Title: QBE Insurance Corporation v. The Austin Company, Inc., and Mobile Press Register, Inc.
Citation: N/A
Docket Number: 1071144
State: Alabama
Issuer: Alabama Supreme Court
Date: May 15, 2009

REL:05/15/2009
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2008-2009
____________________
1071144
____________________
QBE Insurance Corporation
v.
The Austin Company, Inc., and Mobile Press Register, Inc.
Appeal from Mobile Circuit Court 
(CV-06-2663)
BOLIN, Justice.
QBE Insurance Corporation appeals from the trial court's
denial of its motion for permissive intervention. We affirm.
1071144
2
Facts and Procedural History
On July 28, 2006, the Mobile Press Register, Inc.
("MPR"), 
a 
regional 
newspaper 
company, 
sued 
eight
subcontractors and vendors involved in the design and
construction of its new office and printing facility in
Mobile.  The complaint named Structural Masonry, Inc., as one
of the defendants.  Structural Masonry constructed both the
concrete masonry unit walls of the building and the brick-
veneer exterior.  MPR asserted claims against Structural
Masonry alleging negligence, wantonness, breach of warranty,
misrepresentation, and suppression.  Structural Masonry had a
commercial general-liability insurance policy with QBE, and,
pursuant to the policy,  it notified QBE of the pending
lawsuit against it. On October 10, 2006, MPR filed its first
amended complaint, adding as defendants six subcontractors and
vendors. 
On November 9, 2006, QBE advised Structural Masonry that
it was "reserving its right to question its duties in the
future and/or deny any further duties under the Polic[y]
and/or request that a court determine those duties, if any, in
an action seeking a declaratory judgment regarding the
1071144
3
obligations and rights of the parties under the Polic[y]."  In
its letter reserving its rights under the policy, QBE stated
that coverage may be barred because of the applicability of
various exclusions within the policy and/or because the damage
did not occur within the effective term of the policy.  One of
the provisions in the policy excludes from coverage damage to
any part of the property that must be repaired or replaced
because work was "incorrectly performed" by Structural
Masonry.  Subsequently, QBE provided Structural Masonry with
defense counsel.   
On February 8, 2007, MPR submitted a report by an
engineering expert, which details the damage to the building,
including the cost to replace Structural Masonry's allegedly
defective work.  QBE received a copy of the report.  On April
13, 2007, MPR filed its second amended complaint, adding the
general contractor, The Austin Company, Inc. ("Austin"), as a
defendant.  On April 25, 2007, QBE sent Structural Masonry a
second reservation-of-rights letter, again placing Structural
Masonry on notice that QBE was reserving its rights to deny
coverage under the policy.  
1071144
4
On July 9, 2007, Austin filed a cross-claim against
several 
of 
the 
subcontractors 
and 
vendors, 
including
Structural Masonry.  On July 24, 2007, QBE sent Structural
Masonry a third reservation-of-rights letter.  On January 7,
2008, Austin filed a third-party complaint against Thompson
Engineering, Inc., arising out its contract with Austin to
provide 
testing 
and 
inspection 
services 
during 
the
construction of the building.  
On March 3, 2008, QBE filed a motion for permissive
intervention, pursuant to Rule 24(b), Ala. R. Civ. P.  In its
motion, QBE sought to intervene in MPR's action for the
purposes 
of 
participating 
in 
discovery, 
requesting
interrogatories and/or special-verdict forms to be presented
to the jury in order to determine the basis of the jury's
verdict for insurance-coverage purposes, and clarifying, in
any way necessary, coverage issues related to the damages that
may ultimately be awarded.   QBE stated in its motion that
Structural Masonry's commercial general-liability insurance
policy would provide coverage only for damage resulting from
Structural Masonry's allegedly defective construction, e.g.,
water intrusion, but would not provide coverage for repairing
1071144
5
or replacing that defective construction.  QBE also stated
that the policy provided coverage for only a portion of the
period at issue.  QBE argued that in the event the jury
returned a general verdict, QBE would not be able to determine
what portion of the verdict is attributable to damage possibly
covered by the policy and what portion of the verdict is
attributable to damage that occurred during the policy period.
