Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-5_14-cv-00147/USCOURTS-alnd-5_14-cv-00147-0/pdf.json

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

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

OWNERS INSURANCE

COMPANY,

Plaintiff,

vs.

ALABAMA POWERSPORT

AUCTION, LLC, and JAMES

WIESE, as natural father of

Matthew Hunter Wiese,

deceased, 

Defendants.

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 Civil Action No. 5:14-cv-00147-CLS

MEMORANDUM OPINION AND ORDERS

Plaintiff, Owners Insurance Company, seeks a judgment declaring that it has

no duty to either defend or indemnify defendant Alabama Powersport Auction, LLC,

for claims asserted against that entity by defendant James Wiese in the lawsuit

pending in the Circuit Court of Limestone County, Alabama, as Civil Action No. 10-

CV-900146, and styled “James Wiese, as natural Father of Matthew Hunter Wiese,

a Minor, Deceased v. Alabama Powersport Auction, LLC.”1 The action presently is

before the court on cross-motions for summary judgment filed by Owners Insurance

Company and James Wiese.2 Following consideration of the pleadings, briefs,

1

See doc. no. 1 (Federal Complaint); doc. no. 20-7 (State Court Complaint and Amended

Complaint).

2

See doc nos. 17, 18. 

FILED

 2015 May-28 AM 10:38

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 1 of 36
evidentiary submissions, and oral arguments of counsel, this court concludes that

Owners’s motion should be denied, and Weise’s motion should be granted in part and

denied in part. 

I. FACTUAL BACKGROUND

The following facts are not disputed.

3 The Alabama Supreme Court found in

an opinion entered on an interlocutory appeal from the underlying state-court action

that defendant Alabama Powersport Auction, LLC (“APA”), was an entity engaged

in the business of selling at auction

various consumer goods including, but not limited to, go-carts [.] APA

regularly auctionedmotorcycles and golf carts, among otherrecreational

vehicles. In fact, the word “Powersport” in APA’s name was because

“the main things that [APA] sold were four-wheelers, boats,

motorcycles, that type of thing.” Generally, all the goods APA sold

were on consignment to APA from the owners of the goods; the owners

of the goods agreed to pay APA a commission of 10% to 15% of the

price APA was able to acquire at auction from a purchaser of the goods.

Alabama Powersport Auction, LLC v. Wiese, 143 So. 3d 713, 714 (Ala. 2013)

(plurality opinion) (first alteration supplied, second alteration in original). 

DefendantJames Wiese attended an auction conducted by APA on August 27,

2005, and purchased a Model 3206 “Yerf Dog Go-Cart” that had been consigned to

APA by non-party “FF Acquisition Corp., doing business as Flexible Flyer.” 

However, “Wiese was not aware that FF Acquisition had manufactured the go cart.” 

3 Compare doc. no. 17-1 (Owners’s Summary Judgment Brief), at 2–7, with doc. no. 23

(Wiese’s Response to Owners’s Summary Judgment Motion), at 3. 

2

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 2 of 36
Id. at 714-15.

4

 

Soon after purchasing the go-cart, Wiese discovered that the

engine would not operate for more than a few minutes at a time. After

several failed attempts to repair the go-cart, Wiese stored the go-cart in

his garage for almost two years. In September 2007, Wiese repaired the

go-cart. On September 17, 2007, [James Wiese’s minor son, Matthew

Hunter Wiese,] was riding the go-cart and had an accident in which

Matthew hit his head on the ground causing a brain injury that resulted

in his death on March 6, 2010[, some two years and five months later].

Id. at 715 (alterations supplied). 

James Wiese commenced a wrongful death action in the Circuit Court for

Limestone County, Alabama, on August 19, 2010.

5 By that date, however, FF

Acquisition Corp., doing business as Flexible Flyer, had sought bankruptcy

4 On June 21, 2005, prior to the date of the auction at which James Wiese purchased the gocart leading to the underlying state-court action and the present controversy, the United States

Consumer Products Safety Commission announced a recall of Model 3206 “Yerf Dog Go-Carts”

(among other models listed). According to the announcement (“Release # 05-205”), the

manufacturer had “received five reports of the suspension assembly cracking and causing the rider

to lose control, including reports of bruises and head and back injuries.” Consumers were directed

to cease using the recalled products immediately, and the announcement stated: “It is illegal to resell

or attempt to resell a recalled consumer product.” The announcement concluded with this statement: 

“The company is out of business and contact information is no longer available.” See

www.cpsc.gov/en/Recalls/2005 (emphasis supplied) (last visited May 19, 2015). 

5

See doc. no. 20-7 (State Court Complaint and Amended Complaint), at ECF 2-3. “ECF”

is the acronym for “Electronic Case Filing,” a system that allows parties to file and serve documents

electronically. SeeAtterbury v. Foulk, No. C-07-6256 MHP, 2009 WL4723547, at *6 n.6 (N.D. Cal.

Dec. 8, 2009). Bluebook Rule 7.1.4 permits citations to the “page numbers generated by the ECF

header.” Wilson v. Fullwood, 772 F. Supp. 2d 246, 257 n.5 (D. D.C. 2011) (citing The Bluebook:

A Uniform System of Citation R. B. 7.1.4, at 21 (Columbia Law Review Ass’n et al., 19th ed. 2010)). 

Even so, The Bluebook recommends “against citation to ECF pagination in lieu of original

pagination.” Wilson, 772 F. Supp. 2d at 257 n.5. Thus, unless stated otherwise, this court will cite

the original pagination in the parties’ pleadings. When the court cites to pagination generated by the

ECF header, however, it will, as here, precede the page number with the acronym “ECF.” 

3

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 3 of 36
protection.

6

 Consequently, Wiese’s claims were asserted against only APA. 

Wiese’s amended state-court complaint contained two counts. Count One was

based on Alabama’s Wrongful Death statutes, Ala. Code §§ 6-5-391 and 6-5-410

(1975),7

and alleged that the wrongful act giving rise to the cause of action

8 was

APA’s breach of an implied warranty of merchantability that arose from the sale of

6

 FF Acquisition Corp., doing business as Flexible Flyer, experienced significant financial

problems in 2005. Not only were its go-carts subjected to a substantial recall due to defective ball

joints, see supra note 4, but three of its major customers deferred purchasing $5,000,000 in swing

sets. Another important customer withheld payments for merchandise that had already shipped. As

a result, the company was compelled to file for bankruptcy protection on September 9, 2005, in the

United States Bankruptcy Court for the Northern District of Mississippi. See In re Flexible-Flyer

Liquidating Trust f/k/a FF Acquisition Corp. d/b/a Flexible-Flyer, No. 05-16187-JDW(Bankr. N.D.

Miss. Aug. 7, 2013) (slip op. doc. no. 1672 closing Chapter 11 case); see also In re FF Acquisition

Corp. d/b/a Flexible-Flyer, 423 B.R. 502, 503-504 (Bankr. N.D. Miss. 2010). 

7

See doc. no. 20-7 (State Court Complaint and Amended Complaint), at ECF 7-8; Alabama

Powersport Auction, LLC v. Wiese, 143 So. 3d 713, 714 (Ala. 2013) (Parker, J., plurality opinion).

8

 Section 6-5-410 defines Alabama’s general cause of action for the wrongful killing of an

individual, and provides, in pertinent part, that: 

(a) A personal representative may commence an action and recover such

damages as the jury may assess in a court of competent jurisdiction within the State

of Alabama . . . for the wrongful act, omission, or negligence of any . . . corporation

. . . whereby the death of the testator or intestate was caused, provided the testator

or intestate could have commenced an action for the wrongful act, omission, or

negligence if it had not caused death. 

