Evanston Insurance Company v. Brady

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

MIDDLE DIVISION

EVANSTON INSURANCE

COMPANY,

Plaintiff,

v. Case No. 4:23-cv-106-CLM

LISA BRADY, et al.,

Defendants.

MEMORANDUM OPINION

Inmate Trenton Gartman successfully sued healthcare provider QCHC,

Inc. (“QCHC”) and some individual caregivers, including Lisa Brady (“Brady”),

for heart problems he suffered while in the Autauga County jail. This case is

about who pays Gartman’s attorney’s fees: QCHC’s insurer or Brady.

A policy issued to QCHC by Evanston Insurance Company (“Evanston”)

covered Gartman’s lawsuit. Under the policy, Evanston has paid Gartman’s

compensatory and punitive damage awards. Evanston filed this lawsuit under

28 U.S.C. § 2201, seeking a declaration that the Policy does not require it to

also pay Gartman’s attorney’s fees on behalf of Brady. (Doc. 1). In response,

Brady counterclaimed against Evanston, (doc. 7), and a third-party complaint

against QCHC, (doc. 10; doc. 29). Evanston and QCHC move to dismiss those

complaints for failure to state claims under Federal Rule of Civil Procedure

12(b)(6).

As explained below, the court DENIES Evanston’s Motion to Dismiss

Count I and Count III of Brady’s counterclaims and GRANTS Evanston’s

Motion to Dismiss Count II of Brady’s counterclaims. Because Brady cannot

plead facts that would establish bad faith refusal, the court will dismiss Count

II with prejudice. The court GRANTS QCHC’s Motion to Dismiss both counts

of Brady’s Amended Third-Party Complaint, (doc. 40), but because it may be

possible to sufficiently plead both counts, the court will dismiss Count I and

Count II without prejudice. The court will allow Brady to amend her Complaint

on or before March 25, 2024.

BACKGROUND

Because Brady is the non-moving party, the court takes these facts from

Brady’s complaints and assumes all alleged facts are true. Fed. R. Civ. P.

12(b)(6); Hishon v. King & Spalding, 467 U.S. 69, 73 (1984) (at the motion-to-

dismiss stage, “the complaint is construed in the light most favorable to the

plaintiff, and all facts alleged by the plaintiff are accepted as true”).

A. Gartman’s lawsuit

QCHC contracted with the Autauga County Sheriff to provide healthcare

to Autauga County inmates. (Doc. 29, ¶ 4). Brady worked for QCHC as a nurse

in the Autauga County jail. In May 2018, inmate Gartman sued QCHC, Brady,

and others under 42 U.S.C § 1983, alleging deliberate indifference to his

medical needs. See Gartman v. Brady, et al., ALMD Civil Action No. 2:18-cv-

534-MHT (“the Underlying Action”).

B. The Policy

Evanston covered QCHC and employees like Brady against such

lawsuits. The Policy’s Insuring Agreement provides:

INSURING AGREEMENT

A. Professional Liability and Claims Made Clause: The Company shall pay

on behalf of the Insured all sums in excess of the Deductible amount

stated in the Declarations, which the Insured shall become legally

obligated to pay as Damages as a result of a Claim . . . for Professional

Personal Injury:

1. By reason of any act, error or omission in Professional Services arising

out of the conduct of the Insured’s Professional Services rendered or

that should have been rendered by an Insured;

. . . .

(Doc. 1-1 (Form MESM 5010 08 15) at 15)). Relevant Definitions include:

B. Claim means the Insured’s receipt of:

1. A written demand for Damages or Professional Services; or

2. The service of suit or institution of arbitration proceedings

against the Insured seeking Damages.

C. Claim Expenses means reasonable and necessary amounts incurred

by the Company or by the Insured with the prior written consent of the

Company in the defense of that portion of any Claim for which coverage

is afforded under this Coverage Part, including costs of investigation,

court costs, costs of bonds to release attachments and similar bonds, but

without any obligation of the Company to apply for or furnish any such

bonds, and costs of appeals; provided, however, Claim Expenses shall not

include:

1. Salary, wages, overhead, or benefit expenses of or associated

with Employees or officials of the Named Insured or employees or

officials of the Company; or

2. Salary, wages, administration, overhead, benefit expenses, or

charges of any kind attributable to any in-house counsel or captive

out-of-house counsel for the Named Insured or the Company.

