Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_07-cv-00085/USCOURTS-alsd-1_07-cv-00085-0/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

PENNSYLVANIA NATIONAL )

MUTUAL CASUALTY INSURANCE )

COMPANY, )

 )

Plaintiff, )

 )

v. ) CIVIL ACTION 07-0085-WS-M

 )

ROBERTS BROTHERS, INC., et al., )

 )

Defendants. )

ORDER

This declaratory judgment action comes before the Court on the Motion for Summary

Judgment (doc. 20) filed by plaintiff, Pennsylvania National Mutual Casualty Insurance

Company. The Motion has been briefed and is ripe for disposition.

I. Background.

The parties have submitted this dispute on summary judgment with a sparse evidentiary

record. Indeed, the only documents provided to the Court are the pleadings, copies of three

insurance policies, a letter concerning a different claim and policy term, the underlying statecourt complaint, and a docket activity printout in the state-court action. The facts that may be

gleaned from these fragmentary submissions are few.

A. The Tupa Action.

On June 14, 2005, Tamara Tupa filed a lawsuit against Roberts Brothers, Inc. and others

in the Circuit Court of Mobile County, Alabama, styled Tamara Tupa v. Roberts Brothers, Inc.

et al., Civil Action Number CV-05-2079 (the “Tupa Action”). Tupa alleged that, beginning in

July 2000, she rented property located at 7910 Castlewood Court in Mobile, Alabama, and that

Roberts Brothers “served as an agent for [the owner] concerning the property in question and

was responsible for property management for the owner.” (Tupa Complaint, ¶ 6.) The Tupa

Complaint reflects that at various times beginning shortly after she moved in, Tupa gave notice

to Roberts Brothers and others “that there was a problem with a sliding door at the rear of the

property.” (Id., ¶ 7.) According to the Tupa Complaint, an intruder entered the home through

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1 According to the Complaint in this case, Penn National is furnishing a defense to

Roberts Brothers in the Tupa Action subject to a reservation of rights. (Doc. 1, ¶ 16.) 

Unfortunately, the summary judgment record was silent as to the status of the Tupa Action;

therefore, on January 23, 2008, the undersigned entered an Order (doc. 30) directing Penn

National to supplement the record with information as to whether the Tupa Action has gone to

trial, settled, been dismissed, or otherwise been resolved. Plaintiff’s response, filed on February

7, 2008, confirms that Penn National continues to furnish a defense to Roberts Brothers in the

Tupa Action, which remains pending in the Circuit Court of Mobile County, Alabama, and has

been set for jury trial late next month. (Doc. 33, ¶¶ 2-3.)

2 For example, neither party has submitted any information concerning any

contractual relationship between Tupa and Roberts Brothers, or between Roberts Brothers and

the property owner. Nor has either party submitted deposition transcripts, affidavits, or other

evidence concerning Tupa’s allegation that she placed Roberts Brothers on notice of the

defective sliding door. Indeed, the parties have neglected to submit evidence of even the nature

of that defect, whether the defect was reasonably repairable, and whether and how the intruder

exploited that defect to commit criminal acts. The parties have furnished the Court with literally

no information about the underlying events other than the bare allegations of the state-court

complaint.

3 In opposition to Penn National’s Motion, Roberts Brothers argued that the CGL

Policy appended to the Complaint as Exhibit B cannot be considered on summary judgment

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that sliding door on December 3, 2003, sexually assaulted Tupa, threatened to kill her, and

subsequently escaped. (Id., ¶¶ 8-9.) Tupa maintains that the intruder was able to enter the

premises to perpetrate these offenses because of Roberts Brothers’ failure to remedy the

defective condition with the door and lock. (Id., ¶ 8.) Based on these factual allegations, Tupa

sued Roberts Brothers on state-law theories of negligence, wantonness, and breach of contract,

all predicated on the notion that Roberts Brothers had notice of the defective condition of the

sliding door and lock, yet it failed to correct the problem, fix the lock, and secure the premises. 

(Id., ¶¶ 11-15.)1 The Court has been given no other specifics concerning the underlying facts,

beyond the mere allegations of the Tupa Complaint.2

B. The Penn National Insurance Policies.

At the time of the assault on Tupa, Roberts Brothers had two separate policies of

insurance with Pennsylvania National Mutual Casualty Insurance Company (“Penn National”). 

The first was a Commercial General Liability policy numbered CL9 096662 ( the “CGL

Policy”), whose term ran from April 1, 2003 through April 1, 2004. (Complaint, Exh. B.)3 The

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because it is uncertified and incomplete. Penn National sought to overcome this argument by

“attaching another copy of its CGL policy to [its] reply as Exhibit ‘A’.” (Doc. 27, at 1.) 

Unfortunately, Penn National appended the wrong policy. Exhibit A to the reply brief is the

iteration of the CGL Policy in effect from April 1, 2004 through April 1, 2005. The incident in

question occurred on December 3, 2003 and would appear to be governed by the 2003-2004

version of the CGL Policy, which affords coverage for bodily injury occurring “during the policy

period.” (Doc. 1, Exh. B, at 76.) As such, the 2004-05 version of the policy appears irrelevant

to the coverage issues presented herein. Even if it were not irrelevant, the policy form attached

to the Reply Brief (doc. 27) as Exhibit A is materially incomplete (lacking, for instance, the

entire Commercial General Liability Coverage Form).

Notwithstanding these defects with the policy exhibit attached to plaintiff’s Reply as

Exhibit A, the Court has overruled Roberts Brothers’ objections to plaintiff’s use of the policy

form found at Exhibit B to the Complaint on summary judgment via separate Order (doc. 29)

entered on January 23, 2008. On that basis, the CGL Policy will be considered on summary

judgment in the form appended as Exhibit B to Penn National’s Complaint. As for Roberts

Brothers’ contention that “[t]he lack of a complete policy precludes Roberts Brothers from fully

responding to Plaintiff’s arguments” (doc. 26, at 6), the Court cannot agree that defendant has

been unfairly constrained in this regard. If Roberts Brothers has a copy of the CGL Policy, then

it could have attached the relevant portions as an exhibit to its own summary judgment

submission. To the extent that Roberts Brothers is insinuating that it lacks a complete copy of

the subject policy, surely this document was available in discovery. If Roberts Brothers

requested it in discovery and never received it, then defendant should have requested judicial

intervention to compel such disclosure long before now. If Roberts Brothers never requested a

copy of the policy in discovery, then defendant has only itself to blame for its alleged

impairment in responding to movant’s summary judgment arguments. Either way, Roberts

Brothers’ predicament is of its own making.