Ala. Code § 6-5-410(a) (emphasis supplied). Section 6-5-391 specifically defines a cause of action

that accrues upon the wrongful killing of a minor, and its pertinent provisions read as follows: 

(a) When the death of a minor child is caused by the wrongful act,

omission, or negligence of any person, persons, or corporation . . . the father . . . may

commence an action. 

(b) An action under subsection (a) for the wrongful death of the minor

shall be a bar to another action either under this section or under Section 6-5-410.

Ala. Code § 6-5-391 (emphasis supplied). 

4

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 4 of 36
the go-cart.

9

 See, e.g., Ala. Code § 7-2-314 (1975).10 

Count Two of the amended complaint also asserted a claim for breach of an

implied warranty of merchantability independent of Weise’s wrongful-death claim,

and sought compensatory damages. Specifically, Weise alleged that APA 

is liable for the injuries and damages sustained by Plaintiff’s decedent

based on a breach of the implied warranty of merchantability. 

18. The Plaintiff claims compensatory damagesfor the injuries

suffered by the Plaintiff’s decedent, Matthew Hunter Wiese, between the

time of his injury and his death pursuant to Benefield v. Aquaslide ‘N’

Drive Corp., 406 So. 2d 873 (Ala. 1981).[11]

9

See doc. no. 20-7 (State Court Complaint and Amended Complaint), at ECF 7-8; see also

Alabama Powersport, 143 So. 3d at 716. 

10 Alabama Code § 7-2-314 is part of Alabama’s version of the Uniform Commercial Code,

and provides, in pertinent part, that: 

(1) Unless excluded or modified (Section 7-2-316), a warranty that the

goods shall be merchantable is implied in a contract for their sale if the seller is a

merchant with respect to goods of that kind. Under this section the serving for value

of food or drink to be consumed either on the premises or elsewhere is a sale. 

(2) Goods to be merchantable must be at least such as: . . . (c) Are fit for

the ordinary purposes for which such goods are used; . . . .

Ala. Code § 7-2-314 (1975). 

11 At common law, both a cause of action (the right of a person to commence a suit against

another party) and an action then pending in a court of law ended upon the death of the plaintiff. 

Alabama Code § 6-5-42 allows for revival of an action commenced prior to the plaintiff’s death,

and, survival of certain causes of action in favor of and against personal representatives of a

deceased person: i.e., 

In all proceedings not of an equitable nature, all claims upon which an action

has been filed and all claims upon which no action has been filed on a contract,

express or implied, and all personal claims upon which an action has been filed,

except for injuries to the reputation, survive in favor of and against personal

representatives; and all personal claims upon which no action has been filed survive

against the personal representative of a deceased tort-feasor.

5

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 5 of 36
19. Defendant’s breach proximately caused the Plaintiff’s

decedent, Matthew Hunter Wiese, a Minor, to suffer the following

injuries and damages, to-wit:

(a) Plaintiff’s decedent suffered permanent physical injuries;

(b) Plaintiff’s decedent suffered physical pain and mental

anguish; and

(c) Plaintiff’s decedent has been caused to incur medical,

doctor and drug expenses in the treatment of his injuries[.]

Doc. no. 20-7 (State Court Complaint and Amended Complaint), at ECF 8 (footnote

and alteration supplied). 

APA’s motion for summary judgment on both counts of Weise’s amended

complaint was denied by the state trial court. APA’s petition for interlocutory appeal

from the trial court’s adverse ruling was granted by the Alabama Supreme Court,

which unanimously concluded that “a breach of warranty claimcannot be maintained

under Alabama’s wrongful-death statute.” Alabama Powersport, 143 So. 3d at 716.

12

Ala. Code § 6-5-462 (1975) (emphasis supplied). The case cited in paragraph 18 of James Wiese’s

amended state-court complaint, Benefield v. Aquaslide ‘N’ Drive Corp., 406 So. 2d 873 (Ala. 1981),

turned upon the foregoing statute, and held that the personal representative of a deceased person’s

estate could recover compensatory damages for the injuries suffered by the decedent prior to death

under a breach of warranty (contract) claim. See, e.g., id. at 876; Alabama Powersport, 143 So. 3d

at 720 n.3. Specifically, the Court held that “[t]he breach of warranty (contract) claim is a separate

and distinct claim from the wrongful death (tort) claim and seeks compensatory damages only, not

for the wrongful death of the decedent but for the injuries suffered before his death.” Benefield, 406

So. 2d at 876. See generally Note, Recovery for Personal Injuries Causing Death After Benefield

v. Aquaslide ‘N’ Drive Corp., 34 Ala. L. Rev. 339 (1983). 

12 That conclusion was dictated by the Court’s opinion in Geohagan v. General Motors

Corp., 291 Ala. 167, 279 So. 2d 436 (Ala.1973), which held that 

“no contractual cause of action for wrongful death is created by our Uniform

6

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 6 of 36
Consequently, the Courtreversed the trial court’s denial of summary judgment on the

claim alleged in Count One of Wiese’s amended complaint, and remanded the case

with directions to dismiss the wrongful-death claim. Id. at 720. 

On the other hand, a majority of the members of the State’s highest court

affirmed the trial judge’s denial of summary judgment on the claim alleged in Count

Two, but could not agree upon the rationale for doing so.

13 The plurality opinion held

that an auctioneer (such as APA) selling consigned goods on behalf of another (here,

FF Acquisition Corp. d/b/a Flexible Flyer) may be held liable as “a merchant-seller”

under Alabama Code § 7–2–314 for breach of an implied warranty of

merchantability,

14

if the auctioneer failed to disclose the principal for whom it sold

Commercial Code arising from a breach of warranty, and that actions for wrongful

death can arise in this state and be processed only under our wrongful death acts.”

291 Ala. at 172, 279 So. 2d at 440. In so reaching this conclusion, this Court

explained:

“So far as can be determined from a reading of our Uniform

Commercial Code, there is not one word, sentence, paragraph, clause,

or section which in anywise even suggests that for the breach of an

express or implied warranty in a contract any person is given a right

to maintain an action for a wrongful death. On the other hand, the

precision with which the legislature has defined the purpose and

policy of the act, limiting the same to commercial transactions,

clearly demonstrates that it was not the intent of the legislature in

enacting the Uniform Commercial Code to create a wrongful death

action in case of a breach of warranty of the contract involved.” 

Alabama Powersport, 143 So. 3d at 716-17 (quoting Geohagan, 291 Ala. at 171, 279 So. 2d at 439).

13

Justice Shaw concurred in the result, but did not join the rationale of the plurality opinion

authored by Justice Parker for himself and Justices Murdock, Main, and Wise that is discussed in

the remainder of this textual paragraph. See Alabama Powersport, 143 So. 3d at 725. 

14

See supra note 10 for the pertinent provisions of Ala. Code § 7-2-314. 

7

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 7 of 36
the goods. See id. at 720, 723-24 (plurality opinion). The considerations that framed

the plurality’s analysis were stated as follows: 

An implied warranty of merchantability exists only if there is a

“seller,” as that term is defined in § 7–2–103, Ala. Code 1975, who is a

“merchant with respect to goods of that kind.” § 7–2–314(1), Ala. Code

1975. Section 7–2–103(1)(d) defines a “seller” as “a person who sells

or contracts to sell goods”; [and] § 7–2–104(1), Ala.Code 1975, defines

“merchant” as follows: 

“‘Merchant’ means a person who deals in goods of

the kind or otherwise by his occupation holds himself out

as having knowledge or skill peculiar to the practices or

goods involved in the transaction or to whom such

knowledge or skill may be attributed by his employment of

an agent or broker or other intermediary who by his

occupation holds himself out as having such knowledge or

skill.” 

