IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

GEORGIA-PACIFIC CONSUMER )

PRODUCTS LP, etc., et al., )

 )

Plaintiffs, )

 )

v. ) CIVIL ACTION 15-0342-WS-B

 )

ZURICH AMERICAN INSURANCE )

COMPANY, etc., et al., )

 )

Defendants. )

 ORDER

This matter is before the Court on the motion of defendant National Union 

Fire Insurance Company of Pittsburgh, Pa. (“National”) to dismiss. (Doc. 121). 

The parties have filed briefs and exhibits in support of their respective positions, 

(Docs. 121, 133, 143, 145, 152), and the motion is ripe for resolution. After 

careful consideration, the Court concludes the motion is due to be denied.

BACKGROUND

According to the third amended complaint, (Doc. 182) (“the complaint”),

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the entity plaintiff (“GP”) operates a paper mill facility in Choctaw County. One 

defendant (“S&S”) contracted with GP to perform work at the facility, in the 

 1 The motion to dismiss is directed toward the second amended complaint. (Doc. 

85). Following the completion of briefing, the plaintiffs filed a motion for leave to file a 

third amended complaint. (Doc. 155). After all defendants declined the opportunity to 

object, the Court granted the motion. (Doc. 181). As National recognizes, (Doc. 143 at 

5), the third amended complaint, (Doc. 182), is thus now the operative pleading. E.g., 

Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir. 2011) (“[U]nder the 

Federal Rules of Civil Procedure, an amended complaint supersedes the initial complaint 

and becomes the operative pleading in the case ....”) (internal quotes omitted). However, 

because the third amended complaint makes no changes material to National’s motion to 

dismiss, (Docs. 155, 188), its motion can and will be decided without re-briefing. (Doc. 

188). 

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course of which an employee of S&S was killed. S&S had agreed to obtain 

insurance in favor of GP and its officers and agents (including the individual 

plaintiff). National issued an excess/umbrella policy but refused to investigate the 

matter or provide coverage and refused to participate in the ultimate settlement of 

the underlying lawsuit.

The complaint asserts claims against National for: breach of contract 

(Count One); negligence (Count Two); bad faith (Count Three); abnormal bad 

faith (Count Four); and declaratory relief (Count Nine). 

I. Breach of Contract.

According to the second amended complaint, (Doc. 85), the contract 

between GP and S&S included a master service agreement (“MSA”), which 

required S&S to obtain various insurance policies/coverages. (Id. at 6). National 

asserts that the MSA at issue is one dated June 5, 2007. (Doc. 121 at 4; Doc. 121-

2). The plaintiffs respond that the MSA on which they sue is one dated December 

1, 2008. (Doc. 133 at 4; Doc. 133-1 at 7-12). The language on which National 

relies in support of its motion to dismiss appears in the June 2007 MSA but not in 

the December 2008 MSA, so the question is of some consequence.

As the Court has previously explained, the second amended complaint “in 

pellucid language” identifies the December 2008 MSA as the MSA on which the 

plaintiffs rely. (Doc. 188 at 2). National’s misdirected focus on a different MSA 

cannot support its motion to dismiss. 

In its reply brief, after the plaintiffs pointed out its error, National shifts its 

focus to the December 2008 MSA. (Doc. 143 at 2-5). Because the language from 

the June 2007 MSA that forms the basis of National’s motion to dismiss is absent 

from the December 2008 MSA, National is left to present completely new 

arguments as to how the MSA negates the plaintiffs’ contract claim. “District 

courts, including this one, ordinarily do not consider arguments raised for the first 

time on reply.” Gross-Jones v. Mercy Medical, 874 F. Supp. 2d 1319, 1330 n.8 

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(S.D. Ala. 2012) (citing cases and explaining rationale). National proposes that its 

tardy argument nevertheless should be considered because the second amended 

complaint left National “guessing” as to which MSA the plaintiffs contended was 

controlling. (Doc. 152 at 1). For reasons the Court has already expressed, 

however, the second amended complaint, like its predecessors, was perfectly clear 

that the December 2008 MSA is the one in issue. (Doc. 188). National was not 

left to guess, and its election to ignore the December 2008 MSA was made at its 

peril.2

National argues that the language in the June 2007 MSA also appears in the 

online terms and conditions that are part of the purchase order and thus part of the 

relevant contract. (Doc. 121 at 6, 16). The plaintiffs respond that, pursuant to the 

terms of the purchase order, the relevant terms and conditions are not those

appearing online but those appearing in the December 2008 MSA. (Doc. 133 at 7, 

12-13).

The purchase order provides that the online terms and conditions apply, but 

only “[u]nless expressly subject to a written agreement signed by both Buyer and 

Supplier.” (Doc. 1-1 at 4, 5). The December 2008 MSA – which apparently 

addresses most if not all of the matters addressed in the online terms and 

 2 Moreover, the Court cannot consider the 2007 MSA without converting 

National’s motion into one for summary judgment, which it declines to do. “[A] 

document attached to a motion to dismiss may be considered by the court without 

converting the motion into one for summary judgment only if the attached document is: 

(1) central to the plaintiff’s claim; and (2) undisputed.” Horsley v. Feldt, 304 F.3d 1125, 

1134 (11th Cir. 2002) (emphasis added). “‘Undisputed’ in this context means that the 

authenticity of the document is not challenged.” Id. The authenticity of a document is 

challenged, inter alia, when the plaintiff disputes whether the document is the one 

“referred to in his complaint.” Id. at 1135. Viewing the matter most favorably to 

National, that is the situation presented here. 

