USCA11 Case: 21-11009 Document: 30-1 Date Filed: 01/09/2023 Page: 1 of 15
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-11009
Non-Argument Calendar
____________________
ROBERT BARTON,
MINDY BARTON,
Plaintiffs-Appellants,
STACY ALLISTON DESIGN AND BUILDING, INC.,
Plaintiff,
versus
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY,
Defendant-Appellee.
____________________
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2 Opinion of the Court 21-11009
Appeal from the United States District Court
for the Northern District of Alabama
D.C. Docket No. 2:17-cv-00618-SLB
____________________
Before JORDAN, NEWSOM, and LUCK, Circuit Judges.
PER CURIAM:
Robert and Mindy Barton obtained a judgment against Stacy
Alliston Design and Building, Inc., the general contractor on their
house, and then sued Alliston’s insurer, Nationwide Mutual Fire
Insurance Company, to satisfy the judgment under Alabama’s di-
rect action statute. See
Ala. Code § 27-23-2. After a bench trial, the
district court found for Nationwide because estoppel could not cre-
ate coverage under Alabama law and the Bartons failed to establish
coverage. We affirm.
FACTUAL BACKGROUND
We divide our discussion of the facts into three sections.
First, we discuss the defective construction of the Bartons’ house.
Second, we relate the state court procedural history of the Bartons’
case against Alliston. Third, we describe Alliston’s commercial
general liability insurance policies with Nationwide.
The Defective Construction of the House
The Bartons contracted with Alliston to build a custom
house for almost $700,000. Alliston hired subcontractors to build
the house, some of whom did defective work. For example,
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21-11009 Opinion of the Court 3
subcontractors left holes in the roof and didn’t properly install win-
dows.
During their first year in the house, the Bartons noticed wa-
ter leaking from the roof and windows, among other problems.
The water rotted the roof and stained and cracked the house. Al-
liston told the Bartons that faulty flashing1 was probably responsi-
ble.
The Bartons hired Crown Construction Consulting to in-
spect their house. Crown identified construction defects in the roof
and around the windows, including problems that Alliston was
supposed to have solved. Crown also identified other problems
that the Bartons hadn’t known about before. And Crown pointed
out that water was leaking into electrical outlets and creating a fire
hazard.
In 2015, the Bartons hired Donnie Jones, a residential home-
builder, to provide an estimate to repair the house. Mr. Jones de-
termined that Alliston hadn’t properly installed flashing and house-
wrap 2 around the windows and that this defective installation
caused leaking, which rotted the house and weakened its structural
integrity. Mr. Jones estimated that repairs would cost around
$288,000.
1
In residential construction, flashing is material that prevents water from get-
ting into a house.
2
Like flashing, housewrap prevents water from entering a house.
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4 Opinion of the Court 21-11009
The State Court Proceedings
The Bartons brought negligence claims and wantonness
claims against Alliston in state court. The Bartons alleged that Al-
liston damaged their house by violating building codes and indus-
try standards when Alliston constructed and repaired the house and
by mismanaging the subcontractors. The Bartons sought damages
for the diminution in market value of the house, the cost of repair-
ing the house, and physical injury, mental anguish, and emotional
distress.
Nationwide initially provided for Alliston’s defense under its
policy but withdrew the defense in December 2012. In a joint state-
ment of undisputed facts filed in the district court, the Bartons and
Nationwide represented that, in the state court action, Nationwide
first “provided a defense to [Alliston] while reserving its rights to
review and withdraw coverage” and then “obtained a coverage
opinion from qualified counsel,” which led it to withdraw its de-
fense. Alliston did not retain its own defense counsel after Nation-
wide withdrew.
The Bartons moved for summary judgment on their negli-
gence and wantonness claims. As to negligence, the Bartons con-
tended that Alliston failed to use reasonable care in performing
contracted-for construction services. As to wantonness, they ar-
gued that Alliston knew that it was violating building codes and
thus knew that damages would likely result. The Bartons identified
damages involving flashing, housewrap, windows, roofing, and
more.
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To support summary judgment, Mr. Barton submitted a
five-paragraph affidavit stating that Alliston’s actions caused him
$450,000 in property damage, as well as the same amount in “phys-
ical injury in the form of emotional distress” because the damage
to his house caused him “stress and anxiety.” Mr. Barton based the
amount of property damage on conversations that he had with two
friends who worked in construction.
The state court granted summary judgment to the Bartons.
In a four-sentence order, the state court awarded the Bartons the
$900,000 they had sought. It said, without elaboration, that the
amount was “based on evidence submitted by [the Bartons] regard-
ing damages sustained to their home and emotional distress.”
The Insurance Policies
From December 2005 to March 2009, Alliston had four an-
nual policies of commercial general liability insurance with Nation-
wide. Each policy provided that Nationwide would pay what Al-
liston became legally obligated to pay as damages because of cov-
ered bodily injury or property damage. Under each policy, Alliston
had $2,000,000 in supplemental products-completed operations
coverage.