4 Given the clear text of this exclusion, which specifically recites a “Schedule”

listing “real estate agents error and omissions” under the heading “description of professional

services,” Roberts Brothers’ contention that “[n]o professional service is shown in the schedule”

(doc. 26, at 3) is both misleading and inaccurate.

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CGL Policy provides coverage for amounts that Roberts Brothers “becomes legally obligated to

pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” 

(Doc. 1, Exh. B, at 76.) Two endorsements and exclusions from the CGL Policy are at issue in

this declaratory judgment action. First, the CGL Policy includes an endorsement labeled

“Exclusion - Designated Professional Services” (CG 21 16 07 98) providing that “[t]his

insurance does not apply to ‘bodily injury’ ... due to the rendering of or failure to render any

professional service,” with “professional service” being specifically described in that

endorsement as “real estate agents error and omissions.” (Doc. 1, Exh. B, at 58.)4

 Second, the

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5 Penn National also argues that Exclusion 2b. in form CG 00 01 1001 of the CGL

Policy excludes coverage for any claim that Roberts Brothers is legally liable to pay, solely by

reason of its assumption of liability in a contract or agreement. (Doc. 21, at 2, 5-6.) Movant

does not identify where in this voluminous policy document such an exclusion might be found. 

However, the Court has sifted through the entire 140-page policy excerpt (most of which is

irrelevant to this dispute) appended to the Complaint as Exhibit B in vain for such an exclusion. 

The problem, the Court suspects, is that Penn National neglected to submit the entire form CG

00 01 10001, but instead filed only pages 1, 3, 5, 9, 11, 13 and 16 of that form. (Doc. 1, Exh. B,

at 76-82.) Without the requisite policy language before it, the Court cannot evaluate Penn

National’s summary judgment arguments pertaining to that provision. It is of course a summary

judgment movant’s responsibility to ensure that the necessary policy provisions are part of the

record on summary judgment. Given Penn National’s failure to satisfy this threshold

requirement, the Court cannot and will not take up the legal issue of applicability of the contract

exclusion to the requested coverage in the Tupa Action. It would be folly for the Court to

purport to construe policy provisions that it has never even seen. The same reasoning defeats

Roberts Brothers’ contention that another endorsement, CG 22 70 11 85, not found in Exhibit B

was actually part of the policy and should be considered on summary judgment. Roberts

Brothers likewise fails to submit the requisite section of the CGL Policy for the Court’s

consideration, and instead points to a letter from Penn National concerning another claim against

Roberts Brothers for a different policy term. (Doc. 26, Exh. A.) Roberts Brothers would have

the Court accept on faith that the policy language quoted in that letter concerning a different

policy period and a different claim is precisely that stated in the 2003-2004 iteration of the CGL

Policy, that the form language did not change between the 2003-2004 policy and the 2005-2006

policy, that the language in the letter constitutes the entire endorsement, and that there are no

other provisions of that endorsement that might qualify, limit or alter the meaning of the out-ofcontext excerpt mentioned in the letter. The Court will not make such an unsubstantiated

assumption. More generally, the Court’s task on summary judgment is unnecessarily

complicated by both parties’ presentation of legal arguments on summary judgment concerning

the proper interpretation of insurance policy provisions that neither side has placed in the record.

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CGL Policy includes a “Limitation of Coverage - Real Estate Operations” endorsement (CG 22

60 07 98) which provides in pertinent part as follows: “With respect to real estate operations, this

insurance applies only to ‘bodily injury’ ... arising out of the ownership, operation, maintenance

or use of ... [p]remises listed with you for sale or rental, if: a. You do not own, operate, manage

or rent the premises; b. They are not in your care, custody, or control; or c. You do not act as

agent for the collection of rents or in any supervisory capacity.” (Doc. 1, Exh. B, at 88.)5

 

The second policy of insurance that Penn National issued to Roberts Brothers for the time

period in question was a Commercial Umbrella Liability Policy (the “Umbrella Policy”) bearing

number UL9 0096662, with effective dates from April 1, 2003 through April 1, 2004. (Doc. 21,

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 4 of 20
6 The next page of the Umbrella Policy recites a similar exclusion for “Real Estate

Agents, Consultants or Brokers Professional Liability (Exclusion),” bearing form number 70-

2138 (Ed. 8/87) and providing that the policy shall not apply to liability for bodily injury “on

account of any claim made against the Insured for breach of duty arising out of the rendering of

or failure to render professional services in the conduct of the Insured’s business as a real estate

agent, real estate consultant, or real estate broker.” (Doc. 21, Exh. A, at 9.)

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Exh. A, at 1.) Two provisions of this Umbrella Policy are germane to the issues on summary

judgment. First, the Umbrella Policy contains a “Professional Liability Endorsement

(Exclusion)” numbered 70 101, and stating that “this policy shall not apply to liability arising out

of the rendering of or failure to render professional service, or any error or omission, malpractice

or mistake of a professional nature committed or alleged to have been committed by or on behalf

of the named insured in the conduct of any of the insured’s business activities.” (Doc. 21, Exh.

A, at 8.)6

 Second, the Umbrella Policy has an “Other Insurance” condition stating as follows: “If

other insurance applies to claims covered by this policy, the insurance under this policy is excess

and we will not make any payments until the other insurance has been used up.” (Id. at 19.)

