Colony Insurance Company v. Georgia-Pacific, LLC, Lumbermens Mutual Casualty Company, and Industrial Maintenance and Mechanical, Inc.

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REL:07/31/2009 Notice: T h i s o p i n i o n i s s u b j e c t t o formal r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e R e p o r t e r o f D e c i s i o n s , Alabama A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may b e made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . SUPREME COURT OF ALABAMA SPECIAL TERM, 2009 1071593 Colony Insurance Company v. G e o r g i a - P a c i f i c , LLC, Lumbermens M u t u a l C a s u a l t y Company, and I n d u s t r i a l M a i n t e n a n c e a n d M e c h a n i c a l , I n c . 1071604 G e o g i a - P a c i f i c , LLC v. Colony Appeals Insurance Company from H o u s t o n C i r c u i t (CV-07-5095) Court 1071593; 1071604 BOLIN, J u s t i c e . Colony Insurance summary judgment Company ("Lumbermens") Pacific"), in Company favor ("Colony") of appeals Lumbermens Mutual and G e o r g i a - P a c i f i c , i n an a c t i o n filed by C o l o n y , ("Georgiaa d e c l a r i n g t h a t L u m b e r m e n s was r e q u i r e d t o d e f e n d a n d Georgia-Pacific death of i n an u n d e r l y i n g Rufus Maintenance Scott and M e c h a n i c a l , " I M M I " ) , who was k i l l e d Pacific's and facility while an arising employee judgment indemnify out of the of Industrial I n c . ( h e r e i n a f t e r r e f e r r e d t o as working i n Cedar S p r i n g s , on t h e r o o f Georgia. at Georgia- Georgia-Pacific Lumbermens a l s o a p p e a l f r o m a summary j u d g m e n t i n f a v o r o f Colony on breached their counterclaim, i t senhanced Georgia-Pacific under have been c o n s o l i d a t e d We White, lawsuit a Casualty LLC seeking from alleging o b l i g a t i o n o f good a reservation that faith of r i g h t s . Colony in The had defending appeals f o r t h e p u r p o s e o f i s s u i n g one o p i n i o n . affirm. I. Undisputed Colony issued of i n s u r a n c e , September Facts and P r o c e d u r a l IMMI a c o m m e r c i a l g e n e r a l no. GL113031, t h a t p r o v i d e d liability policy annual coverage 10, 2 0 0 1 , t o S e p t e m b e r 10, 2 0 0 2 . 2 History from An e n d o r s e m e n t t o 1071593; this 1071604 policy added organizations as as additional required by insureds written " a l l persons contract with the or named insured." On M a r c h 28, 2002, Georgia-Pacific, roof IMMI e x e c u t e d whereby IMMI of G e o r g i a - P a c i f i c ' s After entering as contract, as "insured" general l i a b i l i t y p o l i c y of May 5AA045534-00, 15, 2001, to On April 18, White, the listed the was no. an roof May employee of the of estate sued named parties, IMMI, was alleging was IMMI's both the Georgia-Pacific under a with annual policies killed Georgiacommercial Lumbermens, coverage subsequently determination On IMMI, negligence, referred to dismissed that for workers' compensation 3 White were when he facility. Georgia-Pacific, case"). a on Georgia. policy. i t had provided while (hereinafter after work with from 2002. willfulness case Colony insurance Georgia-Pacific White's IMMI an that 15, 2002, perform IMMI a d d e d under Pacific policy also to f a c i l i t y i n Cedar S p r i n g s , additional insured an into this agreed a written contract in effect, fell July and through 11, 2002, fictitiously wantonness, as from was purposes. "the the an and underlying underlying employee of 1071593; 1071604 Pursuant IMMI's to policy, reservation judgment provided "additional Colony defended of r i g h t s . action, defendants the and under seeking the p o l i c y was e x c e s s c o v e r a g e defend On filed share a 21, counterclaim 2007, limits a reservation On J a n u a r y a motion for alleging that Colony the and coverage. provided coverage Lumbermens with to each coverage. Lumbermens had breached i t s Georgia-Pacific summary judgment, and Lumbermens contending L u m b e r m e n s p o l i c y was n o t a p o l i c y o f i n s u r a n c e coverage as of r i g h t s . 