Ala. Space Sci. Exhibit Comm'n v. Markel Am. Ins. Co.
| Decision Date | 30 August 2021 |
| Docket Number | Case No.: 5:19-cv-594-LCB |
| Citation | 557 F.Supp.3d 1199 |
| Parties | ALABAMA SPACE SCIENCE EXHIBIT COMMISSION d/b/a U.S. Space & Rocket Center, Plaintiff, v. MARKEL AMERICAN INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Alabama |
Daniel Kaufmann, Bradley Arant Boult Cummings LLP, Huntsville, AL, Hallman B. Eady, Bradley Arant Boult Cummings LLP, Birmingham, AL, for Plaintiff.
Brian C. Richardson, Fredrick Lane Finch, Jr., Brandon J. Clapp, Swift Currie McGhee & Hiers LLP, Birmingham, AL, for Defendant.
This is an insurance coverage dispute. What began as a fight over the funding of a children's television show has spawned over one hundred pages of briefing on an insurer's duties to defend and indemnify. Alabama Space Science Exhibit Commission ("ASSEC") alleges that Markel American Insurance Company ("Markel") failed to provide it a defense in arbitration as required by its insurance policy. ASSEC also alleges that Markel has failed to indemnify it for the award stemming from that proceeding and that Markel's denials to amounted to bad faith.
Before the Court are ASSEC's Motion for Partial Summary Judgment and Brief in Support (Docs. 33 & 35), Markel's Motion for Summary Judgment and Brief in Support (Docs. 36 & 37), the Parties’ respective Oppositions (Docs. 43 & 44), and Replies (Docs. 45 & 46). After thorough review, and with the benefit of oral argument, Markel's Motion for Summary Judgment is GRANTED , ASSEC's Motion for Summary Judgment is DENIED , and this matter is DISMISSED WITH PREJUDICE .
ASSEC is a non-profit commission and state agency, created by Ala. Code. § 41-9-430. (Doc. 34 at 4; Doc 35 at 6). ASSEC was covered by a Markel Not-for-Profit Management Liability insurance policy (Policy No. ML824342-0) ("the policy") from October 30, 2017 to October 30, 2018. (Doc. 34-5 at 6). The policy's general terms and conditions section defined the term "claim" as follows: "with respect to each purchased Coverage Part those matters defined as a Claim in each such Coverage Part." (Doc. 34-5 at 12) (emphasis in original).
The policy included a "Directors and Officers and Organization Liability Coverage Part" or "D and O" coverage part. Id. at 27. Under that provision, Markel was obligated to defend ASSEC if a claim was made against it. (Doc. 34-5 at 28). In accordance with the D and O coverage part, a claim constituted, among other things:
A written demand against an Insured for monetary damages or non-monetary relief, including a written demand that an Insured toll or waive a statute of limitations, commenced by such Insured's receipt of such written demand [and] [a] civil proceeding against an Insured commenced by the service of a complaint or similar pleading upon such Insured [.]
(Doc. 34-5 at 28) (emphasis in original). The policy also defined what types of actions would trigger Markel's duty to defend in such a claim. These events were defined as wrongful acts. Under the D and O coverage part, a wrongful act included "any actual or alleged error, misstatement, misleading statement, act, or omission, neglect or breach of duty[.]" (Doc. 34-5 at 30). Finally, the D and O coverage part excluded coverage "[f]or any actual or alleged liability of the Organization under any written or express contract or agreement, except to the extent that the Organization would have been liable in the absence of such contract or agreement." (Doc. 34-5 at 32) (emphasis in original).
On May 24, 2016, ASSEC entered into a Cooperative Agreement ("CAN") with NASA to fund the children's television program, Space Racers. (Doc. 34-2 at 2). The CAN stated that NASA would provide ASSEC with an incremental funding award for three years contingent on the availability of NASA funds. Id. The agreement provided the funding would take place as follows: the first year of funding would amount to $1,500,000.00; the second year of funding would amount to $1,500,000.00; and third year funding would amount to $1,500,000.00. (Doc 34-2 at 4). Eventually each funding installation was reduced to approximately $1.4 million. (Doc. 35 at 5).
