Appellate Law

Court of Civil Appeals Dismisses Appeal as Moot

In Colony Insurance Co. v. Alabama Heat Exchangers, Inc., No. 2071037, the Alabama Court of Civil Appeals held that a settlement agreement between two of the parties which resolved the coverage issues which had existed in the case mooted the appeal.  

There were three parties involved in Colony: Olin, AHE and One Beacon.  The basic dispute was between Olin and AHE and entailed allegations of negligent manufacture against AHE.  Olin also alleged that One Beacon had inspected AHE's product and certified that it complied with all applicable national standards.  Against AHE, Olin asserted claims based on that allegedly negligent inspection.  This core action was pending in Washington County Circuit Court. 

During the relevant time period, AHE was insured under a commercial general liability policy issued by Colony.  In Mobile Circuit Court, Colony filed a declaratory judgment action naming Olin, AHE, and One Beacon as defendants and seeking a declaration of rights and liabilities under the policy, specifically whether it had an obligation to indemnify AHE against the claims asserted by Olin by AHE in the Washington Country case.   One Beacon was ultimately dismissed from this case and the court entered a judgment declaring that Colony was required to defend and indemnify Olin in the underlying action.  That order was appealed.

While that appeal was pending, One Beacon filed a cross claim against AHE in the Washington county case, asserting that it was entitled to indemnification from AHE for any liability imposed upon One Beacon as a result of Olin's claims.  

On October 15, 2008, Olin moved to be dismissed as a party to the appeal, asserting that it had settled its claims against AHE and OneBeacon and that Colony had made a substantial contribution to the settlement of those claims.  Olin also asserted that the Washington County court had dismissed with prejudice all of Olin's claims against AHE and One Beacon in the underlying action.  

The Court of Civil Appeals dismissed Olin from the appeal, but Colony asserted that the coverage issues raised on appeal were not moot because One Beacon had filed a cross claim against AHE in the underlying action.  According to Colony, a justiciable controversy remained pending in the underlying action that was directly affected by the erroneous ruling of the Mobile Circuit Court on the coverage question. AHE filed its own motion to dismiss, arguing that the appeal was moot. 

The court reasonsed that there was no longer a justiciable controversy between colony and AHE.  The coverage dispute between Colony and AHE, as presented to the Mobile Circuit Court, was rendered moot when Colony accepted responsibility for and entered into the unconditional settlement of Olin's claims against AHE.  Whether the Mobile Court correctly decided that Colony had a duty to defend and indemnify AHE against Olin's claims was the very issue raised by Colony on appeal; the settlement in the underlying action rendered a decision by the Court of Civil Appeals as to that issue unnecessary. 

The court also rejected the argument taht the cross-claim asserted by One Beacon presented a justiciable controversy and saved the appeal from mootness.  The court concluded that Colony has appealed from a judgment in which the Mobile Circuit Court determined the rights and liabilities of Colony, AHE, and Olin under the general commercial liability policy.  That judgment, however, did not purport to consider and determine Colony's rights and liabilities as to the claim asserted by One Beacon against AHE after the appeal was initiated.

However, "appeal will lie only from a final judgment which determines the issues before the court and ascertains and declares the rights of the parties involved."  As the judgment from which Colony appealed did not purport to address Colony's obligation to defend and indemnify AHE against One Beacon's claim, that issue was not before the Court and the appeal was due to be dismissed.

Full post as published by Alabama Appellate Watch on May 06, 2009 (boomark / email).