The policies covered only bodily injury or property damage
caused by an “occurrence” during the policy period. And they de-
fined “occurrence” to mean “an accident, including continuous or
repeated exposure to substantially the same general harmful con-
ditions.” The policies only covered occurrences discovered during
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6 Opinion of the Court 21-11009
the policy period, though they also covered a continuation, change,
or resumption of property damage that occurred during the policy
period.
The policies contained several exclusions. First, the policies
didn’t cover bodily injury and property damage that Alliston “ex-
pected or intended” to occur. Second, the policies contained broad
exclusions for bodily injury and property damage resulting from
fungi, including mold. And, third, the policies excluded “‘property
damage’ to ‘your work’ arising out of it or any part of it” provided
that the damage was “included in the ‘products-completed opera-
tions hazard.’
As to the “your work” exclusion, the policies defined “prod-
ucts-completed operations hazard” to include, subject to excep-
tions, “all ‘bodily injury’ and ‘property damage’ occurring away
from premises [Alliston] own[ed] or rent[ed] and arising out of
‘your product’ or ‘your work’” provided that the work was com-
pleted. The policies defined “your work” as (1) work performed by
Alliston or on its behalf and (2) materials, parts, or equipment pro-
vided in connection with this work. And they specified that “your
work” included warranties or representations about the quality of
“your work.”
Under the first two annual policies, the “your work” exclu-
sion didn’t apply to damages arising from work performed for Al-
liston by subcontractors. But, under the last two policies, the ex-
clusion applied to damages arising from subcontractor work.
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PROCEDURAL HISTORY
The Bartons sued Nationwide under Alabama’s direct action
statute, section 27-23-2, to satisfy their state court judgment against
Alliston. The Bartons alleged that they could stand in Alliston’s
shoes and assert a direct right of action against Nationwide because
they were third-party beneficiaries of Alliston’s policies with Na-
tionwide. 3
The district court held a bench trial on the Bartons’ direct
action claim. The Bartons testified on their own behalf and called
Mr. Jones as a witness. Nationwide called no witnesses. After the
Bartons rested their case, Nationwide moved for judgment as a
matter of law. In response to this motion, the district court asked
for proposed findings of fact and conclusions of law from the par-
ties.
Nationwide argued that the Bartons sought compensation
for defective work itself (not covered) rather than for damages
3
When an injured party obtains a judgment against an insured, Alabama’s di-
rect action statute entitles that injured party, as judgment creditor, to satisfy
the judgment by suing the insured’s insurer directly. See
Ala. Code § 27-23-2.
The statute “plainly limits recovery by the judgment creditor to . . . the insur-
ance money provided for in the contract of insurance between the insurer and
the [insured].” Dumas Bros. Mfg. Co. v. S. Guar. Ins. Co.,
431 So. 2d 534, 536
(Ala. 1983) (quotation omitted). The injured party “stands in the shoes of the
insured” and “is entitled to recover from [the insurer] only to the extent of [the
insured’s] coverage for the claims asserted.” Admiral Ins. Co. v. Price-Wil-
liams,
129 So. 3d 991, 997 (Ala. 2013) (emphasis omitted).
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8 Opinion of the Court 21-11009
resulting from that work (potentially covered), that the mold ex-
clusion applied, and that the last two policies didn’t cover damages
arising from subcontractor work. Nationwide also contended that
the district court was not bound by the state court judgment, which
was not supported by the evidence presented at trial, that the Bar-
tons presented insufficient evidence to establish their emotional
distress damages, and that repairs made to the house differed from
the damages about which Mr. Jones testified.
The Bartons argued that Nationwide was estopped from
contesting coverage because it withdrew its defense of Alliston in
the state court and failed to prove in the district court that it had
reserved its rights to contest coverage and because it violated its
enhanced duty of good faith by failing to prove that it fully in-
formed Alliston of the coverage disputes that Nationwide claimed
in the district court. The Bartons also contended that the instances
of water leaking into their house qualified as “accidents” and thus
“occurrences” under the policies, that the property damages re-
sulted from defective work and were thus covered, and that the
costs to remove defective work to replace and repair the damages
caused by that defective work were covered. And the Bartons
maintained that all the policies covered subcontractor work be-
cause Alliston bought products-completed operations coverage
and that the record supported the emotional distress award in the
state court judgment.
