Home Indem. Co. v. City of Mobile, 83-7664

• Decision Date: 26 December 1984
• Docket Number: No. 83-7664,83-7664
• Citation: 749 F.2d 659
• Parties: HOME INDEMNITY COMPANY, Plaintiff-Appellant, v. CITY OF MOBILE, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 659

749 F.2d 659

HOME INDEMNITY COMPANY, Plaintiff-Appellant, v. CITY OF MOBILE, et al., Defendants-Appellees.

No. 83-7664.

United States Court of Appeals Eleventh Circuit.

Dec. 26, 1984.

A. Danner Frazer, Jr., Mobile, Ala., Eugene D. Martenson, Rebecca L. Shows, Birmingham, Ala., for plaintiff-appellant.

G.B. McAtee, Mobile, Ala., for Barrett, Dumas, Whitehead, Watt & Tuberville.

Theodore L. Hall, Mobile, Ala., for William M. Coker.

William H. Brigham, Mobile, Ala., for City of Mobile.

Russell S. Terry, Mobile, Ala., for Richard L. and Marion S. Frank, M.W. Frank, Brown & Brown, Inc., and Brownfield Inv. Corp., Inc.

Appeal from the United States District Court for the Southern District of Alabama.

Before HILL and HENDERSON, Circuit Judges and WISDOM ^*, Senior Circuit Judge.

JAMES C. HILL, Circuit Judge:

The sole issue presented in this case is the meaning of the term "occurrence" as used in a comprehensive, general liability insurance policy issued by plaintiff/appellant Home Indemnity Company (Home) to the defendant/appellee City of Mobile (City).

This case arose as a result of over 200 lawsuits filed against the City of Mobile after major rains on April 13, 1980, May 16-17, 1980 and May 5-6, 1981. During and following these rains, overflows occurred at various points in the surface water drainage system maintained by the City, and extensive flood damage resulted. In suits filed in state court, property owners alleged that the City was liable for the flood damage due to its negligence in the planning, construction, operation, and maintenance of its surface water drainage system.

Prior to the flooding, Home issued to the City an insurance policy indemnifying the City against property damage liability up to $100,000 for any one occurrence. ¹ The City apparently sought this policy to protect itself from potential liability as a result of 1975 Alabama legislation which partially waived sovereign immunity, permitting damage recoveries against governmental entities up to $100,000 for property damage "arising out of any single occurrence." Ala.Code Sec. 11-93-2.

The terms of the policy issued by Home provide that:

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

(a) bodily injury or

(b) property damage

to which this insurance applies, caused by an occurrence (emphasis added).

This per occurrence limit is defined as follows:

The total liability of the company for all damages because of all property damage sustained by one or more persons or organizations as a result of any one occurrence should not exceed the limit of property damage liability stated in the schedule as applicable to "each occurrence."

"Occurrence" is defined in the policy as

an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damages neither expected nor intended from the standpoint of the insured.

In addition, the policy states that:

for the purpose of determining the limit of the company's liability, all bodily injury and property damage arising out of the continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence.

In November, 1980, Home filed this suit in federal district court seeking a declaratory judgment as to the meaning of the term "occurrence" in the policy. Home argued (and still contends) that each separate rainfall and consequent flooding is "one occurrence;" and that since there were three separate rainfalls that resulted in flooding, it is liable for only three "occurrences." The City and the numerous flood victims maintained (and still maintain) that "occurrence" should be defined in terms of the resulting damage to each claimant's property, so that each incident of flooding to the property of each individual property owner is an "occurrence."

The district court issued its final order interpreting the policy on December 1, 1982, and entered a final judgment for the defendants based on that order on November 3, 1983. The court held that the term "occurrence" as used in this policy means "the occurrence of events or incidents for which the City is liable," stating further that the policy extends $100,000 in coverage to the City "for each occurrence which results in the City becoming legally obligated to pay damages for property damages." The court noted that what creates liability against the City is not the rainfall and flooding itself, but the "intervening negligence of the City" in constructing or maintaining its drainage system. Home brought this appeal from that judgment.

We agree with the above statements of the district court, although we clarify any portions of the court's order which could be construed as indicating that the damages to each individual property owner are separate "occurrences."

This court is bound by Alabama law in interpreting this insurance contract. We must give to the terms of the policy the meaning intended by the parties to the policy. United States Fire Insurance Co. v. Safeco Insurance Co., 444 So.2d 844, 846 (Ala.1983).

In the recent case of United States Fire Insurance, the Alabama Supreme Court adopted the "cause" theory of analyzing the meaning of an "occurrence" in an insurance policy, rather than the "effect" or "result" theory. In that case, water had leaked through the roof of a building, damaging the merchandise of the lessee occupying the building. Subsequently, the lessee sustained additional damages by rainfall when the roofing company working on the roof failed to effectively cover a portion of the roof on which it was working. The lessor had two insurance policies: one providing primary coverage for losses up to $100,000 per occurrence; and a second, "umbrella" policy covering excess losses. The definition of "one occurrence" in the primary insurance policy was identical to the definition in our present case. ² The primary insurer refused to pay more than $100,000, asserting that all of the water damage resulted from one "occurrence."

The issue presented to the Alabama Supreme Court was whether the additional damage caused by the later rainfall, resulting from the roofing company's negligence, was part of a single occurrence as defined by the insurance policy. The court first set out the applicable standard--" [a]s long as the injuries stem from one proximate cause there is a single occurrence." 444 So.2d at 846. Thus, a single occurrence may result in multiple injuries to multiple parties over a...