D. Damages means the monetary portion of any judgment, award or

settlement; provided, however, Damages shall not include:

1. Punitive or exemplary damages or multiplied portions of

damages in excess of actual damages, including trebling of

damages;

2. Taxes, criminal or civil fines, or attorneys’ fees of a party other

than an Insured or other penalties imposed by law;

3. Sanctions;

4. Matters which are uninsurable under the law pursuant to which

this Coverage Part shall be construed;

5. The return, withdrawal, reduction or restitution or payment of

fees, profits or charges for services or consideration and/or any

expenses paid to the Insured; or

6. The cost of complying with an award or order for declaratory,

equitable or injunctive relief or remedy.

(Doc. 1-1 (Form MESM 5010 08 15) at 16)) (highlighting added). The court

highlights the exclusion of “attorney’s fees of a party other than an Insured” as

covered “Damages” because this case, at its core, asks the court to determine

whether Evanston must pay Gartman’s attorney’s fees.

C. Evanston’s Declaratory Judgment Action

Attorney’s fees are relevant because a jury found Brady guilty of

deliberate indifference and awarded Gartman compensatory and punitive

damages. (Doc. 1, ¶ 10). The district court then awarded Gartman his

attorney’s fee of $143,552 and legal expenses of $19,716.25. (Doc. 1, ¶ 11).

Evanston paid the compensatory and punitive damages (Doc. 1, ¶ 12), and filed

this lawsuit seeking a judicial determination of its obligation to cover Brady’s

liability for Gartman’s attorney’s fees. (Doc. 1).

D. Brady’s Counterclaim against Evanston

Brady responded (in part) by filing a three-count Counterclaim against

Evanston. (Doc. 7). Brady claims Evanston breached the enhanced obligation

of good faith owed to Brady (Count I) because (1) Evanston failed to tell Brady

or her attorney about policy exclusions or that they undertook the defense of

Brady under a reservation of rights; and (2) Evanston failed to consult Brady

before offers on her behalf were extended or before offers of settlement from

the plaintiff were rejected. (Doc. 7, ¶ 17). Brady thus argues that she was not

given an opportunity (1) to demand settlement by Evanston within policy

limits; (2) to offer some amount from her personal resources to settle the case;

or (3) to retain an attorney of her own choosing. (Doc. 7, ¶ 17). Brady also

argues that Evanston, having undertaken the defense of Brady without

properly reserving its purported non-coverage rights, cannot deny coverage for

the attorneys’ fees and costs for which a judgment has been issued against

Brady, so Evanston’s refusal to cover and pay the attorneys’ fees and costs was

a breach of the insurance contract, and Evanston intentionally failed to

determine whether there was a legitimate or arguable reason to deny coverage

(Count II). (Doc. 7, ¶ 19). Brady’s last count (Count III) states:

Evanston had a duty to disclose to Brady the coverage exclusions in the

policy when they undertook her defense under the contract of insurance

Evanston concealed or failed to disclose the existence of these coverage

exclusions, which induced Brady to allow Evanston to take control of her

defense by choosing an attorney for Brady and making and rejecting offers

of settlement on Brady’s behalf without consulting Brady [(Count III)].

(Doc. 7, ¶ 20).

E. Brady’s Third-Party Complaint against QCHC

Brady also sued QCHC in a (now amended) third-party complaint, based

on QCHC’s alleged failure to tell Brady about Evanston’s reservation of rights.

On June 4, 2018, Evanston sent a reservation of rights letter to QCHC’s

Birmingham office. The letter was addressed to QCHC’s Chief Financial

Officer Dr. Johnny Bates, QCHC’s legal counsel Christie Estes, Brady, and one

other individual party to the lawsuit. (Doc. 29, ¶ 7). The letter allegedly set out

certain exclusions to the “damages” covered under the policy, which included

an exclusion for “exemplary damages” and “[t]axes, criminal or civil fines,

attorneys’ fees of a party other than an Insured” and stated that it reserved

the right to deny coverage for the listed policy exclusions. (See Doc. 29).