It is well settled that under Alabama law an auctioneer may be

considered a merchant under Alabama’s version of the UCC. See

Bradford v. Northwest Alabama Livestock Ass’n, 379 So. 2d 609, 611

(Ala. Civ. App. 1980) (holding that a livestock auctioneer was a

merchant because it “was in the business of selling cattle to prospective

buyers and had been so engaged for a number of years and held itself out

as having the knowledge and skill to conductsuch sales”). However, the

parties have not directed this Court’s attention to any Alabama

precedent concerning whether an auctioneer selling goods on behalf of

a consignor — and, thus, not holding title to the goods being sold, see

Bischoff v. Thomasson, 400 So. 2d 359 (Ala. 1981) (noting that a

consignee does not hold title to the goods consigned to it by a

consignor; title passes from the consignor to the buyer) — may be

considered a seller under Alabama’s version of the UCC and held liable

as a merchant-seller for a breach of an implied warranty of

merchantability. 

Alabama Powersport, 143 So. 3d at 721 (alteration and emphasis supplied). 

8

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 8 of 36
Addressing that question of first impression under Alabama law, the plurality found

the rationale for the decision of the Tenth Circuit Court of Appeals in Powers v.

Coffeyville Livestock Sales Co., 665 F.2d 311 (10th Cir. 1981), to be persuasive. The

opinion in that case turned upon Kansas’s version of the Uniform Commercial Code,

which is identical to Alabama’s enactment, and held that: 

“Under traditional agency law, an agent [such as an auctioneer

selling goods on consignment for another] is liable as if it were the

principal when the agent acts for an undisclosed principal. This rule

applies whether the agent holds itself out as principal or only as agent

but does not disclose the identity of its principal. Bruce v. Smith, 204

Kan. 473, 464 P.2d 224 (1970); Restatement (Second) of Agency §§

321–22 (1958). Applying this common law rule to auctioneers, courts

in other jurisdictions have held that an auctioneer is liable as a seller if

the auctioneer fails to disclose to the buyer the identity of the principal.

E.g., Universal C.I.T. Credit Corp. v. State Farm Mutual Automobile

Insurance Co., 493 S.W.2d 385, 390 (Mo. Ct. App. 1973); Itoh v. Kimi

Sales, Ltd., 74 Misc. 2d 402, 345 N.Y.S. 2d 416, 420 (Civ. Ct. N.Y.

1973); Hagen v. Brzozowski, 336 S.W.2d 213, 215–16 (Tex. Civ. App.

1960). The UCC did not alter the common law application of agency

principles to sales made by an auctioneer. See Kan. Stat. Ann. §

84–1–103. We believe the Kansas courts would hold that an auctioneer

who fails to disclose the identity of its principal and who regularly

auctions merchandise of a particular kind is, with regard to those goods,

a merchant seller within the coverage of section 84–2–314.” 

Alabama Powersport, 143 So. 3d at 722-23 (quoting Powers, 665 F.2d at 312-13)

(alteration supplied, footnote omitted).15 

15

 The omitted footnote reads as follows: 

Accord Lary Lawrence, Lawrence’s Anderson on the Uniform Commercial

Code § 2–103:37 (3d ed. 2012) (citing Powers, supra) (“If the auctioneer does not

disclose the identity of the principal, the auctioneer is the seller. Although the

9

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 9 of 36
Based upon the common-law agency principles recited in the foregoing

opinion, as well as those set forth by the Alabama Supreme Court in Abercrombie v.

Nashville Auto Auction, Inc., 541 So. 2d 516, 518 (Ala. 1989) (observing that an

auctioneer may be liable as a seller under Ala. Code § 7–2–312 for a breach of the

warranty of title if the auctioneer fails to disclose to the buyer the identity of the

principal), the plurality opinion on interlocutory appeal from the underlying state

court action held that “an auctioneer may be held liable as a merchant-seller for the

implied warranty of merchantability under § 7–2–314 if the auctioneer fails to

disclose the principal for whom the auctioneer is selling the goods.” Alabama

Powersport, 143 So. 3d at 723-24.

16 Cf., e.g., Welch v. Mitchell, 351 So. 2d 911, 915

(Ala. Civ. App. 1977) (holding that “an auctioneer who acts for a disclosed principal

will not be deemed liable for a defect in the title of the property sold”) (emphasis

supplied). The present action followed. 

auctioneer does not transfer title, he or she makes a contract of sale and, thus, comes

within the definition of ‘seller.’ ”); §§ 2–314:580 and 2–314:581 (“A sale by auction

is a sale and consequently the same warranties arise when the sale is made through

an auctioneer as when a sale is made directly by the principal. . . . When the

auctioneer sells without identifying the principal on whose behalf it is selling, the

auctioneer has the status of a partially-disclosed agent, and is deemed the seller and

is liable for any warranty, express or implied, that is involved in the sale.”); and 12

Richard A. Lord, Williston on Contracts § 35:43, at 555 (4th ed. 2007) (“The rule of

liability which ensues from a nondisclosure of the principal has been applied to hold

a selling agent who does not disclose the principal to all the general liabilities of any

other seller.”). 

Alabama Powersport, 143 So. 3d at 723 n.6. 

16

See supra note 10 for the pertinent language of Ala. Code § 7-2-314. 

10

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 10 of 36
II. DISCUSSION

Owners founded the jurisdiction of this court upon the parties’ complete

diversity of citizenship and the requisite amount in controversy. See doc. no. 1

(Federal Complaint) ¶¶ 1-5; 28 U.S.C. § 1332.

17 Consequently, considerations of

comity and the Erie doctrine compel this court to apply state substantive law, and

federal procedural and evidentiary rules. Erie Railroad Co. v. Tompkins, 304 U.S. 64

(1938); see also, e.g., Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S.

487, 496-97 (1941); National Distillers and Chemical Corp. v. Brad’s Machine

Products, Inc., 666 F.2d 492, 494-95 (11th Cir. 1982). 

A. The Insured’s and Insurer’s Respective Burdens of Persuasion 

Under Alabama law, the insured (here, APA) normally bears the burden of

establishing that a claim falls within the coverage of the policy. See, e.g., Chandler

v. Alabama Mutual Insurance Co., 585 So. 2d 1365, 1367 (Ala.1991); Employers

Mutual Casualty Co. v. Mallard, 309 F.3d 1305, 1307 (11th Cir. 2002) (citing Life

& Casualty Insurance Company of Tennessee v. Garrett, 35 So. 2d 109, 111 (Ala.

1948)). During oral argument, however, counsel represented that APA is no longer

a viable entity. Even though this court’sinternet research castssome doubt upon that

17

 Even though it is nowhere mentioned in the complaint, this court presumes that Owners

seeks relief pursuant to the federal Declaratory Judgment Act, 28 U.S.C. § 2201.

11

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 11 of 36
assertion,

18

the Clerk’s docket entries establish that APA was notserved; and, but for

the fact that Owners is providing a defense under reservation of rights, APA has not

otherwise appeared by way of counsel or pleadings in this action. Hence, the burden

of proving that coverage existed under the terms of Owners’s policy shifts to James

Wiese, the party seeking to establish coverage. See, e.g., Alabama Hospital

Association Trust v. MASA, 538 So. 2d 1209, 1216 (Ala. 1989). 

