Nationwide Property and Casualty Insurance Company v. Long

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

NATIONWIDE PROPERTY §

& CASUALTY INSURANCE CO., §

§

Plaintiff, §

§ Case No. 5:21-cv-1131-LCB

v. §

§

JEREMIAH LONG, Rochelle §

Long, J.L., J.L., J.L., Doris Bond, §

James Bond, and Charles Hopkins, §

§

Defendants. §

OPINION

Before the Court in this declaratory judgment action1 is Nationwide’s motion

for judgment on the pleadings.2 Nationwide contends that it owes no duty to defend

or indemnify Doris Bond3 with respect to an underlying state-court action arising

from a June 2021 vehicular collision. For the forthcoming reasons, the motion is due

to be granted in part and denied in part.

I. BACKGROUND

The following facts are undisputed.4

1 Nationwide seeks relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq.

2 Doc. 42.

3 Nationwide also requests similar relief with respect to Mr. James Bond and Mr. Charles Hopkins.

Those issues are squarely addressed in an opinion, entered contemporaneously herewith, on

Nationwide’s motion (Doc. 49) for default judgment.

4 “Defendant adopts and incorporates by reference the factual and procedural background set forth

in Plaintiff’s Motion for Judgment on the Pleadings.” Doc. 44 at 1 n.1.

A. The Policy

In March 2021, Nationwide Property & Casualty Insurance Co. issued to Ms.

Doris Bond an automobile-insurance policy.5 Its effective dates were March 19,

2021 to September 19, 2021.6 Ms. Bond was the sole named insured, and her 2014

Nissan Frontier S (“the Vehicle”) was the only covered vehicle.7 By way of

coverage, the Policy bound Nationwide to “pay damages . . . for which any ‘insured’

becomes legally responsible because of an auto accident” and to “settle or defend

. . . any claim or suit asking for these damages.”8 That provision additionally

provided that Nationwide would have no duty to defend Ms. Bond on any claim

beyond the scope of coverage.9

Incorporated within the Policy was Ms. Bond’s signed “Authorization To

Exclude A Driver.”10 Through that Authorization, Ms. Bond and Nationwide agreed

5 Doc. 3-2 at 6. The Court relies upon the parties’ written agreement (Docs. 3-2; 3-3) because its

contents are central to the present determination and its authenticity is unquestioned. FED. R. CIV.

P. 10(c) (“A copy of a written instrument that is an exhibit to a pleading is a part of the pleading

for all purposes.”). Though the agreement was attached to the original complaint (Doc. 1) and

Amended Complaint (Doc. 3), it was not attached to the latest complaint— Second Amended

Complaint (Doc. 38). Nevertheless, Nationwide filed the Second Amended Complaint for reasons

purely stylistic, namely to comport with this Court’s confidentiality order. (See Docs. 37; 38 n.1.)

6 Doc. 38 at 5 ¶ 19; Doc. 41 at 2 ¶ 19.

7 Doc. 38 at 5 ¶ 19; Doc. 41 at 2 ¶ 19. The Vehicle’s Vehicle Identification Number is

1N6AD0ER7EN722444; The Policy number is 7701J014719. Doc. 38 at 5 ¶ 19; Doc. 41 at 2 ¶ 19.

8 Doc. 3-2 at 23.

9 Doc. 3-2 at 24.

10 Doc. 3-3 at 2. For the curious reader, the Court notes that the Policy, supra note 3, was a renewed

(rather than originally issued) in March 2021. Doc. 38 at 5 ¶ 19; Doc. 41 at 2 ¶ 19. Ms. Bond

signed the Authorization to exclude Mr. Bond in June 2019; as Ms. Bond admits, the

Authorization—by its own terms—applied to the Policy as renewed in March 2021. Doc. 38 at 5

¶ 20; Doc. 41 at 2 ¶ 20.