8, 2 0 0 8 , G e o r g i a - P a c i f i c a the of applicable Georgia-Pacific a declaratory- i n proportion enhanced o b l i g a t i o n o f good f a i t h i n d e f e n d i n g under under a n d t h a t L u m b e r m e n s was r e q u i r e d of the t o t a l September and in Lumbermens that policy and i n d e m n i f y G e o r g i a - P a c i f i c insurer's a and determination Colony case filed Georgia-Pacific a endorsement the underlying Colony t h e r e a f t e r naming both insured" by the Colony policy 1 was that filed the and t h a t t h e the On F e b r u a r y 1 9 , 2 0 0 8 , C o l o n y s e t t l e d t h e primary underlying Georgia-Pacific and Lumbermens c o n t e n d t h a t GeorgiaP a c i f i c ' s p o l i c y w i t h L u m b e r m e n s was a " f r o n t i n g p o l i c y , " i . e . , a p o l i c y i n which the deductible i s equal to the p o l i c y l i m i t s , so t h e a c t u a l c o v e r a g e i s $ 0 , e s s e n t i a l l y r e n d e r i n g Georgia-Pacific self-insured. 1 4 1071593; case. On 1071604 April judgment, 1, 2008, C o l o n y f i l e d seeking declaratory a judgment judgment and counterclaim alleging good The favor faith. of on Lumbermens i t s for a summary complaint Georgia-Pacific a breach trial on a motion and o f the enhanced for a Lumbermens' obligation of summary j u d g m e n t in court entered a and Georgia-Pacific on Colony's d e c l a r a t o r y - j u d g m e n t c o m p l a i n t , from which C o l o n y a p p e a l s ; the trial court e n t e r e d a summary j u d g m e n t Lumbermens and Georgia P a c i f i c ' s a breach of the enhanced Georgia-Pacific and i n favor counterclaim, obligation of Colony which of good f a i t h , alleged from Lumbermens a p p e a l . II. Standard of Review "In r e v i e w i n g a summary j u d g m e n t , we u s e t h e same s t a n d a r d t h e t r i a l c o u r t u s e d i n d e t e r m i n i n g whether the evidence b e f o r e i t p r e s e n t e d a genuine i s s u e o f m a t e r i a l f a c t a n d w h e t h e r t h e m o v a n t was e n t i t l e d t o a j u d g m e n t as a m a t t e r o f l a w . Bussey v . J o h n D e e r e Co., 531 So. 2 d 8 6 0 , 862 ( A l a . 1 9 8 8 ) ; R u l e 5 6 ( c ) , A l a . R. C i v . P. When t h e m o v a n t m a k e s a prima facie showing t h a t no g e n u i n e issue of m a t e r i a l f a c t e x i s t s , the burden then s h i f t s to the nonmovant t o p r e s e n t s u b s t a n t i a l e v i d e n c e c r e a t i n g s u c h an i s s u e . B a s s v. S o u t h T r u s t Bank o f B a l d w i n C o u n t y , 538 So. 2 d 794 ( A l a . 1989). Evidence i s ' s u b s t a n t i a l ' i f i t i s o f 'such w e i g h t and q u a l i t y that fair-minded persons in the exercise of impartial judgment can reasonably infer the e x i s t e n c e o f t h e f a c t s o u g h t t o be p r o v e d . ' West v. F o u n d e r s L i f e A s s u r a n c e Co. o f F l o r i d a , 547 So. 2 d 870, 871 ( A l a . 