Home Indem. Co. of New York v. City of Mobile

• Decision Date: 20 September 1985
• Docket Number: No. 84-359,84-359
• Parties: The HOME INDEMNITY COMPANY OF NEW YORK, et al. v. CITY OF MOBILE.
• Court: Alabama Supreme Court

Page 312

477 So.2d 312

The HOME INDEMNITY COMPANY OF NEW YORK, et al. v. CITY OF MOBILE.

No. 84-359.

Supreme Court of Alabama.

Sept. 20, 1985.

De Martenson and Rebecca L. Shows of Huie, Fernambucq & Stewart, Birmingham, for appellants.

William H. Brigham, Mobile, for appellee.

TORBERT, Chief Justice.

This appeal is a continuation of the litigation which we first considered in Home Indemnity Co. v. Anders, 459 So.2d 836 (Ala.1984) (hereinafter Home I ), between the City of Mobile (City), Home Indemnity Company (Home), and numerous property owners in the City of Mobile. The sole question before us is whether the trial court properly granted summary judgment for the City on its claim that the insurance coverage provided by Home, to the City, is coextensive with the City's liability under Code 1975, § 11-93-2. ¹

Home's first contention is that the trial court was precluded from ruling on this issue because (1) the issue was pending in another action in federal district court when this action was filed in state court and (2) the federal court decision bars the state court from considering the issue.

Initially, we note that Code 1975, § 6-5-440, was not a bar to the City's filing a declaratory judgment action in state court after Home had filed an action in federal court. Section 6-5-440 only refers to "no plaintiff [being] entitled to prosecute two actions in the courts of this state at the same time." The City was not a plaintiff in the federal court action. ²

Home also contends that the doctrines of res judicata or collateral estoppel precluded the trial court from entering the judgment. The issues decided in federal court were the definition of "occurrence," as used in the policy, and whether under the policy there was an aggregate limitation on damages resulting from property damage. In Home I, this Court, among other things, defined the word "occurrence" as used in § 11-93-2 and held that there was no aggregate limitation on the recovery for property damage when multiple judgments were entered as a result of a single occurrence. The issue raised in count four of the City's complaint and decided by the trial court on summary judgment was whether the City's coverage under the policy was coextensive with its liability under the statute. This precise issue has not been decided in any prior litigation between these parties, and therefore the defense of collateral estoppel (issue preclusion) does not apply. Fisher v. Space of Pensacola, Inc., 461 So.2d 790 (Ala.1984). Furthermore, the defense of res judicata does not apply either, because this claim of coextensive coverage has not been adjudicated in any prior judgment. ³ Id.

The following is the standard for granting summary judgment:

"It is a long-established rule in this state that on motions for summary judgment, the movant has the burden of negating the existence of any issue of material fact; Plant v. Reid, Inc., 365 So.2d 305 (Ala.1978); Worley v. Worley, 388 So.2d 502 (Ala.1980), and if there is a scintilla of evidence supporting the non-moving party, summary judgment is inappropriate. Studdard v. South Central Bell Tel. Co., 356 So.2d 139 (Ala.1978). In determining the existence of genuine issues of material fact, the record must be viewed by this Court in a light most favorable to the non-moving party. Papastefan v. B & L Const. Co., Inc. of Mobile, 356 So.2d 158 (Ala.1978)."

Ryan v. Charles Townsend Ford, Inc., 409 So.2d 784, 786 (Ala.1981).

There is no question that Home and the City disagree as to the extent of the coverage Home's insurance policy provided the City. It has already been determined that under the insurance policy "each discrete act or omission, or series of acts or omissions, on the part of the City of Mobile which caused ... [damage] ... is a single 'occurrence' " and that Home's liability for property damage is $100,000 per occurrence. Home Indemnity Co. v. City of Mobile, 749 F.2d 659 (11th Cir.1984). In Home I, we said, "[A]ll injuries that stem from one proximate cause are the result of a single 'occurrence.' " Home I, at 843. Recovery under any judgment for property damage is limited to $100,000 per occurrence. Code 1975, § 11-93-2. Therefore, there is a disparity between the liability to which the City is exposed and the coverage which Home provided. Because the construction of the policy as written has already been conclusively decided in federal court, the only issue open for consideration is whether the policy should be reformed or had been modified so that coverage under the policy is coextensive with liability.

"An insurance policy may be reformed as other instruments." Highland Underwriters Ins. Co. v. Elegante Inns, Inc., 361 So.2d 1060, 1063 (Ala.1978). Reformation is proper when there was a "prior agreement which the contract, on account of mutual mistake or mistake on one side and fraud or inequitable conduct on the other, failed to express." Pearson v. Agricultural Ins. Co., 247 Ala. 485, 487, 25 So.2d 164, 166 (1946). There can be no modification of an insurance policy unless both parties have agreed to the modification. 17 G. Couch, Couch on Insurance § 65:3 (2d Rev. ed 1983). Therefore, in order to prove either that reformation was a proper remedy or that there had been a modification, the City had to show that Home had made some sort of agreement other than that provided in the policy itself. ⁴

The City attempted to show that there was such an agreement, based upon the statements of James Paulk, an insurance agent. However, a threshold question exists as to whether Paulk had the authority to bind Home by any statement or representation that he made. The evidence presented on this issue consists of a letter signed by Paulk, Paulk's deposition testimony, an affidavit of Joseph Kasuba, budget officer of the City of Mobile, and the agency agreement between Home and the Cook, Cadden, Fowler, Paulk, Insurance Agency, Inc.

The letter itself does not give any indication of Paulk's authority....