On March 4, 2008, the trial court set the motion for a
hearing on April 4, 2008.  On March 24, 2008, another
insurance company, Penn National Insurance Company, filed a
motion to intervene.  Penn National also insured Structural
Masonry.   On March 27, 2008, Austin filed a motion objecting
to QBE's and Penn National's motions to intervene, arguing
that allowing either insurance company to intervene would
prejudice Austin and introduce into the case the issue of the
existence of liability-insurance coverage.  Austin also stated
that the insurance companies had an adequate remedy to protect
their 
interests 
through 
a 
separate 
declaratory-judgment 
action
determining coverage under their respective policies.  
On April 2, 2008, two days before the scheduled hearing,
the trial court denied both QBE's and Penn National's motions
1071144
6
to intervene.  On May 14, 2008, QBE filed its notice of
appeal.  Penn National appealed, but on August 28, 2008, this
Court dismissed the appeal (no. 1071176) as untimely.
Standard of Review
In Universal Underwriters Insurance Co. v. Anglen, 630
So. 2d  441, 443 (Ala. 1993), this Court set out the
applicable standard for reviewing the denial of a motion for
permissive intervention under Rule 24(b), Ala. R. Civ. P.:
"The standard of review for a denial of a motion
for permissive intervention is whether the trial
court 
abused 
its 
discretion. 
Universal
[Underwriters, Ins. Co. v. East Central Alabama
Ford-Mercury, Inc., 574 So. 2d 716, 723 (Ala.
1990)].  See also, New Orleans Public Service, Inc.
v. United Gas Pipe Line Co., 732 F.2d 452, 470-71
(5th Cir. 1984)('when we are asked to review a
denial of permissive intervention, the question on
appeal is not whether "the factors which render
permissive intervention appropriate under Federal
Rule of Civil Procedure 24(b) where present," but is
rather "whether the trial court committed a clear
abuse of discretion in denying the motion"').
Again, we see no reason to depart from the Federal
courts' interpretation of the corresponding Federal
rule."
Discussion
The issue thus is whether the trial court exceeded its
discretion 
in 
denying 
QBE's 
motion 
for 
permissive
intervention.  We note that all the parties to this appeal
1071144
In Universal, we recognized the dilemma faced by insurers
1
in situations where the insured was being sued on claims that
might or might not be covered by the insurance policy, and we
adopted 
an 
alternate 
procedure 
involving 
permissive
intervention and a bifurcated trial. QBE did not seek to
intervene in the underlying action for the purpose of
participating in a bifurcated trial. 
7
recognize that an insurer has no absolute right to intervene
in an action against its insured.  Universal Underwriters Ins.
Co. v. East Central Alabama Ford-Mercury, Inc., 574 So. 2d 716
(Ala. 1990).  In Universal, the insurer sought to intervene in
an action brought against its insured for the limited purpose
of  presenting the trial court with either special-verdict
forms or special interrogatories to be given to the jury at
the close of the trial.  The trial court denied the insurer's
motion, and the insurer appealed. This Court held that the
insurer did not have a direct, substantial, and legally
protectible interest allowing it to intervene as a matter of
right as provided in Rule 24(a), Ala. R. Civ. P.  We
recognized that permissive intervention under Rule 24(b) is
within the broad discretion of the trial court, and we
affirmed the trial court's denial of the insurer's motion to
intervene.          
1
1071144
8
Rule 24(b), Ala. R. Civ. P., provides that on a timely
motion the court may permit anyone to intervene when a statute
confers a conditional right to intervene or when an
applicant's claim or defense and the main action share a
common question of law or fact.  Rule 24(b) goes on to provide
that "[i]n exercising its discretion the court shall consider
whether  the intervention will unduly delay or prejudice the
adjudication of the rights of the original parties."  