Even were the 2007 MSA properly before the Court, both sides present 

documents beyond the complaint in an effort to show that their preferred version of the 

MSA is the one actually made part of the contract. The Court cannot consider such 

materials without converting National’s motion into one for summary judgment, Fed. R. 

Civ. P. 12(d), which it declines to do. 

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conditions – appears to be signed by GP (or a related entity) and S&S. (Id. at 6-9). 

Moreover, the purchase order also provides that “[t]he terms and conditions of 

Georgia-Pacific’s Form 7141 shall supersede those herein and apply as the terms 

and conditions of this purchase order,” (id. at 3), and the December 2008 MSA 

indicates on its face that it is a Form 7141. (Id. at 6).3 The plaintiffs rely on the 

quoted language. If the plaintiffs are correct and the online terms and conditions 

do not apply, National’s argument cannot succeed. The parties’ arguments in 

favor of their respective positions rest in part on the content of various documents 

beyond the pleadings. 

For reasons set forth in note 2, supra, the Court thus cannot resolve this issue 

without converting National’s motion to dismiss into a motion for summary 

judgment, which the Court declines to do.

II. Bad Faith.

The parties agree as to the elements of a normal bad faith claim under 

Alabama law: (1) a breach of an insurance contract; (2) the intentional refusal to 

pay a claim; (3) the absence of an arguable reason for the refusal; and (4) the 

insurer’s knowledge of the absence of an arguable reason for the refusal. They 

also agree that a claim of abnormal bad faith includes a fifth element: the 

intentional failure to determine whether there is an arguable basis for the refusal. 

(Doc. 121 at 21; Doc. 133 at 14). National argues the plaintiffs cannot satisfy the 

first, third or fifth element. (Doc. 121 at 21-25).

National’s argument as to the first element depends on the success of its 

motion to dismiss the contract claim. (Doc. 121 at 21). Because National’s 

motion to dismiss that claim is due to be denied, it cannot obtain dismissal of the 

bad faith claims for want of a breach of contract.

 3 National admits that the December 2008 MSA is a Form 7141. (Doc. 143 at 9-

10).

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National’s argument as to the third element is premised upon the 

applicability of the provisions of the June 2007 MSA and the online terms and 

conditions. (Doc. 121 at 22). Because National has not established this premise, 

neither has it negated the plaintiffs’ ability to satisfy this element of their bad faith 

claims. 

As to the fifth element, National argues that, pursuant to the terms of its 

policy, it had no duty to investigate until and unless all underlying insurance was 

exhausted by payment, which it says never occurred. (Doc. 121 at 23-25). This 

argument fails for reasons stated in the Court’s order denying the substantively 

identical argument of defendant Aspen Specialty Insurance Company. (Doc. 193

at 7-9). In short, the complaint alleges that National denied coverage, and that 

denial triggered a duty implied by law, independent of any contractual duty, to 

make the coverage decision in good faith – including, in the context of an 

abnormal bad faith claim, to conduct a legally sufficient investigation and 

cognitive review before denying coverage.

III. Negligence.

In a brief two sentences, National argues that “Alabama does not recognize 

a separate negligence cause of action for the breach of a duty created by contract.” 

(Doc. 121 at 25-26). It appears that Alabama law is a bit more nuanced than that 

pronouncement would suggest, see, e.g., Morgan v. South Central Bell Telephone 

Co., 466 So. 2d 107, 114 (Ala. 1985), and National’s cursory treatment of the 

issue is insufficient to demonstrate as a matter of law that the plaintiffs have not 

stated a claim.

Moreover, Count Two alleges in part a negligent failure to settle, (Doc. 182 

at 18), and, as the plaintiffs note, (Doc. 133 at 23-24), the cases are legion that 

such a cause of action exists under Alabama law. 

In its reply brief, National argues the plaintiffs cannot maintain a claim for 

negligent failure to settle because they were not, and cannot be, subject to 

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judgment (since the underlying lawsuit was concluded by settlement). (Doc. 143 

at 13). No such argument appears in National’s principal brief; indeed, that brief 

fails to recognize the existence of a claim for negligent failure to settle, even 

though such a claim is articulated explicitly in the complaint. Because National 

identifies no excuse for not asserting this argument in its principal brief, the Court 

will follow its general rule of not considering arguments first raised in reply.

CONCLUSION

For the reasons set forth above, National’s motion to dismiss is denied.

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DONE and ORDERED this 25th day of April, 2016. 

 s/ WILLIAM H. STEELE

CHIEF UNITED STATES DISTRICT JUDGE

 4 For the reasons set forth above and in its previous order, (Doc. 188), National’s 

motion to dismiss the third amended complaint, (Doc. 187), is also denied.

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