PROCEDURALLY SPEAKING:

 

Ex parte Safeway Ins. Co. of Alabama, Inc., 148 So. 3d 39 (Ala. 2013).  An insurance company was sued for bad faith due to its denial of an uninsured motorist claim.  Safeway moved to dismiss the case for lack of subject matter jurisdiction The crux of its argument was the claim for UM benefits was not ripe for adjudication until liability and damages had been established.  The trial court denied the motion, and Safeway petitioned the Court for a writ of mandamus directing the trial court to dismiss only the bad faith claim for lack of subject matter jurisdiction.  Writ of mandamus denied.

 

In Alabama, in order to recover UM benefits, the insured must establish fault on the part of the uninsured motorist and prove the extent of damages.  Consequently, there can be no bad faith refusal to pay until the insured proves that he is legally entitled to recover.  LeFevre v. Westberry, 590 So. 2d 154 (Ala. 1991).  The Court explained this does not mean the trial court lacked subject matter jurisdiction.  “The trial court does have the authority to hear the case and may dismiss it on the merits.  The outcome of the case ought to depend on a Rule 12(b)(6) motion to dismiss, not a Rule 12(b)(1) motion to dismiss, and proving fault and damages ought to be an evidentiary or elemental prerequisite for showing an insurer’s bad faith failure to pay benefits, not a jurisdictional prerequisite.” The Court provided an example as to when a problem might arise as to subject matter jurisdiction; if a party files a bankruptcy petition in circuit court, because the nature of those actions is limited to a particular forum with the authority to handle them.  “There are, however, no problems with subject matter jurisdiction merely because a party files an action that ostensibly lacks a probability of merit.” 

 

Voltz v. Dyess, 148 So. 3d 425 (Ala. 2014). The Plaintiffs’ in the action filed a complaint and made two attempts to perfect service on the Defendant.  The trial court dismissed the Plaintiffs’ action, without giving notice for lack of service.  Rule 4(b), Ala.R.Civ.P., provides that the court may dismiss an action “upon motion or on its own initiative, after at least fourteen (14) days’ notice to the plaintiff.”  The Court stated it had not had the opportunity to construe this provision but agreed with the Court of Civil Appeals that the obvious purpose of the notice requirement of Rule 4(b) is to give the plaintiff an opportunity to show “good cause” to extend the time for service.  Mofett v. Stevenson, 909 So. 2d 824 (Ala. Civ. App. 2003).  The Court noted that, standing alone, the plaintiffs’ lengthy delay might warrant dismissal for lack of service pursuant to Rule 41(b), Ala. R. Civ. P., permitting dismissal for failure to prosecute, but the court did not dismiss the action pursuant to that rule.  “Under Rule 4(b), a failure to effect service within 120 days does not, alone, warrant summary dismissal absent at least 14 days’ notice. . . We hold, therefore, that a trial court is required to give plaintiff’s at least 14 days’ notice before dismissing an action against a defendant on whom service was not perfected.”

 

INSURANCE COVERAGE ISSUE:

Owners Ins. Co. v. Jim Carr Homebuilder, LLC, 2104 WL 1270629 (Ala.).  The homeowners contracted with Jim Carr Homebuilders, LLC (hereinafter “JCH”) to construct a lake house.  The homeowners took possession of the completed construction, and within one year started experiencing problems with the home.  The main issues were related to water intrusion from the roof, walls and floors.  The homeowners subsequently brought claims against JCH for breach of contract, fraud, and negligence and wantonness. The homeowner’s claims against JCH were submitted to final arbitration wherein an award of $600,000.00 was entered in favor of the homeowner.  The award was based on findings of improperly installed flashing by a JCH subcontractor; brick was improperly prepared for installation; damaged mortar subjected other parts of the house to damage; insufficient number of weep holes; windows and doors were improperly installed by JCH subcontractors; lack of caulking on windows and doors; the upper porches were not properly installed and waterproofed by JCH subcontractors; roof was improperly installed by JCH subcontractor; downstairs bathroom was improperly installed by JCH subcontractor.  The award also included an amount for significant mental anguish.  Owner’s Insurance filed a separate declaratory judgment action on the coverage issues.  The underlying trial court held that the entire judgment rendered to the homeowner was covered under the CGL policy Owners Insurance had issued to JCH.  Owner’s Insurance subsequently appealed the trial court’s findings.