Brady alleges that she never received a copy of the letter until the jury

found her liable to Gartman. (Doc. 29, ¶ 11). Brady further alleges that

Evanston allowed QCHC to select counsel for all defendants without any input

from Brady. (Doc. 29, ¶ 9). QCHC chose attorney LaBella Alvis (“Alvis”). (Doc.

29).

The parties engaged in pretrial mediation. Alvis represented all

defendants at the mediation. (Doc. 29, ¶ 12). Brady alleges that Alvis told

Brady that she could attend the mediation, but she was not required to attend.

(Doc. 29). The mediation did not succeed, (doc. 29), and as recounted, Gartman

won a verdict against Brady for compensatory damages, punitive damages, and

attorney’s fees.

Based on these facts, Brady claims fraud (Count I) and negligence/

wantonness (Count II) against QCHC related to the reservation of rights letter

Evanston sent QCHC. (See generally Doc. 29). Brady alleges that she was not

allowed to select her own attorney and was not given a copy of the reservation

of rights letter. (Doc. 29, ¶¶ 9, 11). She also claims that she was not told about

the authority Evanston gave Alvis to offer at mediation before the mediation;

that no one told Brady about the offers and counteroffers exchanged during the

mediation; and, that no one consulted her about the settlement offers

submitted on her behalf. (Doc. 29, ¶¶ 12- 13). Brady also alleges that she was

not notified of the Policy’s exclusions until one week before the pretrial

hearing, when Alvis told her that punitive damages were not covered. And

Brady says she was never told that attorney’s fees were uncovered until after

the trial. (Doc. 29, ¶ 11).

STANDARDS OF REVIEW

1. General Rule 8 standard: A complaint must contain a “short and plain

statement of the claim showing that the pleader is entitled to relief.” FED. R.

CIV. P. 8(a)(2). Rule 8 does not require “detailed factual allegations,” but does

demand more than “an unadorned, ‘the-defendant-unlawfully-harmed-me’

accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 555 (2007)). Mere “labels and conclusions” or “a

formulaic recitation of the elements of a cause of action” are insufficient. Id.

Rule 12(b)(6) permits dismissal when a complaint fails to state a claim upon

which relief can be granted. FED. R. CIV. P. 12(b)(6). “To survive a motion to

dismiss, a complaint must contain sufficient factual matter, accepted as true,

to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678. A

complaint states a facially plausible claim for relief when the plaintiff pleads

facts that permit a reasonable inference that the defendant is liable for the

misconduct alleged. Id.

2. Heightened Rule 9 standard: Fraud-based claims must also satisfy

Rule 9(b)’s heightened pleading standard, by “stat[ing] with particularity the

circumstances constituting fraud or mistake.” FED. R. CIV. P. 9(b). To meet that

standard, the complaint must set forth:

(1) precisely what statements were made in what documents or oral

representations or what omissions were made, and (2) the time and place

of each such statement and the person responsible for making (or, in the

case of omissions, not making) same, and (3) the content of such

statements and the manner in which they misled the plaintiff, and (4)

what the defendants obtained as a consequence of the fraud.

Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001) (internal

citations and quotation marks omitted).

DISCUSSION

A. Evanston’s Motion to Dismiss Brady’s Counterclaim

To begin, Evanston argues that Brady’s counterclaim should be

dismissed as a “shotgun pleading” for two reasons: (1) it’s vague and conclusory

and (2) it lumped two causes of action together. Having reviewed the

Complaint, the court does not find that Brady’s Complaint amounts to a

shotgun pleading. See Thompson v. RelationServe Media, Inc., 610 F.3d 628,

650 n.22 (11th Cir.2010) (Tjoflat, J., concurring in the appeal, No. 07–13225,

and dissenting in the cross-appeal, No. 07–13477) (“a typical ‘shotgun’

pleading” where “each count incorporated by reference all preceding

paragraphs and counts of the complaint notwithstanding that many of the facts

alleged were not material to the claim, or cause of action, appearing in a count’s

heading”). So the court will review Evanston’s count-specific arguments.

Evanston moves to dismiss each count asserted in Brady’s Counterclaim

for failure to state a claim under Rule 12(b)(6) and failure to plead fraud-based

claims with particularity as required by Rule 9(b). See FED. R. CIV. P. 12(b)(6);

FED. R. CIV. P. 9(b). The court addresses each count in turn.

