[ DO NOT PUBLISH] 

## In the 

# United States Court of Appeals For the Eleventh Circuit

____________________
No. 21

- 11009
Non

- Argument Calendar

____________________
ROBERT BARTON, MINDY BARTON,
Plaintiffs

- Appellants, STACY ALLISTON DESIGN AND BUILDING, INC., Plaintiff,

versus NATIONWIDE MUTUAL FIRE INSURANCE COMPANY,

Defendant

- Appellee.

____________________ USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 1 of 152 Opinion of the Court 21

- 11009 Appeal from the United States District Court for the Northern District of Alabama D. C. Docket No. 2:17

- cv

- 00618

- SLB

____________________ Before J ORDAN , N EWSOM , and L UCK , Circuit Judges.

P ER C URIAM : Robert and Mindy Barton obtained a judgment against Stacy Alliston Design and Building
, Inc. , the general contractor on their house, and then sued Alliston’s insurer, Nationwide Mutual Fire Insurance Company, to satisfy the judgment under Alabama’s direct action statute

. See Ala

. Code § 27

- 23

- 2

. After a bench trial, the district court found for Nationwide because estoppel could not c reate coverage under Alabama law and the Bartons failed to establish coverage . We affirm.
FACTUAL BACKGROUND

We divide our discussion of the facts into three sections. First, we discuss the defective construction of the Bartons’ house

. Second, we relate the state court procedural history of the Bartons’ case against Alliston . Third, we describe Alliston’s commercial general liability insurance polic ies with Nationwide

. The D efective C onstruction of the House
The Bartons contracted with Alliston to build a custom ho us e for almost $700,000

. Alliston hired subcontractors to build the ho us e , some of whom did defective work

. For example, USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 2 of 1521

- 11009 Opinion of the Court 3

subcontractors left holes in the roof and didn’t properly install windows. During their first year in the ho us e, the Bartons noticed water leaking from the roof and window s , among other problems. The water rotted the roof and stain ed and crack ed the hous e

. Alliston told the Bartons that faulty flashing 1 was probably r esponsible

. T he Bartons h ired Crown Construction Consulting to inspect their house. Crown identified construction defects in the roof and around the windows, including problems that Alliston was supposed to have solv ed. Crown also identified other problems that the Bartons hadn’ t known about before

. And Crown pointed out that water was leak ing into electrical outlets and creating a fire hazard. In 2015, the Bartons hired Donnie Jones , a residential homebuilder, to provide an estimate to repair the house

. Mr. Jones determined that Alliston had n’t properly installed flashing and housewrap 2 around the wi ndows and that this defective installation caused leaking
, which rott ed the house and weaken ed its structural integrity. Mr. Jones estimated that repairs would cost a round $288,000

.

1 In residential construction , flashing is material that prevent s water from gett ing into a house

.

2 Like flashing, housewrap prevents water from entering a house. USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 3 of 154 Opinion of the Court 21

- 11009 The State Court Proceedings
T he Bartons brought negligence claims and wantonness claims against Alliston in state court

. The Bartons alleged that Alliston damage d their house by violatin g building code s and industry standards when Alliston c on struct ed and repair ed the house and by mismanaging the subcontractors

. The Bartons sought damages for the diminution in market value of the house, the cost of repairing the house, and physical injury, mental anguish, and emotion al distress

. Nationwide initially provided for Alliston’s defense under its policy but withdrew the defense in December 2012

. I n a joint statement of undisputed facts filed in th e district court , the Bartons and Nationwide represented t hat
, in the state court action, Nationwide first “ provided a defense to [Alliston] while reserving its rights to review and withdraw coverage ” and then “ obtained a coverage opinion from qualified counsel, ” which led it to withdr a w its defense. Alliston did not retain its own defense counsel after Nationwide withdrew.The Bartons moved for summary judgment on their negligence and wantonness claims

