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. Defendants.
MADELINE HUGHES HAIKALA UNITED STATES DISTRICT JUDGE
action, plaintiff American Chemicals & Equipment, Inc.
d/b/a American Osment contends that defendants Continental
Casualty Company and CNA Financial Corporation, Inc. breached
the terms of an employment practices liability policy that
the company issued to American Osment. American Osment
asserts breach of contract, bad faith, negligence, and
wantonness claims against the defendants.
2, 2017, the Court entered a memorandum opinion and order
denying American Osment's motion for summary judgment on
its breach of contract claim against Continental regarding
Continental's failure to provide a defense in an
underlying lawsuit that a former employee filed against
American Osment. (Doc. 11).
June 2, 2017 memorandum opinion and order, pursuant to
Federal Rule of Civil Procedure 56(f), the Court directed the
parties to examine a coverage issue that neither American
Osment nor Continental addressed in the summary judgment
briefs: whether the policy provides coverage for punitive
damages that would give rise to duty a defend the state court
considered the parties' arguments (see Doc. 46;
Doc. 47), and with the benefit of oral argument, the Court
finds in favor of American Osment on its breach of contract
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).
When considering a summary judgment motion, the Court must
view the evidence in the record in the light most favorable
to the non-moving party and draw reasonable inferences in
favor of the non-moving party. Bivens v. Bank of America,
N.A., 868 F.3d 915, 918 (11th Cir. 2017).
The Insurance Policy's Punitive Damages Clause
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). The policy 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 Employment Practices
Liability (or EPL) Coverage Part provides coverage for Loss
on account of a Claim against an Insured for a Wrongful
Employment Practice. (Doc. 11-2, p. 20).
the policy, the definition of “Loss” includes:
“punitive and exemplary damages and the multiplied
portion of multiplied awards (subject to this Policy's
other terms, conditions and limitations). Enforceability of
this paragraph shall be governed by such applicable law that
most favors coverage for such punitive, exemplary and
multiplied amounts.” (Doc. 11-2, p. 29). The EPL
defines “applicable law” to include the law of
the jurisdiction where the Insured is incorporated. (Doc.
11-2, p. 29). American Osment is incorporated in Alabama.
(Doc. 7, ¶ 1).
Allegations of Promissory Fraud in the Underlying State Court
the policy period, Steve Pate, a former American Osment
employee, sued the company in the Circuit Court of Jefferson
County, Alabama. In his state court complaint, Mr. Pate
alleged that the company failed to pay him the salary and
sales commission rate that the company's president
guaranteed him when he accepted an offer to work at American
Osment. (Doc. 11-3, pp. 1-3). Mr. Pate's complaint
contains a promissory fraud claim. (Doc. 11-3, p. 6).
support of his fraud claim, Mr. Pate alleged that before he
entered an employment agreement with American Osment, the
company's president “represented that he would pay
Pate $120, 000.00 plus commissions at the rate of thirty-six
percent (36%).” (Doc. 11-3, p. 6, ¶ 36; see
also Doc. 11-3, p. 1, ¶ 2). According to Mr. Pate,
“[a]t the time these statements were made, [American
Osment's president] had no intention of paying Pate $120,
000.00 and thirty-six percent (36%) commissions but instead,
only intended to pay him [Pate] $100, 000.00 and thirty-two
percent (32%) commissions.” (Doc. 11-3, p. 6, ¶
36; see also Doc. 11-3, p. 1, ¶ 3). Mr. Pate
alleged that he “believed the representations”
that American Osment's president made, and, “in
reasonable reliance on those representations, ” entered
an employment agreement with the company to work as ...