Alabama 2021 Insurance Law Update

In 2021, the Alabama Supreme Court addressed various insurance related issues, including UM “covered persons” and the relationship between indemnity provisions and insurance coverage. The following are summaries of some of the more notable decisions released this year. Please feel free to reach out to us if you need any additional information about these cases.

Uninsured Motorist “Covered Person”

Jay v. United Servs. Auto Ass’n, No. 1190941, 2021 Ala. LEXIS 58 (June 18, 2021)

In Jay, the Alabama Supreme Court affirmed summary judgment in favor of USAA finding that the Plaintiff was not a “covered person” under the USAA policy.

Plaintiff was injured in an automobile accident when he was riding as a passenger in an uninsured vehicle. He recovered $50,000 in uninsured motorist insurance benefits through a policy he had with Nationwide Insurance Company. Thereafter, he filed suit against USAA seeking UM benefits pursuant to a USAA policy owned by his father-in-law. Plaintiff’s wife was identified as “operator” on her father’s USAA policy.

As is usually the case with Alabama Uninsured Motorist coverage, “covered persons” under the policy were defined as “[y]ou or any family member” or “[a]any other person occupying your covered auto.” The policy defined “you” as the “named insured” and the named insured’s spouse if he or she is a resident of the same household. The policy further defined “family members” as persons related to the named insured “by blood, marriage, or adoption who reside primarily in your household.”

In support of his position, Plaintiff also relied upon an insurance card issued by USAA which contained the following information:

“NAME OF INSURED: GEORGE M. BREWER MICHELLE D. JAY”

Other insurance cards included with the policy listed the named insured along with individuals identified on the declarations page as “operators.”

Plaintiff asserted that he was a “covered person” as defined in the policy because his wife was a named insured and Plaintiff was her spouse residing in the same household. Alternatively, Plaintiff argued that the discrepancy between his wife being listed under “name of insured” on the insurance card, but also as an “operator” on the declarations page, created an ambiguity which was to be resolved in his favor.

The Supreme Court disagreed, finding that the insurance card did not create an ambiguity regarding the true “named insured” under the policy. Because Michelle Jay was not a “named insured” per the policy, Plaintiff was not entitled to receive UM benefits based on his status as her spouse. While Plaintiff was related to the named insured by marriage, it was undisputed that he did not primarily reside in the named insured’s household. Instead, Plaintiff resided with his wife in a separate household. Therefore, he did not meet the definition of a “family member” of the named insured and, as such, was not a “covered person” entitled to receive UM benefits.

Proof of Lack of Driver’s License

James v. Assurance Am. Ins. Co., No. 1200462, 2021 Ala. LEXIS 80 (Aug. 20, 2021)

In 2019, Plaintiff was injured in an automobile accident in which the adverse driver was operating a 2003 Chrysler Town and Country minivan. As a result of the events involved in the accident, the adverse driver was arrested and indicted for reckless murder and four counts of first-degree assault. Plaintiff filed suit against various defendants, but that case was stayed given the criminal charges against the adverse driver.

Subsequently, Assurance filed a complaint for declaratory judgment against the adverse driver as well as the Plaintiff. Assurance insured the minivan, though asserted that the adverse driver was not identified on its policy and that coverage was excluded because he did not have a valid driver’s license. The insurance policy excluded coverage for injury or damage caused by an insured vehicle when driven by a person who was not listed as a driver on the declarations page of the policy and who did not have a valid driver’s license.

Assurance filed for summary judgment and supported this motion with an affidavit from one of its employees. The affidavit attached the Alabama Uniform Traffic Crash Report which reflected that the adverse driver did not have a driver’s license at the time of the accident. Additionally, attached was a screen shot from a database named “TLOxp TransUnion”, a reportedly reputable database, which showed no results for a driver’s license search for a name purportedly associated with the adverse driver. The trial court granted the motion for summary judgment and Plaintiff appealed.

In reversing the summary judgment, the Alabama Supreme Court found that Assurance did not produce substantial evidence to establish that the adverse driver did not have a valid driver’s license at the time of the accident. First, the Court found that the affidavit filed in support of the summary judgment motion did not comply with ARCP 56(e) as the accident report constituted inadmissible hearsay and was further barred from use as evidence in any civil trial per Ala. Code §32-10-11 (1975).

