1

The only defense briefing has come from Ty Ty Enterprises, Inc. and Gerald Donald

Clark. For convenience, the Court attributes all defense arguments to “the defendants.”

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

ASSURANCE COMPANY OF AMERICA, )

 et al., )

 )

Plaintiffs, )

 )

v. ) CIVIL ACTION 05-0662-WS-C

 )

TY TY ENTERPRISES, INC., etc., et al., )

 )

Defendants. )

ORDER 

This matter is before the Court on the plaintiffs’ second motion to allow them to pay

funds into court. (Doc. 28). Because the plaintiffs represented that the correct resolution of the

issue depends upon whether Alabama or Georgia law governs, (id. at 2, ¶ 4), the Court ordered

briefing on the choice-of-law issue. (Doc. 29). The parties have complied, (Doc. 31 at 1-2; Doc.

33 at 5-6; Doc. 39 at 7-8; Doc. 40 at 3-5),1

 and the motion is ripe for resolution. After carefully

considering the foregoing and other relevant materials in the file, the Court concludes that the

plaintiffs’ motion is due to be denied.

The plaintiffs are citizens of New York, Illinois and Florida. (Doc. 1, ¶¶ 1-2). The

defendants are Georgia citizens, with the corporate defendants’ principal place of business in

Georgia. (Id., ¶¶ 3-6). Shortly before Hurricane Dennis struck the Gulf Coast in July 2005, the

defendants obtained from the plaintiffs a builder’s risk policy covering a warehouse project in

Atmore, Alabama. (Id., ¶¶ 14-15, 19). This suit is a declaratory judgment action filed after the

defendants made a claim on the policy for damage caused by Dennis. 

The plaintiffs have asserted that the defendants made misrepresentations in their

insurance application upon which the plaintiffs relied in issuing the subject policy. Under

Alabama law, “[n]o plea of misrepresentation or fraud in connection with the issuance of a life

insurance policy or annuity contract shall be filed unless accompanied by a payment into court of

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2

Although this provision appears by its terms to be limited to life insurance policies and

annuity contracts, neither of which is involved in this case, the plaintiffs insist that the same

requirement applies to the builder’s risk policy they provided. (Doc. 28 at 2, ¶ 4).

3

The plaintiffs themselves initially urged that “Georgia law likely applies” to this issue. 

(Doc. 28 at 2, ¶ 4). After being confronted with other, less appealing aspects of Georgia law,

however, they reversed course. 

4

At least implicitly, they agree that the court payment provision is substantive rather than

procedural and thus potentially applicable in a diversity action in federal court.

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all premiums paid on the policy or contract.” Ala. Code § 27-14-7(b).2 Georgia law apparently

has no similar provision. See Ga. Code § 33-24-7 and Doc. 28 at 2, ¶ 4. Thus, in order to

prevail on their motion, the plaintiffs must show that Alabama law controls the deposit of funds

with the Court. The defendants insist that Georgia law governs. (Doc. 31 at 1-2).3

The parties agree that in this diversity case the Court must employ the choice-of-law

rules of Alabama.4 They also agree that the general Alabama rule is that the interpretation of a

contract (which they construe to include the issue of payment into court) looks to the law of the

state where the policy was delivered to the insured. They agree as well that the general rule

would require application of Georgia law. (Doc. 33 at 5; Doc. 39 at 7). The plaintiffs, however,

cite two exceptions to Alabama’s general rule, triggered when: (1) the parties intend the law of

some other state to govern; or (2) the contract is to be performed primarily in some other state. 

(Doc. 39 at 7).

The second exception actually applies only when the contract is to be performed

“wholly” in another state. Ex parte Owen, 437 So. 2d 476, 481 (Ala. 1983). Under either

formulation, the exception does not apply here. The plaintiffs emphasize that the insured risk

involves property in Alabama. (Doc. 39 at 8). That is indeed the location of the defendants’

performance under their construction contract to build a warehouse, but is not the location of the

parties’ performance under the insurance contract. The defendants’ performance thereunder

consists primarily of making premium payments, and there has been no showing and no

explanation why Georgia residents or Georgia corporations with their principal places of

business in Georgia would send premiums from an Alabama construction site. Likewise, the

plaintiffs’ performance consists primarily of making payments on valid claims, and there has

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been no showing and no explanation why these foreign entities would send such payments to a

construction site in Alabama rather than to the defendants’ offices or residences in Georgia. See

Cincinnati Insurance Co. v. Girod, 570 So. 2d 595, 597 (Ala. 1990)(applying Alabama law

because the policy was issued in Alabama, even though the loss occurred in Louisiana).

To establish the intent of the parties that Alabama law govern the construction of the

contract, the plaintiffs cite to an endorsement styled, “Alabama changes - actual cash value.” 

(Doc. 39 at 8 & Exhibit I). They argue that it would render the provision meaningless not to

construe it as manifesting the parties’ intent that Alabama law govern the policy. However, the

provision — which simply defines actual cash value — plainly carries the same definition

regardless of what state’s law controls the construction of the contract, so that use of Georgia

law does not render the provision meaningless. To the extent the plaintiffs suggest that the mere

use of the word “Alabama” in the heading of the endorsement establishes the parties’ intent that

Alabama law control the contract, “the caption of a provision ... does not alter the meaning of the

contents of the document — it does not control the interpretation or construction of the

document ....” Wayne J. Griffin Electric, Inc. v. Dunn Construction Co., 622 So. 2d 314, 317

(Ala. 1993). Moreover, for all that appears, the endorsement would seem to have been included

only because the covered property is located in Alabama, not because the parties intended

Alabama law to control the policy’s construction. Finally, the plaintiffs have not rebutted or

even addressed the defendants’ assertion that Alabama courts have applied this exception only

when the contract contains an express choice-of-law provision. (Doc. 40 at 4). See also Cherry,

Bekaert & Holland v. Brown, 582 So. 2d 502, 506 (Ala. 1991)(“Alabama follows the principle of

‘lex loci contractus,’ which states that a contract is governed by the laws of the state where it is

made except where the parties have legally contracted with reference to the laws of another

jurisdiction.”)(emphasis added).

In short, the parties agree that Georgia law controls unless one of two exceptions to

Alabama’s general rule applies. Because neither applies, Georgia law controls. Because

Georgia law controls, Alabama’s provision for making payment into court does not apply. 

Accordingly, the plaintiffs’ second motion to pay funds into court is denied.

 

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DONE and ORDERED this 8th day of May, 2006.

s/ WILLIAM H. STEELE

UNITED STATES DISTRICT JUDGE

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