Court Opinion

ID: 9665936
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:00:05.873302+00
Date Added: 2024-06-11T18:15:20.929579
License: Public Domain

JONES and SHORES, Justices
(dissenting) :
We note that while the majority of the Court decides this case to reversal, it does not decide the issue presented. Tit. 13, § 14, Code, as amended. Mr. Justice Embry’s opinion, with which a majority of this Court concurs in the result, finds no ambiguity (the basis of the trial Court’s holding) and grounds its reversal on the “freedom to contract” principle. As to the ambiguity issue, we agree. We would affirm the trial Court, however, for the reasons expressed below.
The freedom to contract rule, particularly in instances involving adhesion contracts, where the contracting parties are not equally capable of negotiating the terms, should be tempered by the dictates of public policy. In the case before us, its unchecked application would allow successive insurance policies to create a hiatus in coverage with no break in premium obligations. Some factual examples will demonstrate the fallacy: Suppose, for example, the Auto-Owners’ policy read differently from Utica’s to the effect that “occurrence” meant the negligent or wrongful act which culminates in liability; or, alternatively, suppose Auto-Owners, under identical language, asserted the defense that no coverage was afforded for negligent acts which preceded the policy period. Would each insurer then have an absolute defense even though the insured had paid for continuous coverage ?
Still worse, suppose the coverage remained with Utica and the contract of insurance for the new policy period substituted the latter definition of “occurrence,” could Utica then plead the alternative defenses under the identical policy language ? Would we then hold “no coverage” on the “freedom to contract” principle? If so, we would have invited the insurance industry to alternate definitions of language for successive policy periods and thereby create indefinite gaps in coverage; and, in so doing, we would have interpreted the language here involved adverse to the insured in each instance where the total transactions necessary to the accrual of an action did not occur within the policy period — all of this, in spite of the insured’s payment of premiums for continuous protection.
In the event Auto-Owners’ “ex post facto coverage” defense is rejected, from the standpoint of public policy, there are inherent evils in the imposition of liability against the insurer arising out of a wrong*315ful act of its insured which takes place prior to the policy period. This would allow an uninsured, suspicious that his employee has performed negligent repairs likely to cause an immediate accident, to insure against a loss which is almost certain to occur. Such risks on behalf of the insurer would far exceed that normally contemplated by contracts of insurance. The only element in the total chain of the' liability-producing events within the exclusive control of the insured is the initial wrongful act. While the injury-producing accident must result directly from the culpable conduct of the insured, ordinarily such subsequent consequences lie beyond the insured’s immediate control as to time and place of occurrence. Thus, public policy favors contracts of insurance in such cases which fixes the coverage concurrent with the time of the insured’s culpable conduct — making the insured’s and the insurer’s legal obligations coextensive.
Other examples may further elucidate problem potentials. Suppose the garage owner permanently terminated his business operations concurrent with the expiration date of the policy period. Should he continue his insurance for an additional policy period? And, if so, assuming an insurer would be willing to write the risk, could the latter company successfully defend, even under the identical language here involved, on the ground that the public policy would void coverage for risks antedating the policy period ?
Only a minimum of imagination is required to visualize the myriad problems arising from such restrictive language in professional malpractice and errors and omissions policies.
We turn now to the case at hand. What was the insured insuring against? What risks did it attempt to cover? Tuscaloosa Motor Company’s legal responsibilities arising out of its business operations are fixed by operation of law. The law dictates that any injury or damage resulting directly from its culpable conduct is actionable and the action for such injury or damage may be maintained against it by an injured party upon the accrual of such action and for the applicable period of limitations.
The language of the insuring clause of this policy commits Utica to “pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages . . Tuscaloosa Motor Company, Inc., could not be “legally obligated to pay as damages” any amount to either Johnson or Nuchols until it breached some duty resulting in injury to them.
A cause of action did not accrue in favor of either Johnson or Nuchols against Tuscaloosa Motor Company until each of them was actually injured, whether in person or property. A right of action against the insured did not accrue until the injury actually occurred. West Pratt Coal Co. v. Dorman, 161 Ala. 389, 49 So. 849 (1909). Therefore, the insured could not become legally obligated to pay before that time.
By virtue of the definition of “occurrence,” Utica restricts its liability to ". . . an accident . . . which results, during the policy period, in bodily injury or property damage . . . . ”1 While Tuscaloosa Motor Company’s liabil*316ity, by operation of law, runs to an injured party from the moment of injury to the running of the statute of limitations, the liability of Utica to Tuscaloosa Motor Company extends only to in jury-producing accidents occurring within the policy period.
Thus, by contract Utica has limited its liability to its insured to a definable time limit unrelated to the length of exposure which the law imposes on Tuscaloosa Motor Company.
In this case, Tuscaloosa Motor Company has been sued by two plaintiffs alleging negligence resulting in injury or damage. The alleged act of negligence by Tuscaloosa Motor Company occurred within the policy period. Utica, however, disclaims liability since the injury or property damage did not occur during the policy period, but concedes that the act of its insured, allegedly producing such injury or property damage, did occur within the policy period.
Utica, therefore, stands absolved of the very liability to which its insured is exposed by operation of law notwithstanding the fact that the policy commits Utica to “pay on behalf of the insured all sums which the insured shall become legally obligated to pay . . .”
Undoubtedly, it is this anomaly which prompted the trial Court to conclude that the policy provisions created an ambiguity which it resolved in favor of the insured. We agree with Utica, however, that the policy provisions are clear as to their meaning and intent. A reading of the language of the policy leaves no uncertainty that Utica by contract has limited its risk of loss by definition of the term “occurrence” to the extent set out above. It is not on the basis of ambiguity that we would affirm the trial Court, but rather because the incongruity results in an anomaly which the public policy of this State cannot sanction.
The provisions of this policy, although unambiguous, leave Tuscaloosa Motor Company without a remedy against Utica for the very liability it sought insurance to protect against. Likewise, it leaves the plaintiffs (Johnson and Nuchols) without the protection which Tuscaloosa Motor Company sought to provide through its insurance contract with Utica. This result offends the public policy of this State.
As observed by Judge Walter Gewin in Northwestern Casualty Co. v. McNulty, 307 F.2d 432 (5th Cir. 1962):
“Implicit in the entire field of tort liability and insurance law is the concept of furnishing some protection to those who are injured. Public policy is involved here . . . .”
We, therefore, would affirm the trial Court in holding Utica liable under its policy.

. For the history of the various clauses included in the policy and their purported purpose see: Long, The Law of Liability Insurance, Mathew Bender, 1969. The author observes that the “occurrence” provision “presents baffling problems since it has to do with a situation the reverse of the traditional one of coverage ‘caused by accident.’ But there is a substantial difference between accident and occurrence. The substitution, of the word ‘occurrence’ confronts the insurance industry with new and special problems. They may arise out of court expansion of the scope of the coverage far greater than that intended by the underwriters when the substitution of words was made.
“The intent of the underwriter being to cover gradual injury, it should follow that the injury could be exposure to a continuing condition resulting in injury extending over more than one policy period ....
“When damage is caused by exposure to a condition extending over policy periods of successive policies, the question is presented as to which policy is answerable. ...”