Titan Indem. Co. v. Riley

• Decision Date: 03 July 1996
• Citation: 679 So.2d 701
• Parties: TITAN INDEMNITY COMPANY v. John Thomas RILEY, Jr., et al. 1940312.
• Court: Alabama Supreme Court

Page 701

679 So.2d 701

TITAN INDEMNITY COMPANY v. John Thomas RILEY, Jr., et al.

1940312.

Supreme Court of Alabama.

July 3, 1996.

James R. Shaw and T. Kelley May for Huie, Fernambucq & Stewart, Birmingham, for Appellant.

Griffin Sikes, Jr., Montgomery, for John Thomas Riley, Jr. Truman M. Hobbs, Jr. of Copeland, Franco, Screws & Gill, P.A., Montgomery, for Jerome M. Wooten.

Charles L. Anderson of Parnell, Crum & Anderson, P.A., Montgomery, for Frank Bertarelli.

COOK, Justice.

Titan Indemnity Company ("Titan") appeals from a judgment entered in favor of John Thomas Riley, Jr., and others in a declaratory judgment action commenced by Titan to determine its liability under an insurance policy it had issued to the City of Montgomery. We affirm.

This is the second time we have addressed issues in this action. See Titan Indemnity Co. v. Riley ("Titan I"), 641 So.2d 766 (Ala.1994). Titan I, which was released on February 25, 1994, set forth the following:

"The City of Montgomery (hereinafter 'the City') and Titan Indemnity Company (hereinafter 'Titan') brought a declaratory action seeking a determination of whether, pursuant to an insurance policy between Titan and the City, Titan was obligated to defend and indemnify Frank Bertarelli, B.H.H. Davis, Jerome M. Wooten, and Michael G. Jones, four of the City's police officers, in regard to federal charges of malicious prosecution and civil rights violations. The trial court entered a judgment holding that Titan was contractually bound to defend the police officers, but did not rule on the issue of indemnity; the court certified the judgment as final under Rule 54(b), A.R.Civ.P. Titan and the City appeal.

"The dispositive issue before us is whether the trial court properly determined that Titan must defend officers Bertarelli and Wooten against the federal charges. We note these facts from the record: In 1991, a series of federal habeas corpus hearings revealed that the Narcotics Division of the Montgomery Police Department had engaged in a pattern of corrupt practices, including the misappropriation of that Division's 'informant fund,' i.e., money set aside to pay informants who provided the police with information regarding illegal drug activity. Police officers who withdrew cash from this fund were required to report the amount withdrawn, the informant to whom it was paid, and the information that was received in return for the payment. The hearings revealed that Bertarelli, Davis, Wooten, and Jones repeatedly withdrew money from the fund, pocketed it for themselves, and then falsified the files to show that they had paid the money to informants.

"In 1989, those four police officers withdrew money from the informant fund and then falsely reported that they had spent it on 'information' from 'anonymous persons' regarding the alleged illegal drug activities of John Thomas Riley, Jr. Based on this fabricated 'information' from these fictitious informants, the four policemen conducted an unconstitutional search of Riley's person and his automobile and filed criminal complaints against him without probable cause. They also 'planted' false evidence in Riley's vehicle and supported Riley's criminal prosecution with false testimony. As a result, Riley was convicted on two counts of possession of crack cocaine with intent to distribute and on one count of carrying a firearm during a drug transaction. He served approximately three years of a 123-month sentence, first in the Montgomery County jail and then in the federal penitentiary in Oakdale, Louisiana, until his repeated habeas corpus proceedings ultimately exposed the unconstitutionality of his arrest and prosecution.

"The United States District Court for the Middle District of Alabama vacated the judgments of conviction against Riley and ordered his release from prison, and the United States attorney dropped all claims against him. Riley then sued the four police officers, along with their supervisors (John Wilson, chief of the Montgomery Police Department and Dennis Bodine, commander of the Narcotics Division of the Montgomery Police Department) and the City [and its mayor, Emory Folmar], alleging malicious prosecution and violations of his civil rights and seeking damages under 42 U.S.C. § 1983. Riley alleged that his arrest and convictions occurred as a result of an intentional pattern of corruption within the Narcotics Division of the Montgomery Police Department, perpetuated by the four police officers and tacitly authorized by their supervisors and the City."