The first requirement is that a motion for permissive
intervention be timely filed.  Whether such a motion is timely
is a determination within the discretion of the trial court.
"Since [Rule 24, Ala. R. Civ. P.], itself, is
silent 
concerning 
what 
constitutes 
a 
'timely
application,' it has long been held that the
determination of timeliness is a matter committed to
the sound discretion of the trial court. See
Strousse v. Strousse, 56 Ala. App. 436, 322 So. 2d
726 (1975). See also McDonald v. E.J. Lavino Co.,
430 F.2d 1065, 1072 (5th Cir. 1970).  Because the
pressure to allow intervention 'of right' under Rule
24(a) is by its very nature more compelling than is
permissive intervention, most courts tend to require
less rigidity in evaluation of timeliness under Rule
24(a).  See Diaz v. Southern Drilling Corp., 427
F.2d 1118 (5th Cir.), cert. denied, 400 U.S. 878, 91
S.Ct. 118, 27 L.Ed.2d 115 (1970), rehearing denied,
400 U.S. 1025, 91 S.Ct. 580, 27 L.Ed.2d 638 (1971).
See generally, [Charles Alan Wright et al., Federal
Practice & Procedure] § 1916 [(2d ed. 1986)].  As
expressed in McDonald, 430 F.2d at 1073: 'Since in
situations where intervention is as of right, the
1071144
9
would-be intervenor may be seriously harmed if he is
not permitted to intervene, courts should be
reluctant to dismiss such a request for intervention
as untimely, even though they might deny the request
if the intervention were merely permissive.'"
Randolph County v. Thompson, 502 So. 2d 357, 364 (Ala. 1987).
In other words, trial courts have broader discretion in
denying a motion for permissive intervention as untimely under
Rule 24(b) than they do in denying as untimely a motion to
intervene as of right under Rule 24(a).
Several United States Courts of Appeals have set out
factors to use in assessing the timeliness of a motion to
intervene filed under Rule 24, Fed. R. Civ. P.  See, e.g.,
Shea v. Angulo, 19 F.3d 343, 348-49 (7th Cir. 1994);  United
States v. Jefferson County, 720 F.2d 1511, 1516 (11th Cir.
1983); and Stallworth v. Monsanto Co., 558 F.2d 257, 264-67
(5th Cir. 1977).  "Cases interpreting the Federal Rules of
Civil Procedure can be persuasive authority in construing the
Alabama Rules of Civil Procedure because of the similarities
between the Alabama rules and federal rules."  Pontius v.
State Farm Mut. Auto. Ins. Co., 915 So. 2d 557, 561 n.3 (Ala.
2005).  The court must consider the totality of the
circumstances 
in 
determining 
whether 
the 
motion 
for
1071144
10
intervention is timely and not merely the point to which the
action has progressed at the time the motion is filed.  NAACP
v. New York, 413 U.S. 345, 365-66 (1973).  In United States v.
Jefferson County, the United States Court of Appeals for the
Eleventh Circuit set out the factors as follows:
"(1) [T]he length of time during which the would-be
intervenor knew or reasonably should have known of
his interest in the case before he petitioned for
leave to intervene; (2) the extent of prejudice to
the existing parties as a result of the would-be
intervenor's failure to apply as soon as he knew or
reasonably should have known of his interest; (3)
the extent of prejudice to the would-be intervenor
if his petition is denied; and (4) the existence of
unusual circumstances militating either for or
against a determination that the application is
timely.  Stallworth [v. Monsanto Co., 558 F.2d 257,
264-66 (5th Cir. 1977)].  This analysis applies
whether 
intervention 
of 
right 
or 
permissive
intervention under Fed. R. Civ. P. 24 is claimed.
