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08/26/94 DEWEY M. SAXON AND EDNA SAXON v. LLOYD'S

August 26, 1994

DEWEY M. SAXON AND EDNA SAXON
v.
LLOYD'S OF LONDON



Appeal from Mobile Circuit Court. (CV-92-1884). Douglas I. Johnstone, Trial Judge.

The Name of this Case has been Corrected by the Court. As Amended. Second Amendment. Released for Publication December 5, 1994.

Houston, Hornsby, C. J., and Maddox, Almon, and Steagall, JJ., concur. Kennedy, J., concurs in the result. Shores and Ingram, JJ., Dissent.

The opinion of the court was delivered by: Houston

HOUSTON, JUSTICE.

Dewey M. Saxon and his wife, Edna Saxon, sued the Alabama State Docks Department; its director, John Dutton; its safety director, Frank Daniels; and the State Docks' liability insurance carriers, Lloyd's Underwriters and various other insurance companies, seeking damages for personal injuries Dewey Saxon claimed to have sustained while he was delivering computer equipment to a building owned by the State Docks. Edna Saxon sought damages for loss of consortium. The Saxons alleged negligence and wantonness on the part of the State Docks, Dutton, and Daniels; they sought to recover insurance proceeds directly from the insurance carriers pursuant to Ala. Code 1975, § 33-1-25. The State Docks, Dutton, and Daniels moved for a summary judgment, invoking the doctrine of sovereign immunity under Article I, § 14, Alabama Constitution, as a defense to the Saxons' claims. The insurance carriers also moved for a summary judgment, arguing that the State Docks' liability insurance policy did not authorize a direct action against them. The trial court denied these motions. We granted the defendants' requests for permission to appeal and set aside the trial court's order denying the motions for summary judgment, holding that the State Docks, Dutton, and Daniels were protected under the doctrine of sovereign immunity from liability in connection with Dewey Saxon's accident. We also held that the State Docks' liability insurance policy was not a "sham"; however, because the trial court had not ruled on them, we did not address the Saxons' arguments that § 33-1-25 and the liability insurance policy authorized them to file a direct action against the insurance carriers. We remanded the case for further proceedings consistent with our opinion. See Alabama State Docks v. Saxon, 631 So. 2d 943 (Ala. 1994).

On remand, the trial court entered a summary judgment for the insurance carriers, ruling as a matter of law that neither § 33-1-25 nor the insurance policy authorized the Saxons to sue the insurance carriers directly. The Saxons appealed, again arguing that they had either a statutory or a contractual right to maintain a direct action against the insurance carriers. We affirm.

It is a well-recognized rule that when the liability of an insurer to pay for injuries suffered by a third party is predicated on the establishment of the liability of its insured to that third party, a direct action by the third party against the insurer is not permitted under Alabama law until the third party has obtained a judgment against the insured. Of course, this rule would not be applicable in this case if § 33-1-25 or the State Docks' liability insurance policy authorized a direct action by the Saxons against the insurance carriers, because in such a case the insurance carriers' obligation to pay for Dewey Saxon's injuries would not be predicated on the establishment of legal liability on the part of the State Docks. See State Farm Fire & Casualty Co. v. Green, 624 So. 2d 538 (Ala. 1993).

The Saxons contend that the third clause of the third sentence in § 33-1-25 authorizes a direct right of action by an injured third party against the State Docks' insurance carriers unless the insurance policy expressly prohibits such an action. Section 33-1-25 reads as follows:

"The state docks department is hereby authorized to provide insurance covering loss or damage to its properties, or any properties of others in its custody, care or control, or any properties as to which it has any insurable interest, caused by fire or other casualty; and may likewise provide insurance for the payment of damages on account of the injury to or death of persons, and the loss of or destruction of properties of others; and may pay the premiums thereon out of the revenues of the department. Nothing herein shall be construed to authorize or permit the institution of any civil action or proceeding in any court against the department for or on account of any matters referred to in this section; provided, that any contracts of insurance herein authorized may, in the discretion of the director of the department, provide for a direct right of action against the insurance carrier for the enforcement of any such claims or causes of action. The liability under any such policy or contract of insurance, arising out of such facts and circumstances as would bring such claim or cause of action within the provisions of chapter 5 of Title 25 of this Code, if the department were subject to the provisions of said law, shall be governed by the provisions of said law; provided, however, that the director of the state docks department may increase the hospital and medical liability coverage if in his opinion he deems such increase of such liability coverage to be in the best interests of the department; the liability in all other cases from any such policy or contract of insurance, except to the extent expressly stated to the contrary therein, shall be the same as that imposed by law upon private persons, firms or corporations in like circumstances."

