Ala. Mun. Ins. Corp. v. Munich Reinsurance Am., Inc.

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ALABAMA MUNICIPAL INSURANCE CORPORATION, a non-profit corporation, Plaintiff, v. MUNICH REINSURANCE AMERICA, INC., a foreign corporation, Defendant.

Civil Action No. 2:20cv300-MHT (WO)

United States District Court, M.D. Alabama

August 30, 2023

OPINION ON AMIC'S WOODLAND CLAIM

MYRON H. THOMPSON, UNITED STATES DISTRICT JUDGE

This litigation involves disputes between plaintiff Alabama Municipal Insurance Corporation (AMIC) and defendant Munich Reinsurance America, Inc. over assertions that each party failed to honor its obligations to the other under a series of reinsurance contracts, known as “treaties.” Several of the disputes also involve competing interpretations of AMIC's underlying insurance contracts with its clients, which bind Munich under the terms of the reinsurance treaties. AMIC asserts five breach-of-contract claims and seeks compensatory damages and pre-judgment interest as remedy. Munich denies it breached any treaties and asserts six counterclaims, requesting declaratory judgments from this court as remedy.

Jurisdiction is proper pursuant to 28 U.S.C. § 1332 (diversity).

This lawsuit is now before the court on Munich's motion for summary judgment on one of AMIC's breach-of-contract claims: the Woodland claim, which arises out of AMIC's insurance policy with the town of Woodland, Alabama, as well as subsequent litigation between AMIC and Scottsdale Insurance Company. Oral argument was held on the motion as to this claim on August 28, 2023. For the reasons below, the court concludes that summary judgment should be granted in favor of Munich and against AMIC on the Woodland claim.

I. Legal Standard

“A party may move for summary judgment, identifying each claim or defense--or the part of each claim or defense--on which summary judgment is sought. The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine dispute of material fact exists “if the nonmoving party has produced evidence such that a reasonable factfinder could return a verdict in its favor.” Waddell v. Valley Forge Dental Assocs., Inc., 276 F.3d 1275, 1279 (11th Cir. 2001). The court must view the admissible evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

II. Background

A. Overview of Parties and Treaty Structure AMIC is a non-profit insurance company wholly owned by Alabama municipalities and regulated by the Alabama Department of Insurance. It is chartered to insure

Alabama's cities, towns, and subsidiary corporate entities, including bus services and police forces. Munich is a national provider of property and casualty reinsurance based in Princeton, New Jersey.

For at least ten years, between May 1, 2005, and October 31, 2015, AMIC and Munich entered into annual reinsurance agreements, formally known as “Casualty Excess of Loss Reinsurance Agreements,” or treaties, wherein Munich took on a portion of AMIC's risk in exchange for a portion of the premiums AMIC received from its insured clients.^[1] All of the underlying incidents at issue in this litigation occurred during that ten-year period.

In addition to plaintiff AMIC and defendant Munich, the Woodland claim also involves a third insurance company: Scottsdale Insurance Company.^[2] At all times relevant to the Woodland claim, AMIC was under contract with Scottsdale for professional-liability insurance. In this context, the policy of professional-liability insurance primarily covered AMIC's risk of loss associated with its handling of claims on behalf of its insured. Specifically, the policy covered losses resulting from claims alleging errors and omissions in AMIC's performance of its professional services. See Scottsdale Ins. Co. v. Alabama Mun. Ins. Corp., No. 2:11cv688-MEF, 2013 WL 5231928, at *2 (M.D. Ala. Sept. 16, 2013) (Fuller, J.), aff'd, 586 Fed.Appx. 572 (11^th Cir. 2014).

Crucially, only AMIC and Scottsdale were parties to this professional-liability-insurance contract. Scottsdale did not have any contractual relationship with Munich.

The instant case, between AMIC and Munich, began in May 2020, when AMIC accused Munich of five counts of breach of contract based on five insurance claims that AMIC submitted to Munich between 2015 and 2018, none of which Munich agreed to reimburse in full.^[3] Munich denied that it breached any of its treaties with AMIC and filed six counterclaims, seeking declaratory relief regarding the interpretation of other treaties between Munich and AMIC and other contracts held by AMIC with its insured clients.

