United States District Court, N.D. Alabama, Southern Division
R. DAVID PROCTOR, District Judge.
This case is before the court on Defendant's Motion for Summary Judgment (Doc. 52) and Plaintiff's Motion for Summary Judgment (Doc. 55), both filed November 3, 2014. These motions have been fully briefed. ( See Docs. 53, 55-1, 57, 59, 62, 64). Although relatively few facts are genuinely disputed in this action, the court concludes that those facts which are disputed are material and preclude summary judgment.
This insurance coverage dispute arises from a car wreck that killed two persons and sent another to prison. On June 27, 2012, while driving home from work, Jason Stewart swerved into an oncoming lane and struck a motorcycle, killing the driver and passenger. Jason worked for Defendant Piggly Wiggly Alabama Distributing Company ("Defendant") and was driving a company-owned vehicle at the time of the accident. A jury eventually convicted Jason of criminally negligent homicide while driving under the influence.
At the time of the accident, Defendant held an umbrella insurance policy with Plaintiff Continental Casualty Company ("Plaintiff"). Plaintiff paid over $8 million under this policy to settle a claim deriving from the accident. Now, Plaintiff seeks to recoup this payment. Specifically, Plaintiff seeks a declaratory judgment that Plaintiff is entitled to rescind its policy entirely because Defendant misrepresented that it was applying certain safety controls to all of its drivers, while, in actuality, it selectively excused Jason Stewart from compliance. Alternatively, Plaintiff seeks a declaration that, under the policy's "expected or intended injury" exclusion, Plaintiff is excused from paying Defendant's claim related to the June 27, 2012, accident. Defendant counters by asserting that Plaintiff is engaged in "reverse underwriting, " by seeking to void payment on a legitimate claim.
For the reasons outlined below, and after careful review of the record and briefs, the court concludes that both Defendant's Motion for Summary Judgment (Doc. 52) and Plaintiff's Motion for Summary Judgment (Doc. 55) are due to be denied.
I. Standard of Review
Under Federal Rule of Civil Procedure 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The party asking for summary judgment always bears the initial responsibility of informing the court of the basis for its motion and identifying those portions of the pleadings or filings which it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. Once the moving party has met its burden, Rule 56(e) requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial. See id. at 324; Gargiulo v. G.M. Sales, Inc., 131 F.3d 995, 999 (11th Cir. 1997) (facing a "properly supported motion for summary judgment, [the nonmoving party] must come forward with specific factual evidence, presenting more than mere allegations").
The substantive law will identify which facts are material and which are irrelevant. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All reasonable doubts about the facts and all justifiable inferences are resolved in favor of the nonmovant. See Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. See id. at 249.
Defendant is a wholesale cooperative grocery distributor based out of Bessemer whose shareholders and customers own independent retail grocery stores throughout the Southeast. (Doc. 54-2, Bullard Decl. ¶ 2). Defendant has approximately 500 employees. (Doc. 54-1, Bullard Dep. 59:15-18, 81:20-82:2). Currently David Bullard is Defendant's CEO ( id. at 135:16-19), although he previously held a position in Human Resources. Defendant has a fleet of vehicles, including tractor trailers driven by commercially licensed drivers (which distribute the groceries) and private passenger vehicles driven by other employees. ( See Doc. 54-2, Bullard Decl. ¶ 2).
B. Defendant's Insurance Policies
In addition to its primary general liability insurance and auto liability insurance,  Defendant bought three (renewable) one-year umbrella policies from Plaintiff which were in effect from August 1, 2010 to August 1, 2013. ( See Doc. 54-30, Exs. 10, 12, 22 to Tegtman Dep., at 13-28, 33-34, 90-136). The relevant underwriting and renewal process for each successive policy is detailed below.
1. 2010 Insurance Policy
Plaintiff does not seek rescission of the 2010 Policy. Nevertheless, it is instructive to review the events leading up to its issuance because the 2010 policy application and the application process are significant as it relates to the 2011 policy issued to Defendant.