that Nationwide’s duties to indemnify and defend would be altogether excluded

while “JAMES BOND is operating any of the vehicles to which the policy

applies.”11 The Policy’s “Named Driver Exclusion Endorsement” relatedly provided

the following: “With respect to all coverage under this policy, [Nationwide] will not

pay damages, expenses, or loss arising out of the maintenance or use of any auto or

trailer by the named excluded driver(s).”12 In addition, the Policy’s Declarations

section clearly denoted Mr. Bond’s status as an excluded driver.13

B. The Accident

On June 4, 2021—while the Policy was in effect—Mr. Bond was involved in

a three-car accident while driving the Vehicle.14 Mr. Bond veered into oncoming

traffic, struck the vehicle of Charles Hopkins, and, a bit farther along, collided with

a vehicle occupied by the Long family.15 Thereafter, the Longs filed suit in the

Circuit Court of Madison County, Alabama (“the underlying lawsuit”), through

which they presently seek money damages for injuries sustained during the

accident.16 From Ms. Bond, the Longs seek damages on a theory of negligent

11 Doc. 3-3 at 2 (emphasis in original).

12 Doc. 3-2 at 51.

13 Doc. 3-2 at 6.

14 Doc. 38 at 6 ¶ 23; Doc. 41 at 2 ¶ 14.

15 Doc. 38 at 6 ¶ 23; Doc. 41 at 2 ¶ 14.

16 Doc. 38 at 4 ¶ 18; Doc. 41 at 2 ¶ 18.

entrustment, specifically for Ms. Bond’s entrustment of the vehicle to an

incompetent driver (Mr. Bond).17

Nationwide subsequently filed this lawsuit. In its motion for judgment on the

pleadings, Nationwide argues that the Policy’s “Named Driver Exclusion

Endorsement” and “Authorization To Exclude A Driver” operate to absolve

Nationwide of any duty to indemnify or defend Ms. Bond under the circumstances

of the June 4 accident.18

II. LEGAL STANDARD

Rule 12(c) of the Federal Rules of Civil Procedure permits a party to request

judgment on the pleadings, which “is governed by the same standard as a motion to

dismiss under Rule 12(b)(6).” Carbone v. CNN, Inc., 910 F.3d 1345, 1350 (11th Cir.

2018). The analysis centers, in a word, on the “plausibility” of the nonmovant’s

position. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). If the nonmovant’s

opposition to judgment as a matter of law is plausible, then the motion is due to be

denied. Id. at 570.

III. DISCUSSION

Nationwide’s request for a determination of its duty to indemnify Ms. Bond

must be denied for want of judiciable ripeness. However, with respect to the issue

17 As addressed in the Court’s opinion on Nationwide’s motion (Doc. 49) for default judgment,

the Longs also seek damages from James Bond in the underlying lawsuit.

18 Doc. 38.

of its duty to defend Ms. Bond in the underlying lawsuit, Nationwide has

sufficiently demonstrated entitlement to judgment as a matter of law.

A. The indemnification issue presents no judiciable controversy.

“Article III of the United States Constitution limits the jurisdiction of federal

courts to cases and controversies of sufficient concreteness to evidence a ripeness

for review.” Digital Props., Inc. v. City of Plantation, 121 F.3d 586, 589 (11th Cir.

1997) (citing U.S. CONST. art. III, § 2, cl.1). A claim that “rests upon contingent

future events that may not occur as anticipated, or indeed may not occur at all” is not

ripe for adjudication. Texas v. United States, 523 U.S. 296, 300 (1988) (internal

quotation omitted). Thus, an insurer’s request for declaratory relief on the issue of

its duty to indemnify is not ripe for adjudication unless and until the underlying

action is resolved. Pa. Nat’l Mut. Cas. Ins. Co. v. Hethcoat & Davis, Inc., 339 F.

Supp. 3d 1248, 1257 (N.D. Ala. 2017). The perils of a premature judgment on the

issue are obvious: The plaintiff in the underlying suit could subsequently raise an

additional theory or claim that brings injuries within the scope of coverage, or the

insured could ultimately prevail in the underlying suit. Id. at 1258.

Here, no party alleges any facts indicating that the underlying lawsuit has

resulted in a judgment. Thus, the question of Nationwide’s duty to indemnify Ms.

Bond is not sufficiently ripe to constitute a controversy suitable for this Court’s

review; the Court is accordingly powerless to resolve Nationwide’s request for

declaratory relief thereon.

B. The Policy’s clear language excludes the duty to defend.

It is, however, “important to understand the difference between a claim that

concerns the insurance company’s duty to defend and a claim that concerns its duty

to indemnify (i.e., the duty of an insurer to pay a judgment against its insured).”

