Admiral Ins. Co. v. Price-Williams

• Decision Date: 17 May 2013
• Docket Number: 1110993.
• Citation: 129 So.3d 991
• Parties: ADMIRAL INSURANCE COMPANY v. Ryan PRICE–WILLIAMS.
• Court: Alabama Supreme Court

129 So.3d 991

ADMIRAL INSURANCE COMPANY

v.Ryan PRICE–WILLIAMS.

1110993.

Supreme Court of Alabama.

May 17, 2013.

Bert P. Taylor and Natalie A. Daugherty of Taylor Ritter, P.C., Orange Beach, for appellant.

Robert J. Hedge of Citrin Law Firm, P.C., Daphne, for appellee.

On Application for Rehearing

STUART, Justice.

The opinion of January 11, 2013, is withdrawn, and the following is substituted therefor.

Ryan Price–Williams sued Admiral Insurance Company and Gabriel Dean and Charles Baber in the Mobile Circuit Court pursuant to Alabama's direct-action statute, § 27–23–2, Ala.Code 1975.¹ Both Dean and Baber were alleged by Price–Williams to be covered under a commercial general-liability insurance policy Admiral had issued the national Kappa Sigma fraternity to which Dean and Baber belonged. Price–Williams alleged that Admiral was obligated to pay a judgment that had been entered in favor of Price–Williams and against Dean and Baber in a previous action (“the underlying action”). Following a bench trial, the trial court entered a judgment in favor of Price–Williams and against Admiral, holding that the Admiral policy provided coverage to Dean and Baber for the negligent and/or wanton acts that formed the basis of the underlying action. We reverse and remand.

I.

On January 31, 2004, Price–Williams was attacked and beaten at a fraternity house maintained by the University of South Alabama chapter of Kappa Sigma in Mobile (the local chapter is hereinafter referred to as “Kappa Nu”; the national fraternity is referred to as “Kappa Sigma”). Price–Williams suffered significant, permanent injuries as a result of the assault and incurred medical expenses of approximately $27,145. On November 28, 2005, Price–Williams sued Kappa Sigma and Kappa Nu and Dean, Baber, and Michael Howard, the three individuals alleged to have committed the assault, in the Mobile Circuit Court. ² Price–Williams's complaint sought recovery based on the assault and asserted negligence and/or wantonness claims based on Dean's and Baber's failure as officers of Kappa Nu to implement the risk-management program Kappa Sigma required of local chapters, which program, Price–Williams alleged, would have either prevented the assault entirely or, at a minimum, limited its duration and intensity.³

Shortly after it received the complaint, Kappa Sigma notified its insurer Admiral of a possible occurrence under its commercial general-liability policy; however, because its policy with Admiral contained a self-insured retention clause, Kappa Sigma took initial responsibility for the defense of Price–Williams's claims.⁴ Kappa Sigma therefore retained its own counsel, which also represented Kappa Nu. However, that counsel did not represent either Dean or Baber, neither of whom made a claim upon Admiral for coverage based upon their status as officers of Kappa Nu. In fact, Dean, Baber, and Howard never retainedcounsel, never answered the complaint, and never appeared in the action, and a default judgment was accordingly entered against them. A summary judgment was also entered in favor of Kappa Sigma, and, by the time the jury trial began on November 17, 2008, Kappa Nu was the only remaining defendant.⁵

After closing arguments were made at the conclusion of the trial, Kappa Nu reached a settlement with Price–Williams. Upon notifying the trial court of the settlement agreement, Price–Williams moved the trial court to withdraw his jury demand and to enter a final judgment against Dean, Baber, and Howard based upon the evidence adduced at trial.⁶ The trial court granted the motion, dismissed the jury, and thereafter entered a 10–page order containing the following findings of fact and judgment:

“11. As to [Price–Williams's] second and third causes of action, the court finds that both Dean and Baber, as officers of the local fraternity, had assumed and/or were under a duty to create, implement, supervise, and enforce what was described during trial as the chapter's ‘risk management program.’ The court further finds, based upon the testimony offered at trial as well as documentary evidence introduced during trial, including the Executive Officers' Manual ... and the Kappa Sigma Fraternity Risk Management Manual ..., that these defendants both negligently and wantonly breached their individual duties to create, implement, supervise, and enforce a risk management program, and that as a proximate consequence of said breaches, [Price–Williams] was caused to suffer those injuries and damages as proven in this case.

