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Ex parte Alfa Insurance Corp.

Supreme Court of Alabama

April 6, 2018

Ex parte Alfa Insurance Corporation et al.
v.
Alfa Insurance Corporation et al. In re: R.G. "Bubba" Howell, Jr., and M. Stuart "Chip" Jones

         Montgomery Circuit Court, CV-14-901893)

          PETITION FOR WRIT OF MANDAMUS

          BOLIN, JUSTICE.

         Alfa Insurance Corporation, ALFA Mutual General Insurance Corporation, ALFA Life Insurance Corporation, and ALFA Specialty Insurance Corporation (hereinafter referred to collectively as "Alfa") petition this Court for a writ of mandamus seeking review of an order entered by the Montgomery Circuit Court on December 18, 2015. Alfa requests this Court to order the circuit court to vacate its December 18, 2015, order and to grant its motion for a protective order.

         Although Alfa sets forth three issues for this Court's review, we review only one of those issues: Whether the circuit court had jurisdiction to enter the December 18, 2015, order and whether it exceeded its discretion by not setting that order aside. Our conclusion that the circuit court exceeded its discretion in entering the December 18, 2015, order compelling discovery pretermits discussion of the two discovery issues.

         Facts

         The issues presented by this petition are primarily procedural. However, a brief recitation of the underlying facts is necessary for a complete understanding of the case. R.G. "Bubba" Howell, Jr., and M. Stuart "Chip" Jones were insurance agents for an Alfa insurance agency in Mississippi. Their agency agreements with Alfa included an arbitration provision, as well as a provision requiring Howell and Jones to purchase "errors and omissions" insurance coverage.

         Howell and Jones purchased errors and omissions insurance policies from Alfa Mutual General Insurance Corporation ("the E&O policies"). The certificate of insurance for the E&O policies provided that Alfa, as the insurer, would

"pay on behalf of the Individual Insured all sums in excess of deductible amount for which Individual Insured is legally obligated to pay as damages as a result of CLAIMS FIRST MADE AGAINST INDIVIDUAL INSURED DURING THE COVERAGE PERIOD by reason of acts, errors, or omissions in the performance of Professional Services by the Individual Insured, provided that such acts, errors, or omissions occurred (i) when acting on behalf of [Alfa] or with the specific consent of [Alfa], and (ii) during the Coverage Period."

(Capitalization in original.) The certificate also sets forth three "key exclusions" to coverage under the E&O policies: "(1) Intentional, dishonest, fraudulent, etc., acts; (2) Commingling of funds; (3) Suits/claims by business enterprises owned by Individual Insured and not named on declarations."

         In 2012, Alfa accused Howell and Jones of selling competing products in contravention of their agency agreements; Howell and Jones, however, alleged that their actions had been approved by Alfa. Regardless, Alfa forced Howell to resign his position as an Alfa agent on December 31, 2012, and discharged Jones on January 1, 2013.

         Procedural History

         A. The First Arbitration Proceeding

         On March 27, 2013, Howell and Jones invoked the arbitration provision in their agency agreements by initiating separate arbitration proceedings against Alfa, seeking post-separation benefits and damages. On June 19, 2013, Alfa answered the complaints in arbitration and filed counterclaims against Howell and Jones alleging breach of contract, breach of fiduciary duty, fraudulent misrepresentation, suppression, and intentional interference with business relations.

         Howell's arbitration proceeding began on February 10, 2014; Jones's arbitration proceeding began on February 16, 2014. In March 2014, arbitrators awarded Howell and Jones post-separation benefits and arbitration fees. Alfa's counterclaims against Howell and Jones, however, remained pending.

         On May 23, 2014, Howell and Jones submitted insurance claims under the E&O policies demanding that Alfa defend and/or indemnify costs to combat Alfa's counterclaims against them. On June 4, 2014, Alfa denied Howell's and Jones's insurance claims on the basis that the E&O policies do not cover intentional torts. On July 9, 2014, Alfa voluntarily dismissed its counterclaims against Howell and Jones without prejudice.

         B. The State-Court Proceedings

         On November 13, 2014, Howell and Jones filed a complaint in the Montgomery Circuit Court asserting claims of breach of contract, bad faith, abuse of process, the tort of outrage, and conspiracy against Alfa. Howell and Jones alleged, among other things, that Alfa breached the E&O policies by refusing to provide them defense and/or indemnity coverage on the counterclaims and that Alfa had filed the counterclaims, which it knew were not covered under the E&O policies, in the arbitration proceedings for the purpose of causing Howell and Jones to incur thousands of dollars in unnecessary legal expenses.

         Along with their complaint, which they subsequently amended, Howell and Jones propounded discovery requests, including a request for admissions and a request for production of documents, in which they requested:

"1. Any and all claim files pertaining to the subject matter of [Howell and Jones's] complaint and amended complaint.
"2. Any and all legal department files pertaining to the subject matter of [Howell and Jones's] complaint and ...

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