On the other hand, the insurer (Owners) “bears the burden of proving the

applicability of any policy exclusion.” Acceptance Insurance Company v. Brown,

832 So. 2d 1, 12 (Ala. 2001). 

B. The Duties Arising Under a Policy of Liability Insurance 

18 A Google®

search disclosed several listings for an entity named “Alabama Powersport

Auction, LLC” in Athens, Alabama. One website contained the following information: 

Alabama Powersport Auction, LLC

Alabama Powersport Auction is one of the fastest growing auction Houses in the

Southeast, and we invite you to join us for our next exciting event! Convenient to

all areas in North & Central Alabama, South & Central Tennessee, as well as

Northeastern Mississippi, Alabama Powersport Auction is located onlyminutes west

of Interstate 65 off Hwy. 72 in Athens. Offering a HUGE selection of boats, ATV’s,

tools, cars, trucks, recreational vehicles, motorcycles, utility vehicles, jewelry,

antiques and other furniture, Alabama Powersport Auction is your connection for a

wide array of items to fill personal, business, and recreational needs. During your

visit to Alabama Powersport Auction, you will find plenty of restaurants, fueling

stations, and hotel rooms in Athens and the immediate area. Our facility features

public restrooms, concessions, free parking, and 7:00 am early viewing on the day

of sale. Our auctions are held monthly, and we always have something NEW! Don’t

miss a single event! 

http://www.liveauctioneers.com/alabama-powersport-auction-llc (last visited May 19, 2015). See

also http://www.auctionzip.com/AL-Auctioneers/10724.html. 

12

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 12 of 36
Liability insurance coverage includesseparate duties: the duty to defend; and,

the duty to indemnify. See, e.g., Porterfield v. Audubon Indemnity Co., 856 So. 2d

789, 791 (Ala. 2002). An insurance company’s duty to defend is more extensive than

its duty to indemnify. See, e.g., United States Fidelity & Guaranty Co. v. Armstrong,

479 So. 2d 1164, 1168 (Ala. 1985). 

1. The duty to defend

The question of whether an insurance company owes a duty to defend its

insured from suit is determined by the language of the company’s policy, and by the

allegations in the complaint filed against the insured. See, e.g., Alfa Mutual

Insurance Co. v. Morrison, 613 So. 2d 381, 382 (Ala. 1993). Moreover, it is the

factual allegations of the complaint, and not the “legal phraseology” or remedial

theories undergirding those allegations, that is controlling. Hartford Casualty

Insurance Co. v. Merchants & Farmers Bank, 928 So. 2d 1006, 1012 (Ala. 2005)

(“Where facts are alleged in the complaint to support a cause of action, it is the facts,

not the legal phraseology, that determine whether an insurer has a duty to defend its

insured in the action.”). See also, e.g., Cotton States Mutual Insurance Co. v. Daniel,

No. 3:07–CV–843–WKW, 2008 WL 4999097, at *18 (M.D. Ala. Nov. 20, 2008)

(Watkins, J.) (“To ascertain whether [an insurer] owes [its insured] a duty to defend,

the court focuses on the factual allegations in the complaint, not on the legal theories

13

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 13 of 36
asserted.”) (alterations supplied). 

a. Was the underlying event an insurable “occurrence”?

The following provisions from the commercial general liability insurance

policy issued by Owners to APA provide that coverage will be provided for “bodily

injury” or “property damage” that is caused by an “occurrence”: a term defined as

“an accident, including continuous or repeated exposure to substantially the same

general harmful conditions.” 

SECTION I — COVERAGES

COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE

LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes

legally obligated to pay as damages because of “bodily injury” or

“property damage” to which thisinsurance applies. We will have

the right and duty to defend the insured against any “suit” seeking

those damages. . . . . 

. . . .

b. This insurance applies to “bodily injury” and

“property damages” only if: 

(1) The “bodily injury” or “property damage” is

caused by an “occurrence” that takes place in the “coverage

territory”;

. . . .

SECTION V – DEFINITIONS

. . . .

14

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 14 of 36
14. “Occurrence” means an accident, including continuous or

repeated exposure to substantially the same general harmful conditions.

Doc. no. 20-5 (Policy No. 054617-38227830-07), at 1, 19 (emphasis supplied). 

(i) Owners’s primary argument

Owners argues that the remedial theory supporting James Wiese’s remaining

claim in the underlying state-court action — breach of an implied warranty of

merchantability — is a “contract claim”; and, therefore, that it is not covered by the

terms of APA’s policy which provides insurance only for an “occurrence,” meaning

“an accident”: i.e., 

Wiese’ssole claim against Powersport Auction isthat it breached

the implied warranty of merchantability with regards to a go-cart he

purchased at an auction held by Powersport Auction. A claim of breach

of warranty is a contract claim. Geohagen v. General MotorsCorp., 279

So.2d 436 (Ala. 1973). 

Matthew Wiese passed away prior to the filing of the underlying

suit. Therefore, the breach of warranty claimbeing made byWiese must

be purely contractual because an unfiled tort claim does not survive the

death of the injured party. Benefield v. Aquaslide ‘N’ Dive Corp., 406

So.2d 873 (Ala. 1981). In fact, Wiese acknowledged this is in a brief he

submitted to the Alabama Supreme Court in the underlying suit, stating:

A breach of implied warranty is a contract claim. While

an unfiled claim sounding in tort will not survive the death

of the person with the claim, a claim on a contract does

survive the death of the injured party. (Wiese’s Brief at

page 14).

The insurance policy issued to Powersport Auction contains the

following language:

15

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 15 of 36
I. Insuring Agreement

b. This insurance applies to “bodily injury” and “property

damage” only if:

(1) The “bodily injury” or “property damage” is caused by an

“occurrence” that takes place in the “coverage territory”.

The policy defines the term, “occurrence”, as meaning, “an accident,

including continuous or repeated exposure to substantially the same

general harmful conditions”. Breach of warranty / contract is not an

“occurrence” because it is not an accident. Prudential Property and

Cas. Ins. Co. v. Boyle, 305 Fed. Appx. 35 (3rd Cir. 2008) (Breach of an

implied warranty is not an accident); Nationwide Mut. Ins. Co. v. CPB

International, Inc., 2007 WL 4198173 (M.D. Penn. 2007) (Breach of

contract is not an occurrence). There is no coverage for Wiese’s claim

because breach of warranty is not an accident, and therefore, not an

occurrence. 

Doc. no. 17-1 (Owners’s Summary Judgment Brief), at 8-10 (emphasis in original).

(ii) The Alabama Supreme Court’s opinion in Reliance

Insurance Co. v. Gary C. Wyatt, Inc. 

The Alabama Supreme Court’s opinion in Reliance Insurance Co. v. Gary C.

Wyatt, Inc., 540 So. 2d 688 (Ala. 1988), appears to be the only binding precedent that

addresses the question of whether a “contract claim” can be included within the

standard definition of an “occurrence” in a commercial general liability insurance

policy.

19

In that case, a construction company, Gary C. Wyatt, Inc. (“Wyatt”),

19 Accord Auto-Owners Insurance Co. v. Toole, 947 F. Supp. 1557, 1563 (M.D. Ala. 1996)

(Thompson, J.) (observing that “[t]here is almost no Alabama law addressing if and when events

giving rise to a contract dispute fall within the standard definition of [an] occurrence,” and then

proceeding to discuss the holding in Reliance) (alterations supplied). 

