Grimes v. Alfa Mut. Ins. Co.

227 So.3d 475

Warren GRIMES and Johanna Grimes

v.ALFA MUTUAL INSURANCE COMPANY

1150041.

Supreme Court of Alabama.

January 27, 2017

W. Cone Owen, Jr., of Smith Alspaugh Owen, P.C., Birmingham, for appellants.

L. Merrill Shirley and Griffin M. Shirley of Shirley Law Office, Elba, for appellee.

Leila H. Watson of Cory Watson, P.C., Birmingham; and R. Edwin Lamberth of Gilmore Law Firm, Mobile, for amicus curiae Alabama Association for Justice, in support of the appellants.

Mark D. Hess of Hand Arendall, LLC, Birmingham; Allen M. Estes of Balch & Bingham, LLP, Birmingham; and Sharon D. Stuart of Christian & Small, LLP, Birmingham, for amicus curiae Alabama Defense Lawyers' Association, in support of the appellee.

BOLIN, Justice.

Warren Grimes and Johanna Grimes appeal from a declaratory judgment holding that a liability policy issued by Alfa Mutual Insurance Company ("Alfa") did not provide coverage for a user of an automobile who did not have the express permission of the owner or drivers covered by the policy.

Facts and Procedural History

On May 7, 2010, Teresa Boop added liability coverage and uninsured/underinsured-motorist coverage for a pickup truck to her automobile insurance with Alfa. Boop also added her minor son as a driver under the policy. Boop's son was listed as the rated driver for the pickup truck and his addition was reflected in the rates charged by Alfa for the additional coverage. The liability provision of the policy provided:

"If this coverage is shown on your declaration, we will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of a car accident arising out of the ownership, use or maintenance of a covered car or non-owned car. We will settle or defend lawsuits asking for these damages until your coverage for such damage has been exhausted with attorneys hired and paid by us as we consider appropriate. In addition to our limit of liability, we will pay all defense costs we incur. We have the right to investigate, negotiate and settle any claim or suit. We have no duty to defend any suit or settle any claim for bodily injury or property damage not covered under this policy."

The policy defined "covered person" as:

"1. You and your:

"2. Family members.

"3. Any other person while using the covered car with the express permission of you or a family member.

"4. Under Part A [liability coverage], any person or organization legally responsible for the use of the covered car by covered persons as defined under the three subsections above.

"5. Under Part D [uninsured/underinsured-motorist coverage], any person while occupying your covered car."

On May 23, 2010, Amy Arrington was operating the pickup truck when it collided with a vehicle owned and occupied by the Grimeses. Both of the Grimeses suffered personal injuries as a result of the collision. The Grimeses' vehicle was insured by Liberty Mutual Group, Inc.

On April 16, 2012, Liberty Mutual sued Arrington, alleging negligence and wantonness and seeking recovery of damages for the Grimeses' vehicle. On May 23, 2012, the Grimeses sued Arrington and Boop, alleging negligence, wantonness, and negligent entrustment, and seeking damages for their personal injuries. Arrington filed answers, arguing that she was a covered person under the terms of Boop's policy with Alfa and that Alfa, therefore, should provide her with a defense in the Grimeses' action and in Liberty Mutual's action.

On October 15, 2012, Alfa filed a complaint, seeking a judgment declaring that the Alfa policy did not require it to defend either lawsuit or to pay damages caused by the collision. Liberty Mutual and the Grimeses filed a joint motion to dismiss Alfa's declaratory-judgment action, which the trial court denied. On February 14, 2014, Liberty Mutual filed a motion for a partial summary judgment, arguing that, under the Alabama Motor Vehicle Safety Responsibility Act, § 32–7–1 et seq., Ala. Code 1975 ("the MVSRA"), and the Mandatory Liability Insurance Act, § 32–7A–1 et seq., Ala. Code 1975 ("the MLIA"), Alfa was required to extend coverage to drivers of covered vehicles who have the implied permission of the insured to operate the vehicle. The trial court denied the motion.

On August 19, 2015, Alfa's declaratory-judgment action went to trial with all the parties present. The trial court entered the following order:

"This matter comes before the Court upon the complaint of Alfa Mutual Insurance Company (‘Alfa’) seeking a declaratory judgment to determine coverage arising from an automobile accident which occurred on May 23, 2010. The court called the case for hearing at its scheduled time on August 19, 2015, and all parties were present with their respective attorneys of record. The court heard testimony, accepted exhibits, and considered various motions and arguments of counsel. Defendant Liberty Mutual Group was granted leave to submit a post-trial amendment to its motion for judgment as a matter of law filed in open court at the close of all the evidence. Based upon the relevant and competent evidence presented, the court finds and adjudges as follows:

"1. On the aforementioned date of May 23, 2010, Teresa Boop was the owner of a 1990 Chevrolet K1500 pickup truck covered by a policy of liability insurance issued by Alfa, namely, Policy number A2234762. Ms. Boop and her minor son, Ryan, were the primary drivers of the referenced vehicle.

