Opinion ID: 1676244
Heading Depth: 1
Heading Rank: 2

Heading: The Contract to Procure Insurance

Text: Goodyear also claimed that Tull breached its agreement to procure insurance to pay any amount due under the indemnity provision of the purchase order. The trial court cited Gunter v. United States Fidelity & Guaranty, supra, and held that this claim was also due to be dismissed as violating § 25-5-3, essentially because there was no distinction between a contract to indemnify and a contract to procure insurance. In Gunter, however, this Court did not address the issue whether the workers' compensation exclusivity provision bars a claim against an employer for breach of contract by failing to procure insurance. Agreements to procure insurance are generally enforceable under Alabama law, and a party who breaches such an agreement is liable for damages resulting from the failure to obtain the promised insurance. Turner v. Deutz-Allis Credit Corp., 544 So.2d 840, 844 (Ala.1988) (recognizing that even an oral contract to provide insurance is enforceable); James E. Watts & Sons Contractors, Inc. v. Nabors, 484 So.2d 373, 375 (Ala.1985) (damages award supported by a claim alleging breach of contract to obtain insurance). A contractual obligation to indemnify is distinct from a contractual obligation to procure insurance. Under an agreement to indemnify, the promisor assumes liability for all injuries and damages upon the occurrence of a contingency. In contrast, an agreement to obtain insurance involves the promisor's agreement to obtain or purchase insurance coverage, regardless of whether an contingency occurs. Zettel v. Paschen Contractors, Inc., 100 Ill.App.3d 614, 56 Ill.Dec. 109, 427 N.E.2d 189 (1981). See also Mark S. Rhodes, Couch on Insurance 2d §§ 44:4, 44:19, 44:250 (Rev. ed. 1982). Because the contract to procure insurance is distinct from the contract to indemnify, the contract to procure insurance must be considered in light of Ala.Code 1975, § 25-5-53 notwithstanding our holding that the exclusivity provisions of the Workers' Compensation Act do not bar enforcement of express contracts to indemnify. First, Tull's obligation to procure insurance is separate from and independent of any obligation to indemnify. Also, Goodyear's claim, alleging that Tull breached its contractual obligation to procure insurance, seeks to hold Tull civilly liable not for an injury to Tull's employee, but for Tull's failure to honor its contractual obligation to obtain insurance covering Goodyear. Because Goodyear's claim against Tull is a claim alleging breach of contract for failure to procure insurance, not for personal injury or death of the employer's employee, as noted in § 25-5-53, the exclusive remedy provision has no application. This Court's holding in Reliance Ins. Co. v. Gary C. Wyatt, Inc., 540 So.2d 688 (Ala. 1988), supports such a conclusion. In Reliance, this Court held that an employer's breach of contract to obtain insurance was not an occurrence, defined as an accident... which results in bodily injury within the contract, that would give rise to coverage under the employer's general liability insurance. Similarly, in this case there is no accident ... while engaged in the service or business of the employer giving rise to application of the exclusivity provisions of Ala. Code 1975, § 25-5-53. Further, in Reliance, this Court noted that the employee's injury may go to the issue of damages sustained by the breach of contract to procure insurance, but that it is not relevant to a determination of whether the employer breached the contract. 540 So.2d at 690-91. Accordingly, we hold that Goodyear could present facts that would entitle it to maintain an action for breach of contract to procure insurance against Tull that would not be barred by the exclusivity provision of the Workers' Compensation Act. Therefore, the dismissal of the claim alleging a breach of contract to procure insurance is reversed. The cause is remanded for further proceedings in light of this opinion. In light of our holding with respect to Goodyear's claims concerning breach of contract to indemnify and breach of contract to procure insurance, we do not address Goodyear's arguments with respect to the constitutionality of Ala. Code 1975, § 25-5-53. REVERSED AND REMANDED. ALMON, SHORES, ADAMS and HOUSTON, JJ., concur. MADDOX, STEAGALL and INGRAM, JJ., dissent.