641 So.2d at 767 (emphasis added, footnote omitted).

In Titan I, Titan argued that it was not bound to defend the officers, because, it contended, "the acts of corruption that caused Riley's unlawful incarceration were not 'occurrences' that resulted from law enforcement activities and that caused 'personal injury that the insured did not expect or intend.' " Id. at 768. It insisted that "the acts were intentional wrongs that cannot give rise to a duty to defend under the policy." Id. Titan also argued for a reversal of the summary judgment on the ground that "the actions alleged in the complaint did not arise from law enforcement activities within the scope of the ... officers' duties for the City of Montgomery." Brief of Appellee John Thomas Riley, Jr., App. B., at 6 (emphasis added).

In deciding whether Titan was obligated to defend the officers, this Court set forth and construed the following provisions of the Titan insurance policy:

" 'PART 1--WORDS AND PHRASES WITH SPECIAL MEANING

" '....

" 'E. "Occurrence" means an event and includes continuous or repeated exposure to the same condition that results in:

" '1. personal injury the insured did not expect or intend unless the personal injury resulted from the use of reasonable force to protect persons or property.

" '....

" 'F. "Personal injury" means:

" '1. Bodily injury. Any physical harm to a person's health including sickness or disease. This includes mental harm, mental anguish or mental illness whether or not there has been physical harm or illness.

" '2. False arrest, wrongful detention or imprisonment.

" '3. Malicious prosecution.

" '....

" '6. Humiliation.

" '....

" '10. Violation of civil rights.

" '....

" 'PART III--WHAT THIS AGREEMENT COVERS

" 'A. WE WILL PAY.

" '1. We will pay all sums the insured legally must pay as damages because of personal injury or property damage to which this insurance applies, caused by an occurrence resulting from law enforcement activities....

" '2. We have the right and duty to defend any claim, suit, or action asking for these damages even if it is groundless or fraudulent. This includes but is not limited to inquests and civil or criminal suits brought under the Federal Civil Rights Act.' "

Id. at 768 (emphasis added in Titan I ). ¹

This Court affirmed the judgment, holding that the policy provided coverage for the acts forming the basis of Riley's § 1983 action in the federal courts. Specifically, we explained:

"The language of the policy does preclude coverage for intentional acts, but it also specifically provides coverage for acts of malicious prosecution, assault and battery, wrongful entry, piracy, and other offenses that require proof of intent. Further, the policy specifically provides coverage for claims brought under the Federal Civil Rights Act. The conflict between these provisions creates an inherent ambiguity within the policy, and it is well settled in this state that when there is any doubt as to whether insurance coverage exists under a policy, the policy must be construed for the benefit of the insured. Guaranty National Insurance Co. v. Marshall County Board of Education, 540 So.2d 745 (Ala.1989). Because the policy is ambiguous on its face, we construe it against Titan and conclude that Titan must defend the defendants on the claims against them."

641 So.2d at 768 (emphasis added).

After Titan I was released, the United States District Court for the Middle District of Alabama entered a judgment in favor of Bertarelli, Davis, Jones, and Wooten as to the § 1983 claims, and in favor of Bertarelli, Davis, and Jones as to Riley's state-law claims. It denied Wooten's summary judgment motion as to the state-law claims. Subsequently, the court entered a judgment in favor of the City of Montgomery, Bodine, Mayor Folmar, and Chief Wilson as to all claims against them. From those judgments, which were certified as final judgments pursuant to Fed.R.Civ.P. 54(b), Riley appealed to the United States Court of Appeals for the Eleventh Circuit. (So far as the record here indicates, that appeal is still pending in that court.) Wooten sought "permission to take an interlocutory appeal" of the denial of his summary judgment motion, but the Eleventh Circuit denied it.

Meanwhile, on July 27, 1994, the Montgomery County Circuit Court entered an order in the declaratory action, holding that the policy issued by Titan requires it to indemnify the defendants Bertarelli, Davis, Wooten, and Jones if Riley's action against them in the federal courts is ultimately successful. The order stated in pertinent part:

"This court is not called upon to rule on the underlying merits of the claims brought by plaintiff John Thomas Riley, Jr. against all other parties under the Federal Civil Rights Act, but simply answer the very narrow questions of whether there should be indemnification under the policy of insurance issued by Titan Indemnity Company in the event that the plaintiff ... is successful in his suit....

"The policy of insurance in question does preclude coverage for intentional acts, but includes coverage for claims brought under the Civil Rights Act and for malicious prosecution. ² Therefore, the court concludes that the answer to the question that has been presented must be answered affirmatively."

That order was certified as a final judgment pursuant to Ala.R.Civ.P. 54(b), and Titan appealed.

Titan bases its arguments for reversal of...