United States District Court, N.D. Alabama, Southern Division
AMERICAN CHEMICALS & EQUIPMENT, INC. d/b/a AMERICAN OSMENT, Plaintiff,
CONTINENTAL CASUALTY COMPANY and CNA FINANCIAL CORPORATION, INC. Defendant.
MEMORANDUM OPINION AND ORDER.
MADELINE HUGHES HAIKALA UNITED STATES DISTRICT JUDGE.
American Chemicals & Equipment, Inc. d/b/a American
Osment brings this action against defendants Continental
Casualty Company and CNA F in ancial Corporation, Inc.
alleging, among other things, that Continental breached the
terms of an employment practices liability policy that the
company issued to American Osment. (Docs. 1 & 7).
American Osment r e lie s on broad language in a general
provision in the policy and argues that the general provision
obligated Continental to provide a defense to American Osment
in a state court action even if the state court claim is not
covered under the policy. (Docs. 10 & 37). American
Osment attempts to advance its duty to defend theory on
behalf of a class of “all other policyholders of
Defendant Continental, whose policy language regarding the
duty to defend claims mirrors the policy language in
Plaintiff's policy, and who have reported claims, as that
term is defined in the policy, to Defendant Continental for
which Defendant Continental has refused to provide a
defense.” (Doc. 7, p. 9).
Osment seeks summary judgment on its breach of contract claim
against Continental regarding Continental's failure to
provide a defense in the underlying lawsuit against American
Osment. (Doc. 11). Continental seeks summary
judgment on American Osment's class action claim and
moves to strike the class allegations in American
Osment's complaint. (Docs. 29 & 31). Because American
Osment's interpretation of its policy does not withstand
scrutiny under Alabama's rules of contract
interpretation, the Court denies American Osment's motion
for summary judgment. The Court grants Continental's
motion to strike and denies Continental's motion for
summary judgment as moot. (Doc. 42). For the reasons stated
below, the Court directs the parties to examine a coverage
issue that neither American Osment nor Continental addressed
in the summary judgment briefs.
Summary Judgment Standard
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). Absent ambiguity, the interpretation of
an insurance policy presents a question of law which a court
may resolve summarily. See e.g., Giddens v. Equitable
Life Assur. Soc. of U.S., 445 F.3d 1286, 1297 (11th Cir.
2006); Technical Coating Applicators, Inc. v. U.S.
Fidelity Guar. Co., 157 F.3d 843, 844 (11th Cir. 1998);
see also Cool Temp., Inc. v. Pennsylvania Nat. Mut. Cas.
Ins. Co., 148 So.3d 448, 454 (Ala. 2013). When
considering a summary judgment motion, “[t]he court
need consider only the cited materials, but it may consider
other materials in the record.” Fed.R.Civ.P. 56(c)(3).
Relevant Facts and Procedural Background
issued the employment practices liability policy at issue
--Epack Extra policy number 26764149 -- to American Osment on
February 10, 2012. (Doc. 11-2, pp. 5-6). Th e p olicy was in
force until May 9, 2014. (Id., pp. 5-6, 9). The
policy includes a set of general terms and conditions, a
specific Employment Practices Liability Coverage Part which
contains the insuring agreement, and a glossary of defined
terms. (See Doc. 11-2). The relevant provisions in
each section of the policy are as follows:
General Terms and Conditions
are 24 separate sections in the general terms and conditions
portion of the policy. Section I is titled “Terms and
Conditions” and provides in part:
If any provision in the General Terms and Conditions is
inconsistent or in conflict with the terms and conditions of
any Coverage Part, the terms and conditions of such Coverage
Part shall control for purposes of that Coverage Part.
(Doc. 11-2, p. 10).
XXI is titled “Defense/Settlement/Mediation/Pre-Claim
Assistance.” This section of the general terms and
with respect to Liability Coverage Parts, . . .
The insurer has the right and duty to defend all Claims even
if the allegations are groundless, false or fraudulent. The
Insurer shall have the right to appoint counsel and to make
such investigation and defense of a Claim as it deems
necessary. Alternatively the Insurer may, at its option, give
its written consent to the defense of any such Claim by the
Insureds. The Insurer's obligation to defend any Claim or
pay any Loss, including Defense Costs, shall be completely
fulfilled and extinguished if the applicable limit of
liability has been exhausted by payment of Loss.
(Doc. 11-2, p. 16) (emphasis added).
Employment Practices Liability Coverage Part
Employment Practices Liability (or EPL) Coverage Part
describes the scope of the insuring agreement. The EPL
states, in pertinent part:
The Insurer shall pay on behalf of Insured that Loss, in
excess of the retention and up to the applicable limit of
liability, resulting from any Claim first made against the
Insureds during the Policy Period . . . by or on behalf of 
a natural person who is an Employee . . . for a Wrongful
Employment Practice as described in paragraphs 1 through 11
of the definition of Wrongful Employment Practice [or] any
other natural person, for a Wrongful Employment Practice but
solely to the extent that such Wrongful Employment Practice
is as described in paragraph 12 of the definition of Wrongful
(Id., pp. 20-21).
Coverage Part also lists exclusions from coverage, including
six exclusions that apply to all Loss and two exclusions that
apply to Loss other than Defense Costs. (Id.). Among
the exclusions that apply to all Loss, the following
The Insurer shall not be liable to pay any Loss under this
Coverage Part in connection with any Claim made against any
Insured [. . .] based upon or arising out of any actual or
alleged violation of . . . any  federal, state or local
statutory law or common law ...