16

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 16 of 36
engaged in a project that necessitated the rental of a crane from the Essex Crane

Rental Corporation (“Essex”). One clause of the lease agreement required Wyatt to

include Essex as an additional insured under Wyatt’s general liability insurance

policies. Two days after Wyatt and Essex executed the lease agreement, Reliance

Insurance Company (“Reliance”) issued a general liability insurance policy to Wyatt,

but “Essex was not included as an additional insured under [that] policy, nor did

Wyatt request that Essex be listed as an additional insured. . . .” Id. at 689 (alteration

supplied). Five months after leasing the crane and procuring insurance from

Reliance, one of Wyatt’s employees, Robert Batson, was injured when the crane’s

boom fell and struck him. Batson sued both Essex and Wyatt. Essex then filed

a third-party complaint, asserting a claim for breach of contract for

Wyatt’s failure to include Essex as an additional insured under its

liability insurance policy as required by the lease. Essex claimed

Wyatt’s failure to procure such insurance caused Essex to suffer

damages as a “direct, foreseeable and proximate result of the breach of

contract.” 

Id.

20 When Wyatt subsequently made a demand for Reliance to provide a defense to

(and indemnity for) Essex’s third-party complaint, Reliance instituted a declaratory

judgment proceeding in the Circuit Court for Jefferson County, Alabama.21 Reliance

20 There is no explanation in the Alabama Supreme Court’s opinion for Essex’s decision to

file a “third-party complaint” — as opposed to a cross-claim—against Wyatt for breach of the lease

agreement. 

21

Interestingly, the suit filed by Robert Batson against Essex and Wyatt, and Essex’s thirdparty complaint asserting a claim for breach of the lease agreement against Wyatt, were commenced

in the United States District Court for the Northern District of Florida, and that court ultimately

17

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 17 of 36
argued that there was no coverage under its policy because “the claim against Wyatt

is based on breach of contract, not an ‘occurrence’ resulting in bodily injury or

property damage, and . . . Reliance did not undertake to insure Wyatt against breach

of contract.” Id. The state trial court entered judgment in favor of Wyatt, and

Reliance appealed. The Alabama Supreme Court reversed, saying that: 

The portion of Essex’s complaint with which we are concerned in

this appeal is predicated upon the following alleged breach of contract:

“Wyatt failed to procure liability insurance as required . . . [and this]

failure constitutes a breach of the lease agreement, and Essex has, and

will, suffer damages as a direct, foreseeable, and proximate result of said

breach.” The breach of contract was the failure to procure liability

insurance. This is not an “occurrence” that results in bodily injury or

property damage. Batson’s injury may go to the issue of damages

sustained by this breach of contract, but it is not the “occurrence” that

causes the breach of contract. The contract had been breached, with or

without Batson’s injury. The “occurrence” in this case is the breach of

contract rather than the bodily injury to Batson. We conclude that no

coverage exists for the breach of contract, because the breach did not

constitute an “occurrence” that resulted in bodily injury or property

damage under the definitions within the policy, which was necessary to

bring such claim within the policy coverage. . . . 

Reliance Ins. Co., 540 So. 2d at 690-91 (citations omitted, alteration in original,

emphasis supplied). As another judge in the Eleventh Circuit observed in a case that

also required construction of the Reliance holding, it is difficult to lift from the

foregoing statements “any overall principle or principles that might guide the court

in resolving the issue presented in the instant case.” Auto-Owners Insurance Co. v.

“granted summary judgment in favor of Essex against Wyatt on the breach of contract claim.” 

Reliance Insurance Co. v. Gary C. Wyatt, Inc., 540 So. 2d 688, 689 (Ala. 1988). 

18

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 18 of 36
Toole, 947 F. Supp. 1557, 1564 (M.D. Ala. 1996) (Thompson, J.). 

In addition, this court finds that Reliance is distinguishable. That case turned

upon the fact that the insured, Wyatt, had breached an express contractual promise,

whereas the claim in the present action is predicated upon an obligation imposed by

the law in the absence of an express representation or promise that the thing sold to

James Wiese was fit for the ordinary purposes for which such goods are used.

22

 

(iii) The Alabama Supreme Court’s plurality opinion in

Benefield v. Aquaslide ‘N’ Dive Corp. 

The binding authority that ultimately providesthe most guidance for a decision

in the present action is the one upon which James Wiese’s remaining claim was

founded: Benefield v. Aquaslide ‘N’ Dive Corp., 406 So. 2d 873 (Ala. 1981). The

plaintiff’s decedent in that case died nine days after suffering a spinal cord injury on

a swimming pool sliding board manufactured by the defendant, Aquaslide. Neither

the deceased, nor anyone acting on his behalf, filed an action prior to his death. The

suit subsequently filed against Aquaslide by the personal representative of the

decedent’s estate contained a claim for wrongful death under the Alabama Extended

Manufacturer’s Doctrine and the wrongful death statute, as well as a separate count

setting forth “a claim for breach of warranties, seeking recovery not for the death of

22

See, e.g., Black’s Law Dictionary 1725 (9th ed. 2009) (defining implied warranty as: “An

obligation imposed by the law when there has been no representation or promise; esp., a warranty

arising by operation of la because of the circumstances of a sale, rather than by the seller’s express

promise.”). 

19

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 19 of 36
the decedent, but for the pain and medical expensessuffered by him between the date

of his injury and the date of his death.” Id. at 874. The trial court dismissed the claim

for “breach of warranties” (presumably, the implied warranties of merchantabilityand

fitness for a particular purpose). See id.; Ala. R. Civ. P. 12(b)(6). The Alabama

Supreme Court accepted an interlocutory appeal from that ruling, and a majority of

the Court reversed — even though, as in the opinion entered following interlocutory

appeal from the underlying state-court action, the Justices could not agree on the

rationale for doing so.

23

The plurality opinion turned upon Alabama Code § 6-5-462, providing that “all

claims upon which no action has been filed on a contract, express or implied, . . .

survive in favor of . . . personal representatives,”24 and held that:

A contract action pursuant to § 6-5-462 survives in favor of the

personal representative regardless of whether the decedent filed the

action before his death. The fact that the decedent dies as a result of the

23

Justice Beatty authored the plurality’s opinion for himself and Justices Faulkner, Embry,

and Adams. Justice Jones concurred specially, and filed a separate opinion. Justice Shores dissented

in an opinion joined byChief Justice Torbert and Justice Maddox. Justice Almon dissented without

opinion. See Benefield v. Aquaslide ‘N' Dive Corp., 406 So. 2d 873, 876 (Ala. 1981). 

24

 The full text of the quoted statute reads as follows: 

In all proceedings not of an equitable nature, all claims upon which an action

has been filed and all claims upon which no action has been filed on a contract,

express or implied, and all personal claims upon which an action has been filed,

except for injuries to the reputation, survive in favor of and against personal

representatives; and all personal claims upon which no action has been filed survive

against the personal representative of a deceased tort-feasor. 

Ala. Code § 6-5-462 (1975) (emphasis supplied). 

20

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 20 of 36
injuries sued upon does not change this general rule. Simmons [v.

Clemco Industries, 368 So.2d 509, 516 (1979) (holding, among other

things, that “[o]rdinarily, contract actions do survive in favor of the

personal representative, and the fact that plaintiff died as a result of the

injuriessued upon does not change the generalrule”) (citation omitted)].

