Medlock v. Safeway Ins. Co. of Alabama

• Decision Date: 30 January 2009
• Docket Number: 1071303.
• Citation: 15 So.3d 501
• Parties: Mary MEDLOCK, Cassandra Cooper, Johnnie Baker, and the estate of Keith Cooper v. SAFEWAY INSURANCE COMPANY OF ALABAMA.
• Court: Alabama Supreme Court

15 So.3d 501

Mary MEDLOCK, Cassandra Cooper, Johnnie Baker, and the estate of Keith Cooper v. SAFEWAY INSURANCE COMPANY OF ALABAMA.

1071303.

Supreme Court of Alabama.

January 30, 2009.

Scott M. Speagle of Hill, Hill, Carter, Franco, Cole & Black, P.C., Montgomery, for appellants.

Robert C. Ward, Jr., and Bethany L. Bolger of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, for appellee.

STUART, Justice.

Safeway Insurance Company of Alabama sued policy owners Mary Medlock and Cassandra Cooper, seeking a judgment declaring that it did not owe underinsured-motorist benefits to Johnnie Baker and the estate of Keith Cooper. The trial court entered a judgment for Safeway; Medlock, Cooper, Keith Cooper's estate, and Baker appeal. We reverse and remand.

Facts and Procedural History

On October 11, 2006, Safeway issued an automobile insurance policy to Medlock. On October 12, 2006, Safeway issued a renewal policy for automobile insurance to Cooper. The declaration in both policies provided:

"By acceptance of this policy you agree:

". . . .

"4. that the coverage afforded by the policy shall not apply to any loss or damage arising from any accident which occurs while any automobile is being driven, operated, manipulated, maintained, serviced, or used in any other manner by an unlisted driver, on the Application, Declarations, and/or on the Endorsement, under the age of twenty-five(25), who resides in the same household as the named insured, and/or is a regular or frequent operator of any automobile insured under this policy. This exclusion shall apply whether or not the named insured is occupying any automobile at the time said driver is using it in any manner whatsoever."

With regard to uninsured-motorist coverage, both policies provided:

"Part C — Uninsured Motorist Coverage Insuring Agreement

"We will pay damages which a Covered Person, as defined in this Part, is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury:

"1. Sustained by a Covered Person; and

"2. Caused by an accident, which in no way involves the operation of any automobile by a Non-Covered Person, as defined in this Part;

"The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the uninsured motor vehicle.

"Any judgment for damages arising out of a suit brought without prior notice to us, and without our written consent is not binding on a claim being made by any Covered Person, as defined in this Part, against us. A default judgment rendered against the owner or operator of an uninsured motor vehicle shall not be binding nor determinative of any issue arising in a claim being made by any Covered Person, as defined in this Part.

"No recovery can be made under this Part until the Covered Person has received by way of settlement or judgment, the full limits of coverage under any applicable bodily injury liability policy or bond.

"`Covered Person' as used in this Part means:

"1. You, and a Family Member¹ other than a Non-Covered Person

"2. Any other person occupying Your Covered Auto (provided it is not operated by a Non-Covered Person)

"`Non-Covered Person' as used in this Part means an operator of any automobile who:

"1. Is a Family Member or is otherwise a member of your household under the age of twenty and is not listed on the Application, Declarations and/or added by Endorsement.

"2. Is listed as an `Excluded Driver(s)' on the Application, Declarations and/or added by Endorsement.

"3. Is a regular and frequent user of Your Covered Auto and not listed on the Application, Declarations and/or by Endorsement.

"`Uninsured Motor Vehicle' means a land motor vehicle or trailer of any type:

"1. To which no bodily injury liability bond or policy is in effect at the time of the accident.

"2. To which a bodily injury liability bond or policy is in effect at the time of the accident but the sum of the limits of liability coverage under all policies is less than the damages which the injured person is legally entitled to recover from the owner or operator of the uninsured motor vehicle.

"3. Which is a hit and run vehicle whose operator or owner cannot be identified and which hits or which causes an accident resulting in `bodily injury' without hitting. If there is no physical contact with the hit and run vehicle the fact of the accident must be corroborated by competent evidence other than testimony of any person making a claim under this or any other similar insurance as a result of such accident.

"However, `Uninsured Motor Vehicle' does not include any vehicle or equipment:

"1. Identified as `Your Covered Auto' on the Application, Declarations, and/or by Endorsement.

"2. Owned by or furnished or available for the regular use of you or any Family Member.