On July 8, 2010, Defendant sent Plaintiff a submission for umbrella coverage through Statehouse Casualty Managers ("Statehouse"), Plaintiff's wholesale broker. (Doc. 56-1 at 2). An email from Statehouse to Plaintiff's 2010 underwriter, Rosemary Sica, suggests that Plaintiff requested information on Defendant's "safety controls" on the same day. (Doc. 54-29, Ex. 4 to Tegtman Dep., at 102). The next morning, on Friday, July 9, 2010, Statehouse requested information regarding Defendant's "safety controls" from Johnson & Johnson, the intermediary broker, who in turn requested the information from Defendant's insurance agent, Clark Associates, Inc. ("Clark"). (Doc. 56-1, at 4). Statehouse advised Defendant's agent that the underwriter for the policy "sounded like she wanted to have [information about the safety controls] before quoting." (Id. ). Later, at or around 10:00 a.m., Johnson & Johnson sent Statehouse a responsive email from Clark with an attached PDF document named "FLEETSAF.pdf." (Doc. 56-1, at 3). The attached document included pages fourteen to thirty of a document titled "DRIVER SAFETY" (the "Fleet Safety Manual" or the "Manual"). (Doc. 56-1, at 3; see Doc. 56-2). Very shortly thereafter, Statehouse sent Sica an email stating as follows:
Attached is the fleet safety information. Please let me know if you need anything else to consider. We do need to have something to them by today unfortunately.
(Id. at 2). The only attachment to that email was the Fleet Safety Manual. (Doc. 56-2, at 3-19). Neither Plaintiff nor its agents requested any additional information regarding the Manual. (Doc. 54-28, Seigel Dep. 189:24-197:25). Later, however, Sica asked Statehouse:
Can you tell me what controls they [ i.e., Defendant] have for the 55 [private passenger vehicles.] I assume that the sales force is driving these vehicles.
Do they check [Motor Vehicle Records]?
Do they have a Personal Use Policy for the drivers of the [private passenger vehicles]?
No drivers under 25 or over 65?
(Id. at 132). The same day, Statehouse replied that Defendant checked its drivers' Motor Vehicle
Records, had a Personal Use Policy in effect, but that one or two drivers might be over 65 years old. (Id. at 131). In response, Plaintiff's underwriter stated:
I assume the Personal Use Policy extends the use to spouses or does it limit the use to employees only. This is my last question.... I promise.
I am finishing up my referral now and should have an answer for you on Monday.
(Id. ). That afternoon, Statehouse replied that the Personal Use Policy allowed for spousal use in limited circumstances. (Id. at 130).
On July 12, 2010, Sica referred the submission to her supervisor for approval, noting that the main coverage exposure was auto, but that there was a "Fleet Safety Program" in place:
There are 93 tractors, 55 [private passenger vehicles] and 1 light truck.... The [private passenger vehicles] are used by the managers and sales force. The risk has a Fleet Safety Program... which includes MVR checks, driver training, drug testing, accident investigation and driver incentives. DOT regulations are strictly enforced. There is a personal use policy in place for the [private passenger vehicles], only the employees are allowed to drive the vehicles for business purposes no pleasure use allowed. The underlying auto has a $1m limit.
(Doc. 56-3, at 3). Defendant suggests that that this communication demonstrates that Plaintiff (or at least one of its underwriters) understood Defendant had "personal use policies" in place for private passenger vehicles and a separate "Fleet Safety Program" only for its tractor trailers.
After consummating the underwriting process, Plaintiff issued Defendant a policy (the "2010 Policy") with a $25 million limit for the policy period August 1, 2010, to August 1, 2011. ( See Doc. 56-4).
2. 2011 Renewal Policy
Plaintiff issued a renewal policy to Defendant for the policy period August 1, 2011, to August 1, 2012 (the "2011 Renewal Policy"). (Doc. 56-9, 2011 Renewal Policy). In May 2011, CRC Insurance Services ("CRC") contacted Plaintiff's underwriter, Jarrell Hall, and informed Hall that CRC was the new broker of record for the 2011 Renewal Policy. (Doc. 56-32, Hall Decl. ¶ 6). Due to this change in broker, Defendant's account was reassigned to the Birmingham office, where Hall became the handling underwriter. (Id. at ¶ 7). CRC submitted pertinent underwriting information from the prior year to Hall in order to begin the process of underwriting the 2011 Renewal Policy. ( See Doc. 56-5).
Hall reviewed and relied on the information contained in the 2010 underwriting file, including the Fleet Safety Manual, in determining whether to bind coverage and calculating Defendant's premium. (Doc. 56-6, Hall Dep. 99:5-10, 105:13-106:17; 111:3-112:3; Doc. 56-32, Hall Decl. ¶ 13). Hall asked CRC whether Defendant's Fleet Safety Manual remained in force. (Doc. 56-6, Hall Dep. 105:22-106:10; 110:9-14; Doc. 56-32, Hall Decl. ¶ 9). CRC advised Hall that the Safety Program was still in place. (Doc. 56-6, Hall Dep. 101:21-102:5, 108:20-22, 110:6-14; Doc. 56-32, Hall Decl. ¶ 11). In another exchange, CRC referenced Hall's need for certain updated information on Defendant's "fleet." (Doc. 54-30, Ex. 11 to Tegtman Dep., at 29 (emphasis added)). Fourteen minutes later, CRC followed up with Hall suggesting "I just spoke to producer and [premiums] won't change.... Producer monitors fleet regularly and still has 93 tractors of which 10 sit in terminal and only used for backup purposes." (Id. ).