Aquaslide arguesfurther that, even if the breach of warranty claim

survives, plaintiff’s exclusive remedy is under the wrongful death

statute, § 6-5-410, Code of 1975. That is, Aquaslide appears to argue

that the breach of warranty claim merges into the extended

manufacturer’s liability claim for wrongful death. The fallacy of that

argument is that this plaintiff as well as future plaintiffs would then be

barred from seeking any damages other than punitive damages for the

death of the decedent. Should breaching manufacturers be allowed to

escape liability for compensatory contract damages sustained by the

decedent before his death merely because he dies as a result of the

breach? We think not. The breach of warranty (contract) claim is a

separate and distinct claim from the wrongful death (tort) claim and

seeks compensatory damages only, not for the wrongful death of the

decedent but for the injuries suffered before his death. It would be

illogical to merge the two claims. We hold that it was error for the trial

court to dismiss count three. That count does state a claim for which

relief can be granted. The judgment therefore, must be, and is, reversed

and this cause isremanded for further proceedings not inconsistent with

this opinion. 

Benefield, 406 So. 2d at 875-76 (alteration supplied). 

There are obvious distinctions between the facts of Benefield and those of the

present controversy. The defendant in Benefield was the manufacturer of the

allegedly defective product that injured and ultimately caused the death of the

plaintiff’s decedent, while the defendant in the underlying state-court action (APA)

was the intermediate seller between the manufacturer (FF Acquisition Corp. d/b/a

21

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 21 of 36
Flexible Flyer) and purchaser (James Wiese). Even so, that difference is of no

moment, because APA failed to disclose that it was acting as a consignment agent for

its undisclosed principal; and, as a matter of well-settled principles of agency law, it

thereby stepped into the liability shoes of the manufacturer of the allegedly nonmerchantable go-cart. 

Indeed, it is the similarities between the Benefield case and this one that are

dispositive. The breach of implied warranty (“contract”) claims asserted in both cases

arose from events that were classic “accidents” involving “bodily injury” to each

state-court plaintiff’s decedent. In both cases, “breach of implied warranty” was

merely “the legal phraseology,” or remedial theory, under which each state-court

plaintiff alleged that the insured party should be held liable for compensatory

damages for the “bodily injuries” inflicted upon the personal representative’s

decedent. See, e.g., Hartford Casualty Insurance Co. v. Merchants &Farmers Bank,

928 So. 2d 1006, 1012 (Ala. 2005) (“Where facts are alleged in the complaint to

support a cause of action, it is the facts, not the legal phraseology, that determine

whether an insurer has a duty to defend its insured in the action.”). See also, e.g.,

Cotton States Mutual Insurance Co. v. Daniel, No. 3:07–CV–843–WKW, 2008 WL

4999097, at *18 (M.D. Ala. Nov. 20, 2008) (Watkins, J.) (“To ascertain whether [an

insurer] owes [its insured] a duty to defend, the court focuses on the factual

22

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 22 of 36
allegations in the complaint, not on the legal theories asserted.”) (alterations

supplied). 

Consequently, this court looks through “the legal phraseology” to the events

forming the basis of the underlying state-court action, and concludes that the claim

is based upon an insured “occurrence.” See, e.g., Auto-Owners Insurance Co. v.

Toole, 947 F. Supp. at 1564 (holding that, when “determining whether there is

coverage, the court should look to the specific kind of . . . claim being asserted,

regardless [of] whether it is labeled a contract claim, a tort claim, or whatever, and

the purpose of the general liability policy from which coverage issought”) (alteration

and emphasis supplied). Cf. Employers Mutual Casualty Co. v. Smith Construction

& Development, LLC, 949 F. Supp. 2d 1159, 1173-74 (N.D. Ala. 2013). 

Further, James Wiese’s claim in the state-court action — that APA isliable for

the bodily injuries suffered by his son as a result of the accidental wreck of the nonmerchantable go-cart sold by APA to Wiese — falls within the purpose of general

commercial liability insurance policies in Alabama: that is, protecting “an insured

frombearing financialresponsibility for unexpected and accidental damage to people

or property.” Town & Country Property, L.L.C. v. Amerisure Insurance Co., 111 So.

3d 699, 707 (Ala. 2011). 

Accordingly, this court finds that the complaint in the underlying, state-court

23

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 23 of 36
action alleges an “occurrence” that wasthe result of an “accident” that caused “bodily

injury” and, therefore, the claim is covered by the terms of Owners’s policy. 

b. Does the contractual liability exclusion apply?

In addition to arguing that James Wiese’s breach of implied warranty claim is

not a covered “occurrence,” Owners contends that the claim is excluded by the

policy’s “Contractual Liability” provision,

25 which states that the policy does not

cover: “‘Bodily injury’ or ‘property damage’for which the insured is obligated to pay

damages by reason of the assumption of liability in a contract or agreement.” Doc.

no. 20-5 (Policy No. 054617-38227830-07), at 2 (emphasis supplied). 

Owners argues that claims for breach of an implied warranty of

merchantability, which sound in contract rather than tort, fall within the contractual

exclusions typical of commercial general liability insurance policies.

26 Once again,

Owners confuses the issue. 

Under Alabama law, the purpose of contractual exclusions such as the present

one is not to exclude liability for claims sounding in contract but, instead, to exclude

an insured’s liability to a third party that the insured expressly assumed in an

indemnity, or hold-harmless agreement. As the Fifth Circuit stated in a persuasive

opinion, Ingalls Shipbuilding v. FederalInsurance Co., 410 F.3d 214 (5thCir. 2005),

25

 Doc. no. 17-1 (Owners’s Summary Judgment Brief), at 13.

26

Id. at 13–14.

24

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 24 of 36
courts “have consistently interpreted the phrase ‘liability assumed by the insured

under any contract’ to apply only to indemnification and hold-harmless agreements,

whereby the insured agrees to ‘assume’ the tort liability of another. This phrase does

not refer to the insured’s breaches of its own contracts.” Id. at 222 (quoting 1 Barry

R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes §

7.05, at 460 (12th ed. 2004)). 

The Alabama Supreme Court reached the same conclusion in Townsend Ford,

Inc. v. Auto-Owners Insurance, Co., 656 So. 2d 360 (Ala. 1995), holding that a

contractual exclusion clause identical to the one at issue here 

“traditionally serve[s]to exclude ‘indemnity’types of liability, whereby

the liability itself was assumed, rather than warranty situations.” The

specific express warranty alleged to have been breached is that

“[Townsend Ford] warrant[ed] that said automobile had in fact only

been driven by a Ford manager” and the plaintiff alleged that

“[Townsend Ford] breached said warranty by failing to deliver a

conforming automobile.” This warranty does not involve “the

assumption of liability,” but rather merely a representation. Insurers can

plainly provide in their policies that coverage for breach of warranty

claims is excluded if they so choose. 

Id. at 364–65 (alterations in original) (quoting trial court opinion). 

In like manner, the claim for breach of an implied warranty of merchantability

asserted in the underlying state-court action “does not involve the ‘assumption of

liability’” under an express agreement. Id. at 365. Accordingly, the policy’s

“Contractual Liability” exclusion does not apply. Cf., e.g., Dreis & Krump

25

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 25 of 36
Manufacturing Co. v. Phoenix Insurance Co., 548 F.2d 681, 684 (7th Cir. 1977)

(“[T]his circuit has construed the coverage language in the endorsement ‘liability

assumed by him under any written contract’ to mean a specific written agreement

between the insured and some third party whereby the insured agrees to ‘indemnify’

the third party.”) (alteration and emphasis supplied); Smithway Motor Xpress, Inc. v.