“12. More particularly, the court finds that both Dean and Baber, in accepting their roles as executive officers of the local fraternity, agreed and assumed the duties imposed upon them that are found in the Executive Officers' Manual and the Kappa Sigma Fraternity Risk Management Manual, which included the implementation and enforcement of a risk management program....

“13. The evidence introduced at trial established that Dean, the president of the local fraternity, was considered the chief executive officer of the chapter. As president, Dean assumed and carried the ultimate duty both individually and on behalf of the local and national fraternity for the implementation and supervision of the chapter's risk management program. This means that it was his responsibility, acting within the scope of his duties as president, to take steps toward creating and enforcing a risk management program for the local fraternity at the University of South Alabama. He was responsible for working with the risk management committee chairman on the development of the chapter's risk management program, and in carrying out the goals of preventing injuries at the chapter house.

“14. Additionally, substantial evidence was introduced that established that Baber, as the vice president, was the second in command at the fraternity house on the night in question. The court finds that his duties included not only the implementation of a risk management program, but also the actual enforcement of the program on the night in question.... [Price–Williams] proved through the evidence at trial that neither of these officers took any steps in carrying out their duties of ensuring that order was maintained at the fraternity house on the evening in question.

“15. To the contrary, the evidence clearly and convincingly established that both Dean and Baber had been drinking this particular night, and that one or both of them knew that an assault was probably going to occur on [Price–Williams] once he walked through the front door of the fraternity house. The fact that no risk management program or education had been implemented only aggravated the situation once the assault began, since neither Dean nor Baber had left any responsible individual in charge of maintaining order at the fraternity house as was required under a reasonable risk management program which, in the court's opinion, would have minimized and/or prevented the assault from occurring in the first instance....

“16. The Kappa Sigma national fraternity, a former defendant in this action, granted to the local fraternity the authority and right to establish and operate a local fraternity at the University of South Alabama. The evidence at trial clearly established that both Dean and Baber, as the president and vice president of the local fraternity, pursuant to the authority bestowed upon them by the national and local fraternity, assumed the duty to create, implement, supervise, and enforce a risk management program relative to the operation of the local fraternity. These individuals were obligated to act in accordance with these duties which were required to be performed as part of their duties on behalf of the local and national fraternity. The court finds that these two individual defendants, Dean and Baber, both negligently and wantonly breached their individual duties by failing to create, implement, supervise, and enforce an appropriate risk management program as alleged by [Price–Williams] in his complaint. The court further finds that these two individual's negligence and wantonness was committed while acting within the scope of these two individual's duties on behalf of the fraternity.

“Accordingly, the court hereby finds in favor of the plaintiff, Ryan Price–Williams, and against the three individual defendants, jointly and severally, as to the claims raised in [Price–Williams's] complaint. The court hereby awards to [Price–Williams] and against the individual defendants total compensatory damages in the amount of $500,000. The court further finds that an award of punitive damages is warranted based upon the clear and convincing evidence of wantonness of the individual defendants as to all three claims raised in [Price–Williams's] complaint, and hereby awards to [Price–Williams] and against the individual defendants punitive damages in the amount of $750,000, which is one and one-half times the amount of compensatory damages to be awarded to [Price–Williams]. The total amount of the verdict is therefore $1,250,000. It is the intention of this Court that this verdict represents the total damages to be awarded to [Price–Williams] in this case for all damage [ ] suffered by him as a result of the January 31, 2004, incident, and that the individual defendants are entitled to a setoff of the amount paid to [Price–Williams] by [Kappa Nu] as a result of the confidential pro tanto settlement.”

Subsequently, there was a dispute between Price–Williams and Kappa Nu regarding the settlement agreement and, specifically, whether as part of the settlement Price–Williams had agreed to release only Kappa Sigma and Kappa Nu or, as Kappa Nu maintained, to release Kappa Sigma, Kappa Nu, and Dean and Baber in their capacities as agents of Kappa Nu. Motions were filed by both parties with the trial court, which eventually ruled in favor of Price–Williams. Kappa Nu appealed that judgment to this Court, which affirmed the decision...