C. The Declaratory Judgment Action.

On February 6, 2007, Penn National filed its Complaint (doc. 1) in this District Court,

seeking a declaratory judgment against Roberts Brothers and Tupa. The Complaint recounts

Penn National’s position that “Roberts is not entitled to liability coverage for any claims that

may be asserted against it by Tupa.” (Complaint, ¶ 16.) In the confusingly labeled “Requested

Release” section of the Complaint (which presumably should read “Requested Relief”), Penn

National asks this Court to “[d]eclare that the [Penn National] policies do not provide coverage

for Roberts for the claims against it by Tupa” and to “[d]eclare that any possible coverage under

the umbrella policy is subject to the ‘other insurance’ clause in the policy.” (Id. at 6.) Roberts

Brothers opposes this requested relief and maintains that coverage properly lies under the CGL

Policy and the Umbrella Policy. Penn National now seeks to have these coverage issues

resolved by the Court as a matter of law pursuant to Rule 56, Fed.R.Civ.P.

II. Summary Judgment Standard.

Summary judgment should be granted only if “there is no issue as to any material fact

and the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). The

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party seeking summary judgment bears “the initial burden to show the district court, by reference

to materials on file, that there are no genuine issues of material fact that should be decided at

trial.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). Once the moving party

has satisfied its responsibility, the burden shifts to the nonmovant to show the existence of a

genuine issue of material fact. Id. “If the nonmoving party fails to make 'a sufficient showing

on an essential element of her case with respect to which she has the burden of proof,' the

moving party is entitled to summary judgment.” Id. (quoting Celotex Corp. v. Catrett, 477 U.S.

317 (1986)) (footnote omitted). “In reviewing whether the nonmoving party has met its burden,

the court must stop short of weighing the evidence and making credibility determinations of the

truth of the matter. Instead, the evidence of the non-movant is to be believed, and all justifiable

inferences are to be drawn in his favor.” Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 999

(11th Cir. 1992) (internal citations and quotations omitted). “Summary judgment is justified only

for those cases devoid of any need for factual determinations.” Offshore Aviation v. Transcon

Lines, Inc., 831 F.2d 1013, 1016 (11th Cir. 1987) (citation omitted).

III. Analysis.

A. Plaintiff’s Claims Relating to Indemnification Are Premature.

Implicit in Penn National’s Complaint is a request that this Court enter a declaration both

as to its duty to defend Roberts Brothers in the Tupa Action and its duty to indemnify Roberts

Brothers from any adverse judgment in the Tupa Action. To date, however, no judgment has

been entered in the Tupa Action and Roberts Brothers has made no payments to resolve Tupa’s

claims against it; therefore, Penn National’s requests for a declaration as its duty to indemnify

Roberts Brothers are plainly premature. See, e.g., Employers Mut. Cas. Co. v. All Seasons

Window & Door Mfg., Inc., 387 F. Supp.2d 1205, 1211-12 (S.D. Ala. 2005) (“It is simply

inappropriate to exercise jurisdiction over an action seeking a declaration of the plaintiff’s

indemnity obligations absent a determination of the insureds’ liability to the movants.”); State

Farm Fire and Cas. Co. v. Myrick, 2007 WL 3120262, *2 (M.D. Ala. Oct. 23, 2007)

(“Resolving the duty to indemnify before the underlying case is concluded could potentially

waste resources of the court because the duty to indemnify could become moot if the insured

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7 See also Allstate Ins. Co. v. Employers Liability Assur. Corp., 445 F.2d 1278,

1281 (5th Cir. 1971) (“no action for declaratory relief will lie to establish an insurer’s liability in

a policy clause contest such as the one at bar until a judgment has been rendered against the

insured since, until such judgment comes into being, the liabilities are contingent and may never

materialize”); American Fidelity & Cas. Co. v. Pennsylvania Threshermen & Farmers’ Mut.

Cas. Ins. Co., 280 F.2d 453, 461 (5th Cir. 1960) (observing in declaratory judgment action

concerning insurance coverage that “it is not the function of a United States District Court to sit

in judgment on these nice and intriguing questions which today may readily be imagined, but

may never in fact come to pass,” such that court “was well within its considered judicial

discretion to decline to express legal opinions on academic theoreticals which might never come

to pass”).

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prevails in the underlying lawsuit.”).7

 In light of these and other authorities set forth in an Order

(doc. 30) entered on January 23, 2008, the Court indicated in that Order that “if the Tupa Action

remains unresolved at this time, then Pennsylvania National’s claim for declaratory judgment on

the indemnification is properly dismissed without prejudice as premature,” leaving as the sole

remaining issue Penn National’s duty to defend its insured in the Tupa Action. (Doc. 30, at 2.) 

Plaintiff subsequently confirmed that the Tupa Action remains ongoing at this time; therefore,

the duty to indemnify aspect of this action is due to be dismissed because Penn National’s

indemnification obligations to Roberts Brothers are hypothetical and contingent at this time.

Notwithstanding the foregoing, and with no citations of authority, plaintiff now urges the

Court to “reconsider its position concerning the ripeness of Penn National’s duty to indemnify

Roberts Brothers” on the grounds that “[t]he ripeness issue was not raised by Roberts Brothers in

its response to Penn National’s motion.” (Plaintiff’s Supplement (doc. 33), ¶ 4.) However, such

issues are properly raised by the district court sua sponte, irrespective of whether a litigant has

interposed them. See, e.g., Johnson v. Sikes, 730 F.2d 644, 647 (11th Cir. 1984) (“The question

of ripeness affects our subject matter jurisdiction ... and may be raised sua sponte at any time.”);

Peachlum v. City of York, Pennsylvania, 333 F.3d 429, 433 (3rd Cir. 2003) (“This court has

recognized that considerations of ripeness are sufficiently important that the court is required to

raise the issue sua sponte even though the parties do not.”); Utah v. U.S. Dep’t of the Interior,

210 F.3d 1193, 1196 n.1 (10th Cir. 2000) (because ripeness doctrine is drawn from constitutional

limitations on judicial power and prudential reasons for refusing jurisdiction, “ripeness can be

raised at any time, even by the court sua sponte”); Sammons v. National Comm’n on

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Certification of Physician Assistants, Inc., 104 F. Supp.2d 1379, 1381 (N.D. Ga. 2000) (“As

ripeness goes to this court’s subject matter jurisdiction, the court must consider the question sua

sponte.”). “The ripeness doctrine protects federal courts from engaging in speculation or

wasting their resources through the review of potential or abstract disputes.” Digital Properties,

Inc. v. City of Plantation, 121 F.3d 586, 589 (11th Cir. 1997) (explaining that ripeness enables

courts to avoid becoming entangled in the hazards of premature adjudication). The reasoning of

these cases is that, even where no litigant has asserted a ripeness defense, it is entirely

appropriate for a district court to invoke that doctrine to conserve scarce judicial resources and

avoid adjudicating speculative or theoretical disputes that may never be realized. Plaintiff’s

suggestion to the contrary is without merit.