. As to negligence, the Bartons contended that Alliston failed to use reasonable care in performing contracted

- for construction services

. As to wantonness, the y argued that Alliston knew that it was violating building code s and thus knew that damages would likely result. T he Bartons identified damages involving flashing, housewrap, windows, roof ing , and

more

. USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 4 of 1521

- 11009 Opinion of the Court 5
To support summary judgment , Mr. Barton submitted a five

- paragraph affidavit stating that Alliston’s actions caused him $450,000 in pr operty damage
, as well as the same amount in “physical injury in the form of emotional distress” because the damage to his house caused him “stress and anxiety.” Mr. Barton based the amount of property damage on conversations that he had with two friends who worked in constructi on

. T he state court granted summary judgment t o the Bartons

. In a four

- sentence order, t he state court awarded the Bartons the $900,000 they had sought . It said, without elaboration, that theamount was “based on evidence submitted by [the Bartons] regarding damages sustained to their home and emotional distress.”
The Insurance Polic ies From December 2005 to March 2009, Alliston had four annual policies of commercial general liability insurance with Nationwide

. Each polic y provided that Nationwide would pay what Alliston became legally obligated to pay as damages because of covered bodily injury or property damage

. Under each polic y , Alliston had $2,000,000 in supplemental products

- completed operations coverage

. The policies covered only bodily injury or property damage caused by an “occurrence” during the policy period

. A nd they defined “occurrence” to mean “an accident, includin g continuous orrepeated exposure to substantially the same general harmful conditions.” The policies only cover ed occurrences discovered during USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 5 of 156 Opinion of the Court 21

- 11009 the policy period, though they also cover ed a continuation, change, or resumption of property damage that occu rred during the policy period. The policies contained several exclusions. First, t he policies didn’t cover bodily injury and property damage that Alliston “ expected or intended ” to occur. Second, t he policies contained broad exclusions for bodily injur y and property damage resulting from fungi
, including mold. A nd , third, the policies excluded “‘property damage’ to ‘your work’ arising out of it or any part of it” provided that the damage was “included in the ‘products

- completed operations hazard.’

As to th e “your work” exclusion, the policies defined “products

- completed operations hazard” to include , subject to exceptions, “all ‘bodily injury’ and ‘property dama ge’ occurring away from premises [Alliston] own[ed] or rent[ed] and arising out of ‘your product’ or ‘your work’” provided that the work was completed . T he policies defined “your work” as (1) work performed by Alliston or on its behalf and (2) materials, parts, or equipment provided in connection with this work . A nd they specified that “your work” includ ed warranties or representations about the quality of “your work

. ”
Under the first two annual policies, the “your work” exclusion didn’t apply to damage s ar i s ing from work performed for Alliston by subcontractors

. But , under the last two policies, the exclusion applied to damages arising from subcontractor work

. USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 6 of 1521

- 11009 Opinion of the Court 7

PROCEDURAL HISTORY

T he Bartons sued Nationwide under Alabama’s direct action

statute , section 27

- 23

- 2, to satisfy their state court judgment against Alliston

. The Bartons alleged that they could stand in Alliston’s shoes and assert a direct right of action against Nationwide because they were third

- party beneficiari es of Alliston’s policies with Nationwide. 3
The district court held a bench tria l on the Bartons’ direct action claim

. The Barton s testified on their own behalf and called Mr. Jones as a witness

. N ationwide called no witnesses. A fter the Bartons rested their case, Nationwide moved for judgment as a matter of law

. In response to this motion, t he district court asked for proposed findings of fact and conclusions of law from the parties

. Nationwide argued that the Bartons sought compensation for defective work itself (not covered) rather than for damages

3 When an injured party obtains a judgment against an insured, Alabama’s direct action statute entitles that injured party, as judgment creditor, to satisfy the judgment by suing the insured’s insurer directly. See Ala. Code § 27

