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Canal Insurance Co. v. Butler

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

January 22, 2019

CANAL INSURANCE COMPANY, Plaintiff,
v.
MICHAEL BUTLER, et al., Defendants.

          MEMORANDUM OF OPINION

          L. SCOTT COOGLER, UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiff Canal Insurance Company's (“Canal”) motion for summary judgment. (Doc. 25.) The motion has been briefed and is ripe for review. For the reasons stated below, Canal's motion for summary judgment (doc. 25) is due to be denied.

         I. Background[1]

         This is a declaratory judgment action seeking a determination of the parties' respective rights and obligations under an insurance policy issued by Canal to Defendant Alan Farmer Trucking, Inc. (“Alan Farmer”). Defendant Sheridan Logistics, Inc. (“Sheridan”) is listed as an additional insured in the policy. On September 14, 2017, Defendant Michael Butler (“Butler”) filed an underlying state court action against Alan Farmer and Sheridan. In the state court action, Butler alleges that he was injured while working as an independent contractor transporting military vehicles for Alan Farmer and Sheridan. Butler asserts that as he was unloading a tactical vehicle from a trailer the vehicle flipped and injured him. Both Alan Farmer and Sheridan dispute that Butler had any duty to unload the vehicle.

         Although the incident that forms the basis of the underlying state court action occurred on January 9, 2017, it was not reported to Canal until October 4, 2017, after Butler filed suit. Canal is providing a conditional defense to Alan Farmer and Sheridan in the underlying action under a complete reservation of rights. In the insurance policy at issue, Canal agreed to defend Alan Farmer and Sheridan in the following provision:

         SECTION II - COVERED AUTOS LIABILITY COVERAGE

         A. Coverage

We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto.”
. . . .
We have the right and duty to defend any “insured” against a “suit” asking for such damages or a “covered pollution cost or expense”. However, we have no duty to defend any “insured” against a “suit” seeking damages for “bodily injury” or “property damage” or a “covered pollution cost or expense” to which this insurance does not apply.

(See Doc. 1-2 at 33.)

         Canal's insurance coverage is subject to an “injury to employee” exclusion. This exclusion provides that the insurance coverage does not apply to bodily injury to an employee of the insured arising out of the employee's employment with the insured or performance of “duties related to the conduct of the ‘insured's' business.” (See Id. at 34-35.) A separate policy provision contains the following definition of the term employee: “‘Employee” includes a ‘leased worker'. ‘Employee' does not include a ‘temporary worker.'” (See Id. at 42.) Canal's insurance coverage is also subject to the following condition precedent:

2. Duties In The Event of Accident, Claim, Suit Or Loss
We have no duty to provide coverage under this policy unless there has been full compliance with the following duties:
a. In the event of “accident”, claim, “suit” or “loss”, you must give us or our authorized representative prompt notice of the “accident” or “loss”. Include:
(1) How, when and where the “accident” or ...

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