Id., citing  United Airlines, Inc. v. McDonald, 432
U.S. 385, 387, 97 S.Ct. 2464, 2466, 53 L.Ed.2d 423
(1977); NAACP v. New York, 413 U.S. 345, 366, 93
S.Ct. 2591, 2602-03, 37 L.Ed.2d 648 (1973); Smith
Petroleum Service, Inc. v. Monsanto Chemical Co.,
420 F.2d 1103, 1115 (5th Cir. 1970)." 
1071144
Other circuits have used similar factors.  For example,
2
the Sixth Circuit Court of Appeals has set out the following
factors: 
"(1) the point to which the suit has progressed; (2)
the purpose for which intervention is sought; (3)
the length of time preceding the application during
which the proposed intevenors knew or should have
known of their interest in the case; (4) the
prejudice to the original parties due to the
proposed intervenors' failure to promptly intervene
after they knew or reasonably should have known of
their interest in the case; and (5) the existence of
unusual circumstances militating against or in favor
of intervention."
Stupak-Thrall v. Glickman, 226 F.3d 467, 473 (6th Cir. 2000).
 
11
720 F.2d at 1516.   "These factors are a framework and 'not a
2
formula for determining timeliness.'"  John Doe No. 1 v.
Glickman, 256 F.3d 371, 376 (5th Cir. 2001)(quoting Edwards v.
City of Houston, 78 F.3d 983, 1004 (5th Cir. 1996)). "The
requirement of timeliness is not a tool of retribution to
punish the tardy would-be intervenor, but rather a guard
against prejudicing the original parties by the failure to
apply sooner."  Sierra Club v. Espy, 18 F.3d 1202, 1205 (5th
Cir. 1994).
The first factor set out b the Eleventh Circuit Court of
Appeals is the length of time the would-be intervenor knew or
reasonably should have known of its interest in the case
1071144
12
before it sought intervention.  This is not necessarily the
date the would-be intervenor learned of the existence of the
legal action; rather, it is the time when the intervenor  knew
or should have known that its interest would be implicated by
the action.  Stallworth v. Monsanto Co., 558 F.2d at 264.  The
would-be intervenor must act promptly in protecting its
interest.  Here, it appears that QBE received notice of the
action shortly after it was filed, because Structural Masonry,
its insured, was one of the defendants in the original
complaint filed on July 28, 2006, and it notified QBE that an
action had been filed.  On November 9, 2006, QBE recognized
that its interests and Structural Masonry's interests might
differ because on that date QBE sent a letter to Structural
Masonry reserving its right to deny coverage under the policy.
Almost 16 months after notifying Structural Masonry that there
were potential coverage issues, QBE, on March 3, 2008,  filed
its motion for permission to intervene.  In its motion, QBE
asserted that it sought to intervene because otherwise it
would be unable to determine what portion of any verdict that
might be entered against Structural Masonry consisted of types
of damages covered by the policy and it would be unable to
1071144
13
determine what portion of any verdict consisted of damages for
harm that occurred during the policy period.  In seeking to
intervene, QBE asked to participate in discovery, to submit
interrogatories to the jury, and to request that a special-
verdict form be submitted to the jury.  This first factor thus
weighs against QBE, which realized its interests were no
longer being protected by Structural Masonry when it sent the
first reservation-of-rights letter on November 9, 2006, yet
waited almost 16 months before seeking to intervene.  
The second factor is "the extent of prejudice to the
existing parties as a result of the would-be intervenor's
failure to apply as soon as [it] knew or reasonably should
have known of [its] interest."  United States v. Jefferson
County, 720 F.2d at 1516.  QBE is seeking not only to submit
interrogatories and special-verdict forms to the jury with
regard to its interest in the case, but is also seeking to
participate in discovery.  The 17 parties to this litigation
have substantially completed written discovery and have
deposed MPR's corporate representative. The Eleventh Circuit
Court of Appeals has indicated that discovery considerations
are important in determining whether a motion to intervene is
1071144
14
timely.  See Chiles v. Thornburgh, 865 F.2d 1197, 1213 (11th
Cir. 1989)(concluding that a motion to intervene, filed before
any discovery had begun, was timely).   QBE is seeking to
participate in discovery and seeking to litigate whether
particular acts of its insured are covered by the insurance
policy.  "The most important consideration in determining
timeliness is whether any existing party to the litigation
will be harmed or prejudiced by the proposed intervenor's
delay in moving to intervene."  McDonald v. E.J. Lavino Co.,
430 F.2d 1065, 1073 (5th Cir. 1970).  Clearly, QBE's
intervention will necessarily complicate and further delay the
action, thus prejudicing the existing parties to the
litigation.   
