Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-2_08-cv-00475/USCOURTS-almd-2_08-cv-00475-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:2201 Declaratory Judgement (Insurance)

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IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

NORTHERN DIVISION

FIRE INSURANCE EXCHANGE, )

)

)

Plaintiff, )

)

v. ) CASE NO. 2:08-CV-475-WKW[WO]

)

JEFFREY McCOY; LISA BLEDSOE; )

and J.J., a Minor by and through his )

Mother and Next Friend, Lisa Bledsoe, )

)

Defendants. )

MEMORANDUM OPINION

Plaintiff Fire Insurance Exchange (“FIE”) brings this action pursuant to the Federal

Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, seeking a determination of its duty to

defend and/or indemnify Defendant Jeffrey McCoy (“McCoy”) under its insured’s

Homeowners policy bearing Policy Number 0915034569 (Doc. # 1). Lisa Bledsoe

(“Bledsoe”), on behalf of her minor son, J.J., sued McCoy in Montgomery County Circuit

Court after her son was bitten by one of McCoy’s dogs while staying at McCoy’s house.

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McCoy responded by filing a counterclaim alleging bad-faith breach of contract and seeking

punitive damages (Doc. # 6-2).

Following a bench trial held on June 17, 2009, this cause is before the court for a

decision on FIE’s declaratory judgment action and McCoy’s counterclaim. After careful

 Bledsoe v. McCoy, No. CV-2007-900348 (Ala. Cir., Montgomery County). 1

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consideration of the arguments of counsel, the evidence and the applicable law, the court

makes the following findings of fact and conclusions of law, in accordance with Rule 52 of

the Federal Rules of Civil Procedure.

I. JURISDICTION AND VENUE

Jurisdiction is exercised pursuant to 28 U.S.C. § 1332 (diversity jurisdiction) and 28

U.S.C. § 2201. The parties do not contest personal jurisdiction or venue, and the court finds

allegations sufficient to support both.

II. STANDARD OF REVIEW

In a civil case, the same burden of proof applies “regardless of whether the finder of

fact is a judge in a bench trial or a jury.” Prickett v. United States, 111 F. Supp.2d 1191,

1192 (M.D. Ala. 2000). A plaintiff has the burden of proving each element of his claim by

a preponderance of the evidence. As succinctly stated by the Supreme Court of the United

States,

“[t]he burden of showing something by a ‘preponderance of the evidence,’ the

most common standard in the civil law, ‘simply requires the trier of fact to

believe that the existence of a fact is more probable than its nonexistence

before [he] may find in favor of the party who has the burden to persuade the

[judge] of the fact’s existence.’”

Concrete Pipe & Prod. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S.

602, 622 (1993) (citations omitted). Moreover, in a bench trial, the judge’s “function

includes weighing the evidence, evaluating the credibility of witnesses, and deciding

questions of fact, as well as issues of law.” Prickett, 111 F. Supp. 2d at 1192 (citing Childrey

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v. Bennett, 997 F.2d 830, 834 (11th Cir. 1993) (holding that “it is the exclusive province of

the judge in non-jury trials to assess the credibility of witnesses and to assign weight to their

testimony”)).

III. FINDINGS OF FACT

Based on the testimony and evidence presented at the bench trial, the court finds the

following facts. McCoy and Bledsoe are first cousins. J.J. is Bledsoe’s son and was 12 years

old at the time of the incident. On June 24, 2005, J.J. was a guest at McCoy’s home when

one of McCoy’s Rottweilers attacked J.J. in McCoy’s backyard, causing lacerations to his

right leg from the mid-calf area up to the knee and to his left leg near the Achilles tendon.

McCoy, realizing that the wounds were serious, immediately transported J.J. to the hospital.

J.J. received twelve stitches for his injuries.

After departing from the emergency room, McCoy and Bledsoe had a conversation

wherein McCoy mentioned that he was contemplating reporting the incident to FIE. Bledsoe

told McCoy not to worry about it. Relying on the amicability of familial ties, the

representations of his cousin, and his own perception of the finality of the incident, McCoy

chose not to report the attack to FIE.