Hethcoat & Davis, 339 F. Supp. 3d 1248, 1257 at 1256 (emphasis in original) (citing

16 Couch on Insurance 3d § 227:21). Because the broader duty to defend arises far

earlier in time than does the duty to indemnify, “the duties must be analyzed

separately.” Id. (internal quotation omitted). And a request for declaratory judgment

regarding an insurer’s duty to provide a defense in an underlying lawsuit is ripe for

review upon the underlying suit’s filing. See id. at 1256–57 (“Federal courts in

Alabama have repeatedly resolved the issue of an insurer’s duty to defend based

upon the pleadings, and prior to resolution of the underlying lawsuit.”); see also,

e.g., Hanover Ins. Co. v. Superior Lab. Servs., Inc., 179 F. Supp. 3d 656, 670 (E.D.

La. 2016) (“Because the duty to defend does not depend on the outcome of the

underlying law suit, a duty-to-defend claim is ripe when the underlying suit is

filed.”).

Alabama law controls the Policy.19 And Alabama law’s application thereto

makes clear that Nationwide’s entitlement to declaratory relief on the duty-to-defend

issue cannot plausibly be contested.

As a threshold matter, the Court must determine what the Policy actually says.

The task is, relatively speaking, not burdensome in this case.

Insurance policies are subject to governance by the same law applicable to

contracts generally. Twin City Fire Ins. Co. v. Alfa Mut. Ins. Co., 817 So.2d 687, 691

(Ala. 2001). And insurers are no less entitled than any other party to have their

policies “enforced as written.” Id. Through an objective lens, the trial court

determines whether an insurance policy is ambiguous. Id. at 692. Where no

ambiguity clouds the parties’ intentions as manifested in the agreement, “the

construction of the contract and its legal effect become questions of law for the

court” as well. Reeves Cedarhurst Dev. Corp. v. First Amfed Corp., 607 So.2d 184,

186 (Ala. 1992).

The Policy here could hardly be less ambiguous—in fact, there exists no

dispute about the ordinary meaning of its terms. There persists only a question of

Alabama law’s application to thereto. See infra Part III(C). Nobody proffers

19 The Court’s jurisdiction over this dispute is grounded in the diversity statute, 28 U.S.C. § 1332.

Thus, the Court must apply the law of Alabama to resolve this contractual dispute. Manuel v.

Convergys Corp., 430 F.3d 1132, 1139 (11th Cir. 2005) (citing Klaxon Co. v. Stentor Elec. Mfg.

Co., 313 U.S. 487, 496 (1941)); see also Cherry, Bekaert & Holland v. Brown, 582 So.2d 502, 506

(Ala. 1991) (describing Alabama choice-of-law rule applicable to contractual disputes).

competing interpretations of the signed Authorization’s language (specifically, its

exclusion of accidents that occur while Mr. Bond “is” driving the Vehicle). And all

are in agreement that the dispute here concerns injuries alleged to have arisen from

an accident that occurred during Mr. Bond’s operation of the Vehicle on June 4,

2021.

The Policy’s clear language excuses Nationwide from any duty to defend Ms.

Bond in the underlying lawsuit, and the Court is bound to enforce the Policy’s

unambiguous terms. E.g., Johnson v. Allstate Ins. Co., 505 So.2d 362, 365 (Ala.

1987).

C. The arguments in opposition fail as a matter of law.

Both Ms. Bond and the Longs oppose Nationwide’s motion, but they assert

distinct legal arguments. The Longs argue that, under Alabama law, the Policy’s

clear language requires Nationwide to defend Ms. Bond on their negligent-

entrustment claim—namely, that the entrustment preceded Mr. Bond’s operation of

the Vehicle.20 Ms. Bond, on the other hand, argues that despite the Policy’s

unambiguous terms, Nationwide should nevertheless be equitably estopped from

refusing to defend her in the underlying lawsuit. Both arguments fail.

20 Doc. 43.

i. The Longs’ Argument

The Policy excludes Nationwide’s duty to defend claims for injuries arising

“while James Bond is operating” the Vehicle.21 That language, the Longs argue,

cannot apply to exclude their suit for “the separate tort of negligent entrustment,

committed by Ms. Bond, [which] occurred during a time period before James Bond

operated the vehicle.”22 For two primary reasons, the Longs have failed to plausibly

contest Nationwide’s entitlement to declaratory relief on the duty-to-defend issue.