1. Count I: Breach of Enhanced Duty of Good Faith.

1. State law: Under Alabama law, an enhanced obligation of good faith

arises when an insurer defends an insured under a reservation of rights and

requires the insurer to take the following steps to protect the insured:

First, the company must thoroughly investigate the cause of the

insured’s accident and the nature and severity of the plaintiff's

injuries. Second, it must retain competent defense counsel for the

insured. Both retained defense counsel and the insurer must

understand that only the insured is the client. Third, the company

has the responsibility for fully informing the insured not only of

the reservation-of-rights defense itself, but of all developments

relevant to his policy coverage and the progress of this lawsuit.

Information regarding progress of the lawsuit includes disclosure

of all settlement offers made by the company. Finally, an insurance

company must refrain from engaging in any action which would

demonstrate a greater concern for the insurer’s monetary interest

than the insured’s financial risk.

See L & S Roofing Supply Co., Inc. v. St. Paul Fire & Marine Ins. Co., 521 So.2d

1298, 1303 (Ala. 1987) (quoting Tank v. State Farm Fire & Cas. Co., 715 P.2d

1133, 1137 (Wash. 1986)).

The Supreme Court of Alabama has explained that a claim for breach of

the enhanced obligation of good faith is a contract claim. See Twin City Fire

Ins. Co. v. Colonial Life & Accident Ins. Co., 839 So.2d 614 (Ala. 2002). The

Court wrote that “whenever an insurer defends the insured under a

reservation of rights, the enhanced duty of good faith is read into that

reservation of rights.” Id. at 616. “Because the enhanced duty arises from the

contract, it follows that claims alleging a breach of the enhanced duty of good

faith are contract claims.” Id.

2. Brady’s claim: Brady alleges that Evanston breached its enhanced

duty of good faith by (1) failing to inform her or her attorney about policy

exclusions or that they undertook the defense of Brady under a reservation of

rights and (2) failing to consult Brady before offers on her behalf were extended

or before offers of settlement from Gartman were rejected. (Doc. 7, ¶ 17). Brady

contends that “Evanston took control of the defense by retaining Labella Alvis

to represent Brady in addition to the other QCHC . . . defendants.” (Doc. 7, ¶

15). Because Evanston controlled Attorney Alvis, Brady alleges that she was

not given an opportunity to (1) demand settlement within policy limits; (2) offer

some amount from her personal resources to settle the case; or (3) retain an

attorney of her own choosing. (Doc. 7, ¶ 17).

Evanston argues that the enhanced duty of good faith does not apply

“because Evanston permitted QCHC to select its own counsel to defend it and

its employees.” (Doc. 11 at 6). Evanston bases this argument on Aetna Cas. &

Sur. Co. v. Mitchell Bros. Inc., 814 So.2d 191 (Ala. 2001), a case in which the

Alabama Supreme Court determined the enhanced duties did not apply when

“the insured used its own selected counsel.” (Doc. 11 at 6). Evanston argues

that because it allowed QCHC to “select its own counsel to defend it and its

employees,” Aetna should apply. (Doc. 11 at 6).

But Aetna turned on who controlled the litigation, not who chose the

lawyer: “MBI and Mitchell accepted defense of the Lowman suit under

reservation of rights, but never relinquished control of the lawsuit,

including settlement negotiations, to Aetna. Under such circumstances, we

hold that Aetna did not have an ‘enhanced obligation of good faith’ to its

insureds.” Id. at 196 (emphasis added). As the Aetna court noted, earlier cases

also turned on control: “The result in Shelby Steel was equitable. U.S.F. & G.

was in a position of authority when it extended a defense to Shelby Steel under

reservation of rights, gaining ‘exclusive control over Shelby Steel’s

defense.’ Shelby Steel agreed to accept that defense and relied upon U.S.F. &

G. to protect Shelby Steel’s interests. However, because U.S.F. & G. did not

keep Shelby Steel advised as to the status of the lawsuit, U.S.F. & G. was

estopped to deny coverage.” Id. (emphasis added) (discussing Shelby Steel Fab.,

Inc. v. United States Fidelity & Guar. Ins. Co., 569 So.2d 309 (Ala. 1990)).