1989). In r e v i e w i n g a summary judgment, t h i s C o u r t must r e v i e w t h e r e c o r d i n a 5 on which 1071593; 1071604 light most favorable t o t h e nonmovant and must r e s o l v e a l l r e a s o n a b l e doubts a g a i n s t the movant. H a n n e r s v . B a l f o u r G u t h r i e , I n c . , 564 So. 2 d 412 (Ala. 1990). Furthermore, ' [ i ] f the terms w i t h i n a c o n t r a c t a r e p l a i n and u n a m b i g u o u s , t h e c o n s t r u c t i o n of the contract and i t s legal effect become questions of law for the court and, when a p p r o p r i a t e , may be d e c i d e d b y s u m m a r y j u d g m e n t . ' M c D o n a l d v . U.S. D i e C a s t i n g & Dev. Co., 585 So. 2 d 8 5 3 , 855 ( A l a . 1 9 9 1 ) . " Taylor v. Striplin, 974 III. In the So. 2d 298, 301 P r i m a r y or Excess instant case, both ( A l a . 2007). Insurance the Colony policy and the Lumbermens p o l i c y c o n t a i n " o t h e r i n s u r a n c e " c l a u s e s s p e c i f y i n g when t h e i r respective to coverage. excess coverage On i s primary coverage appeal, Colony does as opposed not dispute Georgia-Pacific and Lumbermens' a s s e r t i o n t h a t c o v e r a g e the policy Lumbermens argues that because clauses, liability prorated between company's citing share State I n s u r a n c e Co., both Farm 282 insurance policies insurance clauses, coverage. policies Instead, contain Colony excess-insurance f o r d e f e n d i n g t h e u n d e r l y i n g c a s e s h o u l d be the of i s excess under the two insurers total Mutual limits Insurance A l a . 212, covering 210 the So. in proportion of applicable Co. 2d same to v. 688 risk coverage, General (1968) Mutual (where contain the c l a u s e s are m u t u a l l y repugnant 6 each two excessand the 1071593; loss 1071604 should be apportioned prorata "other the two clause of the insurers on a basis). The between insurance" Colony provides: "4. Other Insurance. " I f o t h e r v a l i d and c o l l e c t i b l e insurance i s a v a i l a b l e t o t h e i n s u r e d f o r a l o s s we cover under Coverages A or B of this Coverage P a r t , our o b l i g a t i o n s are l i m i t e d as f o l l o w s : "a. Primary Insurance " [ C o l o n y ] i n s u r a n c e i s p r i m a r y e x c e p t when b. b e l o w a p p l i e s . If this insurance i s p r i m a r y , our o b l i g a t i o n s are not a f f e c t e d u n l e s s any o f t h e o t h e r i n s u r a n c e i s a l s o primary. T h e n , we w i l l s h a r e w i t h a l l t h a t o t h e r i n s u r a n c e by t h e method d e s c r i b e d i n c. b e l o w . "b. Excess Insurance " T h i s i n s u r a n c e i s e x c e s s o v e r any o f t h e other insurance, whether primary, excess, c o n t i n g e n t o r on a n y o t h e r b a s i s : "(1) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or s i m i l a r c o v e r a g e f o r 'your work'; "(2) That i s F i r e I n s u r a n c e for premises r e n t e d t o you o r t e m p o r a r i l y r e n t e d t o you o r o c c u p i e d by you w i t h p e r m i s s i o n o f t h e owner; or "(3) If the loss arises out of the m a i n t e n a n c e or use of a i r c r a f t , ' a u t o s ' or 7 policy 1071593; 1071604 w a t e r c r a f t to the e x t e n t not s u b j e c t to E x c l u s i o n g. o f C o v e r a g e A ( S e c t i o n 1 ) . "When t h i s i n s u r a n c e i s e x c e s s , we will h a v e no d u t y u n d e r C o v e r a g e s A o r B t o d e f e n d t h e i n s u r e d a g a i n s t any 'suit' i f any o t h e r i n s u r a n c e i n s u r e r has a d u t y t o d e f e n d t h e i n s u r e d a g a i n s t t h e ' s u i t . ' ... " (Emphasis added.) Colony's policy primary, subject 4.b.(1), ( 2 ) , and (3) are to inapplicable in property coverage, See Co., 92 Great App. language at a 4.b.