First and foremost, in an action for negligent entrustment of a vehicle,

“negligent use by the one to whom it is entrusted is essential to recovery” under

Alabama law. Cooter v. State Farm Fire & Cas. Co., 344 So.2d 496, 499 (Ala. 1977)

(per curiam) (applying homeowner-insurance provision excluding coverage for

injuries arising from use of vehicle in negligent entrustment action against non-

operator for such injuries). In other words, the negligence of the entrustor and the

entrustee are “concurren[t] . . . dual elements.” Id.; see also Dutton v. State Farm

Mut. Auto Ins. Co., 383 So.2d 519, 521 (Ala. 1980) (Jones, J., dissenting) (recalling

that negligent entrustment and operation are “dual acts” under Alabama law).

Thus, the Longs cannot avoid the Policy’s unambiguous terms by arguing that

Ms. Bond handed the Vehicle over to Mr. Bond before he wrecked it. Alabama law

21 Doc. 3-3 at 2 (emphasis added).

22 Doc. 43 at 4 (emphasis in original).

forecloses their theory.23 Any negligence in Ms. Bond’s entrustment of the Vehicle

is not so “separate,” as the Longs allege, from Mr. Bond’s operation thereof.

Second, in construing an insurance contract, “a court must examine more than

an isolated sentence or term; it must read each phrase in the context of all other

provisions.” Twin City Fire, 817 So.2d at 691. So, Cooter aside, the Longs’ isolated

reading of one word within the signed Authorization ignores the context within

which it was written. For example, the Named Driver Exclusion clearly states that

Nationwide denies “all coverage” under the policy for claims “arising out of the . . .

use of [the Vehicle] by the named excluded driver(s).”24 The Court will not read one

word—“is”—in isolation and without consideration of the instrument in its entirety.

ii. Ms. Bond’s Argument

The Court next turns to Ms. Bond’s argument, which is likewise insufficient

to cast plausible doubt upon Nationwide’s entitlement to judgment as a matter of law

on the duty-to-defend issue.

Ms. Bond alleges that despite the Policy’s clear language, Nationwide should

be estopped from denying her a defense because Nationwide requested that counsel

23 Cooter, 344 So.2d at 499 (rejecting argument that “negligent entrustment of the vehicle, and not

its use, is the basis of insured’s alleged liability” because the argument “does not comport with the

elements that make up this tort of negligent entrustment”). The principle makes good sense when

one considers the alternative, which would permit recovery absent any showing that the entrustee-

driver “actually caused the injury by his negligent use of the vehicle.” Id.

24 Doc. 3-2 at 51.

for the Longs allow Ms. Bond an additional 30 days to answer their complaint.25

Nationwide’s request, Ms. Bond alleges, amounts to an exercise of exclusive control

over her defense and thus a waiver of Nationwide’s contractual right to deny her a

defense.26 But the problem for Ms. Bond is that her argument rests upon a false

premise.

“The doctrine of estoppel is said to be founded upon principles of equity,

morality and justice.” Campbell Piping Contractors, Inc. v. Hess Pipeline Co., 342

So.2d 766, 770 (Ala. 1977). To that end, where “a liability insurer, by assuming the

defense of an action, leads one to believe that liability to do so is not denied,” the

insurer may not subsequently withdraw from the defense on noncoverage grounds.

Id. (emphasis added). The Alabama Supreme Court espoused that principle in

Campbell Piping, id., and stated it more succinctly a decade later: “[I]f an insurer

does, in fact, undertake to defend an insured without reserving the right to withdraw

its defense, it thereby waives the right to do so.” Burnham Shoes, Inc. v. W. Am. Ins.

Co., 504 So.2d 238, 242 (Ala. 1987) (emphasis added) (answering Eleventh Circuit’s

certified question), abrogated on other grounds by Williamson v. Indianapolis Life

25 Doc. 41 at 3 ¶ 3; Doc. 44 at 2.

26 Ms. Bond also alleges, as a prerequisite to invocation of the equitable doctrine upon which she

relies, that she detrimentally relied upon Nationwide’s conduct—namely, in that she incurred a

default judgment below. The Court need not address the argument because Nationwide never

undertook her defense. See infra. But in any event, nothing in this case indicates that Ms. Bond

was prejudiced by the default judgment entered against her in the underlying case. The Court can

only assume that the default was set aside; otherwise, it would make little sense for the parties here

to continue litigating Nationwide’s duty to defend Ms. Bond below.