Munich filed a motion for summary judgment on all eleven claims and counterclaims. The court has already issued rulings on two of those claims: AMIC's Spanish Fort claim, Alabama Mun. Ins. Corp. v. Munich Reinsurance Am., Inc., No. 2:20cv300-MHT, 2023 WL 2138904 (M.D. Ala. Feb. 21, 2023) (Thompson, J.) (hereinafter referred to as Spanish Fort); and AMIC's Hanceville claim, Alabama Mun. Ins. Corp. v. Munich Reinsurance Am., Inc., No. 2:20cv300-MHT, 2023 WL 3095558 (M. D. Ala. Apr. 26, 2023) (Thompson, J.) (hereinafter referred to as Hanceville).

As stated, only one of AMIC's claims is now before the court: the Woodland claim, which arises out of AMIC's insurance policy with the town of Woodland, Alabama, as well as subsequent litigation between AMIC and Scottsdale.

B. Woodland Litigation

The factual allegations underlying the Woodland claim, taken in the light most favorable to AMIC, are as follows.

Between February 19, 2009, and February 19, 2010, AMIC provided the town of Woodland with a commercial automobile insurance policy. The limit of AMIC's liability to Woodland, as stated in the the terms of the policy, was $ 2 million per occurrence.

During this coverage period, on November 24, 2009, a Woodland employee drove a group of the town's citizens to visit Pine Mountain, Georgia. They traveled there and back in a town-owned vehicle. On the trip back, the driver, Billie Edmondson, missed a sharp turn in the road and crashed. Two passengers, Connie Meadows and Jeanette Holloway, sustained serious injuries as a result of the crash.^[4]

After the crash, the two crash victims filed lawsuits against Woodland and Edmondson in a Georgia state court. AMIC, as the town's insurer, provided legal representation, and was joined by consent as an additional defendant. At trial, the crash victims received jury awards of $ 340,000 (for Meadows) and $ 3,650,000 (for the Holloway estate).

A flurry of further litigation followed. AMIC, Edmondson, and Woodland appealed the Georgia court judgment, while simultaneously filing a new lawsuit in an Alabama state court. In both cases, AMIC argued that the victims' recoveries should have been capped at $ 100,000 each under an Alabama law limiting recovery of damages against governmental entities. The Georgia trial court disagreed, holding that the Alabama recovery cap did not apply. Instead, the court found that, under Georgia law, the recovery cap would be determined by the limits of Woodland's insurance policy with AMIC. As a result, the Georgia court set the cap at $ 2 million--the maximum coverage for which AMIC was liable as Woodland's insurer.

As AMIC was in the middle of appealing this decision and filing an additional lawsuit in an Alabama court, the crash victims filed garnishment actions and probate-court claims, in order to attempt to secure their jury awards.

Ultimately, in January 2011, the crash victims filed a new lawsuit in a Georgia state court, this time suing AMIC directly on the grounds of negligent, wanton, and bad-faith failure to settle within policy limits. At this point, AMIC tendered defense of the lawsuit to its professional-liability-insurance carrier, Scottsdale.

C. Scottsdale's Involvement

As explained above, Scottsdale's role in this case was to provide professional-liability insurance directly to AMIC. Scottsdale did not insure automobile losses or have any contractual relationship with the town of Woodland itself.

After AMIC was sued for failure to settle, Scottsdale took over AMIC's role in all underlying litigation, in addition to representing AMIC in its defense against the failure-to-settle claims. Scottsdale agents assessed the factual record and reviewed all accumulated documentation, dating back to the beginning of the crash victims' lawsuit against Woodland. Ultimately, Scottsdale agents reached the position that the most cost-effective path forward would be for AMIC to settle with the crash victims for a total of $ 2 million.

AMIC and Scottsdale agreed to split the costs of the settlement as follows: First, AMIC would pay the initial $ 200,000, the amount that AMIC contended it rightfully owed to the crash victims under Alabama's tort liability cap. Second, AMIC and Scottsdale would evenly split the remaining $ 1,800,000 of the settlement.

Crucially, Scottsdale reserved the right to sue AMIC in a separate action in order to recover its portion of the payment ($ 900,000), based on the terms of the insurance policy that AMIC held with Scottsdale.

Eventually, the parties successfully settled all claims by the crash victims. The crash victims received a total of $ 2 million, and all of their claims against Woodland, in its capacity as as AMIC's insured client, were resolved.

Roughly two weeks later, Scottsdale initiated a federal lawsuit against AMIC in Alabama, seeking a declaratory judgment that it was not obligated to pay its share of the settlement to AMIC. AMIC filed counterclaims for breach of contract and bad faith. Neither...