Subsection B(a) of the CAN stated that (Doc. 34-2 at 4) (emphasis added). The immediately following subsection provided that (Doc. 34-2 at 4). Absent from the CAN is any indication that ASSEC was required to request funding from NASA apart from submitting receipts for work completed by Space Race, LLC.
On June 29, 2016, ASSEC and Space Race, LLC entered into a Memorandum of Agreement ("MOA") to memorialize their obligations to each other in accordance with the CAN. (Doc. 34-1 at 2). The MOA specified that ASSEC agreed to pay Space Race, LLC $4,314,812.00 in exchange for Space Race, LLC's production of Space Racers and other supplemental content. Id. ASSEC and Space Race, LLC also agreed to co-brand Space Racers and work on promotional materials together. (Doc. 34-1 at 2).
As to payments, ASSEC agreed, on the date of signing, to pay Space Race, LLC all the amounts Space Race, LLC had already spent for the production of Space Racers and other related funding incurred up to that date, and further provided that it would "make prompt payment to [Space Race, LLC] pursuant to its invoices ... provided, however, that (i) [ASSEC's] payment obligations are expressly conditioned on its receipt of the related funding from NASA" and "(ii) to the extent that any invoiced amounts exceed the contemporaneously available NASA funding, [ASSEC] shall make prompt payment to [Space Race, LLC] upon receipt of the NASA funding." According to Section 4 of the MOA, Space Race, LLC was also required to provide any additional backup information or assistance to "aid [ASSEC] in connection with its reporting obligations in respect of the [CAN]." (Doc. 34-1 at 3). Absent from the MOA was any indication that ASSEC was required to request funding from NASA. The parties agreed to arbitrate any disputes arising from the MOA. (Doc. 34-1 at 4).
In 2016, NBC approached Space Race, LLC with an offer to broadcast Space Racers on its children's television network, Sprout. This deal resulted in an amendment to the MOA titled "Exhibit A." (Doc. 34-1 at 5). Exhibit A shortened Space Race, LLC's deadline to produce episodes of Space Racers from three years to 12–18 months. (Doc. 34-1 at 6). It recognized that, due to this amendment, the funding schedule the parties originally contemplated – for an even distribution of funds across three years of production – would be altered such that "the bulk of funding" would be provided in fiscal year 2016–2017 to meet broadcasting production and distribution schedules. (Doc. 34-1 at 13). Exhibit A also provided that ASSEC would "request[ ] funding for contract labor for team members Michael Matays, Matthias Schmitt, and Charles Matays, as well as production and development costs of the episodic content and development of associated digital assets for distribution." (Doc. 34-1 at 13).
For a time, ASSEC and Space Racer, LLC's arrangement flourished. But their relationship soured around November 2016. This souring resulted in Space Race, LLC filing a Demand for Arbitration against ASSEC on December 28, 2017 (Doc. 34-3 at 2) and a three-count Statement of Claim with the American Arbitration Association against ASSEC in January 2, 2018. (Doc. 34-4).
In its Demand, Space Race, LLC described the nature of its dispute with ASSEC as follows: (Doc. 34-3 at 2). In a section titled "Other Relief Sought" on the Demand form, Space Race, LLC indicated they sought attorney's fees, interest, arbitration costs, and punitive / exemplary damages. Id.
In its Statement of Claim, Space Racer, LLC asserted that ASSEC's former CEO, Dr. Deborah Barnhart, motivated by personal grievances, actively undermined the CAN and the MOA, resulting in NASA's refusal to fund Space Racers. (Doc. 34-3 at 2–4, 9–11, 19, 21). In its "Summary of the Action," preceding its "Facts" section, Space Race, LLC stated (as distilled by this Court):
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