Liberty Mutual Insurance Co., 484 N.W. 2d 192, 196 (Iowa 1992) (“Liability

assumed by an insured under [a contract] refers to the assumption of another’s

liability, such as an agreement to indemnify or hold another harmless.”) (alteration

supplied). 

Owners citesseveral district court opinions interpreting Alabama law thatreach

a different conclusion. For example, the Southern District of Alabama found in

Assurance Company of America v. Admiral Insurance Co., No. 10-0117-CG-C, 2011

WL 1897589 (S.D. Ala. May 18, 2011) (Granade, J.), that a breach of implied

warranty claim fell within a policy’s contractual exclusion because such actions

“sound in contract as opposed to tort,” and because the warranty at issue “would not

exist were it not for” a construction contract. Id. at *8. That holding is not

persuasive, however, because the district court did not address either the holding in

Townsend Ford, or the assumption of liability language found in the contractual

exclusion at issue here. 

26

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 26 of 36
Another judge on this same court held, in OwnersInsurance Co. v. Shep Jones

Construction, Inc., No. 08-AR-514-S, 2012 WL 1642169 (N.D. Ala. May 3, 2012)

(Acker, J.), that

Alabama courts have recognized that contractual liability exclusions

identical to the one here operate to deny liability for “property damage”

and “bodily injury” resulting from breach of contract. See Carter v.

Cincinnati Ins. Co., 435 So. 2d 42, 45 (Ala. 1983) (holding that there is

no insurance coverage pursuant to a commercial general liability policy

with a contractual liability exclusion, when the plaintiff only sought to

recover for breach of an implied contract, because the claim “falls

squarely within the clear and unambiguous terms of the exclusionary

provision [ ]”); Am. Nat. Prop. & Cas. Co. v. Blocker, 165 F. Supp. 2d

1288, 1296–97 (S.D. Ala. 2001) (discussing Carter and holding same);

Ajdarondinni v. State Auto Mut. Ins. Co., 628 So. 2d 312, 313 (Ala.

1993) (equivalent contractual liability exclusion in commercial general

liability policy; jury in underlying suit returned verdict solely on the

claims for breach of contract; court held that because the policy “clearly

excludes breach of contract claimsfromits coverage, insurer has no duty

to pay the judgment”).

Shep Jones, 2012 WL 1642169, at *6 (alteration in original). Judge Acker’s opinion

in Shep Jones accurately describes the holdings in Carter and Ajdarondinni: two

cases in which the Alabama Supreme Court held that contractual exclusions in

commercial general liability insurance policies exclude liability for breach of contract

claims. Even so, the Townsend Ford decision was handed down after both Carter

and Ajdarondinni, and represents the State Supreme Court’s most recent statement

of Alabama law governing the interpretation of such contractual exclusions.

27

 

27

In the same opinion, Judge Acker called into question the validity of the Alabama Supreme

Court’s holding in Townsend Ford, when observing that 

27

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 27 of 36
The Southern District of Alabama’s opinion in Pennsylvania National Mutual

Casualty Insurance Co. v. Saint Catherine of Siena Parish, 16 F. Supp. 3d 1370 (S.D.

Ala. 2014) (DuBose, J.), also sought to limit the holding in Townsend Ford. In Saint

Catherine, Judge DuBose essentially dismissed the “indemnity” language in the

Townsend Ford holding as dicta, stating that the “ultimate conclusion” in Townsend

was merely that the claim for breach of an express warranty at issue in that case did

not fall within the insurance policy’s contractual exclusion. See id. at 1381. 

Accordingly, Judge DuBose held that, because the plaintiff in Saint Catherine did not

rely on an express warranty claim as the basis for her claimed coverage, but instead

upon an implied warranty claim, “the holding in Townsend [was] inapplicable.” Id.

at 1381–82 (alteration supplied). This court does not agree. The indemnity language

in Townsend Ford is not dicta, because it was “essential to the judgment” of the

Court. See Ex parte Williams, 838 So. 2d 1028, 1031 (Ala. 2002) (defining “dicta”

under Alabama law). More importantly, it is readily apparent that the holding in

ALLEN’SALABAMALIABILITY INSURANCEHANDBOOKnotesthat the court

in Townsend Ford did not cite any authority for its refusal to extend the contractual

liability exclusion to claims for breach of express warranty. § 10.02 at 215. No other

Alabama case has cited Townsend Ford for its interpretation of the contractual

liability exclusion.

Shep Jones, 2012 WL 1642169 at *6. Neither of those considerations is relevant, however, because

“the Alabama Supreme Court is the final arbiter of Alabama law.” Ex parte James, 836 So. 2d 813,

834 (Ala. 2002) (emphasis in original). Until that Court revisits the issue, its holding in Townsend

Ford remains the final statement of Alabama law governing the interpretation of contractual

exclusions found in commercial general liability insurance policies. 

28

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 28 of 36
Townsend Ford is not so limited as to apply only to claims for breach of an express

warranty, and not implied warranties. In Townsend Ford, the Alabama Supreme

Court avoided the express/implied distinction when it held that contractual exclusions

in commercial general liability insurance policies traditionally do not apply to

“warranty situations.” Townsend Ford, 656 So. 2d at 364. The Court further held

that insurers “can plainly provide in their policies that coverage for breach of

warranty claims is excluded if they so choose.” Id. at 364–65 (emphasis supplied). 

The fact that the Court’s judgment in Townsend Ford was limited to the express

warranty before it does not undermine the Court’s holding in support of that

judgment. To read Townsend Ford as applying only to express warrantiesisto ignore

the crux of the Court’s holding: that is, that contractual exclusionstraditionally apply

to expressindemnity and hold-harmless agreements, “whereby the liability itself was

assumed.” Id. at 364. Asin the case of express warranties, implied warranties do not

involve the assumption of liability. Accordingly, this court declines to follow Judge

DuBose’s limitation of the holding of Townsend Ford. 

At oral argument, the parties discussed the Alabama Supreme Court’s

characterization of the express warranty in Townsend Ford as “merely a

representation.” See id. It was argued that such a characterization indicates that the

Court viewed the breach of express warranty claim in Townsend Ford as an action ex

29

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 29 of 36
delicto, closely resembling the tort of fraud, rather than an action ex contractu. That

argument is unavailing. Justice Maddox, who authored the Townsend Ford opinion,

stated in a prior opinion that breach of warranty claims, regardless of whether they

be based upon express or implied warranties, are actions ex contractu. For example,

in his concurring opinion in Geohagen v. General Motors Corp., 279 So. 2d 436, 440

(1973) (Maddox, J., concurring), Justice Maddox wrote: 

Unquestionably, by adoption of the Uniform Commercial Code,

the Legislature intended to provide, and did provide, consumer

protection which was unavailable before in instances where products

were not reasonably safe. However, in granting this consumer

protection the Legislature used the word ‘warranty,’ which had acquired

a special meaning in the field of products liability. While the

Legislature knocked out the requirement of privity in product liability

cases, horizontally and vertically, in my opinion, I do not think it

changed the nature of the action for breach of warranty from ex

contractu to ex delicto. In arriving at this belief, I recognize that there

are decisions which hold that in products liability cases, regardless of

the Form of the action, that the tort aspects of warranty call for the

application of a tort rather than a contract rule in allowing recovery for

wrongful death. But many cases have held to the contrary, on the

ground that the gist of warranty has become contract, and it is not

included within the wrongful death statutes. W. Prosser, Law of Torts

635, s 95 (4th ed. 1971). See also, Annotation: Action ex contractu for

damages caused by death, 86 A.L.R.2d 316, 317 (1962), where it is

stated:

‘While there is some authority to the contrary, it

appears to be generally recognized that in absence of

statute an action ex contractu is not the appropriate remedy

to recover damages resulting from the death of another.’

