Alabama Caselaw Alert: Ex Parte ALFA Mutual Insurance Company v. Kelisha Saulsberry
Prepared by Jim L. Pattillo
November 23, 2020
The Alabama Supreme Court has denied an uninsured motorist insurer’s ability to opt-out of litigation if it entered the litigation by intervening when it was not previously sued. While there are some logistical hurdles, insurers can achieve the needed result a number of ways and essentially circumvent this ruling.
I. HOLDING AND RESULT
In Ex parte Alfa Mut. Ins. Co., No. 1190117, 2020 WL 6372812 (Ala. Oct. 30, 2020), the Alabama Supreme Court, held that upon exercising its right to intervene in the litigation of a case for which they were on notice of a claim, an uninsured motorist carrier forfeited its right to later opt-out.
Underinsured motorist carriers risk losing their right to opt-out of litigation if they chose to intervene in ongoing litigation between their insured claimant and the tortfeasor. This changes the common practice of underinsured motorist carriers of intervening in the litigation, evaluating the exposure, then later opting out.
II. STRATEGY RECOMMENDATION
Most underinsured motorist policies give the insurer the right to 1) request any authorizations from the insured necessary to investigate the claim (including for medical records, employment records, etc.) and 2) to sit for an examination under oath (similar to a deposition). This gives the insurer the tools to investigate the claim outside of litigation as they would if they were a named defendant.
The insurer has two options in light of this new holding. First, it can use the authorization and EUO power in the policy to conduct its own investigation that parallels the discovery in the litigation with the tortfeasor. If duplicating discovery is not enticing to the parties, the underinsured carrier can alternatively request an agreement from plaintiff’s counsel to not oppose an opt-out after intervention. If this is agreed to by the parties, it would be good practice to file a motion or stipulation along with the motion to intervene that sets out the agreement of the parties to later allow opt-out. Defense counsel should make it clear to the court that it only desires to intervene if the Court agrees with the stipulation preserving its right to opt-out.
Plaintiff’s counsel should find the latter approach favorable because the plaintiff will not need to sit for both a deposition AND an examination under oath.
Alfa intervened in a lawsuit brought by its insured against an uninsured motorist. Alfa filed a motion to opt-out two weeks before trial, citing Lowe v. Nationwide Insurance Co., 521 So. 2d 1309 (Ala. 1988). The trial court issued an order granting that motion, but it later vacated its order and required Alfa to continue participating in the case as a named defendant. Alfa requested mandamus review from the Supreme Court. The Court held that “[b]ecause Alfa has not established a clear legal right to intervene in the lawsuit and then opt out before trial, we deny Alfa’s petition. Ex parte Alfa Mut. Ins. Co. at *1.
IV. COURT’S ANALYSIS AND RATIONALE FOR HOLDING
The Court’s analysis is set out in full here:
Alfa asks this Court to “issue a writ allowing [it] to opt-out of participation of trial, and further allow [its] Counsel to defend [Saulsberry] at trial.” Alfa’s petition, p. 22. Because Alfa’s second request hinges on whether it may opt-out of the lawsuit,2 we first consider whether Alfa has met its burden of establishing a clear legal right to opt-out after intervening in the lawsuit. We hold that Alfa has not met its burden and, thus, deny the petition.
In Lowe, this Court addressed for the first time whether an insured motorist may file a claim against his or her liability provider in an underlying lawsuit against the negligent, underinsured motorist. This Court answered that question by establishing the following procedure:
“A plaintiff is allowed either to join as a party defendant his own liability insurer in a suit against the underinsured motorist or merely to give it notice of the filing of the action against the motorist and of the possibility of a claim under the underinsured motorist coverage at the conclusion of the trial. If the insurer is named as a party, it would have the right, within a reasonable time after service of process, to elect either to participate in the trial (in which case its identity and the reason for its being involved are proper information for the jury), or not to participate in the trial (in which case no mention of it or its potential involvement is permitted by the trial court). Under either election, the insurer would be bound by the factfinder’s decisions on the issues of liability and damages. If the insurer is not joined but merely is given notice of the filing of the action, it can decide either to intervene or to stay out of the case. The results of either choice parallel those set out above — where the insurer is joined as a party defendant. Whether the choice is timely made is left to the discretion of the trial court, to be judged according to the posture of the case.”
Lowe, 521 So. 2d at 1310.3
According to Alfa, this passage means that, once a nonparty insurer decides to intervene in a case, “Lowe would apply as if the insurer was originally named in the suit, meaning the insurer would still have the choice on whether to participate or not participate in the trial.” Alfa’s petition, pp. 12-13. Specifically, Alfa contends that, where Lowe stated that the “results of either choice parallel those set out above,” this Court was “referring to an insurance carrier’s right to eventually opt out of participation from trial.” Id., p. 15.
That interpretation of Lowe is wrong. The error seems to stem from a misreading of the following sentence in Lowe: “The results of either choice parallel those set out above — where the insurer is joined as a party defendant.” Lowe, 521 So. 2d at 1310. The “results” to which Lowe refers are whether the insurer’s identity will be made available to the fact-finder and the fact that the insurer will be bound by the factfinder’s findings on liability and damages regardless. See Ex parte State Farm Mut. Auto. Ins. Co., 674 So. 2d 75, 76 (Ala. 1995) (quoting Lowe and noting that, whether the insurer is named as a defendant or not, the insurer’s identity and role are available to the jury if the insurer decides to participate in trial). Thus, the word “results” does not refer to a defendant insurer’s option to opt-out.
*3 Examining the complete passage of Lowe makes this reading even clearer. In Lowe, this Court emphasized that a plaintiff, at the outset, may “either” name the insurer as a defendant “or” give the insurer notice of the filing of the lawsuit. Once the plaintiff makes that election, the ball is in the insurer’s court. If the insurer has been named as a defendant, the insurer can “either” participate in trial “or” not participate in trial (i.e., opt-out). In parallel fashion, if the insurer has not been named as a defendant but is given notice that the suit has been filed, the insurer can “either” intervene “or” stay out of the case. In or out — that is the only choice Lowe gives the insurer under either scenario. See Ex parte Aetna Cas. & Sur. Co., 708 So. 2d 156, 158 (Ala. 1998) (noting that defendant insurer’s attempt to reserve a right to opt-in after opting out was “inconsistent with the procedure set forth in Lowe“); Edgar, 543 So. 2d at 685 (stating that defendant insurer’s attempt to reserve the right to continue participating in discovery after opting out “is just the opposite of the procedure that was sanctioned in Lowe“). Lowe does not provide a nonparty insurer with another election once the insurer chooses to intervene — and Alfa does not convincingly point to any authority that says otherwise.4
In short, Alfa has not identified — and this Court is not aware of — any binding authority giving a nonparty insurer the right to intervene in an uninsured-motorist suit and then opt out before trial. Thus, Alfa has not shown that it has a clear legal right under Lowe to opt-out after intervening, and its petition must be denied. Because Alfa will remain a named defendant under the trial court’s order, its request to have its counsel represent Saulsberry moving forward is moot.
Ex parte Alfa Mut. Ins. Co., No. 1190117, 2020 WL 6372812, at *2–3 (Ala. Oct. 30, 2020).
Partner Jim L. Pattillo brings 20 years of litigation experience and has tried more than 70 trials to verdict. He focuses his practice on matters involving insurance coverage and bad faith liability, business and commercial litigation, professional and product litigation. Jim frequently assists in special investigations involving a variety of fraud involving insurance claims as well as vendor fraud and institutional fraud. He is a frequent speaker and writer in the areas of trial practice and technique, litigation management, and is a legal columnist for CLM Magazine.
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