- 23

- 2

. The statute “ plainly limits recovery by the judgment creditor to

. . . the insurance money provided for in the contract of insurance between the insurer and the [insured].” Dumas Bros. Mfg. Co. v. S. Guar. Ins. Co. , 431 So. 2d 534, 536 (Ala. 1983) (quotation omitted). The injured party “ stands in the shoes of the insured ” and “ is entitled to recover from [the insurer] only to the extent of [the insured’s] coverage for the claims asserte d. ” Admiral Ins. Co. v. Price

-Williams , 129 So. 3d 991, 997 (Ala. 2013) (emphasis omitted). USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 7 of 158 Opinion of the Court 21

- 11009 resulting from that work (potentially covered)
, th at th e mold exclusion applied , and th at th e last two policies didn’t cover damages arising from s ubcontractor work. Nationwide also contend ed that the district court was not bound by the state court judgment, which was not supported by the evidence presented a t trial , that the Bartons presented insufficient evidence to establish their emotional distr ess damages, and that repairs made to the house differed from the damages about which Mr. Jones testified

. T he Bartons argu ed that Nationwide was estopped from contesting coverage because it withdrew its defense of Alliston in the state court and failed to prove in the district court that it had reserved its rights to contest coverage and because it violated its enhanced duty of good faith by failing to prove that it fully inform ed Alliston of the coverage disputes that Nationwide claimed in the district court

. The Bartons also contend ed that the instances of water leaking into their house qualified as “accidents” and thus “occurrences” under the policies, that the property damages resulted from defective work and were thus covere d, and that the costs to remove defective work to replace and repair the damages caused by that defective work were covered. And the Bartons maintained that all the policies covered subcontractor work because Alliston bought products

- completed operations coverage and that the record supported the emotional distress award in the state court judgment

. The district court entered judgment for Nationwide because the Bartons “failed to show what, if any, damages Nationwide USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 8 of 1521

- 11009 Opinion of the Court 9 [wa]s required to indemnify” and thus failed to meet their burden

to prove coverage

. As to e stoppel, t he district court explained that

“ Alabama law d [id] not allow estoppel to create coverage

— and, thus, indemnification

— under an insurance policy
, ” so t he Bartons could not “ rely on estoppel to require Nationwide to indemnify their damages against [Alliston] where the damages [we] re not covered

. ” T he distric t court concluded that the Bartons had to prove that Alliston’s policies with Nationwide covered the damages awarded by the state court
, and the Bartons failed to do so because the state court awarded them damages in a nonspecific judgment that could have been for wanton ness (not covered) or negligence (potentially covered)
, for defective construction (not covered) or damages resulting from the defective construction (potentially covered)
, and for emotional distress based on mold (not covered) or

on other c oncerns (potentially covered)

. The Bartons established that they “experienced some damage to their home that could be covered by the Nationwide polic[ies] as resulting from faulty construction, ” the district court explaine d, but they did not meet “ their burden of proving that Nationwide [wa]s required to indemnify any of the state court’s judgment because [they] failed to show the amount of damages arising out of the covered injuries. ” The district court also explained that , although Mr. Jones testified about the cost of repairing the water damage to the Bartons’ house
, he did not “ offer insight into the portion of the state court judgment related to covered occurrences ” or “provide any information for the state court proceedings under lying the Bartons’ claim.” USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 9 of 1510 Opinion of the Court 21

- 11009

STANDARD OF REVIEW In an appeal from a judgment after a bench trial, we review the district court ’ s conclusions of law and its application of the law to the facts de novo. U.S. Commodity Futures Trading Comm’n v. S. Tr. Metals , Inc. , 894 F.3d 1313, 1322 (11th Cir. 2018)

. DISCUSSION

The Bartons contend that the district court should not have allowed Nationwide to dispute coverage when Nationwide had not proven a reservation of rights to do so and had violated its enhanced duty of good faith to Alliston

