Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_06-cv-00664/USCOURTS-alsd-1_06-cv-00664-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

MARILYN G. OSBORN, )

 )

Plaintiff, )

 )

v. ) CIVIL ACTION 06-0664-WS-M

 )

HARTFORD FIRE INSURANCE )

COMPANY, et al., )

 )

Defendants. )

ORDER 

This matter is before the Court on the motion of defendant Alabama Insurance

Underwriting Association (“the Association”) to stay or to dismiss. (Doc. 13). The

parties have filed briefs and (by the Association) evidentiary materials in support of their

respective positions, (Docs. 14, 15, 17, 20), and the motion is ripe for resolution. After

carefully considering the foregoing and other relevant materials in the file, the Court

concludes that the motion to stay is due to be granted and the motion to dismiss denied. 

The plaintiff’s home in Gulf Shores, which was insured as to wind by the

Association, was damaged during Hurricane Ivan in September 2004. The plaintiff sues

the Association for breach of contract (the policy) and bad faith. The Association argues

that the plaintiff has failed to comply with a policy provision concerning exhaustion of

certain non-judicial remedies.

The plaintiff’s policy reads in pertinent part as follows:

Any ... person insured by the Association may appeal to the Board of 

Directors within thirty (30) days after any ruling, action or decision of 

denial of any ... claim. ... A final decision by the Board of Directors of 

such appeal, may thereafter be appealed to the Alabama Commissioner 

of Insurance within thirty (30) days. No action can be brought unless the 

policy provisions have been complied with and the claim is started within 

one year after the date of loss.

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Although the policy was not appended to the federal complaint, it may be considered

without converting the Association’s motion to dismiss into one for summary judgment. “[A]

document outside the four corners of the complaint may still be considered if it is central to the

plaintiff’s claims and is undisputed in terms of authenticity.” Maxcess, Inc. v. Lucent

Technologies, Inc., 433 F.3d 1337, 1340 n.3 (11th Cir. 2005). The policy is of course central to

the plaintiff’s claims that the Association breached the policy and did so in bad faith, and the

plaintiff does not dispute the policy’s authenticity. 

2

Because the unambiguous language of the policy compels this conclusion, it is

unnecessary to consider the Association’s alternative argument that principles of administrative

law require the plaintiff to pursue these appeals before resorting to litigation.

-2-

(Doc. 15, Exhibit E at 11).1

The plaintiff has not invoked these non-judicial remedies. She argues that she

need not do so because the provision uses the term “may,” which is commonly permissive

rather than mandatory. (Doc. 17 at 2-3). However, “[i]nsurance contracts, like other

contracts, are construed so as to give effect to the intention of the parties; and, to

determine this intent, a court must examine more than an isolated sentence or term; it

must read each phrase in the context of all other provisions.” Celtic Life Insurance Co. v.

McLendon, 814 So. 2d 222, 224 (Ala. 2001). Thus, where a policy provided that

controversies “may be resolved by arbitration” but also provided that “arbitration shall be

binding on the parties” and that the parties “are waiving their right to seek remedies in

court,” the policy unambiguously provided for mandatory arbitration; the only option

created by the word “may” was the option to abandon the controversy, not the option to

pursue it in court. Id. at 224-25.

The same is true here. In the sentence directly after those on which the plaintiff

relies, the policy provides that “[n]o action can be brought unless the policy provisions

have been complied with.” This language unambiguously reflects that resort to nonjudicial appeals is a condition precedent to bringing suit and that the only option provided

the insured by the word “may” is the option to abandon her claim. The plaintiff offers no

construction to the contrary.2

In its motion and principal brief, the Association expressed no preference as to

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remedy. In its reply brief, the Association suggests that the interests of judicial economy

would be advanced by dismissal. The Association’s theory is that, if the action as to it is

stayed, following the plaintiff’s non-judicial appeals the Association will have to engage

in discovery redundant with that undertaken by the other defendants in the interim. (Doc.

20 at 1-2). The Association does not explain how judicial economy is advanced by

requiring the plaintiff to pursue two lawsuits over a single loss, and any redundant

discovery by the Association will be redundant whether undertaken in this lawsuit or

another one. Moreover, even the risk of redundant discovery can be eliminated by

staying this action as to the other defendants as well. In this vein, it does not appear that

the non-judicial appeals should require extensive time to complete, since the policy

obligates the board of directors to resolve the first-level appeal within 30 days after it is

filed. 

The Court agrees with the Association that it is premature to address its argument

that any suit against it must be brought in the Circuit Court of Montgomery County. 

(Doc. 20 at 3-4). The Association may raise this argument again following the nonjudicial appeals, but it should not expect to prevail absent briefing far more piercing than

that offered on the present motion.

For the reasons set forth above, the Association’s motion to stay is granted and its

motion to dismiss is denied. This action as to all defendants is stayed pending further

order of the Court. The Association is ordered to file and serve, on or before the 20th day

of every month, a status report reflecting the status of the plaintiff’s non-judicial appeals. 

Any settlement of the parties’ dispute must be communicated promptly to the Court. 

 

DONE and ORDERED this 4th day of January, 2007.

s/ WILLIAM H. STEELE

UNITED STATES DISTRICT JUDGE

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