In light of the foregoing, the Court deems it inappropriate at this time to enter a

declaration as to Penn National’s duty to indemnify Roberts Brothers in the Tupa Action. At

present, it is purely a matter of speculation and hypothesis as to whether judgment will ever be

entered against Roberts Brothers in those state-court proceedings. To decide now whether Penn

National is responsible for footing the bill if the Tupa Action culminates in a monetary judgment

against Roberts Brothers would run contrary to fundamental notions of judicial economy, wise

judicial administration, and prudent allocation of scarce judicial resources. Accordingly, in the

exercise of the Court’s sound discretion, Penn National’s claims for a declaratory judgment on

the question of its duty to indemnify are dismissed without prejudice. The Court’s summary

judgment analysis will focus exclusively on the duty to defend dimension of the parties’ dispute.

B. Appropriate Legal Standard under Alabama Law.

The parties are in agreement that Alabama law governs the proper interpretation of the

CGL Policy and Umbrella Policy. (See Plaintiff’s Brief (doc. 21), at 5; Defendant’s Brief (doc.

26), at 6.) Accordingly, this Court will apply Alabama law to the coverage issues presented in

this dispute.

Alabama law generally imposes the burden of proof on policy coverage issues on the

insured, while the burden of proving applicability of a policy exclusion rests with the insurer. 

Compare Jordan v. National Acc. Ins. Underwriters Inc., 922 F.2d 732, 735 (11th Cir. 1991)

(“Under Alabama law the general rule is that the insured bears the burden of proving coverage.”)

with Acceptance Ins. Co. v. Brown, 832 So.2d 1, 12 (Ala. 2001) (“In general, the insurer bears

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the burden of proving the applicability of any policy exclusion.”). Exceptions to coverage are

interpreted as narrowly as possible to maximize coverage, and are construed strongly against the

insurance company that issued the policy. See Porterfield v. Audobon Indem. Co., 856 So.2d

789, 806 (Ala. 2002).

Under Alabama law, “[t]he issue whether a contract is ambiguous or unambiguous is a

question of law for a court to decide. ... If the terms within a contract are plain and unambiguous,

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

Nationwide Ins. Co. v. Rhodes, 870 So.2d 695, 696-97 (Ala. 2003) (citation omitted); see also

B.D.B. v. State Farm Mut. Auto. Ins. Co., 814 So.2d 877, 879 (Ala.Civ.App. 2001) (“The

interpretation of an insurance contract presents a question of law.”). “General contract law

requires a court to enforce, as it is written, an unambiguous and lawful contract.” Drummond

Co. v. Walter Industries, Inc., 962 So.2d 753, 780 (Ala. 2006); see also Progressive Specialty

Ins. Co. v. Naramore, 950 So.2d 1138, 1141 (Ala. 2006) (“Insurance contracts are to be enforced

as they are written, as long as there is no ambiguity in the provisions involved.”) (citations

omitted); Shrader v. Employers Mut. Cas. Co., 907 So.2d 1026, 1034 (Ala. 2005) (“If there is no

ambiguity, courts must enforce insurance contracts as written and cannot defeat express

provisions in a policy ... by making a new contract for the parties.”) (citation omitted).

The determination of whether policy language is ambiguous or unambiguous is critical. 

“To the extent the language of an insurance policy provision is ambiguous, all ambiguities must

be resolved against the insurance company.” Safeway Ins. Co. of Alabama, Inc. v. Herrera, 912

So.2d 1140, 1143 (Ala. 2005). That said, ambiguities cannot be constructed from thin air by

“strained or twisted reasoning” in interpreting the language. Id. Furthermore, “the mere fact

that a word or phrase used in a provision in an insurance policy is not defined in the policy does

not mean that the word or phrase is inherently ambiguous.” Id. Rather, “[i]n determining

whether the language of a contract is ambiguous, courts construe the words according to the

interpretation ordinary men would place on the language used therein. ... The words are given

the meaning that persons with a usual and ordinary understanding would place on the words.” 

Naramore, 950 So.2d at 1141 (citations and internal quotations omitted); see also Herrera, 912

So.2d at 1143 (similar). If a given exclusion is ambiguous, it “will be construed so as to limit the

exclusion to the narrowest application reasonable under the wording.” Porterfield, 856 So.2d at

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806 (citation omitted).

As mentioned, the sole remaining claim in this action concerns Penn National’s duty to

defend its insured in the underlying case. In determining the scope of this duty to defend,

several principles of Alabama law are relevant. The law is clear that an “insurer’s duty to defend

is more extensive than its duty to [indemnify].” Tanner v. State Farm Fire & Cas. Co., 874

So.2d 1058, 1063 (Ala. 2003) (citation omitted); see also Hartford Cas. Ins. Co. v. Merchants &

Farmers Bank, 928 So.2d 1006, 1011 (Ala. 2005) (explaining that broad duty to defend arises

from principle that ambiguous insurance policies must be construed liberally in insured’s favor). 

Furthermore, “[w]hether an insurance company owes its insured a duty to provide a defense in

proceedings instituted against the insured is determined primarily by the allegations contained in

the complaint.” Tanner, 874 So.2d at 1063. However, a court is not constrained to the

allegations of the underlying complaint, but may additionally look to facts which may be proved

by admissible evidence. Id. at 1064. The Alabama Supreme Court has succinctly summarized

the applicable test for gauging the existence of a duty to defend as follows: “The insurer owes no

duty to defend only if neither does the complaint against the insured allege a covered accident or

occurrence nor does the evidence in the litigation between insurer and insured prove a covered

accident or occurrence.” Id. at 1065. If both covered claims and non-covered claims are

pleaded, then the insurer’s duty to defend extends at least to those covered claims. Id.