Ins. Co., 741 So.2d 1057 (Ala. 1999); see also Home Ins. Co. v. Reed Equip. Co.,

381 So.2d 45 (Ala. 1980). Implicit in the Alabama Supreme Court’s instruction has

been, unwaveringly, the undertaking of the insured’s defense as a prerequisite for

invocation of the doctrine. See Campbell Piping, 342 So.2d at 770; Burnham Shoes,

504 So.2d at 241 (couching Campbell Piping within the context of “an insurer

[attempting] to withdraw a defense already undertaken”); Home Ins. Co. v. Rice, 585

So.2d 859, 861 (Ala. 1991) (estopping insurer from denying defense “13 months

after it had assumed that defense.”).

As made clear by the Alabama Supreme Court’s more-recent decision in

Canal Insurance Co. v. Old Republic Insurance Co., 718 So.2d 8 (Ala. 1998),

Nationwide never undertook Ms. Bond’s defense. This case is neither Campbell

Piping, 342 So.2d at 770, nor Rice, 585 So.2d at 861 (applying Campbell Piping rule

to equitably estop insurer from withdrawing defense already undertaken).

In Old Republic, the Alabama Supreme Court refused to estop an automobile

insurer (“Canal”) from denying its insured (“Wilson”) a defense in the wrongful-

death action against him. 718 So.2d at 13 (reversing summary judgment against

Canal). After the court found that Canal owed Wilson no contractual duty to defend,

a co-defendant’s insurer—Old Republic—argued that Canal should nevertheless

have been estopped from denying that defense in light of a letter Canal sent Wilson

in April 1995. In that letter, Canal told Wilson that it had retained a law firm for

purposes of his defense in the wrongful death action. But “[i]n spite of the April

1995 letter,” the Alabama Supreme Court found “no basis for applying the rule of

. . . Campbell Piping.” Acknowledging the “indication that an attorney retained by

Canal may have entered an appearance on behalf of Wilson,” there was still “no

indication that any such attorney took an active role in the defense.” Id. (emphasis

added). Simply put, Canal never “provided a defense to Wilson,” and there thus

existed “no basis on which Wilson could invoke” the doctrine. Id.

Just as in Old Republic, Nationwide never actually provided Ms. Bond’s

defense. Nationwide merely asked the Longs’ counsel to afford Ms. Bond additional

time for answering their complaint. Even where Canal retained an attorney on

Wilson’s behalf, and that attorney actually appeared in the case, the Alabama

Supreme Court declined to apply Campbell Piping because Canal never “in fact

provided a defense” for Wilson. Nationwide did far less here, and it is thus

improper—more improper, to be sure, than in Old Republic—to equitably estop

Nationwide from providing a defense under a contract that plainly excuses their

obligation to do so. This Court heeds the instruction in Old Republic and declines to

apply Campbell Piping and its progeny, cases in which the court premised its

application of equitable estoppel on the foregone conclusion that the insurers had

assumed the responsibilities of defending the insureds in court. In sum, Alabama

law’s application to this case is clear: Nationwide never assumed control of Ms.

Bond’s defense and thus is not estopped from denying her that defense.?’

IV. CONCLUSION

For the foregoing reasons, Nationwide’s motion for judgment on the pleadings

(Doc. 42) is GRANTED in part and DENIED in part.”® Pursuant to Rule 58 of the

Federal Rules of Civil Procedure, a final judgment will be entered separately.

DONE this March 30, 2023.

AG Sha

LILES C. BURKE

UNITED STATES DISTRICT JUDGE

27 Ms. Bond also alleges that she was prejudiced by reliance upon Nationwide’s conduct—namely,

in that she incurred a default judgment below. The Court need not address the argument because

Nationwide never undertook her defense, but in any event, nothing in this case indicates that Ms.

Bond was actually prejudiced. It would make little sense for the parties here to continue litigating

Nationwide’s duty to defend Ms. Bond below had the default not been set aside. Cf Campbell

Piping, supra (describing unfairness looming where insured waived lawyer’s conflict in reliance

on insurer’s promise to defend), or Rice, supra (noting unfairness that would arise from allowing

insurer to withdraw defense after 13 months and leave insured with the bill).

This opinion solely concerns Nationwide’s duty to Ms. Doris Bond. See supra note 3.

14