I believe Alabama has consistently recognized an action for

30

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 30 of 36
breach of warranty to be contractual in nature. Consequently, I cannot

interpret Section 2-318 of the Commercial Code to state that the breach

of an express or implied warranty is an action ex delicto and therefore

a ‘wrongful act’ under Alabama’s Wrongful Death Statute.

Geohagen, 279 So. 2d at 441 (Maddox, J., concurring). 

Owners also cites to Gilbert Texas Construction v. Underwriters at Lloyd’s

London, 327 S.W. 3d 118 (Tex. 2010), a case in which the Texas Supreme Court held

that contractual exclusions in commercial general liability insurance policies are not

limited to cases in which the insured expressly assumed the liability of a third party. 

Id. at 127–28 (abrogating Lamar Homes, Inc. v. Mid-Continent Casualty Co., 242

S.W. 3d 1 (Tex. 2007)). This court acknowledges that there is a complicated split of

authority among various state and federal courts on the interpretation of the

“assumption of liability” language in contractual exclusions. See North Star Mutual

Insurance Co. v. Rose, 27 F. Supp. 3d 1250, 1253 (E.D. Okl. 2014) (“There appears

to be a split of authority on this issue, and Oklahoma law is not certain”). Even so,

this court must apply Alabama law, as interpreted by the Alabama Supreme Court. 

Accordingly, this court declines to follow the Texas Supreme Court’s holding in

Gilbert.

Even so, Owners contends that APA did assume the liability of another entity

in a contract, and that APA’s liability to Wiese is predicated upon that contractual

assumption of liability. Specifically, Owners contends that APA “entered into [a

31

Case 5:14-cv-00147-CLS Document 32 Filed 05/28/15 Page 31 of 36
consignment] agreement to serve as auctioneer for [FF Acquisition Corp. doing

business as] Flexible Flyer, the seller [sic] [i.e., manufacturer] of the go-cart at issue. 

Any liability that [APA] may have arises solely out of [that agreement].”28

In other

words, Owners contends that Wiese’s claim falls within the policy’s contractual

liability exclusion because APA may be held liable in the underlying action only

because it entered into a consignment agreement with FF Acquisition Corp. doing

business as Flexible Flyer. Owners further contends that the Alabama Supreme

Court’s plurality opinion in Alabama Powersport Auction, LLC v. Wiese, 143 So. 3d

713 (Ala. 2013) (Parker, J., plurality opinion), necessitates a finding that APA

assumed the liability of Flexible Flyer in the consignment agreement.

29 That

argument is not correct. 

APA’s assumption of the alleged liability of FF Acquisition Corp. doing

business as Flexible Flyer arises as a matter of law, and not as the result of express

language in the consignment agreement. The contractual liability exclusion contained

in Owners’s policy states that Owners will not cover damages that the insured is

obligated to pay “by reason of the assumption of liability in a contract or agreement.” 

Doc. no. 20-5 (Policy No. 054617-38227830-07), at 2 (emphasis supplied). To fall

28

 Doc. no. 17-1 (Owners’s Reply Brief), at 5 (alterations supplied).

29

Id. at 5–6. At oral argument in the present action, counsel for Owners stated that the

consignment agreement itself had not been discovered, because Alabama Powersport and Flexible

Flyer were both in bankruptcy during discovery in the underlying action. 

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within that exclusion, APA’sliability would have to be predicated upon the language

of a contract or agreement expressly stating that APA assumed the liability of FF

Acquisition Corp., or agreed to indemnify and hold that entity harmless. There is no

evidence that the consignment agreement between APA and FF Acquisition Corp.

contained such language. 

In Alabama Powersport, the plurality opinion applied common law principles

of agency in reaching the conclusion that, “in the eyes of the law,” an auctioneer who

fails to disclose its principal is liable under the UCC as a merchant-seller. 143 So.

3d at 723 (quoting Abercrombie, 541 So. 2d at 518). Significantly, the Court did not

hold that an auctioneer, by entering into a consignment agreement with a seller,

assumes the liability of that seller, as Owners contends. Instead, the Court held that

an auctioneer’s liability on a contract for the sale of goods at auction is predicated

upon the auctioneer’s behavior towards the buyer — i.e., the auctioneer’s failure to

disclose its principal. The consignment agreement between APA and Flexible Flyer,

therefore, is not the type of indemnity or hold-harmless agreement that traditionally

falls within contractual exclusions found in commercial general liability insurance

policies like the one at issue here. Accordingly, and absent any evidence to the

contrary, this court concludesthat APA’s potential liability to JamesWiese for breach

of an implied warranty of merchantability is not predicated upon the company’s

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contractual assumption of Flexible Flyer’s liability. Stated differently, Owners has

not met its burden of showing that the breach of implied warranty claim asserted in

the underlying, state-court action falls within the Policy’s “Contractual Liability”

exclusion. Accordingly, this court finds that Owners owes a duty to provide a

defense for its insured, APA, in the underlying action. 

2. The duty to indemnify 

The duty to defend is broader than the duty to indemnify, and the question of

“[w]hether there is a duty to indemnify under the policy will depend on the facts

adduced at the trial” in the underlying state-court action. Hartford Casualty

Insurance Co. v. Merchants & Farmers Bank, 928 So. 2d 1006, 1013 (Ala. 2005)

(alteration supplied). That case has not yet been tried. Accordingly, this court cannot

determine whether Owners owes a duty to indemnify APA. For that reason, this court

abstains from reaching the issue of Owners’s duty to indemnify. Cf. Employers

Mutual Casualty Co. v. Smith Construction & Development, LLC, 949 F. Supp. 2d

1159, 1176 (N.D. Ala. 2013) (Hopkins, J.) (“abstain[ing] from reaching the duty to

indemnify question, as the underlying action is still pending in state court”)

(alteration supplied). 

III. CONCLUSION AND ORDERS

For all of the foregoing reasons, the motion for summary judgment filed by

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plaintiff is DENIED, but the motion for summary judgment filed by defendantJames

Wiese is GRANTED in part and DENIED in part. It is ORDERED, ADJUDGED,

and DECREED pursuant to 28 U.S.C. § 2201 that Owners Insurance Company owes

a duty under the terms of the commercial general liability insurance policy bearing

Policy Number 054617-38227830-07, and issued to defendant Alabama Powersport

Auction, LLC, to provide a defense for that defendant in connection with the claims

asserted against it in the state court action pending in the Circuit Court of Limestone

County, Alabama, as Civil Action No. 10-CV-900146 and styled “James Wiese, as

natural Father of Matthew Hunter Wiese, a Minor, Deceased v. Alabama Powersport

Auction, LLC.” The claim of defendant James Wiese seeking a declaration that

plaintiff also owes a duty to indemnify Alabama Powersport Auction, LLC, in that

state-court action is DISMISSED, but without prejudice to any party’s right to

reassert a similar claim in another action filed in a court of appropriate jurisdiction

following the conclusion of trial in the underlying state-court suit and the expiration

of all appeals, if any, from the trial court’s judgment. 

The costs of this action are taxed to plaintiff, OwnersInsurance Company. The

Clerk is directed to close this file. 

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DONE and ORDERED this 28th day of May, 2015.

______________________________

United States District Judge 

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