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Auto-Owners Insurance Company v. Small

United States District Court, N.D. Alabama, Southern Division

March 13, 2017

AUTO-OWNERS INSURANCE COMPANY, Plaintiffs,
v.
STANLEY SMALL AND ROBERT A. BOYD, Defendants.

          MEMORANDUM OPINION

          ABDUL K. KALLON UNITED STATES DISTRICT JUDGE

         Auto-Owners Insurance Company (“Auto-Owners”) filed this action against Stanley Small and Robert Boyd, asking the court for a judgment declaring that it has no duty to defend or indemnify Small “in the underlying lawsuit designated as Robert A. Boyd vs. Theodore Mason, et al; 2:14-cv-02290-HGD.” Doc. 1 at 11 (emphasis omitted). The court has for consideration Auto-Owners' motion for summary judgment, doc. 14, which is fully briefed, docs. 14-1; 17; 18; 19; 21, and ripe for review. Upon consideration, the court concludes that the motion is due to be granted, and a declaratory judgment entered in Auto-Owners' favor.

         I. STANDARD OF REVIEW

         Under Federal Rule of Civil Procedure 56(a), summary judgment is proper “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.” “Rule 56(c) 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 Corp. v. Catrett, 477 U.S. 317, 322 (1986) (alteration in original). The moving party bears the initial burden of proving the absence of a genuine dispute of material fact. Id. at 323. The burden then shifts to the non-moving party, who is required to go “beyond the pleadings” to establish that there is a “genuine issue for trial.” Id. at 324 (internal citations and quotation marks omitted). A dispute about a material fact is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         The court must construe the evidence and all reasonable inferences arising from it in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); see also Anderson, 477 U.S. at 244 (all justifiable inferences must be drawn in the non-moving party's favor). Any factual dispute will be resolved in the non-moving party's favor when sufficient competent evidence supports that party's version of the disputed facts. But see Pace v. Capobianco, 238 F.3d 1275, 1276-78 (11th Cir. 2002) (a court is not required to resolve disputes in the non-moving party's favor when that party's version of events is supported by insufficient evidence). However, “mere conclusions and unsupported factual allegations are legally insufficient to defeat a summary judgment motion.” Ellis v. England, 432 F.3d 1321, 1326 (11th Cir. 2005) (citing Bald Mountain Park, Ltd. v. Oliver, 863 F.2d 1560, 1563 (11th Cir. 1989)). Moreover, “[a] mere ‘scintilla' of evidence supporting the opposing party's position will not suffice; there must be enough of a showing that a jury could reasonably find for that party.” Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990) (citing Anderson, 477 U.S. at 252).

         II. FACTUAL BACKGROUND

         Robert Boyd filed a lawsuit against Stanley Small, alleging that he “is the victim of a fraudulent investment scam(s)” perpetrated by Small and other defendants, who “enticed Boyd to invest in an alleged foreign trading platform.” Doc. 14-4 at 3.[1] For the period at issue, Auto-Owners insured Small under a homeowner's insurance policy with a personal liability limit of $500, 000. See generally doc. 14-3. Although Boyd served the summons and complaint on October 25, 2014, see doc. 14-20 at 2, Small failed to alert Auto-Owners of the lawsuit until August 18, 2015, see doc. 14-17 at 2. Small claims he provided late notice because his wife suffered a stroke, followed by “124 days of hospitalization, ” and that his wife required “full time care on a 24 hour-a-day basis” until her death on June 16, 2015. See doc. 17-2 at 3-4. Auto-Owners currently represents Small under a reservation of rights. See doc. 14-9 at 2.

         III. ANALYSIS

         Auto-Owners contends that it is entitled to summary judgment because (1)

         Small failed to alert Auto-Owners of the underlying lawsuit “as soon as possible” pursuant to the policy, and/or because (2) the policy does not cover the types of alleged damages for which Boyd seeks recovery in the underlying suit. The court addresses these arguments below.

         A. Small had a valid reason for failing to notify Auto-Owners of the underlying lawsuit within a reasonable time.

         The policy at issue required Small to notify Auto-Owners “as soon as possible” of the need for personal liability protection in the event of “bodily injury, property damage, or personal injury.” Doc. 14-3 at 39. The Alabama Supreme Court has interpreted similar notice provisions as requiring an insured to notify the insurance company “within a reasonable time in view of the facts and circumstances of the case.” Pharr v. Cont'l Cas. Co., 429 So.2d 1018, 1019 (Ala. 1983). Here, the parties agree that Small informed Auto-Owners of Boyd's lawsuit approximately ten months after receiving notice of the suit. See doc. 17 at 19. Auto-Owners therefore contends that “Mr. Small did not satisfy a condition precedent to coverage, ” and that it “has no duty to continue providing defense coverage and no duty to indemnify Mr. Small under the Policy.” Doc. 14-1 at 17.

         To support its contention, Auto-Owners cites Pharr v. Continental Casualty Co., 429 So.2d 1018, 1019-20 (Ala. 1983) (eight-month delay unreasonable as a matter of law), and Southern Guaranty Insurance Co. v. Thomas, 334 So.2d 879, 883 (Ala. 1976) (six-month delay unreasonable as a matter of law). Doc. 14-1 at 17. These authorities are distinguishable, however, because, in Pharr, the insured provided no “excuse for the delay, ” 429 So.2d at 1019, and, in Thomas, the insured claimed that he thought the policy did not provide coverage and/or that he was not liable for the underlying accident, 334 So.2d at 883-84. Accepting the non-movant's factual allegations as true, as this court must do, Small delayed providing notice to Auto-Owners because of his wife's stroke and his resulting responsibility to provide constant care for her until her death. Therefore, because the reasonableness of a delay is often a factual issue, see, e.g., Dill v. Colonial Ins. Co., 569 So.2d 385, 386 (Ala. 1990) (twenty-two months); State Farm Fire & Casualty Co. v. Hartford Accident & Indem. Co., 347 So.2d 389, 391-92 (Ala. 1977) (six months); Hackleburg Church of Christ v. Great Am. Ins. Cos., 675 So.2d 1309, 1311 (Ala. Civ. App. 1995) (seven years), the court will not grant summary judgment on this basis.

         B. The policy does not protect Small against ...


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