(1) is refers Ins. 689, Co. 685 not v. here to coverage would serve loss"). Specifically, concluded that exceptions liability policy protected the phrase, "similar the context of the 8 the first-party in this Fire Ins. N.E.2d 167 other-insurance "where Court in first-party Great i n a commercial property for enumerated same and that issue 708 (2) as p r i m a r y i n d e m n i f i c a t i o n enumerated coverage 411 , only the only at to Mount V e r n o n N.Y.S.2d apply subsections conclude solely likewise in subsections we 1 9 9 9 ) ( i n t e r p r e t i n g the issue property loss that Furthermore, which 682 , enumerated It is clear Northern N.Y.2d s t a t e s that i t s coverage i s exceptions here. section (N.Y.Ct. for the (3). language case. specifically 'your interests Northern general and that w o r k , ' " when r e a d coverages, meant in first-party 1071593; 1071604 property coverage N.Y.S.2d at 415, f o r commercial 708 N.E.2d work. at 171. 92 N . Y . 2 d The court e l a b o r a t e d on t h e d i f f e r e n c e b e t w e e n f i r s t - p a r t y third-party a t 6 8 8 , 685 further coverage and coverage: "Insurance contracts g e n e r a l l y are assigned to one o f t w o c l a s s e s : e i t h e r ' f i r s t - p a r t y c o v e r a g e ' o r ' t h i r d - p a r t y coverage' ' F i r s t - p a r t y coverage' p e r t a i n s t o l o s s o r damage s u s t a i n e d b y an i n s u r e d to i t sproperty; the i n s u r e d r e c e i v e s the proceeds when t h e damage o c c u r s . ... I n c o n t r a s t , i f t h e i n s u r e r ' s duty t o d e f e n d and pay runs t o a t h i r d p a r t y c l a i m a n t who i s p a i d a c c o r d i n g t o a j u d g m e n t or settlement against the insured, then the i n s u r a n c e i s c l a s s i f i e d as ' t h i r d - p a r t y i n s u r a n c e ' Thus, w h o l l y d i f f e r e n t i n t e r e s t s a r e p r o t e c t e d by f i r s t - p a r t y c o v e r a g e and t h i r d - p a r t y c o v e r a g e . "... The interests protected ... involve property, not persons. Indeed, the goal of f i r s t party property coverage, i n c l u d i n g f i r e , b u i l d e r ' s risk and i n s t a l l a t i o n risk, i s to reimburse the insured f o r the insured's actual property loss, d o l l a r f o r d o l l a r , b u t no m o r e . "Thus, r e a d w i t h i n t h e c o n t e x t o f t h e enumerated coverages, we i n t e r p r e t ' s i m i l a r c o v e r a g e f o r y o u r work' t o mean f i r s t - p a r t y property coverage f o r c o m m e r c i a l work." 92 N . Y . 2 d a t 687-88, 685 N . Y . S . 2 d a t 414-15, 708 N.E.2d at 170-71. The L u m b e r m e n s p o l i c y c o n t a i n s a d d i t i o n a l "other the insurance" Colony language i n i t s c l a u s e , and t h a t language i s not p r e s e n t i n policy: 9 1071593; 1071604 "4. Other "b. Excess "This Insurance Insurance insurance i s excess over: "(1) Any o f t h e o t h e r i n s u r a n c e , w h e t h e r p r i m a r y e x c e s s , c o n t i n g e n t o r on a n y o t h e r basis: "(a) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or S i m i l a r c o v e r a g e f o r 'your work'; "(b) That i s F i r e i n s u r a n c e f o r premises r e n t e d t o you o r t e m p o r a r i l y o c c u p i e d by you w i t h p e r m i s s i o n o f t h e owner; "or "(c) If the loss arises out of the m a i n t e n a n c e or use of a i r c r a f t , ' a u t o s ' or w a t e r c r a f t to the e x t e n t not s u b j e c t to E x c l u s i o n g. o f C o v e r a g e A ( S e c t i o n I ) . "(2) Any o t h e r p r i m a r y i n s u r a n c e a v a i l a b l e to you covering liability for damages a r i s i n g out of the premises or o p e r a t i o n s for which you have been added as an additional i n s u r e d by attachment of an endorsement." (Emphasis added.) When t h e language in ambiguous. section party two policies the two As 4.b.