The Court’s examination of the legal issues presented by the parties concerning the CGL

Policy and the Umbrella Policy proceeds in recognition of these principles.

C. The Professional Service Exclusions in the CGL and Umbrella Policies.

Penn National maintains that the professional services exclusions set forth in both the

CGL Policy and the Umbrella Policy foreclose coverage for Roberts Brothers in the Tupa

Action. The wording of these exclusions is very similar. As described supra, the CGL Policy’s

professional services exclusion provides that coverage is excluded for bodily injury “due to the

rendering of or failure to render any professional service,” which the exclusion specifically

describes as “real estate agents error and omissions.” Likewise, the Umbrella Policy’s

professional services exclusion bars coverage for “liability arising out of the rendering or failure

to render professional service, or any error ... of a professional nature.” Penn National argues

that Roberts Brothers’ maintenance of the rental home occupied by Tupa constitutes a

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8 In arguing otherwise, Roberts Brothers relies on U.S. Fidelity and Guar. Co. v.

Armstrong, 479 So.2d 1164 (Ala. 1985), which is distinguishable. In Armstrong, the evidence

was that the insured’s underlying conduct included both professional and non-professional

services, such that there were questions of fact as to the causation question of which of these

types of services actually caused the injury for which coverage was sought. Id. at 1169. By

contrast, the only activity of Roberts Brothers’ at issue is its alleged failure to repair a defective

sliding door at Tupa’s home despite notice of same. Whether arranging for repair of a sliding

door on a rental house is a “professional service,” as that term is used in the Penn National

insurance policies, is a legal question for the Court to decide.

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“professional service” triggering those exclusions, as Roberts Brothers’ alleged failure to

maintain the home “arises out of its performance of its profession as a real estate agent.” 

(Plaintiff’s Brief (doc. 21), at 7.) Roberts Brothers counters that the term “professional services”

is ambiguous because it is not defined in the policies, that the term does not reasonably

encompass the activities that are the subject of the Tupa Action, and that there are questions of

fact as to whether particular acts and omissions do or do not amount to professional services. 

(Opposition Brief (doc. 26), at 9-13.)

As an initial matter, the Court disagrees with Roberts Brothers’ suggestion that the lack

of an express definition of the term “professional services” in the policy language necessarily

renders these exclusions ambiguous. See, e.g., Herrera, 912 So.2d at 1143 (phrase in insurance

policy is not inherently ambiguous simply because policy does not define it). It is similarly

incorrect to maintain, as Roberts Brothers does, that whether a given activity is or is not a

“professional service” always amounts to a question of fact. In Alabama, the interpretation of

insurance policies is for courts to decide in the first instance, and policy terms must be given

their ordinary meaning. See id. Thus, if the activities for which Tupa seeks to hold Roberts

Brothers liable in the underlying action fall within the usual and ordinary meaning of the term

“professional services,” then the exclusion applies and no question of fact is presented.8

An extensive body of law has developed concerning the meaning of the term

“professional services” as used in exclusions such as those at issue here. Although Alabama

jurisprudence on this topic is limited, courts in other jurisdictions have frequently defined that

term as follows: “[A] ‘professional act or service’ is one arising out of a vocation, calling,

occupation or employment involving specialized knowledge, labor or skill, and the labor or skill

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9 See also Evanston Ins. Co. v. Budget Group Inc., 2006 WL 2828174, *1-2 (11th

Cir. Oct. 5, 2006) (under Florida law, professional services exclusion is confined to persons who

belong to learned profession or whose occupations require a high level of training and

proficiency, such as attorneys, psychiatrists and medical technicians, such that renting vehicles

to the public is not a professional service); Bohreer v. Erie Ins. Group, 475 F. Supp.2d 578, 585

(E.D. Va. 2007) (under Virginia law, application of professional services exclusion requires

court to determine “whether the action arises out of a service that exacts the use or application of

special learning or attainments of some kind,” such that exclusion would reach any service

inextricably intertwined with any such professional services); Stone v. Hartford Cas. Co., 470 F.

Supp.2d 1088, 1098 (C.D. Cal. 2006) (professional services are acts that require specialized

intellectual knowledge, labor and skill, such as drafting architectural plans for home construction

project); Western World Ins. Co. v. American and Foreign Ins. Co., 180 F. Supp.2d 224, 231 (D.

Me. 2002) (similar); American Motorists Ins. Co. v. Southern Sec. Life Ins. Co., 80 F. Supp.2d

1285, 1289 (M.D. Ala. 2000) (applying Florida law, and construing term “professional act or

service” to mean “one arising out of a vocation, calling, occupation, or employment involving

specialized knowledge, labor, or skill, and the labor skill involved is predominantly mental or

intellectual, rather than physical or manual”).

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is predominately mental or intellectual rather than physical or manual.” American Economy Ins.

Co. v. Jackson, 476 F.3d 620, 625 (8th Cir. 2007) (citation omitted).9

The Tupa Complaint contains no facts that might reasonably support a conclusion that

Tupa is suing Roberts Brothers for acts or services involving specialized knowledge, labor or

skill. Simply stated, Tupa claims that she told Roberts Brothers (as property manager) that there

was a problem with her sliding door, and that Roberts Brothers failed to fix it. Nothing in the

Tupa Complaint suggests that Roberts Brothers ever inspected the sliding door and, in reliance

on specialized skill and professional judgment, made a considered determination that repair was

unnecessary, impossible or otherwise untenable. All appearances are that Tupa is suing Roberts

Brothers for an administrative oversight, not a professional judgment call. Under no ordinary

common-sense meaning of the term is it a “professional service” for a property manager to

perform (or fail to perform) the strictly clerical task of picking up the telephone to call a

handyman to repair a broken door. This omission forms the sole basis of the claims against

Roberts Brothers in the underlying lawsuit. Whatever such an omission may or may not be, it

clearly does not arise from a vocation involving specialized knowledge, labor or skill, and it

cannot reasonably fit within the definition of a professional service as that term is used in

exclusions in both the CGL Policy and the Umbrella Policy. See generally Guaranty Nat’l Ins.