The insurance carriers contend that the Saxons are reading the third clause in the last sentence of this section out of context and that the language relied on by the Saxons has nothing to do with whether a direct action can be maintained against the insurance carriers. They argue that judicial acceptance of the Saxons' construction of § 33-1-25 would completely thwart the legislative intent behind the statute.

In John Deere Co. v. Gamble, 523 So. 2d 95, 99-100 (Ala. 1988), this Court noted the rules of statutory construction that are applicable here:

"'The fundamental rule of statutory construction is to ascertain and give effect to the intent of the legislature in enacting the statute. Advertiser Co. v. Hobbie, 474 So. 2d 93 (Ala. 1985); League of Women Voters v. Renfro, 292 Ala. 128, 290 So. 2d 167 (1974). If possible, the intent of the legislature should be gathered from the language of the statute itself. Advertiser Co. v. Hobbie, supra; Morgan County Board of Education v. Alabama Public School & College Authority, 362 So. 2d 850 (Ala. 1978). If the statute is ambiguous or uncertain, the court may consider conditions which might arise under the provisions of the statute and examine results that will flow from giving the language in question one particular meaning rather than another. Studdard v. South Central Bell Telephone Co., 356 So. 2d 139 (Ala. 1978); League of Women Voters v. Renfro , supra.'

" Clark v. Houston County Comm'n, 507 So. 2d 902, 903-04 (Ala. 1987). In deciding between alternative meanings to be given to an ambiguous or uncertain statutory provision, we will not only consider the results that flow from assigning one meaning over another, but will also presume that the legislature intended a rational result, see State v. Calumet & Hecla Consol. Copper Co., 259 Ala. 225, 66 So. 2d 726 (1953); Crowley v. Bass, 445 So. 2d 902 (Ala. 1984) (dictum); 2A N. Singer, Sutherland Statutory Construction § 45.12 (Sands 4th ed. 1984), one that advances the legislative purpose in adopting the legislation, see Mobile County Republican Executive Committee v. Mandeville, 363 So. 2d 754 (Ala. 1978), that is 'workable and fair,' State v. Calumet & Hecla Consol. Copper Co., supra; Ex parte Hayes, 405 So. 2d 366 (Ala. 1981), and that is consistent with related statutory provisions, see Tate v. Teague, 431 So. 2d 1222 (Ala. 1983)...."

Section 33-1-25 consists of three sentences. The first sentence, in pertinent part, provides that the State Docks is authorized to provide insurance "for the payment of damages on account of the injury to or death of persons" and that the premiums for such liability coverage may be paid out of the revenues of the State Docks Department. This sentence is clear enough. The second sentence states that nothing in § 33-1-25 should be construed to authorize or permit a civil action against the State Docks, and that the director of the State Docks, in his discretion, may provide in the insurance policy for a direct right of action by an injured third party against the State Docks' insurance carriers. Again, this sentence is clear on its face. The third sentence, however, is more problematic. The first clause of that sentence provides that "the liability under any such policy or contract of insurance [a policy authorized to be purchased by the State Docks], arising out of such facts and circumstances as would bring such claim or cause of action within the provisions of chapter 5 of Title 25 of this Code [the Workers' Compensation Act], if the department were subject to the provisions of [that] law, shall be governed by the provisions of [that] law...." By including this language in the statute, the legislature apparently intended not only to authorize the State Docks to enter into contracts of insurance for the indemnification of its employees' losses due to on the job accidents, but also to extend to them all of the benefits of the Workers' Compensation Act. See Hale v. United States Fidelity & Guaranty Co., 45 Ala. App. 379, 231 So. 2d 156 (Ala.Civ.App. 1970). The second clause of the third sentence authorizes the director of the State Docks to provide greater hospital and medical benefits to employees of the State Docks than are required under the workers' compensation laws, see Ala. Code 1975, § 25-5-77, if the director deems that to be in the best interests of the State Docks Department. The third clause of the third sentence, the one principally relied on by the Saxons and the one that causes the greatest confusion, states that the liability of the State Docks' insurance carriers "in all other cases ... shall be the same as that imposed by law upon private persons, firms or corporations in like circumstances," subject to any exclusions ...


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