) (citation omitted). The Court is mindful that "[w]hen both parties move for summary judgment, the court must evaluate each motion on its own merits, resolving all reasonable inferences against the party whose motion is under consideration." Muzzy Prods., Corp. v. Sullivan Indus., Inc., 194 F.Supp.2d 1360, 1378 (N.D.Ga.2002). The Court has reviewed the facts submitted by each party and has made its own examination of the record.
Kiker has specifically withdrawn all of its counterclaims against Pennsylvania National "or otherwise concede[d]" them. (Doc. 105 at 2). As such, Pennsylvania National's motion for summary judgment against Kiker, as to those counterclaims, is
Pennsylvania National contends that it is not obligated to indemnify Kiker for the $350,000 verdict for breach of contract because there was no "occurrence" to trigger coverage under the CGL policy. St. Catherine contends that faulty workmanship resulted in a covered occurrence that caused, through repeated exposure to rain, damage to the gypsum substrate of the roof, as well as the interior and ceiling of the building.
The relevant CGL policy's insuring agreement states that insurer Pennsylvania National must pay the sums that the insured Kiker becomes legally obligated to pay as damages because of "bodily injury" or "property damage" caused by an "occurrence:"
(Doc. 76 at 92).
The CGL policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Doc. 76 at 105). Under Alabama law, the term "accident" means "an unintended and unforeseen injurious occurrence; something that does not occur in the usual course of events or that could be reasonably anticipated." Hartford Cas. Ins. Co. v. Merchs. & Farmers Bank, 928 So.2d 1006, 1011 (Ala.2005) (citing St. Paul Fire & Marine Ins. Co. v. Christiansen Marine, Inc., 893 So.2d 1124, 1136 (Ala.2004)).
Pennsylvania National argues that Kiker's breach of contract claim cannot give rise to an occurrence under the policy. Penn also argues that all the cases cited by St. Catherine to the contrary are distinguishable because the verdicts in each of those cases included tort claims as well as breach of contract claims. The court disagrees with both arguments.
In Moss v. Champion Insurance Company, 442 So.2d 26, 29 (Ala.1983), the Alabama Supreme Court found an "occurrence" for CGL policy purposes when the contractor's faulty workmanship resulted in not only a poorly constructed roof — the only job the contractor had been hired to perform — but damage to other parts of the plaintiff's home. One year later the Court held that faulty workmanship itself is not an occurrence for purposes of a CGL policy. U.S. Fid. & Guar. Co. v. Warwick, 446 So.2d 1021
Cincinnati Ins. Co. v. Amerisure Ins. Co., 2012 WL 4033724, *6 (S.D.Ala. Sept. 12, 2012).
The Alabama Supreme Court very recently clarified "the dichotomy" between the court's holdings in Warwick and Moss, in Owners Ins. Co. v. Jim Carr Homebuilder, LLC, 2014 WL 1270629, *5-6 (Ala. Mar. 28, 2014), stating as follows:
Contrary to Pennsylvania's argument, the fact that Moss, Warwick, Town & Country, and Jim Carr, may have all included tort and contract claims, as opposed to only a contract claim, does not distinguish their holdings. The explanation as to when faulty workmanship may give rise to an occurrence did not rest on whether the verdict was for tort or contract. Rather the focus was on the claim of faulty workmanship.
St. Catherine's breach of contract claim against Kiker, as submitted to the jury, included the breach of the implied warranty to perform the contract with ordinary skill or workmanship.
St. Catherine's breach of contract claim, which encompasses its faulty workmanship
Pennsylvania National contends that if it is determined that St. Catherine's claim is an "occurrence", the policy excludes any recovery under two exclusions; the "your work" exclusion and the "contractual liability" exclusion.
In Alabama, "[g]eneral rules of contract law govern an insurance contract." Safeway Ins. Co. of Ala., Inc. v. Herrera, 912 So.2d 1140, 1143 (Ala.2005). "In the absence of statutory provisions to the contrary, insurance companies have the same right as individuals to limit their liability, and to impose whatever conditions they please upon their obligations not inconsistent with public policy; and the courts have no right to add anything to their contracts or to take anything from them." Upton v. Miss. Valley Title Ins. Co., 469 So.2d 548, 554 (Ala.1985) (quoting Life & Cas. Ins. Co. v. Whitehurst, 226 Ala. 687, 148 So. 164 (1933) (internal quotations omitted)). However, Alabama courts have held that an insurance policy "shall be construed liberally in favor of the insured and strictly against the insurer. Exclusions are to be interpreted as narrowly as possible, so as to provide maximum coverage for the insured, and are to be construed most strongly against the insurance company, which drafted and issued the policy." Allstate Ins. Co. v. Skelton, 675 So.2d 377, 379-380 (Ala.1996) (internal citations omitted). "To the extent the language of an insurance policy provision is ambiguous, all ambiguities must be resolved against the insurance company." Safeway Ins. Co., 912 So.2d at 1143. Nevertheless, "[i]nsurance companies are entitled to have their policy contracts enforced as written, rather than risking their terms either to judicial interpretation or the use of straining language, and the fact that different parties contend for different constructions does not mean that the disputed language is ambiguous." Woodall v. Alfa Mut. Ins. Co., 658 So.2d 369 (Ala.1995) (quoting Gregory v. Western World Ins. Co., 481 So.2d 878, 881 (Ala.1985) (internal citations and quotations omitted)).