Control is generally a fact question. In Count I of her counterclaim,

Brady alleges that “Evanston took control of the defense by retaining Labella

Alvis to represents Brady in addition to the other QCHC, Inc. defendants.”

(Doc. 7, ¶ 15). In the next paragraph, Brady alleges that Alvis was “Evanston’s

chosen attorney.” (Doc. 7, ¶ 16). If Brady can prove that Evanston controlled

the defense through Attorney Alvis—and the court must assume she can at the

Rule 12 stage—then Brady can show that Evanston had an enhanced duty of

good faith.1 And Brady pleads sufficient facts that, if proved true, would

establish a breach of that enhanced duty. So the court DENIES Evanston’s

motion to dismiss Count I.

2. Count II: Bad Faith Refusal.

The court will dismiss Count II with prejudice because Brady cannot plead

facts that, if proved true, will establish that Evanston acted in bad faith when

it read the Policy to exclude payment of attorney’s fees.

1. Fairly debatable interpretation: To state a claim for bad faith, an insured

must establish:

1. An insurance contract between the parties and a breach thereof by

the defendant;

2. An intentional refusal to pay the insured’s claim;

3. The absence of any reasonably legitimate or arguable reason for

that refusal (the absence of a debatable reason);

4. The insurer’s actual knowledge of the absence of any legitimate or

arguable reason;

5. If the intentional failure to determine the existence of a lawful

basis is relied upon, the plaintiff must prove the insurer's

intentional failure to determine whether there is a legitimate or

arguable reason to refuse to pay the claim.

Nat’l Sec. Fire & Cas. Co. v. Bowen, 417 So. 2d 179, 183 (Ala. 1982). Brady

cannot establish the third element because Evanston’s reading of the Policy to

exclude Gartman’s attorney’s fees, even if ultimately held to be incorrect, was

a “reasonably legitimate or arguable” reading of the Policy. Id.

1 Earlier paragraphs of the Complaint seem to give control of the attorney hire and defense to QCHC,

not Evanston. See, e.g., (Doc. 7, ¶¶ 8) (“Upon information and belief, Evanston allowed QCHC, Inc. to

choose its own counsel for the defense of the underlying suit.”). Because this is a Rule 12 motion, the

court gives Brady (the non-moving party) the benefit of the doubt. Discovery will clear up which party

actually controlled the defense.

To establish “no lawful basis” for refusing to pay a claim, Brady must

show that Evanston lacked any legitimate or arguable reason for not paying

the claim. See id. at 185. No lawful basis “means that the insurer lacks a

legitimate or arguable reason for failing to pay the claim.” See Gulf Atl. Life

Ins. Co. v. Barnes, 405 So.2d 916, 924 (Ala. 1981). When a claim is “fairly

debatable,” the insurer can debate it, whether the debate concerns a matter of

fact or law. Id.

According to the Policy, “Damages means the monetary portion of any

judgment, award or settlement; provided, however, Damages shall not include:

. . . attorneys’ fees of a party other than an Insured . . . .” (Doc. 1-1 at 16). The

court is mindful that interpreting this provision is the ultimate issue in

Evanston’s declaratory judgment complaint, (doc. 1). So to be clear, the court

does not decide the issue here. But the court can say—and does definitively

say—that Evanston’s reading of the exclusion provision is at least fairly

debatable. A reasonable insurer and a reasonable insured could both interpret

the phrase “Damages shall not include . . . attorneys’ fees of a party other than

an Insured” to preclude Gartman’s attorneys’ fees because Gartman was “a

party other than an Insured.” (See Doc. 1-1 at 16). Brady has not, and cannot,

plead facts that would disprove the “fairly debatable” nature of this reading.

2. Estoppel: Brady argues that Evanston is estopped from relying on its

reading of the Policy’s exclusions as a basis for denying indemnification. But

Brady cannot establish a waiver or estoppel theory: “The doctrine of waiver . .