. And the Bartons argue that the district court erred in determining that their wantonness claims barred indemnity for all their claims and damages. We di sagree. Estoppel
The Bartons assert that , because “Nationwide failed to submit any evidence

— other than statements of counsel which are not evidence

— providing any reasons for withdrawing its defense of [Alliston] in the [underlying] action
, ” and failed to s how that it had reserved its rights to dispute coverage, it wa s estopped from contest ing coverage in this action

. The Bartons argue that estoppel can create coverage under Alabama law whe re, as here, the insurer violates its enhanced duty of good faith to the insured. Nationwide violated its duty, the Bartons say, because it didn’t prove that it notified Alliston that Nationwide was disputing coverage

. The USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 10 of 1521

- 11009 Opinion of the Court 11 Bartons maintain that they can seek estoppel because they stand in Alliston’s shoes as judgment creditors

. The party see king estoppel bears the burden of pro ving estoppel

. See Gen. Am. Life Ins. Co. v. AmSouth Bank , 100 F.3d 893, 899 (11th Cir. 1996)

. Thus, the Bartons had the burden to prove that Nationwide did not reserve its rights and that it violated its enhanced duty of good faith to Alliston

. See Shelby Steel Fabricators, Inc. v. United States Fid. & Guar. Ins. Co. , 569 So. 2d 309, 310
, 312 (Ala. 1990)

. The Bartons d i d not meet their burden . Although they complain that Nationwide did not submit evidence that it reserved its rights and fulfilled its enhanced duty of good faith, the Bartons also didn’t submit any evidence to the contrary. And the burden was theirs, no t Nationwide’s. In fact, the Bartons told the district court that it was undisputed that Nationwide reserved its rights to withdraw coverage in the Bartons’ state court action against Alliston and that Nationwide only withdrew Alliston’s defense in that ac tion after qualified counsel determined that there was no coverage under the policies

. On appeal, t he Bartons seem to dismiss the se representations as “ statements of counsel which are not evidence

. ” But this lack of evidence does not help the Bartons . Instead, it means that they failed

to satisfy their burden

. USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 11 of 1512 Opinion of the Court 21

- 11009

Because the Bartons did not meet their burden of proving estoppel, the district court did not err in allowing Nationwide to contest coverage

. Wan tonness The Bartons argue that the district court erred in concluding that their wantonness claims barred them from recovery

. They contend that “ there [wa] s absolutely zero record evidence

— either before the state court or the district court

— tending to show that [Alliston] acted intentionally or deliberately when its subcontractors improperly installed flashing on the home during construction .” The Bartons c laim that t he district court based its conclusion on the state court pleadings rather than the evidence. “[T] he party seeking coverage under [an insurance policy] bears the burden of proving that coverage exists. ” Pa. Nat’l Mut. Cas. Ins. Co. v. St. Ca therine of Siena Par. , 790 F.3d 1173, 1180 (11th Cir. 2015)

. “ When an insured causes multiple injuries, coverage is determined on an injury

- by

- injury basis, and the insurer is obligated only to indemnify for damages arising out of the covered injuries. ” Id. at 1178. When no jury verdict or final order or judgment in the underlying action identifies the specific injuries for which damages were awarded, “ it is appropriate, under Alabama law, to look to the record

. . . in the underlying action to identify the injuries for which the injured party sought damages. ” See id.

at 1180

. USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 12 of 1521

- 11009 Opinion of the Court 13 A person is liable for wantonness under Alabama law where

“ his knowledge of existing conditions and circumstances ” makes him “ conscious that his conduct will probably result in in jury ” but he acts (or fails to act) “ with reckless indifference or disregard of the natural or probable consequences ” and causes the injury. Reed v. Brunson , 527 So. 2d 102, 119 (Ala. 1988) (quotation omitted); accord Thermal Components v. Golden , 716 So. 2d 1166, 1168 n.2 (Ala. 1998) (“‘ Wantonness ’ is the conscious doing of some act or the omission of some duty under knowledge of existing conditions [ while ] conscious that from the doing of such act or omission of such duty injury will likely or probabl y result. ” (quotation omitted) )

. Here, the Bartons could recover from Nationwide only if Alliston could recover under the insurance policies. See Price

-Williams , 129 So. 3d at 997

. Alliston’s policies with Nationwide provided that Nationwide would “pay t hose sums” that Alliston became “legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which th[e] insurance applie[d].” According to the policies, the insurance applied “only if .