(1) property are compared, policies is p r e v i o u s l y noted, of the coverage. Colony The i t is clear neither the policy conflicting enumerated coverages refers excess-insurance 10 that only to clause the nor in firstin the 1071593; 1071604 Lumbermens p o l i c y , i . e . , section language, that "[a]ny stating other the primary for damages operations for which the Lumbermens liability in attachment Co., supra. In 551, of as a you the o f an e n d o r s e m e n t . " creates to added been Because be an for or additional 4.b.(2) of third-party classification mutually repugnant. Accordingly, covering premises Section category over provision the e x c e s s - i n s u r a n c e c l a u s e i n contains a different cannot primary out i s excess c o v e r a g e , f o r w h i c h t h e r e i s no c o m p a r a b l e policy clauses have policy available arising you policy the Colony p o l i c y . each Lumbermens insurance liability i n s u r e d by 4.b.(2), contains a d d i t i o n a l the Colony of r i s k , S t a t e Farm Mut. policy the Ins. provides the coverage. Nationwide 558 Mutual ( A l a . 2002), Insurance this Court Co. v. Hall, 643 So. stated: "The d e t e r m i n a t i o n o f w h i c h i n s u r a n c e c o v e r a g e i s p r i m a r y and w h i c h , i f any, i s e x c e s s or s e c o n d a r y depends on the exact language of the policy. Insurance contracts, like other contracts, are construed to g i v e e f f e c t to the i n t e n t i o n of the parties, and when that intention i s clear and u n a m b i g u o u s , t h e i n s u r a n c e p o l i c y m u s t be e n f o r c e d as w r i t t e n . " (Emphasis added; IV. citations Enhanced omitted.) Obligation 11 o f Good Faith 2d 1071593; 1071604 As filed previously stated, a counterclaim, enhanced obligation a l l e g i n g that of good Pacific under entered a summary j u d g m e n t Colony a Georgia-Pacific faith reservation argues, Colony in and had Lumbermens breached i t s defending of rights. i n favor of The Georgia- trial court Colony. and i t i s u n d i s p u t e d , t h a t the underlying case has been s e t t l e d w i t h i n t h e p o l i c y l i m i t s p r o v i d e d by t h e C o l o n y p o l i c y a n d t h a t G e o r g i a - P a c i f i c was p r i v y t o a n d agreed to the Pacific and the settlement. Accordingly, and Lumbermens' c o u n t e r c l a i m trial counterclaim court's i s due summary t o be 1071593 --- conclude against judgment that Georgia- C o l o n y was f o r Colony moot, on that affirmed. AFFIRMED. 1071604 AFFIRMED. Cobb, and we C . J . , and Lyons, Woodall, Stuart, Smith, Parker, Shaw, J J . , c o n c u r . Murdock, J . , concurs i n p a r t part. 12 and c o n c u r s i n t h e r e s u l t i n 1071593; 1071604 MURDOCK, J u s t i c e result in part). In (concurring i n part paragraph, the underlying that i t s last case filed Georgia-Pacific, LLC, against the main and opinion by R u f u s has concurring aptly Scott been i n the observes White's settled estate within the policy l i m i t s provided by G e o r g i a - P a c i f i c ' s p o l i c y w i t h Colony Insurance that to agreed the Company and record indicates that was In t h i s to the settlement. Georgia-Pacific I also regard, Colony's defense of privy note Georgia-Pacific. concluding its facts Georgia-Pacific's enhanced duty of good f a i t h moot. the that These I therefore main In concur provide claim that a reached injury basis Colony i s without merit, i n the r e s u l t that Georgia-Pacific d i d not compromise G e o r g i a - P a c i f i c ' s i n t e r e s t s or cause to and for breached rather i n Part than IV of opinion. a l l other respects, I concur 13 i n the main opinion.

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