The third factor is "the extent of prejudice to the
would-be intervenor if [its] petition is denied."  United
States v. Jefferson County, 720 F.2d at 1516.  With regard to
this factor, "the thrust of the inquiry must be the extent to
which a final judgment in the case may bind the movant even
though he is not adequately represented by an existing party."
United States v. Jefferson County, 720 F.2d at 1517.  This
Court has recognized that a declaratory-judgment action is
1071144
15
available to determine coverage issues.  Mutual Assur., Inc.
v. Chancey, 781 So. 2d 712 (Ala. 2000).  QBE has available to
it the option of filing a separate declaratory-judgment action
to resolve the coverage issue.  In addressing prejudice under
Rule 24(b)(2), QBE fails to explain why an independent
declaratory-judgment action cannot be used to allocate between
covered claims and noncovered claims any damages awarded by
the jury in this case.  Furthermore, we agree with Austin that
Structural Masonry has "every reason to defend itself against
all claims of damages of any type." (Austin's brief, p. 23.)
The 
fourth 
factor 
is 
"the 
existence 
of 
unusual
circumstances militating either for or against a determination
that the [motion for permission to intervene] is timely."
United States v. Jefferson County, 720 F.2d at 1516.  Nothing
in QBE's motion to intervene shows any unusual or compelling
circumstances that prevented it from seeking intervention
earlier for the purposes of participating in discovery rather
than after written discovery was substantially completed and
depositions had begun.
Based on the foregoing, the trial court did not exceed
its discretion in denying QBE's motion to intervene because,
1071144
16
under the facts of this case, QBE's motion for permission to
intervene was untimely.  Additionally, even if QBE's motion
for permissive intervention had been timely, the trial court
did not exceed its discretion in denying the motion because
"[w]hether to allow an insurer permissive intervention,
pursuant to Rule 24(b), Ala. R. Civ. P., in a tort action
against its insured, so that the insurer can invoke Rule 49,
Ala. R. Civ. P., and thereby obtain clarification of coverage
issues, falls within the sound discretion of the trial court."
Mutual Assur., Inc. v. Chancey, 781 So. 2d at 176 (Lyons, J.,
concurring specially).  There are 17 parties to this
litigation, which involves alleged defects in constructing a
building, and the controversy is already sufficiently complex
because of the nature of the action.  See In re HealthSouth
Corp. Ins. Litigation, 219 F.R.D. 688 (N.D. Ala. 2004)(finding
that intervention by the movants would unduly complicate and
delay resolution of the matter and would inject collateral
issues).  The trial court property denied QBE's motion for
permission to intervene.     
The judgment of the trial court is affirmed.
AFFIRMED.
1071144
17
Cobb, C.J., and Woodall, Stuart, Smith, Parker, and Shaw,
JJ., concur.
Murdock, J., dissents.
Lyons, J., recuses himself.
1071144
18
MURDOCK, Justice (dissenting).
I respectfully dissent.  Largely on the strength of the
argument made to this Court by QBE, I conclude that the second
and third "factors" as identified in United States v.
Jefferson County, 720 F.2d 1511, 1516 (11th Cir. 1983),
militate in favor of intervention, rather than against it, as
the main opinion concludes.