"Whether a provision of an insurance policy is ambiguous is a question of law[,]" Safeway Ins. Co., 912 So.2d at 1143, and "[t]he test to be applied by [a] court in determining whether there is ambiguity is not what the insurer intended its words to mean, but what a reasonably prudent person applying for insurance would have understood them to mean ... In determining whether an ambiguity exists, a court should apply the common interpretation of the language alleged to be ambiguous.... This means that the terms of an insurance policy should be given a rational and practical construction." Porterfield v. Audubon
"Under Alabama law, the insured bears the burden of establishing coverage by demonstrating that a claim falls within the policy[.]" Auto-Owners Ins. Co. v. Toole, 947 F.Supp. 1557, 1561 (M.D.Ala.1996) (citing Colonial Life & Accident Ins. Co. v. Collins, 280 Ala. 373, 194 So.2d 532, 535 (1967) and U.S. Fidelity & Guarantee Co. v. Armstrong, 479 So.2d 1164, 1168 (Ala.1985)). However, the "insurer bears the burden of proving the applicability of any policy exclusion." Id. The burden is also on the party seeking coverage to prove that coverage existed within the terms of the policy. Owners Ins. Co. v. Shep Jones Const., Inc., 2012 WL 1642169, *3 (N.D.Ala. May 3, 2012).
Pennsylvania National contends that the "your work" exclusion in the policy precludes coverage for Kiker (and thus payment to St. Catherine for its state court verdict). That portion of the policy provides as follows:
The clear policy language specifies that this exclusion does not apply if the work out of which the damage arises was performed by a subcontractor on the insured's behalf. The parties all agree that insured Kiker subcontracted St. Catherine's roofing work to Damon Lett. (Doc. 71-1 at 35-37). Thus, this policy exclusion does not apply to bar coverage.
Pennsylvania National also contends that the contractual liability exclusion precludes coverage for Kiker (and thus payment to St. Catherine for its state court verdict) because that breach of contract verdict is an obligation for Kiker to pay by reason of its assumption of liability in the Kiker-St. Catherine roofing contract. That portion of the policy provides as follows:
Alabama courts have not construed the contractual liability exclusion in the manner urged by St. Catherine. Rather,
Shep Jones, 2012 WL 1642169 at *6.
Therefore under binding Alabama law the breach of contract claim and the implied warranty claim are excluded from coverage under the contractual liability exclusion. See also, Assurance Co. of Am. v. Admiral Ins. Co., 2011 WL 1897589, *8 (S.D.Ala. May 18, 2011) (providing that "[i]mplied warranties are terms that are implied by law in a contract and would not exist apart from that contract .... Actions for their breach therefore sound in contract as opposed to tort. The implied warranty at issue here would not exist were it not for the construction contract... therefore [this claim] is also excluded by operation of the contractual liability exclusion of the Scottsdale policy ...") (citations omitted).
The court acknowledges that the discussion in Townsend Ford, Inc. v. Auto-Owners Ins. Co., 656 So.2d 360 (Ala.1995) confuses the issue. In Townsend Ford the court stated that contractual liability exclusions "traditionally serve[] to exclude `indemnity' types of liability, whereby the liability itself was assumed," rather than warranty situations. Id. at 364. However, the ultimate conclusion was that the breach of the express warranty claim did not fall within the contractual exclusion and that if insurers wish to exclude such liability [express warranties] they can provide for a separate breach of warranty exclusion in the policy. Id. at 364-365. In any event, St. Catherine does not rely on the express warranty claim as the basis for
Accordingly, it is
A Final Judgment consistent with the terms of this Order shall be entered by separate document as required by Rule 58 of the Federal Rules of Civil Procedure.
In accordance with the Order issued on this date, it is hereby
Additionally, St. Catherine repeatedly references the Plaintiff by an incorrect name, as "Continental," in its summary judgment briefing; the Court presumes this is a typographical error.