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 12 of 20
10 This conclusion is reinforced by the CGL Policy endorsement that lists Roberts

Brothers’ “Designated Professional Services” as “1. Real Estate Agent Errors and Omissions”

and “2. Financial Investment Error and Omissions.” (Doc. 1, Exh. B, at 58.) A property

manager’s failure to call a repairman to fix a lock does not fall within the plain meaning of either

of these types of enumerated services, inasmuch as neither real estate agents nor financial

investment professionals would be expected to perform such duties. Stated differently, Roberts

Brothers was clearly not wearing its “real estate agent” hat or its “financial investment” hat when

performing the acts and omissions underlying the state-court action; therefore, the professional

services exclusion in the CGL Policy is inapplicable to the claims asserted against Roberts

Brothers in the Tupa Action.

11 In so concluding, the Court rejects Penn National’s argument that the conduct at

issue should fall within the “professional services” exclusion because it constitutes the sort of

“special risk” that is aligned with the purposes of an errors and omission policy, rather than the

sort of “customary business risk” which CGL policies are designed to cover. (Doc. 21, at 7-8.) 

Such talk of general purposes of different types of insurance is unhelpful and unavailing. If Penn

National wished to limit its liability to certain kinds of risk, it was incumbent upon Penn

National, as insurer and drafter of the CGL Policy, to craft the policy language in such a way to

effectuate that intention. Where an insurer has failed to do so (as Penn National has with respect

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Co. v. North River Ins. Co., 909 F.2d 133, 137 (5th Cir. 1990) (under Texas law, professional

services exclusion does not apply to claims that insured hospital failed to maintain patient’s

window properly by safeguarding the window through screws in window sashes rather than

fixed, protective screens, inasmuch as that was an administrative decision, not a professional

service); Shelley v. Moir, 405 N.W.2d 737, 739 n.2 (Wis.App. 1987) (noting that “[r]epair and

maintenance of property might not normally be considered ‘professional services’” within

meaning of policy exclusion but that policy in question specifically defined professional

activities to include “property management”).10

For these reasons, the Court concludes that Penn National has failed to satisfy its burden

of proving that the professional services exclusions in the CGL Policy and Umbrella Policy

provide a bar to coverage in this case. Given that the clerical/administrative acts and omissions

at issue in the Tupa Action do not fall within the usual and ordinary meaning of the term

“professional services,” and given the canon of construction that policy exclusions must be

construed strictly against the insurer, Penn National’s Motion for Summary Judgment is not

well-taken to the extent that it seeks to avoid a duty to defend in the underlying action pursuant

to both policies’ professional services exclusions.11

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 13 of 20
to its professional services exclusions), it cannot fall back on generalities concerning the relative

purposes of an errors and omissions policy and a CGL policy to avoid coverage.

12 See State Farm Lloyds v. Goss, 109 F. Supp.2d 574, 577 (E.D. Tex. 2000)

(construing similar “real estate operations” limitation to exclude coverage of insured’s real estate

property if insured owns, operates or manages it in a manner inconsistent with merely showing it

to prospective buyers); State Farm Fire & Cas. Co. v. Bohlen, 976 S.W.2d 594, 596 (Mo.App.

E.D. 1998) (holding that similar “real estate operations” limitation excuses insurer from

coverage where underlying action alleged that insured was negligent in managing and

controlling the property where injury occurred).

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D. The Real Estate Operations Limitation in the CGL Policy.

Penn National next contends that the CGL Policy does not obligate it to defend Roberts

Brothers in the Tupa Action, as a matter of law, because it contains a “real estate operations”

limitation. That endorsement provides that “[w]ith respect to real estate operations, this

insurance applies only to ‘bodily injury’ ... arising out of the ownership, operation, maintenance

or use of: (1) Such part of any premises you use for general office purposes; and (2) Premises

listed with you for sale or rental, if: a. You do not own, operate, manage or rent the premises; b.

They are not in your care, custody, or control; or c. You do not act as agent for the collection of

rents or in any supervisory capacity.” Penn National’s position is that the plain language of this

endorsement negates any defense obligation owed to Roberts Brothers here.

The parties do not dispute that Tupa’s claims against Roberts Brothers allege bodily

injury arising from negligent property management. Tupa is not suing Roberts Brothers for

improper management of premises that Roberts Brothers used for general office purposes, or for

negligence in connection with premises listed with Roberts Brothers for sale or rental that it does

not own, operate, control or manage. As such, the critical inquiry becomes whether Roberts

Brothers’ property management services at the home rented by Tupa qualify as “real estate

operations.” If so, then that limitation on its face would preclude coverage for the allegations of

the Tupa Complaint and obviate any duty to defend. The Court answers this question in the

affirmative.12

Although the term “real estate operations” is not defined in the CGL Policy, it would

embrace real property management services under any common-sense, ordinary construction of

the term. Indeed, “real estate operations” on its face has a broader connotation than merely

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 14 of 20
13 No party has submitted evidence as to the meaning of “real estate operations”;

however, a cursory Internet search of the terms “real estate operations” and “property

management” reveals a recurring link between the two, and reflects a common understanding

both in the industry and among lay persons in ordinary parlance that property management is a

subset of real estate operations. This nexus reinforces the foregoing authorities.

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buying, selling and listing properties, and the act of managing or operating a real property lies

well within the purview of that term as it is usually and ordinarily understood. Courts in a

variety of factual and legal contexts have routinely classified property management as a form of

real estate operations. See generally Joyce v. John Hancock Financial Services, Inc., 462 F.

Supp.2d 192, 196 (D. Mass. 2006) (describing “real estate operations department” of financial

services company as a department that manages and operates properties); MB Financial Bank,

N.A. v. MB Real Estate Services, LLC, 2003 WL 21462501, *6 (N.D. Ill. 2003 June 23, 2003)

(characterizing as “commercial real estate business” a company’s operations as property

manager of 22 commercial buildings in Chicagoland area); Gottsegen v. Hart Property

Management Inc., 820 So.2d 1138, 1143 (La. App. 5 Cir. 2002) (“In general, the business of a

real estate company is more closely associated with sales, rental, and property management.”);

Idylwoods Associates v. Mader Capital, Inc., 915 F. Supp. 1290, 1295 (W.D.N.Y. 1996)

(describing employee responsible for company’s real estate operations as handling maintenance,

sales and marketing of property).13 Under any reasonable reading of the CGL Policy, then,

Roberts Brothers’ property management services at the Tupa rental home constitute “real estate

operations” within the scope of that coverage limitation.