 

After a thorough analysis of the holdings in United States Fidelity & Guaranty Co.. v.Warwick, 446 So. 2d 1021 (Ala. 1984) and Moss v. Champion Ins. Co., 442So. 2d 26 (Ala. 1983) the court in Town & Country Prop.,L.L.C. v. Amerisure Ins. Co., 111 So. 3d 699 (Ala. 2011) held that “faulty workmanship itself is not an occurrence” under a standard CGL.   However, the court in Carr has restated the rule as “faulty workmanship itself is not ‘property damage’ ‘caused by or ‘arising out of’ an ‘occurrence.’  Owners Ins. Co. v. Jim Carr Homebuilder, LLC,  2104 WL 1270629 at p. 16  (Ala.)  The Carr court continues to recognize that, “the cost of repairing or replacing faulty workmanship is not the intended object of a CGL policy issued to a builder or contractor.” Id. In other words, the Court does not believe that the question of insurance coverage on a claim involving faulty workmanship should be analyzed based on the definition of an “occurrence.”  The bottom line is that the Court continues to recognize that the cost of repairing or replacing “faulty workmanship” is not the intended object of a CGL policy issued to a builder or contractor, but that conclusion is not solely determined by the definition of an occurrence.  The Standard CGL policy contains an exclusion to “your work” which excludes coverage for “property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”  The exclusion is applicable when the damage is to the contractor’s work and is included in the products-completed operations hazard.  The products-completed operations hazard includes products that have left the insured’s possession or work that has been completed by the insured.   The completed operations hazard basically means (as a default provision) that an insured is assuming the risk (or hazard) related to his completed operations unless the insured purchases coverage for his completed operations. 

Owners Ins. Co. v. Jim Carr Homebuilder, LLC, 2104 WL 1270629 at p. 20   (Ala.)  In other words, the Court is stating that if an insured purchases products-completed operations hazards coverage, it “nullifies and renders inapplicable the ‘your work’ exclusion.”  Id.  Therefore, if an insured purchases products-completed operations hazard coverage, and a claim is made for faulty workmanship and the insured’s operations are completed at the time of an alleged occurrence then there is coverage.  Since the Court has stated the “your work” exclusion is nullified by the purchasing of products-completed operations hazard coverage, then even repair and replacement of the faulty workmanship is included in the coverage. 

 

 

 

 

ON THE BUSINESS END OF THINGS:

 

Smelser v. L & H Truck Services, LLC., 2014 WL 5394525 (Ala. Civ. App.).  L & H Truck Services, LLC is a solely owned LLC by Charlie Hummel.  The Company is in the business of repairing eighteen wheeler trucks.  The Company performed work on behalf of Rickey Smelser and invoiced him for the work performed in excess of $20,000.00.  Smelser did not pay the invoices so L & H Truck Services filed suit against Smelser, individually and doing business as R & D Trucking, LLC.  L & H later amended their complaint to add David Ashmore as a defendant.  A judgment was entered against Smelser, R & D Trucking, LLC, and Ashmore, jointly and severally.  Smelser appealed.  Reversed

 

In this case, the work performed was on vehicles owned by Ashmore who was doing business as R&D Trucking, LLC or D &R Trucking, LLC, both of which Smelser was a founding and managing member.  The testimony was that L & H Truck Services had been doing business with Smelser through four LLC’s for the past seven or eight years.  Hummel told Smelser it would be more convenient for him to bill Smelser directly, and then Smelser could determine which LLC owed the debt.  Smelser always paid the invoices from a business account and never from personal funds.  As a general rule, a member of an LLC cannot be held liable for the debts of the LLC.  However, a member may be held liable individually based on the member’s own acts or conduct. Ala. Code 1975 § 10A-5-3.02.  “An agent acting with actual or apparent authority who enters a contract on behalf of a principal binds the principal but not himself.”  The evidence was clear that L & H knew that Smelser was acting on behalf of the limited-liability companies and agreed to such action. Smelser clearly received the invoices solely in his capacity as a member or manager of the limited liability companies for the purpose of facilitating payment of those invoices by the LLCs, therefore, he is not personally liable. 

 

STATUTES:

 

Amendment of Ala. Code § 12-19-290. SB113 (Enacted 2014-166 (March 6, 2014) (Sen. Orr). Allows for the Circuit and District Courts to now accept credit, debit and charge cards for payment.  However, they cannot charge an additional fee for accepting these forms of payment.

 

Alabama Limited Liability Law of 2014; amendment of §§ 10A-1-1.03, 10A-1-1.08, repeal of Ala. Code §§ 10A-5-1.01 to 10A-5-9.06; creation of §§ 10A-5A-1.01 to 10A-5A-12.08. HB 2 (Enacted 2014-144) March 4, 2014) (Rep. DeMarco).  The Law addresses issues relating to Limited Liability filings, creation of agreements, third party notices, and rights when the operating agreement is silent on a topic.

 

Alabama Informed Voter Act. HB9 (Enacted 2014-399) (April 3, 2014) (Rep. McMillan).  The Act forms a Fair Ballot Commission who will ensure that the public is informed of upcoming and proposed ballet measures through posting of the information on the legislature’s website.