Likewise, the Court found that Assurance failed to authenticate the TLOxp TransUnion screenshot to establish its relevance and reliability. Finally, Assurance failed to confirm that the name described in the search was, indeed, the name of the adverse driver. For these reasons, the Court found that Assurance did not produce substantial admissible evidence to establish that the adverse driver did not have a valid driver’s license at the time of the accident which would have shifted the burden of proof to the Plaintiff. Thus, the summary judgment was reversed.

Impermissible Damages Argument

Allstate Ins. Co. v. Ogletree, No. 1180896, 2021 Ala. LEXIS 10 (Feb. 5, 2021)

Allstate’s insured, Ogletree, was injured in an accident in which an intoxicated driver struck Ogletree’s vehicle from behind damaging both vehicles and injuring Plaintiff Ogletree. After the impact, the striking driver exited his vehicle and ran across the interstate where he was struck by oncoming traffic and killed.

Ogletree sought underinsured motorist benefits from Allstate. She had previously reached a settlement with the striking driver’s estate for the limits of the liability coverage.

During the course of the trial, Ogletree’s attorney requested both compensatory and punitive damages. In closing argument, Allstate’s attorney responded by stating that the purpose of punitive damages would not be served in this case because the wrongdoer, the striking driver, was dead. In rebuttal, Ogletree’s attorney argued that Allstate had a contractual and legal right to be reimbursed from striking driver’s estate. Allstate’s counsel objected because Ogletree had settled with the estate thus extinguishing Allstate’s right of subrogation.

The Alabama Supreme Court agreed with Allstate finding that Ogletree’s argument was impermissible because there was no evidence in the record regarding recovery from the striking driver’s estate and because the argument was prejudicial as there was no longer a right of subrogation. Interestingly, the Court rejected Ogletree’s assertion that the argument was permissible as a “reply-in-kind” and, in doing so, agreed that the comments made during Allstate’s counsel’s closing argument were permissible since the striking driver had died and, therefore, no amount of punitive damages could effectively punish or deter him.

Indemnity Agreement Controls Regardless of the Terms of Required Insurance Coverage

Nucor Steel Tuscaloosa, Inc. v. Zurich Am. Ins. Co., No. 1190545, 2021 Ala. LEXIS 61 (June 25, 2021)

Nucor operates a steel-manufacturing facility in Tuscaloosa, Alabama. It had an internship program which offered part-time work to technical-school students. Nucor entered into a “Temporary Services Agency Agreement” with Onin, a personnel-staffing agency. According to the agreement, Onin was to manage the employment of the technical-school students selected by Nucor for the internship program, including providing payroll services, drug testing, and basic orientation regarding Nucor’s policies. The contract also included an indemnification agreement wherein Onin would indemnify Nucor for any damages caused by Onin’s actions. While the agreement required indemnification in the case of damages caused in part by the concurrent negligence of Nucor, it did not provide for indemnification in cases where only Nucor was negligent. The agreement also required that Onin provide evidence of comprehensive general liability insurance coverage in the amount of $2M with Nucor being named as an additional insured on such policy. That coverage was provided by Zurich.

An intern was killed at the Nucor plant. Following the death, Nucor sought indemnification from Onin. The Alabama Supreme Court affirmed entry of summary judgment in favor of Onin as the evidence established that Onin provided strictly administrative services to Nucor and that Nucor exercised complete operational control over its facility and the work performed by the intern. Citing prior authority, the Court noted that to allow the indemnitee to transfer responsibility to the indemnitor in such a case “would be totally at odds with the tort system’s incentives to encourage safety measures” and, thus, in this case the agreement was unenforceable against Onin.

As the Court determined that the indemnification provision violated public policy, and was, therefore, void, the Court found that there was no need to address whether Nucor was entitled to coverage under the additional-insured endorsement of the Zurich policy. In doing so, the Court noted that the indemnity agreement controls regardless of the provisions of the insurance policy because finding otherwise would have rendered the indemnity contract ineffectual. It is the indemnity contract, not the insurance policy, which defines the parties’ rights and liabilities as regards each other.