To avoid both the common-sense meaning of the term “real estate operations” and the

authority recognizing property management as a form of real estate operations, Roberts Brothers

propounds three arguments. First, it urges the Court to read the real estate operations limitation

in conjunction with the statement on the declaration page describing Roberts Brothers’ business

as “real estate agents.” (Doc. 1, Exh. B, at 2.) According to Roberts Brothers, “real estate

operations” should be read as meaning “real estate agent operations” because of that business

description in the CGL Policy. This argument proves too much. If Roberts Brothers is correct

that the “business description” portion of the declaration page is the benchmark against which all

policy coverages, limitations and exclusions are measured, then coverage is obviously lacking

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 15 of 20
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for the Tupa Action because, as Roberts Brothers itself recognizes, the claims in that case do not

concern its real estate agent operations. Besides, defendant’s construction of the policy language

is unreasonable. Nothing in the CGL Policy would warrant equating “real estate operations”

with “real estate agent services”; rather, Roberts Brothers is simply seizing on unrelated aspects

of the CGL Policy to derive a far more restrictive definition of “real estate operations” than the

plain meaning of the term or the text of the CGL Policy can support. Given its obligation to

construe the term “real estate operations” in accordance with its usual and ordinary meaning, the

Court will not utilize twisted or strained reasoning to conflate that term with the business

description recited on the declarations page of the CGL Policy. See State Farm Fire & Cas. Co.

v. Slade, 747 So.2d 293, 309 (Ala. 1999) (when a court construes an insurance policy, “the terms

of an insurance policy should be given a rational and practical construction”); Lambert v.

Coregis Ins. Co., 950 So.2d 1156, 1161 (Ala. 2006) (citing well-established rule that litigants

cannot create nonexistent ambiguities through use of strained or twisted reasoning).

Second, Roberts Brothers insists that there are questions of fact as to whether property

management services fall within the definition of “real estate operations” as that term is used in

the CGL Policy. The record does not support this contention. Roberts Brothers comes forward

with no evidence of any kind tending to show genuine issues of material fact as to whether the

acts and omissions at issue in the Tupa Action constitute real estate operations. More

fundamentally, defendant once again ignores the black-letter principle that the interpretation of

an insurance policy is a question of law for the court to decide. See, e.g., American and Foreign

Ins. Co. v. Tee Jays Mfg. Co., 699 So.2d 1226 (Ala. 1997) (explaining that it is court’s province

“to construe a policy, even though ambiguous and unclear but not void for uncertainty, where its

interpretation must come from the writing itself”). If property management services for rental

homes fall within the ordinary meaning of the term “real estate operations,” then the limitation

bars coverage. No fact-finding is necessary to make that determination. Thus, Roberts Brothers’

unsupported, vague contention that issues of fact preclude construction of the real estate

operations limitation on coverage at the summary judgment stage is unfounded.

Third, Roberts Brothers contends that when the CGL Policy is construed as a whole, the

meaning of the “real estate operations” limitation becomes ambiguous. It is certainly correct that

courts must examine an insurance policy as a whole, rather than isolating particular portions and

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 16 of 20
14 Indeed, Roberts Brothers’ argument disregards the CGL Policy’s endorsement

labeled “Additional Insured - Managers or Lessors of Premises,” which provides that managers

and lessors listed in the schedule (such as the four managers/lessors named on page 52 of the

CGL Policy) are additional insureds “only with respect to liability arising out of the ownership,

maintenance or use of that part of the premises leased to you.” (Doc. 1, Exh. B, at 140.) On its

face, then, the CGL Policy extends coverage to managers and lessors only for the ownership,

maintenance or use of premises that have been leased to Roberts Brothers. This provision

dovetails with the common, ordinary meaning of the “real estate operations” limitation. As such,

there is no inconsistency between the listing of four managers as additional insureds and the

plain meaning of the “real estate operations” limitation as discussed above.

15 On this issue, Roberts Brothers would also rely on endorsement CG 22 70 11 85,

which the Court has already pointed out is not set forth in the copy of the CGL Policy submitted

-17-

interpreting them out of context. See, e.g., American Resources Ins. Co. v. H & H Stephens

Const., Inc., 939 So.2d 868, 873 (Ala. 2006) (“a court cannot consider the language in the policy

in isolation, but must consider the policy as a whole”) (citations omitted); Slade, 747 So.2d at

309 (same). According to Roberts Brothers, ambiguity arises from the fact that the CGL Policy

includes among the named insureds four people described as “managers/lessors of premises”

located at 3662 Dauphin Street in Mobile, Alabama. (Doc. 1, Exh. B, at 52.) The insured’s

point is that the provision extending coverage to “managers/lessors of premises” cannot be

reconciled with an interpretation of the “real estate operations” limitation as excluding coverage

for bodily injury arising from Roberts Brothers’ property management services. This argument

fails for the following reasons: (a) this action does not involve the property at 3662 Dauphin

Street or the four individuals named as additional insureds on page 52 of the CGL Policy, so the

status of coverage for those persons and property is irrelevant; (b) Roberts Brothers would have

the mere listing of four “managers/lessors” among additional insureds erase, rewrite and

supersede the plain language of the real estate operations limitation; and (c) Roberts Brothers

disregards the fact that the CGL Policy provides coverage beyond “real estate operations,” such

that the four “managers/lessors” could enjoy coverage under the policy in certain respects even

as such coverage remained bounded by the real estate operations limitation.14 In short, Roberts

Brothers is attempting to create an ambiguity where there is none, and is relying on strained

reasoning to do so. Alabama law precludes Roberts Brothers from circumventing the clear

meaning of its insurance policy in this fashion. See Lambert, 950 So.2d at 1161.15

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 17 of 20
by the parties and is not properly before the Court. (See footnote 5, supra.) For the reasons

already stated, this argument will not be considered. Even if it were considered, however, this

contention would fail. Roberts Brothers says that there was an exclusion in the CGL Policy

providing that “[w]ith respect to your liability arising out of your management of property for

which you are acting as real estate manager this insurance is excess.” (Doc. 26, at Exh. A.) 