It is undisputed that Hall never asked any question about who the Fleet Safety Manual applied to, whether there had been any violations of the Fleet Safety Manual, or other questions about its enforcement. (Doc. 54-28, Seigel Dep. 189:24-197:25; see also Doc. 54-30, Exs. 10-21 to Tegtman Dep.). According to Hall, individual employee's driving record, accident history, and drug test history were not important, relevant, or material to him in underwriting. (Doc. 56-6, Hall Dep. 154:12-17, 177:6-178:10). Hall has testified that he believed the Fleet Safety Manual was applicable to all drivers of Defendant's vehicles, not just Defendant's tractor trailers. (Id. at 115:23-116:16; Doc. 56-32, Hall Decl. ¶ 12). However, Hall also testified that no one ever told him that the Manual applied to personal passenger vehicles. (Hall Dep. 116:7-16).
Regardless, Hall relied upon the Manual when making his referral to management for approval. (Doc. 56-32, Hall Decl. ¶ 15). Mirroring Sica's earlier 2010 report, Hall documented that Defendant had a "Fleet Safety Program" in effect and that DOT regulations were strictly enforced for Defendant's tractor trailers, personal passenger vehicles, and one light truck. (Doc. 56-8, Monoline Umbrella Risk Documentation, at 4, 7; Doc. 56-32, Hall Decl. ¶ 15). In reliance on the above-mentioned considerations, Plaintiff issued the 2011 Renewal Policy to Defendant. (Doc. 56-32, Hall Decl. ¶¶ 8-13). Plaintiff seeks rescission of the 2011 Renewal Policy.
3. 2012 Renewal Policy
Soon after Jason Stewart's June 27, 2012, accident, Plaintiff doubled Defendant's premium and issued Defendant a second policy renewal covering the policy period from August 1, 2012 to August 1, 2013 (the "2012 Renewal Policy"). Jason's accident occurred 35 days before the expiration of the 2011 Renewal Policy, and Plaintiff contends that "[b]y the time Plaintiff's underwriting department was notified of the accident, it was too late to non-renew the policy under the Alabama regulations." (Doc. 54-29, Tegtman Dep. 291:22-292:13). Although Plaintiff issued the 2012 Renewal Policy, Plaintiff notified Defendant that it would not renew for the 2013-2014 policy period. (Doc. 56-6, Hall Dep. 247:2-6). Plaintiff does not seek the rescission of the 2012 Renewal Policy.
B. Jason Stewart
On February 23, 2009, thirty-five year old Jason Stewart began working for Defendant as a maintenance supervisor of Defendant's Building and Grounds Department. (Doc. 54-1, Bullard Dep. 220:14-221:12; Doc. 54-4, J. Stewart Dep. 12:10-11, 292:2-4; Doc. 54-10, Reynolds Dep. 62:12-25, 111:19-112:23). Jason was the son of Defendant's then-CEO Dennis Stewart. (Id. at 31:20-23; Doc. 54-10, Reynolds Dep. 62:12-25; 111:19 to 112:23). Both Dale Reynolds (Defendant's Director of Operations) and David Bullard (Defendant's then-Human Resources Director and its current CEO) advised Dennis that they were opposed to hiring Jason due to nepotism problems and creating bad morale by appearing to provide Jason with preferential treatment. (Doc. 54-1, Bullard Dep. 221:13-223:15; Doc. 54-10, Reynolds Dep. 71:16-72:22). Notwithstanding Reynolds and Bullard's concerns, Defendant hired Jason and issued him a credit card and company truck. (Doc. 54-10, Reynolds Dep. 111:19-114:6).
2. Jason's Pain Medication and Drug Treatment
(a) Jason's History of Prescription Drug Use
Jason has a history of prescription drug use for pain management. Since April 2001, Jason has been regularly treated by David W. Cosgrove, M.D., at a pain management clinic due to permanent injuries he sustained as a passenger in a 1993 car wreck and as a driver in a 1995 wreck. (Doc. 54-4, J. Stewart Dep. 321:12-325:23; Doc. 54-5, Cosgrove Decl. ¶¶ 2-4). Dr. Cosgrove never thought Jason was a safety risk in working or driving a vehicle and never expected Jason to have an ...