"2. At the time of the May 23, 2010, accident, Amy Arrington was operating the Boop pickup when it collided on Highway 84 with a vehicle occupied by Warren and Johanna Grimes. Lawsuits were subsequently filed by Liberty Mutual Group against Amy Arrington and by the Grimeses against Teresa Boop and Amy Arrington to recover damages. After the suits were instituted, Amy Arrington called upon Alfa to extend bodily injury and property damage coverage to provide for her legal defense and satisfy any judgment returned against her.

"3. Part A of the subject Alfa policy in fact provides liability coverage ‘for bodily injury or property damage for which any covered person becomes legally responsible because of a car accident arising out of the ownership, use or maintenance of a covered car.’ A ‘covered person’ is elsewhere defined in the policy to include the insured, insured's family members, and any other person while using the covered car with the express permission of the insured or a family member. The policy contains no provision for liability coverage to users of the vehicle with implied permission.

"4. Alfa subsequently filed this action requesting a declaratory judgment be entered finding that it ‘is without obligation to provide ... insurance protection or [indemnity] benefits' for the May 23, 2010, car accident because Amy Arrington did not have the requisite express permission to use the vehicle. Defendants not only contend that Ms. Arrington did have express permission from Ms. Boop and/or Ryan to use the vehicle, but further assert she had implied permission under all the attendant facts and circumstances and, therefore, Alfa is statutorily bound to extend liability coverage for the accident pursuant to Alabama Code § 32–7–22 (1975). Thus, a justiciable controversy exists between the parties as to the policy's liability coverage.

"5. In reiteration, the Alfa policy in question limits liability coverage to users of covered vehicles having express permission. Alabama Code § 32–7–22 (1975) is inapplicable in this instance. On the occasion of the May 23, 2010, vehicular collision involving the Grimeses and Amy Arrington, the latter was a non-insured operator of the Boop pickup truck as she did not have the express permission of the insured (or her son) to use same. Accordingly, there is no coverage under the subject policy and Alfa has no contractual or other legal obligation to defend the respective actions brought by the Grimeses and Liberty Mutual Group or to pay any damages they may recover."

The Grimeses appealed.¹

Standard of Review

When the trial court hears ore tenus evidence during a bench trial, this Court's review of a declaratory judgment is ordinarily governed by the ore tenus standard. Fort Morgan Civic Ass'n, Inc. v. City of Gulf Shores, 100 So.3d 1042 (Ala. 2012). " ‘However, the ore tenus rule does not extend to cloak a trial judge's conclusions of law, or incorrect application of law to the facts, with a presumption of correctness.’ " Aetna Cas. & Sur. Co. v. Mitchell Bros., Inc., 814 So.2d 191, 195 (Ala. 2001) (quoting Eubanks v. Hale, 752 So.2d 1113, 1144–45 (Ala. 1999) ).

Discussion

The Grimeses argue that the trial court erred when it failed to apply the MVSRA to its analysis of the underlying policy, which was issued pursuant to the MLIA. The Grimeses argue that the MVSRA and the MLIA should be read in pari materia. Specifically, the Grimeses argue that § 32–7–22, Ala. Code 1975, of the MVSRA requires the liability policy issued by Alfa to provide coverage for individuals operating the vehicle with either the express or implied permission of the insured. They argue that in Billups v. Alabama Farm Bureau Mutual Casualty Insurance Co., 352 So.2d 1097 (Ala. 1977), this Court held that an owner's liability insurance policy must insure the named insured and any other person who is using the insured vehicle with the express or implied permission of the named insured. The Grimeses also argue that the MLIA requires Alfa to provide liability coverage for individuals driving the insured's vehicle with the insured's implied permission.

Alfa argues that the MVSRA does not require that a liability policy provide coverage for drivers whose permission to use the covered vehicle is implied unless the policy is a "motor vehicle liability policy" required as "proof of financial responsibility" under § 32–7–22, Ala. Code 1975. Alfa argues that this Court has recognized a distinction in the MVSRA between an "automobile liability policy" and a "motor vehicle liability policy." Alfa asserts that ...