McCoy lost contact with Bledsoe soon thereafter. In August 2006, McCoy received

a letter from an attorney retained by Bledsoe, informing him of an impending state-court

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lawsuit, filed on behalf of J.J., seeking compensatory and punitive damages. On August 29,

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2006, McCoy contacted FIE for the first time about the dog biting occurrence (Pl.’s Ex. 9 &

10). In a letter dated September 7, 2006, FIE declined to extend coverage to McCoy,

claiming he had failed to provide notice of the occurrence within a reasonable amount of

time (Pl.’s Ex. 2). Nevertheless, upon a reservation of rights, FIE appointed counsel who

represented McCoy’s interests for nearly eight months before withdrawing. FIE had also

made at least one medical payment to J.J. under the policy.

IV. DISCUSSION

A. Notification

The insurance contract between McCoy and FIE provides that prompt notification is

a condition precedent to any duty on the part of FIE to provide coverage, indemnify, or

defend McCoy in any lawsuit. Specifically, the policy states: “[i]n case of an occurrence the

insured will . . . give written notice to us or our agent as soon as possible . . . ” (Pl.’s Ex. 2).

Under Alabama law, such a notice requirement in an insurance policy is a condition

precedent to the insured’s coverage under that policy. Pharr v. Cont’l Cas. Co., 429 So. 2d

1018, 1019 (Ala. 1983); Martin v. Auto-Owners Ins., 329 So. 2d 547, 550 (Ala. Civ. App.

1976). Notice must be given “within a reasonable time under all the circumstances.” U.S.

Fid. & Guar. Co. v. Baldwin County Home Builders Assoc., Inc., 770 So. 2d 72, 75 (Ala.

 The reason J.J. and Bledsoe ultimately decided to file suit was because of complications

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involving J.J.’s scar tissue. In order to play high school football, J.J. needs plastic surgery to add layers

of skin to his scars; otherwise, they would be in danger of splitting open. As a “cosmetic” surgery,

Bledsoe’s and J.J.’s health insurance would not cover the procedure.

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2000) (quoting Am. Liberty Ins. v. Soules, 258 So. 2d 872, 879 (Ala. 1972)). In determining

whether an insured has satisfied the reasonable notice requirement, courts consider: (1) the

length of the delay, and (2) the existence of a reasonable excuse for the delay. S. Guar. Ins.

Co. v. Thomas, 334 So. 2d 879, 883 (Ala. 1976).

1. Length of the Delay

The length of delay between the incident and McCoy’s notification of FIE of that

incident was a little over fourteen months. The Alabama Supreme Court has held that

similar, even less substantial, delays without excuse are unreasonable as a matter of law. See

Pharr, 429 So. 2d at 1019-20 (holding that an eight-month delay without excuse was

unreasonable as a matter of law); Thomas, 334 So. 2d at 883 (holding that a six-month delay

without a showing of a reasonable excuse was unreasonable as a matter of law); Correll v.

Fireman’s Fund Ins. Cos., 529 So. 2d 1006, 1009 (Ala. 1988) (affirming trial court’s

judgment that one year delay is unreasonable without sufficient “reasons for that delay”).

Based on these Alabama Supreme Court cases, the court finds that the fourteen months that

lapsed between the occurrence of the attack and the date on which McCoy notified FIE is

unreasonable as a matter of law unless McCoy can present a reasonable excuse for that delay.

2. Reasonable Excuse for Delay

Even if the delay is unreasonable as a matter of law, the notice may still be timely if

there exists an objectively reasonable excuse for the delay. Thomas, 334 So. 2d at 883. The

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Alabama Supreme Court has identified a few limited sets of circumstances where otherwise

unreasonable delay is excusable:

Generally, delay is excusable in the case of an accident which is trivial and

results in no apparent harm or which furnishes no ground for [the] insured,

acting as a reasonable and prudent man, to believe at the time that a claim for

damages will arise or that the injury is one insured against. In such case

notice is not required until some claim within the coverage of the policy has

been presented or is reasonably to be anticipated, in which event the

requirement as to notice is satisfied if notice is given within a reasonable time

after the situation assumes an aspect suggestive of a possible claim for

damages. Clearly, notice is necessary when there has been such an

occurrence as would lead a reasonable and prudent man to believe that it

might give rise to a claim for damages.

Progressive Specialty Ins. Co. v. Steele, 985 So. 2d 932, 939 (Ala. Civ. App. 2007) (quoting

Pan Am. Fire & Cas. Co. v. DeKalb-Cherokee Counties Gas Dist., 266 So. 2d 763, 771 (Ala.

1972) (quoting 45 C.J.S. Insurance § 1056)).

