St. Paul Ins. Companies v. Talladega Nursing Home, Inc.

• Decision Date: 15 November 1979
• Docket Number: No. 77-2774,77-2774
• Citation: 606 F.2d 631
• Parties: ST. PAUL INSURANCE COMPANIES, a corporation, Plaintiff-Appellee, v. TALLADEGA NURSING HOME, INC., et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 631

606 F.2d 631

ST. PAUL INSURANCE COMPANIES, a corporation, Plaintiff-Appellee, v. TALLADEGA NURSING HOME, INC., et al., Defendants-Appellants.

No. 77-2774.

United States Court of Appeals Fifth Circuit.

Nov. 15, 1979.

Thomas Reuben Bell, Jerry L. Fielding, Sylacauga, Ala., for defendants-appellants.

Reid B. Barnes, Lyman H. Harris, Birmingham, Ala., for plaintiff-appellee.

Philip Dale Segrest, Montgomery, Ala., for Cook & Mountainview.

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

Before GODBOLD, RONEY and FRANK M. JOHNSON, Jr., Circuit Judges.

GODBOLD, Circuit Judge:

This case involves the liability of an insurance company, under a comprehensive nursing home liability policy, to indemnify and defend the insured in civil actions alleging slander, interference with business relations, and violations of the federal antitrust laws. The district court held that such allegations constitute intentional wrongs and that it is against Alabama public policy to insure against the consequences of intentional wrongs. We affirm.

Appellants William and Hazel Patterson together own 59 shares out of 60 of the Talladega Nursing Home, Inc., and are directors and administrators of the Nursing Home. Both the Pattersons and the Nursing Home were insured by St. Paul's comprehensive nursing home liability policy. Under this policy, St. Paul agreed to pay "all loss by reason of the liability imposed by law or contract upon the Insured for damages . . . on account of injury. . . ." Injury is defined in the contract as "both bodily and personal injury claims (such as libel, slander, invasion of privacy, false detention, etc.)." St. Paul also agreed to defend the Insured in any suit alleging a covered injury, "even if such suit is groundless, false or fraudulent." In 1975, while the St. Paul insurance contract was in force, Ottis D. Cook initiated a civil action in federal district court in Alabama against the Pattersons and the Nursing Home, alleging, in essence, that appellants had intentionally and unlawfully prevented him from successfully operating a rival nursing home in Talladega. ¹ In a nine-count complaint, Cook alleged that appellants' acts had amounted to slander, interference with business relations, and violation of the federal antitrust laws. In their answer appellants denied all the material allegations in the complaint and have claimed before this court that the allegations therein are groundless, false or fraudulent. St. Paul then instituted the instant action in federal district court, seeking a declaratory judgment as to its duty to defend. This appeal is taken from the district court's ruling that St. Paul is not obligated to defend the underlying actions.

Appellants argue, first, that Alabama public policy does not prohibit insuring against all intentional wrongs; second, that the allegations of the underlying complaint do not constitute intentional wrongs; and third, that St. Paul's duty to defend is broader than its indemnification liability, so that even if public policy precludes indemnification, St. Paul must still defend the actions.

In Fidelity-Phenix Fire Ins. Co. v. Murphy, 226 Ala. 226, 146 So. 387 (1933), the Alabama Supreme Court, in the context of the willful and deliberate destruction of the insured's ship by the insured, held void as against public policy any insurance coverage protecting against "loss which (the insured) may purposely and willfully create." Id. at 230, 146 So. at 390. In Pruet v. Dugger-Holmes & Assoc., 276 Ala. 403, 162 So.2d 613 (1964), this doctrine was extended to include a suit for intentional trespass. These two cases have been interpreted to hold that all contracts insuring against loss from intentional wrongs are void in Alabama as against public policy. See Industrial Sugars, Inc. v. Standard Accident Ins. Co., 338 F.2d 673, 676 (CA7, 1964); Thomason v. United States Fidelity & Guaranty Co., 248 F.2d 417, 420 (CA5, 1957) (Rives, J., dissenting). Appellants' contention that the intentional wrongs doctrine is narrowly circumscribed, and limited to such egregiousacts as arson, is without merit; the crucial question, therefore, is whether the acts alleged in the underlying complaint constitute intentional wrongs.

Intentional wrongs are defined in Alabama, in the context of insurance, as including both intentionally causing injury and "intentionally doing some act which reasonable and ordinary prudence" would indicate likely to result in injury. Hartford Fire Ins. Co. v. Blakeney, 340 So.2d 754, 756 (Ala.1976); Accord, Transit Casualty Co. v. Snow, 584 F.2d 97, 99 (CA5, 1978). All of the allegations of the underlying complaint fall within this definition, both as a matter of fact and as a matter of law. A close reading of the complaint demonstrates that appellants are alleged to have committed a series of intentional acts, each of which was calculated to prevent Cook from operating a nursing home in competition with that of appellants. It is also clear from the complaint that the sole purpose of appellants' alleged conduct was to eliminate competition.

Moreover, the elements of each of the underlying causes of action include either an intent to injure or the commission of acts reasonably likely to injure. See Ceravolo v. Brown, 364 So.2d 1155, 1156 (Ala.1978) (slander); Marion v. Davis, 217 Ala. 16, 18, 114 So. 357, 358 (1927) (slander); ² Louisville & Nashville Railroad Co. v. Arrow Transportation Co., 170 F.Supp. 597, 600 & n.3 (N.D.Ala.1959) (interference with business relations); Broadcast Music, Inc. v. CBS, 441 U.S. 1, 8 n.13, 99 S.Ct. 1551, 1556 n.13, 60 L.Ed.2d 1, 23 n.13 (1979) (Stevens, J., dissenting) (conspiracy to restrain trade); Shotkin v. General Electric Co., 171 F.2d 236, 238 (CA10, 1948) (conspiracy to restrain trade); Mabry v. State, 40 Ala.App. 129, 135, 110 So.2d 250, 255, Cert. dismissed, 268 Ala. 660, 110 So.2d 260 (1959) (conspiracy); State v. Cawood, 2 Stew. 360, 363 (Ala.1830) (conspiracy). ³

Appellants also argue that the acts of the Pattersons cannot be attributed to the Nursing Home, and that St. Paul is obligated to defend the Nursing Home regardless of the resolution of the issue as to the Pattersons. This contention is without merit. The district court properly found Hazel Patterson to be the alter ego of the corporation, ⁴ and therefore held that her acts were tantamount to acts of the corporation. This is consistent with Alabama law. Ex parte City Sales Corp., supra ; Williams v. North Alabama Express, 263 Ala. 581, 584, 83 So.2d 330, 333 (1955).

Finally, appellants contend that St. Paul's duty to defend is broader than its liability for indemnification. The insurer's duty to defend is not determined solely by the bare allegations of the complaint. Ladner & Co. v. Southern Guaranty Ins. Co., Supra, 347 So.2d at 103; Alabama Farm Bureau Mutual Cas. Ins. Co. v. Harris, 279 Ala. 326, 328, 184 So.2d 837, 838 (1966). However, in this case, as in Ladner, "there is nothing in the record . . . to indicate that the plaintiffs . . . are asserting any theory of liability" other than deliberate and intentional wrongs. 347 So.2d at 103. There is no duty to defend the cases in their present posture.

The judgment below is AFFIRMED.

1 Cook also initiated a similar action in the Circuit Court of Talladega County, alleging slander and malicious interference with his right to do business. The federal district court held St. Paul had no obligation to defend this action. The same considerations govern St....