. is not available to bring within the coverage of a policy risks not covered by

its terms or risks expressly excluded therefrom.” Home Indem. Co. v. Reed

Equip. Co., 381 So. 2d 45, 50-51 (Ala. 1980). Whether there is a duty to disclose

is a question of law. State Farm Fire & Cas. Co. v. Owen, 729 So. 2d 834, 839

(Ala. 1998). Brady did not properly plead any such duty, nor can one be found

at law. “[C]overage under an insurance policy cannot be created or enlarged by

waiver or estoppel.” Zurich Am. Ins. Co. v. Specialty Foundry Prod., No. 7:08–

cv–01412–LSC, 2009 WL 8612395, at *5-6 (N.D. Ala. July 30, 2009).

—

In short, Evanston can rely on the Policy exclusions to defeat a bad-faith

refusal claim if that reading is at least fairly debatable. And Evanston’s

reading of the exclusionary language is at least fairly debatable. So Brady can

plead no facts that would prove a bad-faith refusal; therefore, the court will

dismiss Count II with prejudice.2

3. Count III: Fraud by suppression.

Count III makes a claim for fraud by suppression. (See Doc. 7, ¶ 20).

Fraud by suppression claims are governed by Ala. Code § 6-5-102: “Suppression

of a material fact which the party is under an obligation to communicate

constitutes fraud. The obligation to communicate may arise from the

confidential relations of the parties or from the particular circumstances of the

case.” And fraud by suppression claims are subject to Rule 9(b)’s heightened

pleading requirements. See Ala. Code § 6-5-102 (1975).

Brady pleads that “Evanston had a duty to disclose to Brady the coverage

exclusions in the policy when they undertook her defense under the contract of

insurance[.]” (Doc. 7, ¶20). The court agrees with Evanston that, under

Alabama law, the contractual relationship between Evanston and Brady alone

did not create the requisite confidential relationship that created a duty to

disclose. See Hardy v. BlueCross BlueShield, 585 So.2d 29, 32-33 (Ala. 1991).

But Brady also pleads that Evanston retained Attorney Alvis and that Alvis

told Brady, by letter, that “as long as you are cooperative with your defense,

the carrier will pay for your attorney fees as well as any settlement and/or

judgment which might be later rendered in the case.” (Doc. 7, ¶ 9). Brady might

be able to establish the requisite duty via the “particular circumstances of the

case,” Ala. Code § 6-5-102, if she can prove that Attorney Alvis was speaking

for Evanston when Alvis told Brady that Evanston would cover any judgment

as long as Brady cooperated. So the court finds that Brady’s pleading of a duty

survives Rule 9 and 12 scrutiny.

Evanston also argues that Brady fails to adequately allege reasonable

reliance on Evanston’s silence. (See Doc. 11 at 11). But even if reasonable

reliance matters to a suppression claim, Brady pleads facts that (in a light most

2 Alternatively, the court could dismiss Count II without prejudice for failing to meet Rule 9(b)’s

enhanced pleading requirements. But the court’s finding that Brady cannot plead any set of facts to

prove Count II obviates the need to explain this point further.

favorable to Brady) would show that Attorney Alvis wrongly told her that the

entire judgment—including attorney’s fees—would be covered if she lost. A

jury might find it reasonable for Brady to rely on Alvis’s assurance and thus

not ask Evanston to confirm the extent of its coverage of a negative judgment.

So the court will allow Count III to proceed to discovery.

B. QCHC’s Motion to Dismiss Brady’s Third-Party Complaint

QCHC moves to dismiss each count asserted in Brady’s Amended Third-

Party Complaint for failure to state a claim under Rule 12(b)(6). (Doc. 40). The

court addresses each count in turn.

1. Count I: Fraud by suppression.

Count I pleads a fraud by suppression claim; specifically, that QCHC

failed to tell Brady that Evanston took on Brady’s defense under a reservation

of rights. (Doc. 29, ¶16).

Again, fraud by suppression claims are subject to Rule 9(b)’s heightened

pleading requirements. See Ala. Code § 6-5-102 (1975) (“Suppression of a

material fact which the party is under an obligation to communicate

constitutes fraud.”). Brady fails to plead with specificity the basis of QCHC’s

duty to tell Brady that Evanston would defend Brady but may not pay certain

damage awards. Brady pleads that “QCHC was under an obligation, either by

contract or by nature of its relationship with Brady” to tell Brady about the

reservation of rights letter. (Doc. 29, ¶ 16). But Brady also pleads that QCHC

did not employ Brady at the time of the alleged suppression—thus making

their relationship co-defendants/co-insureds—and Brady fails to identify a

contemporaneous contract between QCHC and Brady that would create the

obligation that QCHC disclose Evanston’s reserved rights to its co-defendant.