McCoy argues that his fourteen-month delay is excusable for two reasons: (1) his

perception that J.J.’s injuries were de minimis; and (2) his belief, after Bledsoe told him “not

to worry about it,” that no claim would arise from the incident.

Based on McCoy’s response to J.J.’s accident and based on the enduring scars from

the attack, McCoy’s argument that the accident was trivial and resulted in no apparent harm

does not withstand scrutiny. McCoy testified at trial that he immediately determined, after

looking at J.J.’s leg, that his (J.J.’s) injuries required medical attention and that he would

probably need stitches. McCoy also testified that he was concerned about a possible injury

to J.J.’s Achilles tendon. Furthermore, the lasting and pronounced scars on J.J.’s legs bear

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evidence of the seriousness of his injuries. From this testimony and the court’s inspection

of J.J.’s scars, the court concludes that the injuries were not trivial and that their gravity was

immediately apparent to McCoy.

McCoy also argues that he did not believe a claim would arise from the accident. He

bases his belief on the familial ties he has to Bledsoe and J.J. and on Bledsoe’s

representations to him following the incident. While it is understandable that McCoy chose

to rely on a family member’s promise not to file a claim, this would require subjective

inquiry as opposed to the requisite objective inquiry set forth in Pan American Fire &

Casualty Co., 266 So. 2d at 771. The relevant inquiry is whether McCoy, acting as a

“reasonable and prudent” man, would have believed that no claim would arise from the

occurrence. Id.

The court answers this question in the negative. McCoy’s conversation with Bledsoe,

in which he told her that he was contemplating notifying FIE, demonstrates McCoy’s

knowledge that a claim could and might very well arise from the accident. Although McCoy

and Bledsoe had a close relationship when they were younger, they both acknowledged in

their testimony that they had been distant for a number of years prior to the incident. In some

circumstances, a person may be acting reasonably and prudently by relying on a close family

member’s promise that he or she would not file a claim. However, McCoy’s admittedly

distant relationship with Bledsoe at the time of the accident does not rise to a level of familial

confidence that would justify relying on her promise not to file a claim. McCoy’s subjective

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belief that no claim would arise was objectively unreasonable. Because McCoy has proffered

no reasonable excuse for his delay, notice, as required by the contract under Alabama law as

a condition precedent to coverage, was lacking. Therefore, FIE is absolved of its duties to

McCoy under the insurance policy.

B. McCoy’s Counterclaim

McCoy alleges a counterclaim for bad-faith breach of contract and seeks punitive

damages. Because the court finds that FIE is absolved of its contractual obligations to

McCoy due to his failure to give notice to FIE within a reasonable time, the court’s

examination of McCoy’s counterclaim will be cursory. In order to prevail on a bad-faith

breach of contract claim in the insurance context, a court must make the threshold finding

that there was, in fact, a breach of contract. See McDole v. Alfa Mut. Ins. Co., 875 So. 2d

279, 285 (Ala. 2003) (holding that a bad faith refusal-to-pay claim fails as a matter of law

when the underlying breach-of-contract claim fails as a matter of law); Nat’l Sec. Fire & Cas.

Co. v. Bowen, 417 So. 2d 179, 183 (Ala. 1982) (an essential element of a claim alleging a

bad-faith refusal to pay is that the insurer has breached the insurance contract). Since McCoy

failed to provide timely notice, FIE was relieved from the obligations of the contract and thus

did not breach it. Therefore, McCoy’s claims for bad-faith breach of contract and punitive

damages fail as a matter of law.

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V. CONCLUSION

For the foregoing reasons, judgment is due to be entered in favor of Plaintiff Fire

Insurance Exchange, and against Defendants McCoy, Bledsoe, and J.J., and Fire Insurance

Exchange is entitled to a declaratory judgment that under its insured’s Homeowners policy

bearing Policy Number 0915034569, it has no duty to defend or indemnify McCoy in

Bledsoe v. McCoy, No. CV-2007-900348 (Cir. Ct. Montgomery County).

Judgment is also due to be entered in favor of Counterclaim Defendant Fire Insurance

Exchange, and against Counterclaim Plaintiff Jeffrey McCoy, on the bad-faith breach of

contract claim.

An appropriate judgment will be entered.

DONE this 1st day of July, 2009.

/s/ W. Keith Watkins

UNITED STATES DISTRICT JUDGE

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