Ladner & Co., Inc. v. Southern Guaranty Ins. Co.
| Decision Date | 03 June 1977 |
| Citation | 347 So.2d 100 |
| Parties | LADNER AND COMPANY, INC., et al. v. SOUTHERN GUARANTY INS. CO., a corp., et al. SC 2259. |
| Court | Alabama Supreme Court |
Robert T. Cunningham, Cunningham, Bounds, Byrd, Yance & Crowder, Mobile, for appellants.
Bert S. Nettles, Mobile, for appellee, Southern Guaranty Ins. Co., a Corp.
Peter V. Sintz, Sintz, Pike, Campbell & Duke, Mobile, for Fidelity & Casualty Ins. Co.
The original suit, which prompted this declaratory judgment action, was by Wilson and Karen Johnson and five other property owners who bought their respective properties from Ladner Construction Company, Inc. (Ladner). The plaintiffs in the original action brought suit against Ladner 1 and the City of Mobile claiming $500,000 damages for injuries and damages allegedly suffered by them when their homes, which were constructed and sold to them by Ladner, flooded. The complaint alleges that the City of Mobile and Ladner conspired to build houses in an area which they knew to be flood prone and "misled" Johnson and the other plaintiffs into purchasing these homes. The complaint also alleges, in addition to the conspiracy theory, that Ladner ". . . (K)nowing that said property would flood, did construct residential houses on said property and did sell and convey said property to the Plaintiffs, who were unaware that said real property would flood and cause them damage and injury and by reason thereof, the Plaintiffs claim compensatory and punitive damages in the amount aforesaid . . ."
Attached to that complaint is a copy of the City of Mobile's Flood Control Ordinance, copies of extracts of several meetings of the City Commission relative to its decision to allow Ladner to build a house on one of the lots in question, with the proviso that Ladner provide flood insurance and to hold the City harmless in the matter. The indemnity agreement which Ladner executed contained the following language:
Pursuant to the agreement with the City, Ladner first obtained insurance from Fidelity and Casualty Company of New York, which policy covered the period from April 1, 1974, to April 1, 1975. Insurance was procured from Southern Guaranty covering the period from April 1, 1975, to April 1, 1976.
When the lawsuit was served on Ladner, it called upon both companies to defend. Both denied coverage and Southern Guaranty initiated this action for declaratory judgment. It also sought an injunction against further proceedings in the damage suit pending a declaration of rights under its policy. The declaratory judgment action named Fidelity and Casualty as a party. The trial court granted the injunction. Thereafter, both companies filed motions for summary judgment, based upon the pleadings, interrogatories and depositions. The trial court then granted the motions for summary judgment, holding that neither Southern Guaranty nor Fidelity and Casualty was obligated to defend Ladner in the damage suit or to pay any judgment rendered therein.
The policy provisions in both of the two policies are identical:
The word "occurrence" is defined in both policies as follows:
" 'occurrence' means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."
Both insurance companies insist that the allegations charged in the complaint against Ladner do not constitute an "occurrence" as defined in their policies. They contend that the complaint charges Ladner only with knowingly building and selling homes that would flood, and that does not represent an occurrence as defined in the policy. In fact, they say, as characterized in the complaint, the "knowing" actions charged to Ladner resulted in property damage that clearly must have been "expected." It is their contention that the allegation "knowing that said property would flood" is a stronger characterization than an allegation "expecting that said property would flood."
The issue before us, therefore, is whether the qualifying clause in the definition of occurrence, "neither expected nor intended from the standpoint of the insured" operates to excuse the insurer's duty to defend where the only theories of recovery alleged in the complaint charge the insured with intentional acts.
It is well established that the insurer's duty to defend is more extensive than its duty to pay. If the allegations of the injured party's complaint show an accident or occurrence which comes within the coverage of the policy, the insurer is obligated to defend regardless of the ultimate liability of the insured. Goldberg v. Lumber Mutual Casualty Ins. Co., 297 N.Y. 148, 77 N.E.2d 131 (1948). It is also generally the rule that the obligation of a liability insurer, under a policy requiring it to defend its insured in an action brought by a third party, is determined by the allegation of the complaint in such action. Bituminous Casualty Corporation v. Bartlett, Minn., 240 N.W.2d 310 (1976); Argonaut Southwest Insurance Co. v. Maupin, Tex., 500 S.W.2d 633 (1973); 50 A.L.R.2d 499.
This court, however, has rejected the argument that the insurer's obligation to defend must be determined solely from the facts alleged in the complaint in the action against the insured. In Pacific Indemnity Company v. Run-A-Ford Company, 276 Ala. 311, 161 So.2d 789 (1964), Justice Coleman, speaking for the court, held:
". . . We are of opinion that in deciding whether a complaint alleges such injury, the court is not limited to the bare...
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