According to Roberts Brothers, this provision creates ambiguity when read alongside the “real

estate operations” limitation because the former suggests that coverage is available for

management services while the latter indicates that no such coverage is available. This conflict

is illusory. The endorsement labeled “Additional Insured - Managers or Lessors of Premises”

outlines circumstances under which property managers are afforded coverage under the CGL

Policy, and is not inconsistent with the “real estate operations” limitation. The endorsement

cited by Roberts Brothers merely provides that such coverage is excess. The Court will not

accept Roberts Brothers’ strained and selective readings of particular policy provisions to inject

uncertainty into an unambiguous limitation on coverage in the “real estate operations” section of

the CGL Policy.

16 Penn National also maintains that the Umbrella Policy’s coverage is inapplicable

because of the “professional services” exclusion set forth therein. The Court having already

rejected that argument, the only issue remaining as to the Umbrella Policy is the impact, if any,

of the “other insurance” limitation on coverage.

-18-

In short, the plain language of the “real estate operations” provision of the CGL Policy

conclusively defeats Penn National’s obligation to furnish a defense to Roberts Brothers

pursuant to that policy in the Tupa Action. The Court finds that property management services

are within the plain ordinary meaning of “real estate operations” as that term is used in the

policy. The Court further finds that this provision limits coverage for bodily injury arising from

real estate operations to premises that Roberts Brothers uses for general office purposes and

premises listed with it for sale or rental that Roberts Brothers does not own, operate, manage, or

control. As the allegations of the Tupa Action would hold Roberts Brothers liable for real estate

operations that do not fall within the limited coverage provided by the CGL Policy for such

activities, the Court concludes that Penn National owes no duty to defend Roberts Brothers

pursuant to that policy, as a matter of law.

E. The Other Insurance Limitation in the Umbrella Policy.

Finally, Penn National seeks a declaration that the Umbrella Policy’s coverage for

Roberts Brothers is excess to any other coverage (including specifically errors and omissions

policy coverage) that Roberts Brothers may have.16 The Umbrella Policy includes an “Other

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 18 of 20
17 In particular, Roberts Brothers expressly “concedes that the umbrella policy in

question provides excess coverage to the claims at issue if other insurance provides coverage.” 

(Opposition Brief (doc. 26), at 16.) And Penn National theorizes that the Umbrella Policy’s

coverage “would be excess to the professional liability coverage” if in fact Roberts Brothers

possesses such coverage. (Plaintiff’s Brief (doc. 21), at 11.)

-19-

Insurance” condition stating as follows: “If other insurance applies to claims covered by this

policy, the insurance under this policy is excess and we will not make any payments until the

other insurance has been used up.” There is no evidence of record as to whether Roberts

Brothers in fact has any other coverage that might trigger the “other insurance” clause of the

Umbrella Policy. Nonetheless, the parties are in agreement that, to the extent such other

insurance exists, the Penn National Umbrella Policy provides excess coverage.17 On that limited

basis, and without making any findings or expressing any opinions as to the existence of any

such “other insurance,” the Court will enter declaratory judgment in Penn National’s favor.

F. The Umbrella Policy’s Professional Services Exclusion.

The procedural posture of this action is now somewhat unusual. The Court has held as a

matter of law that (1) the CGL Policy does not obligate Penn National to defend the claims

against Roberts Brothers in the Tupa Action and (2) the Umbrella Policy is excess to any other

insurance that may apply to those claims. But Penn National’s Complaint (doc. 1) also includes

a claim that the Court declare that no defense is owed Roberts Brothers in the Tupa Action under

Penn National’s Umbrella Policy because of the “professional services” exemption. This purely

legal issue has been fully briefed and decided in this Order in a manner adverse to Penn

National, but defendants did not file a cross-motion for summary judgment. Inasmuch as this

legal issue has been fully developed and decided by this Court, such that there is no conceivable

need for this action to proceed to trial, the Court hereby grants summary judgment to defendants

on the question of whether the professional services exclusion of the Umbrella Policy defeats the

insurer’s duty to provide a defense in the underlying proceedings. See generally Artistic

Entertainment, Inc. v. City of Warner Robins, 331 F.3d 1196, 1202 (11th Cir. 2003) (“where a

legal issue has been fully developed, and the evidentiary record is complete, summary judgment

is entirely appropriate even if no formal notice has been provided”).

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 19 of 20
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IV. Conclusion.

For all of the foregoing reasons, it is hereby ordered that plaintiff’s claims for

declaratory judgment on the question of its duty to indemnify Roberts Brothers in the underlying

action are dismissed without prejudice as premature. With respect to plaintiff’s claims for

declaratory judgment concerning the duty to defend, plaintiff’s Motion for Summary Judgment

(doc. 20) is granted in part, and denied in part. The Motion is granted in the following

respects:

1. The Court finds and declares that Penn National owes no duty under the

commercial general liability insurance policy number CL9 0096662 to defend

Roberts Brothers in the underlying state-court litigation brought by Tamara Tupa

and styled Tamara Tupa v. Roberts Brothers, Inc. et al., Civil Action Number

CV-05-2079 (Mobile County Circuit Court), such duty being extinguished by the

“real estate operations” limitation.

2. The Court further finds and declares that, with respect to the Tupa lawsuit, Penn

National’s umbrella coverage of Roberts Brothers under insurance policy number

UL9 0096662 is excess to any other insurance coverage available to Roberts

Brothers that is applicable to those claims.

In all other respects, the Motion for Summary Judgment is denied. The Court sua sponte

grants summary judgment to defendants on the legal issue of whether the umbrella policy’s

professional services exclusion relieves Penn National of its duty to defend Roberts Brothers

under that policy. 

There being no further claims remaining to be litigated herein, a separate judgment will

enter and this file will be closed.

DONE and ORDERED this 11th day of March, 2008.

s/ WILLIAM H. STEELE 

UNITED STATES DISTRICT JUDGE

Case 1:07-cv-00085-WS-M Document 35 Filed 03/11/08 Page 20 of 20