The second factor addresses a key issue, at least for
purposes of this case: whether the existing parties would be
unduly prejudiced by the proposed intervention.  As one court
has noted:  "The requirement of timeliness is not a tool of
retribution to punish the tardy would-be intervenor, but
rather a guard against prejudicing the original parties by the
failure to apply sooner."  Sierra Club v. Espy, 18 F.3d 1202,
1205 (5th Cir. 1994).
I cannot agree with my colleagues that the state of the
discovery process in this case was a good basis for not
allowing QBE to intervene when it requested to do so,
especially if QBE desires simply to participate in the
discovery yet to come.  As to the timing of QBE's attempted
1071144
19
intervention in relation to the general progress of discovery,
I find merit in much of the following argument by QBE:
"Neither 
Appellee 
has 
made 
any 
argument
concerning any prejudice that would be suffered by
any party by the timing of QBE's Motion to
Intervene.  Appellees cannot make such an argument
legitimately because, regardless of when the case
was filed, an examination of the record reveals that
the case was still in its early stages when QBE's
Motion to Intervene was filed on March 3, 2008.  One
defendant had just filed its answer to Austin's
Cross-claim in December, 2007.  In January 2008,
Austin added an entirely new defendant to the case
via 
a 
Third-party 
Complaint 
filed, 
without
objection, less than 60 days prior to QBE's Motion
to Intervene.  That Third-party defendant did not
file its response to Austin's Third-party complaint
until after QBE filed its Motion to Intervene.  Some
parties did not respond to initial written discovery
requests until after QBE filed its Motion to
Intervene. (See Exhibit 1, as attached to QBE's
Motion 
to 
Supplement 
the 
Record 
on 
Appeal).
Further, Mobile Press Register[, Inc.,] did not
respond to Austin's First Request for Production
until after QBE's Motion to Intervene was denied.
(See Exhibit 2, as attached to QBE's Motion to
Supplement the Record on Appeal).  In fact, the
original parties were still disputing whether the
documents first produced in initial discovery were
appropriately responsive to the discovery requests
after 
QBE's 
Motion 
to 
Intervene 
was 
denied.
(Exhibit 
3, 
as 
attached 
to 
QBE's 
Motion 
to
Supplement the Record on Appeal).  Finally, as of
the filing of this brief, the case has not been set
for trial, and only one party's deposition has been
taken.  So despite Appellees' protests regarding how
long this case had been pending when QBE filed its
Motion to Intervene, the record reveals that this
case was still in its infancy when QBE's motion was
filed and new parties were still being added to the
1071144
20
case.  The timing of QBE's Motion to Intervene,
therefore, had no impact on the timing or progress
of the underlying case, and therefore, there was no
prejudice to the original parties by the timing of
QBE's Motion to Intervene."
QBE's reply brief, at pp. 13-15 (references to the record
deleted). 
As to the third factor, I conclude that a subsequent
declaratory-judgment action by QBE would not be an adequate
substitute for QBE's intervention in this action and that QBE
likely would suffer definite prejudice if it is not allowed to
intervene.  Again, I believe there is merit in much of QBE's
argument:
"A declaratory judgment action by QBE would not
be an adequate remedy to protect its interest in
this case. The coverage issues in this case are
entirely fact based.  A separate declaratory
judgment action cannot determine the factual basis
for the damages awarded in this action if there is
a general verdict, and therefore, a declaratory
judgment cannot determine the extent of damages
awarded for covered consequential damages, versus
noncovered damages for replacement or repair of the
insured's work. Further, even if  a declaratory
judgment was an effective remedy for QBE to resolve
coverage issues, such an action would be wasteful of
judicial resources, since the coverage questions can
be more efficiently resolved in this action. A
separate declaratory judgment action would involve
QBE, Structural Masonry, and likely Structural
Masonry's other insurer Penn National, in additional
burdensome 
litigation. 
Finally, 
a 
declaratory
1071144
21
judgment action may very well be inconsistent with
the damages awarded in the underlying action."
QBE's brief, pp. 12-13.