Har-Mar Collisions, Inc. v. Scottsdale Ins. Co.
| Decision Date | 03 June 2016 |
| Docket Number | 1141230,1141267. |
| Citation | 212 So.3d 892 |
| Parties | HAR–MAR COLLISIONS, INC. v. SCOTTSDALE INSURANCE COMPANY. Scottsdale Insurance Company v. Har–Mar Collisions, Inc. |
| Court | Alabama Supreme Court |
Scott W. Hunter, Daphne, for appellant/cross–appellee Har–Mar Collisions, Inc.
Kori L. Clement and Brennan C. Ohme of Hare & Clement, P.C., Hoover, for appellee/cross–appellant Scottsdale Insurance Company.
Har–Mar Collisions, Inc. ("Har–Mar Collisions"), appeals from a judgment of the Mobile Circuit Court ("the trial court") following a jury verdict of $101,054.40 in favor of Har–Mar Collisions on its breach-of-contract claim against Scottsdale Insurance Company ("Scottsdale"). The trial court offset the jury verdict by the amounts Har–Mar Collisions had recovered from a settlement agreement it had entered into with Auto–Owners Insurance Company and Owners Insurance Company (hereinafter collectively referred to as "Auto–Owners") and from a settlement agreement it had entered into with CRC Insurance Services, Inc. ("CRC"). Because the total amount Har–Mar Collisions recovered from those two settlement agreements exceeded the amount of the jury verdict, the trial court entered a judgment awarding Har–Mar Collisions $0. Har–Mar Collisions appeals, challenging the setoff. Scottsdale cross-appeals from the judgment against it.
In March 2004, Wayne Hartung began operating an automobile paint-and-body shop ("the auto shop") in Mobile. Wayne incorporated the auto shop as Har–Mar Collisions, Inc., but operated the auto shop under the trade name Marshall Paint & Collision. The auto shop consisted of four buildings owned by Hartung Commercial Properties, Inc. ("Hartung"), which leased the property to Har–Mar Collisions. First National Bank of Baldwin County ("First National") financed Hartung's purchase of the property and retained a mortgage on the property to secure its interest. Wayne is the principal and sole shareholder of both Har–Mar Collisions and Hartung.
Before 2010, Wayne had insured the auto shop with, among other insurance companies, Farmers Insurance Co. ("Farmers"). However, sometime in 2010, Farmers informed Wayne that it would no longer be providing insurance coverage for wind damage for properties south of Highway 90 in Mobile; the auto shop was located approximately 180 feet south of Highway 90. Because Wayne wanted to maintain insurance coverage for wind damage, he elected not to renew the Farmers policy. Instead, Wayne contacted Kris Kahalley, a certified insurance counselor employed with International Assurance, Inc. ("International Assurance"), a company that assists businesses with procuring commercial insurance, to inquire about obtaining insurance for the auto shop. Wayne provided Kahalley with his Farmers policy and told Kahalley that he wanted coverage identical to the coverage provided in the Farmers policy.
(Capitalization in original.)
Kahalley then provided the application to CRC, an insurance broker, to be submitted to various insurance companies that would then offer Har–Mar Collisions proposals for insurance coverage. After receiving proposals, Wayne ultimately decided to split the insurance coverage for the auto shop between two insurance policies, one with Auto–Owners ("the Auto–Owners policy") and one with Scottsdale ("the Scottsdale policy"), both of which were effective from December 15, 2010, to December 15, 2011. The Auto–Owners policy provided garage-liability coverage and commercial umbrella-liability coverage.1 The Scottsdale policy provided commercial-property coverage and lists the insured's name and mailing address as:
(Capitalization in original.)
On January 24, 2011, a fire destroyed the auto shop. The following day, Kahalley submitted a "property-loss notice" to Scottsdale and, either that day or the next, requested on behalf of Har–Mar Collisions a $50,000 advance on the claim for Har–Mar Collisions' lost "business income." On January 27, 2011, Scottsdale sent Wayne a letter informing him that it had engaged an independent claims adjuster to inspect the auto shop and to evaluate the loss. That letter also included a $50,000 check payable to "HARMAR, INC. (DBA): MARSHALL PAINT & COLLISION; AND FIRST NATIONAL BANK OF BALDWIN COUNTY." (Capitalization in original.) Wayne testified that he was uncertain why First National was listed as a payee on the check but that he deposited the check into Har–Mar Collisions' bank account and used the money to pay the ongoing expenses associated with the business operations of the auto shop.
