Smith v. Horace Mann Ins. Co.

Citation713 F.2d 674
Decision Date29 August 1983
Docket NumberNo. 83-7017,83-7017
Parties12 Ed. Law Rep. 1071 Maudine B. SMITH, Plaintiff-Appellant, v. HORACE MANN INSURANCE COMPANY, Defendant-Appellee. Non-Argument Calendar.
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

J. Michael Tanner, Almon, McAlister, Ashe, Baccus & Smith, Tuscumbia, Ala., for plaintiff-appellant.

Porterfield, Scholl, Bainbridge, Mims & Harper, James Mark Naftel, Birmingham, Ala., for defendant-appellee.

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

Before RONEY, VANCE and KRAVITCH, Circuit Judges.


Appellant, Maudine B. Smith, an administrative principal in the Muscle Shoals school system, appeals the judgment of the district court limiting the amount of her recovery for attorney's fees to $1,000 and granting summary judgment in favor of appellee, Horace Mann Insurance Company, on her claim of bad faith refusal to pay. Alabama law governs this diversity action.

Appellant claims that she is entitled to $15,758.00 in attorney's fees, the actual cost of legal representation in her successful defense of an action by a former Muscle Shoals school principal, Charles L. Carter, who claimed that his dismissal violated his civil rights.

At issue is which provision of an insurance policy issued to appellant by Horace Mann Insurance Company applies to the facts of the case.

Section II(A) of the policy states that the insurer shall provide the insured a defense in "any civil suit against the insured seeking damages which are payable under the terms of the policy." Alternatively, the insurance company may choose to "reimburse but not defend the insured for the reasonable costs actually incurred."

The scope of coverage under the policy, as described in Section V, includes "activities of the insured in the course of employment as an Educator, Administrator, Member of a Teaching Staff, Student Teacher, or other employee of a school system ...." This coverage, however, is limited by Exclusion "j" of the policy. Exclusion "j" provides that the above described broad coverage does not apply "to liability in respect to claims brought against the insured by other employees of the same school system or educational institution which employs the insured, except to the reimbursement of attorney's fees and costs under Coverage B."

Coverage B, as described in Section I(B)(2) of the policy states that recovery for legal expenses shall be limited to $1,000 per occurrence:

In defense of any action brought against the insured as employee involving salary, tenure, leave of absence, dismissal, nonrenewal, assignment, act of resignation, or other professional rights, duties or responsibilities arising out of the insured's educational employment activities, as hereinafter defined.

The district court found that because appellant's claim to attorney's fees arose out of an action involving another employee in the same school system, as described in Exclusion "j," and because the action concerned a dismissal from employment, as described in Section I(B)(2), her right to recover attorney's fees was limited to $1,000 under the terms of the policy.

Appellant argues that because Mr. Carter was dismissed from employment on August 9, 1977, but did not file his lawsuit until August 12, 1977, when he was no longer employed by the Muscle Shoals school system, he is not an employee "of the same school system" within the meaning of Exclusion "j."

Appellant's argument is unpersuasive. We recognize that exclusions from coverage are to be strictly construed against an insurer and in favor of coverage. Georgia Casualty and Surety Co. v. Universal Underwriters Insurance Co., 534 F.2d 1108, 1110 (5th Cir.1976); Employers Insurance Company of Alabama, Inc. v. Jeff Gin Co., 378 So.2d 693, 695 (Ala.1979). But provisions of an insurance policy are to be construed in light of the interpretation that ordinary people would place on the language used. Employers Insurance Co. of Alabama, Inc. v. Jeff Gin Co., 378 So.2d at 695. "[P]rovisions of a policy which clearly indicate the parties' real intent are not to be given a strained construction to raise doubts where none exist." Green v. Merrill, 293 Ala. 628, 629, 308 So.2d 702, 704 (1975). "Ambiguities will not be inserted, by strained...

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