"3. Operated by Non-Covered Person.

"4. Operated on rails or crawler treads.

"5. Which is a farm type tractor or equipment designed mainly for use off public roads except while on public roads.

"6. While located for use as a residence or premises.

"EXCLUSIONS

"A. We do not provide Uninsured Motorist Coverage for bodily injury sustained by any person:

"1. During or as a result of operation of any automobile by a Non-Covered Person.

"2. If that person or the legal representative settles the bodily injury claim without notice to us and our consent.

"3. While occupying Your Covered Auto when it is being used to carry persons or property for a fee. This exclusion does not apply to a share-the-expense car pool.

"4. Using a vehicle without a reasonable belief that the person is entitled to do so.

"5. Using a vehicle in the commission of a crime, other than a traffic violation.

"6. Who is an unlicensed driver or whose driving privileges have been terminated and/or suspended.

"B. This coverage shall not apply directly or indirectly to benefit an insurer or self-insurer under any of the following or similar laws:

"1. workers' compensation law; or

"2. disability benefit law."

On October 25, 2006, Keith Cooper, Cassandra Cooper's brother, was driving the automobile described in Medlock's Safeway policy. Johnnie Baker was a passenger in the vehicle. The automobile Keith Cooper was driving was involved in an accident with an automobile driven by Sean Cardell Dees. Keith Cooper died as a result of the accident, and Baker sustained injuries.

Keith Cooper's estate and Baker were paid the limits of Dees's insurance policy. Keith Cooper's estate then made a claim for underinsured-motorist coverage on both Medlock's and Cooper's Safeway policies, and Baker made a claim for underinsured-motorist coverage on Medlock's Safeway policy.

On March 2, 2007, after the claims were made, Safeway filed an action, naming as defendants Medlock and Cooper and seeking a declaration that it did not owe underinsured-motorist benefits to either Keith Cooper's estate or Baker. Safeway averred that Keith Cooper was not a licensed driver at the time of the accident, that Medlock was not a passenger in the vehicle at the time of the accident, that Keith Cooper did not have Medlock's permission or authorization to drive her vehicle at the time of the accident, that Keith Cooper is Cooper's brother, and that Keith Cooper was not listed as an insured driver on the application or declarations of, and was not added by endorsement to, either policy. Safeway further averred that because its policies excluded from coverage an unlicensed operator of the insured vehicle; a driver "using the vehicle without a reasonable belief that the person is entitled to do so"; a family member who is not listed on the application or declarations of the policy and/or was not added by endorsement; or a regular and frequent user of the insured vehicle who is not listed on the application or declarations of the policy and/or was not added by endorsement, it did not owe any benefits as a result of the October 25, 2006, accident. Safeway attached to its complaint copies of the policies issued to Medlock and Cooper. Safeway also attached documents establishing that Keith Cooper was not listed as a driver in the application or declarations of either policy and that he had not been added by endorsement.

Medlock and Cooper filed an answer and counterclaim. In their answer, Medlock and Cooper admitted that Keith Cooper was driving Medlock's vehicle, that Medlock was not a passenger in the vehicle at the time of the accident, and that Keith Cooper was Cooper's brother. Medlock and Cooper denied that Keith Cooper was an unlicensed driver at the time of the accident, denied Safeway's allegation that Medlock had not given Keith Cooper permission to drive the vehicle, and denied Safeway's allegation that Keith Cooper is not listed as a driver on either Medlock's or Cooper's application for her policy or on the endorsement. Medlock and Cooper also asserted an affirmative defense that the "action is improper as the real parties in interest have not been made parties to the suit."

In their counterclaim, they alleged that Keith Cooper and Baker were covered persons under both Medlock's and Cooper's policies and that Safeway had improperly denied the estate's and Baker's claims for coverage. They asked the court to declare that Safeway is obligated to pay underinsured-motorist benefits to Keith Cooper's estate and to Baker as provided in their policies. Additionally, they alleged claims of breach of contract and bad-faith refusal to pay a claim. In its answer, Safeway admitted that Medlock's policy provided underinsured coverage for the automobile Keith Cooper was driving at the time of the accident but denied that it had breached the contract of insurance or had engaged in bad-faith refusal to pay an insurance claim.

On June 20, 2007, Keith Cooper's estate and Baker moved to intervene in Safeway's action. In their motion, they argued that Medlock and Cooper, the defendants in the declaratory-judgment action filed by Safeway,...