(See Doc. 29, ¶ 11). Without more facts, Brady cannot sufficiently prove the

“confidential relations of the parties or . . . the particular circumstances of the

case” that created QCHC’s duty to tell Brady about Evanston’s reservation. See

also Freightliner, L.L.C. v. Whatley Cont. Carriers, L.L.C., 932 So. 2d 883, 891

(Ala. 2005); see also Mason v. Chrysler Corp., 653 So. 2d 951, 954 (Ala. 1995).

But perhaps Brady could allege sufficient facts to meet Rule 9(b) in an

amended complaint. So the court grants QCHC’s motion to dismiss Count I,

without prejudice, so Brady can amend her Complaint.

2. Count II: Negligence/Wantonness.

Brady next alleges that QCHC either negligently or wantonly failed to

forward Evanston’s reservation of rights letter to Brady. (Doc. 10, ¶ 18). The

parties dispute the duty element of negligence and whether wantonness—

“[c]onduct which is carried on with a reckless or conscious disregard of the

rights . . . of others”—applies. See Albert v. Hsu, 602 So. 2d 895, 897 (Ala. 1992)

(negligence); Ala. Code § 6- 11-20(b)(4) (wantonness).

1. Negligence: Brady alleges that the Policy required QCHC to forward

a copy of Evanston’s reservation of rights letter to Brady, but QCHC

negligently failed to do so. (Doc. 29, ¶ 18). But Brady fails to allege facts that

create a duty that can support a negligence claim. Although “[i]t is possible for

a tort to arise in Alabama out of a breach of a duty implied by or arising out of

a contract, . . . an ordinary breach of contract will not give rise to a tort.” Brown-

Marx Assocs., Ltd. v. Emigrant Sav. Bank, 703 F.2d 1361, 1371 (11th Cir.

1983). Indeed, “a negligent failure to perform a contract . . . is but a breach of

the contract.” Vines v. Crescent Transit Co., 85 So. 2d 436, 440 (Ala. 1956). As

pleaded, Brady’s claim hinges on a contract creating the duty and a breach of

contract creating the breach of duty. Because Alabama law does not recognize

simple breach of contract to support a negligence claim, the court must dismiss

Brady’s negligence claim as presently pleaded.

2. Wantoness: For wantonness, Brady fails to allege any facts about

QCHC’s state of mind. Because negligence is the “inadvertent omission of

duty,” and wantonness is about the “state of mind with which the act or

omission is done,” Ex parte Essary, 992 So.2d 5, 9 (Ala. 2007), the Alabama

Supreme Court has explained: “Wantonness is not merely a higher degree of

culpability than negligence. Negligence and wantonness, plainly and simply,

are qualitatively different tort concepts of actionable culpability.” Tolbert v.

Tolbert, 903 So.2d 103, 114 (Ala. 2004) (internal citations omitted); see also

Jinright v. Werner Enterprises, Inc., 607 F. Supp. 2d 1274, 1275-76 (M.D. Ala.

2009).

To sum up, Brady fails to plead facts that would establish negligence or

wantonness under Alabama law. But it is possible that she could plead the

requisite facts for one or both theories in an amended complaint. So the court

will dismiss Count II without prejudice to allow Brady to amend.

CONCLUSION

For these reasons, the court DENIES Evanston’s Motion to Dismiss

Count I and Count III of Brady’s Counterclaims and GRANTS Evanston’s

Motion to Dismiss Count II with prejudice. (Doc. 11). The court GRANTS

QCHC’s Motion to Dismiss Count I and Count II of Brady’s Amended Third-

Party Complaint and dismisses those counts without prejudice.

If Brady chooses to amend her Complaints, she should file one amended

complaint that pleads the factual allegations and counts against both parties.

Brady must file such a consolidated amended complaint on or before March

25, 2024.

DONE and ORDERED on March 4, 2024.

COREY Lu MAZE 7

UNITED STATES DISTRICT JUDGE

15