Title: Burnham Shoes, Inc. v. West American Ins. Co.
Citation: 504 So. 2d 238
Docket Number: N/A
State: Alabama
Issuer: Alabama Supreme Court
Date: March 16, 1987

504 So. 2d 238 (1987)
BURNHAM SHOES, INC.
v.
WEST AMERICAN INSURANCE COMPANY and American Fire and Casualty Company.
85-709-CER.

Supreme Court of Alabama.
January 30, 1987.
Application for Rehearing Stricken March 4, 1987.
Dissenting Opinion March 16, 1987.
William J. Baxley and Joel E. Dillard, of Baxley, Dillard &amp; Dauphin, Birmingham, for appellant.
Robert S. Lamar, Jr., of Lamar &amp; McDorman, Birmingham, for appellees.
BEATTY, Justice.
This Court consented to answer the following questions certified by the United States Court of Appeals for the Eleventh Circuit, 784 F.2d 1531:
(1) Is an insurance provision, which otherwise would obligate the insurer to defend the insured in a lawsuit based upon intentional wrongs alleged to have been committed by the insured, void as against the public policy of the state of Alabama?
(2) Does an insurer, who undertakes to defend an insured without reserving the right to withdraw its defense, thereby waive its right to do so? If so, is the insurer obligated to continue providing a defense even if to do so would otherwise be against public policy?
The following statement of the facts of this case is taken from the certification from the Eleventh Circuit:
In its order, the district court found the case of St. Paul Ins. Cos. v. Talladega Nursing Home, 606 F.2d 631 (5th Cir.1979), to be controlling of the present case. In St. Paul Ins. Cos., the Fifth Circuit, construing Alabama law, held that insurance contracts purporting to obligate an insurer to indemnify an insured in civil actions alleging slander, interference with business relations, and violations of federal antitrust laws (i.e., intentional wrongs), violate the public policy of this state, and are, therefore, invalid. With respect to the additional question of the insurer's obligation to defend an insured in such cases, which is the dispositive question posed here, the Court held in St. Paul Ins. Cos. that there was "no duty to defend the cases in their present posture." 606 F.2d  at 635. In so holding, the Fifth Circuit relied primarily on this Court's decision in Ladner &amp; Co. v. Southern Guaranty Ins. Co., 347 So. 2d 100 (Ala.1977). However, no question of a public policy constraint on the insurance contract was presented in Ladner &amp; Co., although only intentional acts were alleged against the insured. There, this Court simply reiterated well established principles of law and held that, in that case, there was nothing in the allegations of the complaint nor in the record before the Court which tended to establish that the alleged injury or occurrence came within the coverage of the policy (which expressly excluded intentional acts), so as to obligate the insurer to defend regardless of the ultimate liability of the insurer to pay:
347 So. 2d  at 102-03. Accord, United States Fidelity &amp; Guaranty Co. v. Armstrong, 479 So. 2d 1164 (Ala.1985).
Although the insurance policy in St. Paul Ins. Cos., supra, required the insurer to defend the insured against "`both bodily injury and personal injury claims (such as libel, slander, invasion of privacy, false detention, etc.),'" the Fifth Circuit apparently concluded that this contractual obligation to defend also violated Alabama's public policy, as it had concluded that the contractual obligation to indemnify the insured for intentional acts for which he is found *241 liable, violates our public policy.[1] The Fifth Circuit cited no authority for its holding in St. Paul Ins. Cos. with respect to the insurer's obligation to defend. Nor have we been cited to any authority holding that it is or should be a violation of the public policy of this state to require an insurer to uphold its contractual obligation to defend its insured against claims alleging intentional wrongs. Furthermore, we have found no authority concerning the public policy aspects of the insurer's contractual obligation merely to provide its insured a defense to such claims. However, "[i]t is well established [in this state] that the insurer's duty to defend is more extensive than its duty to pay," Ladner &amp; Co., supra, and we fail to perceive how requiring an insurer to meet its contractual obligation to provide a defense to claims alleging intentional acts violates the public policy of this state. Indeed, where the insurance contract in question expressly provides for such coverage (and the insurer has collected a premium therefor), we see no reason whatsoever to allow the insurer, on public policy grounds, to avoid these provisions in its own contract, which would otherwise obligate it to defend.
As noted, the district court in the present case followed St. Paul Ins. Cos., supra, and held that "even if the insurance contracts required defendants to indemnify and defend plaintiff in the earlier action, such contract [sic] would be void in Alabama as against public policy." Thus, apparently, there has been no factual determination as to whether the contracts in question obligate the insurer to provide a defense against the specific claims alleged in this case. We do not presume to make this determination here.
Should it be subsequently determined that the policy in question, by its terms, does not obligate the insurer to provide a defense in this case, then the question becomes whether the insurer waived this lack of coverage by undertaking to provide a defense without reserving the right to withdraw. However, we do not presume to decide whether, in fact, there has been a waiver in this case. Rather, we answer the second question, as certified, objectively. Nevertheless, having answered the first question in the negative, we need only address the first part of the second question, viz., whether an insurer who undertakes to defend an insured without reserving the right to withdraw its defense, thereby waives its right to do so.
In Campbell Piping Contractors, Inc. v. Hess Pipeline Co., 342 So. 2d 766 (Ala. 1977), this Court adopted the general rule with respect to the right of an insurer to withdraw a defense already undertaken without a reservation of the right to question at a later time its obligation to defend under the contract:
Cases from thirty jurisdictions are said to follow this general rule.
342 So. 2d  at 770-71. This Court held that, under the circumstances of that case, the insurer could not withdraw its defense:
342 So. 2d  at 470-71. Accord, Home Indemnity Co. v. Reed Equipment Co., 381 So. 2d 45, 51-52 (Ala.1980).
Thus, under Alabama law, if an insurer does, in fact, undertake to defend an insured without reserving the right to withdraw its defense, it thereby waives its right to do so.
QUESTIONS ANSWERED.
All the Justices concur.
JONES, Justice (dissenting as to the order striking the application for rehearing).
Implicit in the Court's order "striking" (as opposed to "overruling") the insurer's application for rehearing is the holding that applications for rehearing are not authorized in certified question cases. Because the case came to this Court from the federal court by the certified question route, this Court reasons that it lost jurisdiction upon submission of its answer to the inquiring court, and that only that court can seek reconsideration or clarification.
Respectfully, I disagree with this analysis of this Court's role in this kind of case. It is the office of an application for rehearing to afford the nonprevailing party an opportunity to seek reconsideration by the reviewing court, and to afford the reviewing court one final opportunity to correct any errors in its opinion.
The federal court, in diversity cases, is interested only in being informed on state law issues, not in having certified questions answered in a particular manner. Only the parties have an interest in how the question is answered. Thus, it is only the parties and their counsel that have an interest in seeking rehearing, and not the court. Then, too, I find no wisdom in this Court's shielding itself from reconsideration of its own opinion. After all, the application for rehearing affords this Court its final opportunity to get it right.
I find nothing in the certified question procedure that requires us to deviate from our traditional procedure in regard to applications for rehearing. I would accept the application and consider it on its merits.
TORBERT, C.J., and MADDOX and ADAMS, JJ., concur.
[1]  We express no opinion here as to the correctness of the Fifth Circuit's conclusion that insurance contracts in which the insurer agrees to indemnify its insured for intentional acts violate the public policy of this state.