On March 22, 2011, Scottsdale sent Wayne a letter indicating that it had not concluded the investigation of his claim. Concerning Scottsdale's investigation, that letter stated, in pertinent part:
Over the next month, the parties exchanged correspondence in which Wayne, through counsel, asserted that the Scottsdale policy insured the auto shop, incorporated as Har–Mar Collisions; that he had never incorporated a business under the name " ‘Harmar, Inc. dba Marshall Paint and Collision" ’; and that the use of that name in the Scottsdale policy must have been "a typo or abbreviation." Scottsdale, on the other hand, continued to contend that Harmar, Inc., was the named insured in the Scottsdale policy and, as a result, sought documentation from Wayne indicating what, if any, insurable interest Harmar, Inc., had in the auto shop.
In May 2011, Wayne, as principal of Har–Mar Collisions, submitted a proof-of-loss form to Scottsdale. Although Scottsdale never formally denied the claim, it continued to investigate the claim over the next several weeks and refused to make any additional payments on the claim on the basis that its investigation was ongoing. During that time, Scottsdale continued to assert that it was unclear as to what interest Harmar, Inc., the named insured in the Scottsdale policy, had in the auto shop.
On or around June 8, 2011, Mike Norden, a commercial lender with First National, received a letter from Scottsdale informing him that First National, as mortgagee of the insured property, had a right under the Scottsdale policy to receive "loss payment" for the loss of the buildings composing the auto shop, regardless of whether the policyholder's claim was denied. In response to that letter, First National submitted a proof-of-loss form to Scottsdale. On August 4, 2011, Scottsdale issued a check to First National in the amount of $473,268.60, which was approximately $39,000 less than Hartung's mortgage indebtedness at that time. Norden inquired of Scottsdale why the check First National received was approximately $39,000 less than First National's interest in the insured property, to which Scottsdale replied that it had already paid Wayne $50,000 and that it was under the impression that those funds had been, or should have been, applied to the mortgage. To make up the difference, First National liquidated a certificate of deposit Wayne had provided as additional collateral for the mortgage and applied part of the proceeds to the mortgage, thereby extinguishing the mortgage and satisfying First National's interest in the auto shop.
On August 10, 2011, Har–Mar Collisions sued Scottsdale and CRC. That complaint sought a judgment declaring that Har–Mar Collisions was the named insured on the Scottsdale policy, asserted breach-of-contract and bad-faith-failure-to-pay claims against Scottsdale, and asserted negligence and misrepresentation/fraud claims against CRC for its alleged failure to procure insurance for the auto shop.
On April 6, 2012, Auto–Owners filed a motion to intervene in the action. In that motion, Auto–Owners indicated that a separate action had been filed in the trial court by Hartung against, among other defendants, Har–Mar Collisions, in which Hartung alleged that Har–Mar Collisions was leasing from Hartung the buildings in which Har–Mar Collisions was operating the auto shop and that Har–Mar Collisions had negligently/wantonly caused the fire that had destroyed the auto shop. Because the Auto–Owners policy provides coverage for Har–Mar Collisions' liabilities, and because Wayne is the principal of both Hartung and Har–Mar Collisions, Auto–Owners maintained that there were "significant questions regarding coverage under the [Auto–Owners policy]." As a result, Auto–Owners asked the trial court to grant its motion to intervene so that a determination of Auto–Owners' obligations could be determined. The trial court granted the motion to intervene.
On January 22, 2013, Har–Mar Collisions amended its complaint to add International Assurance, Kahalley, and Auto–Owners as defendants and to add the following claims: a negligence claim against International Assurance and Kahalley for their alleged failure to obtain insurance for the auto shop and breach-of-contract and...
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