. . [t]he ‘bodily injury’ or ‘property damage’ [wa]s caused by an ‘occurrence.’ ” The policies defined an “occurrence” as “ an accident .” Alliston’s policies didn’t define “accident,” but in Alabama insurance law, “[t] he term ‘ accident ’ has been variously de fined as something unforeseen, unexpected, or unusual. ” U .S. Fid. & Guar. Co. v. Bonitz Insulation Co. , 424 So. 2d 569, 572 (Ala. 1982)

. “ When the insured makes an error in judgment but at all times act [s] in a deliberate USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 13 of 1514 Opinion of the Court 21

- 11009 and purposeful manner, its condu ct does not constitute an accident

or occurrence. ” St. Catherine of Siena Par. , 790 F.3d at 1178 (quotation omitted).
T he state court granted summary judgment to the Bartons in a brief order that did not specify any injuries

. Thus, it was appropriate f or the district court to review the Bartons’ summary judgment motion to determine the specific injuries for which they were awarded damages so that the district court could de t e rmine whether the injuries were covered under the policies

. See i d. at 1180

. The Bartons moved for summary judgment as to both negligence and wantonness

. T he Bartons argued that Alliston’s

“ knowing failure to construct [the Bartons’] home to applicable code standards constitute [d] wantonness under Alabama law ” because Alliston “ knew it was not following applicable building codes [] and therefore knew that damages were likely to result. ” T he Bartons cited the deposition of Alliston’s corporate representative to support that Alliston knew that “ it was ultimately responsible for the direction and supervision of all employees and subcontractors who performed work on [the Bartons’] home ” and “was fully aware that it was not following the applicable building codes.”
The district court concluded tha t the Bartons’ wantonness claims “ alleged conscious acts with an expectation of causing injury ” and thus could not support coverage under the policies

. On appeal, the Bartons’ wantonness argument is only that no record evidence show ed that Alliston acted intentionally in its mismanagement of its subcontractors. But, even if this is so, the Bartons also USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 14 of 1521

- 11009 Opinion of the Court 15
point to no evidence o f the opposite (that is, that Alliston did not act intentionally)

. The Bartons had the burden to establish that coverage applied

. S ee id. A nd coverage applied only if the damages resulted from an accident

— from something unusual that Alliston didn’t foresee or expect
, see Bonitz Insulation Co. , 424 So. 2d

at 572

— and not from something that Alliston was “fully aware” was “likely to result.” Like the district court, we cannot determine how much the state court awarded the Bartons damages for Alliston’s negligence (potentially covered) versus its wantonness (not c overed)

. Because the Bar t ons did not satisfy their burden to establish coverage , the district court did not err when it entered judgment for Nationwide. See Ala. Hosp. Ass’n Tr. v. Mut. Assurance Soc’y , 538 So. 2d 1209, 1216 (Ala. 1989) ( explaining that, because the person seeking coverage ha d the burden o f pro of
, “ the trial court correctly resolved [the coverage] issue again s t [that person]” when the potential bas e s for the judgment in the underlying action included grounds covered and no t covered under the policy and it was “impossible” to determine which of the grounds supported the jury’s finding of liability )

. CONCLUSION

Because the Bartons did not meet their burden s of proving estoppel or coverage, the district court did not err in fi nding for Nationwide.
AFFIRMED. USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 15 of 15