The district court entered judgment for Nationwide because
the Bartons “failed to show what, if any, damages Nationwide
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21-11009 Opinion of the Court 9
[wa]s required to indemnify” and thus failed to meet their burden
to prove coverage. As to estoppel, the district court explained that
“Alabama law d[id] not allow estoppel to create coverage—and,
thus, indemnification—under an insurance policy,” so the Bartons
could not “rely on estoppel to require Nationwide to indemnify
their damages against [Alliston] where the damages [we]re not cov-
ered.” The district court concluded that the Bartons had to prove
that Alliston’s policies with Nationwide covered the damages
awarded by the state court, and the Bartons failed to do so because
the state court awarded them damages in a nonspecific judgment
that could have been for wantonness (not covered) or negligence
(potentially covered), for defective construction (not covered) or
damages resulting from the defective construction (potentially cov-
ered), and for emotional distress based on mold (not covered) or
on other concerns (potentially covered). The Bartons established
that they “experienced some damage to their home that could be
covered by the Nationwide polic[ies] as resulting from faulty con-
struction,” the district court explained, but they did not meet “their
burden of proving that Nationwide [wa]s required to indemnify
any of the state court’s judgment because [they] failed to show the
amount of damages arising out of the covered injuries.” The dis-
trict court also explained that, although Mr. Jones testified about
the cost of repairing the water damage to the Bartons’ house, he
did not “offer insight into the portion of the state court judgment
related to covered occurrences” or “provide any information for
the state court proceedings underlying the Bartons’ claim.”
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STANDARD OF REVIEW
In an appeal from a judgment after a bench trial, we review
the district court’s conclusions of law and its application of the law
to the facts de novo. U.S. Commodity Futures Trading Comm’n
v. S. Tr. Metals, Inc.,
894 F.3d 1313, 1322 (11th Cir. 2018).
DISCUSSION
The Bartons contend that the district court should not have
allowed Nationwide to dispute coverage when Nationwide had not
proven a reservation of rights to do so and had violated its en-
hanced duty of good faith to Alliston. And the Bartons argue that
the district court erred in determining that their wantonness claims
barred indemnity for all their claims and damages. We disagree.
Estoppel
The Bartons assert that, because “Nationwide failed to sub-
mit any evidence—other than statements of counsel which are not
evidence—providing any reasons for withdrawing its defense of
[Alliston] in the [underlying] action,” and failed to show that it had
reserved its rights to dispute coverage, it was estopped from con-
testing coverage in this action. The Bartons argue that estoppel
can create coverage under Alabama law where, as here, the insurer
violates its enhanced duty of good faith to the insured. Nationwide
violated its duty, the Bartons say, because it didn’t prove that it no-
tified Alliston that Nationwide was disputing coverage. The
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Bartons maintain that they can seek estoppel because they stand in
Alliston’s shoes as judgment creditors.
The party seeking estoppel bears the burden of proving es-
toppel. See Gen. Am. Life Ins. Co. v. AmSouth Bank,
100 F.3d 893,
899 (11th Cir. 1996). Thus, the Bartons had the burden to prove
that Nationwide did not reserve its rights and that it violated its
enhanced duty of good faith to Alliston. See Shelby Steel Fabrica-
tors, Inc. v. United States Fid. & Guar. Ins. Co.,
569 So. 2d 309, 310,
312 (Ala. 1990).
The Bartons did not meet their burden. Although they com-
plain that Nationwide did not submit evidence that it reserved its
rights and fulfilled its enhanced duty of good faith, the Bartons also
didn’t submit any evidence to the contrary. And the burden was
theirs, not Nationwide’s.
In fact, the Bartons told the district court that it was undis-
puted that Nationwide reserved its rights to withdraw coverage in
the Bartons’ state court action against Alliston and that Nationwide
only withdrew Alliston’s defense in that action after qualified coun-
sel determined that there was no coverage under the policies. On
appeal, the Bartons seem to dismiss these representations as “state-
ments of counsel which are not evidence.” But this lack of evi-
dence does not help the Bartons. Instead, it means that they failed
to satisfy their burden.
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12 Opinion of the Court 21-11009
Because the Bartons did not meet their burden of proving
estoppel, the district court did not err in allowing Nationwide to
contest coverage.
Wantonness
The Bartons argue that the district court erred in concluding
that their wantonness claims barred them from recovery. They
contend that “there [wa]s absolutely zero record evidence—either
before the state court or the district court—tending to show that
[Alliston] acted intentionally or deliberately when its subcontrac-
tors improperly installed flashing on the home during construc-
tion.” The Bartons claim that the district court based its conclusion
on the state court pleadings rather than the evidence.
“[T]he party seeking coverage under [an insurance policy]
bears the burden of proving that coverage exists.” Pa. Nat’l Mut.
Cas. Ins. Co. v. St. Catherine of Siena Par.,
790 F.3d 1173, 1180 (11th
Cir. 2015). “When an insured causes multiple injuries, coverage is
determined on an injury-by-injury basis, and the insurer is obli-
gated only to indemnify for damages arising out of the covered in-
juries.”
Id. at 1178. When no jury verdict or final order or judg-
ment in the underlying action identifies the specific injuries for
which damages were awarded, “it is appropriate, under Alabama
law, to look to the record . . . in the underlying action to identify
the injuries for which the injured party sought damages.” See
id.
at 1180.
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A person is liable for wantonness under Alabama law where
“his knowledge of existing conditions and circumstances” makes
him “conscious that his conduct will probably result in injury” but
he acts (or fails to act) “with reckless indifference or disregard of
the natural or probable consequences” and causes the injury. Reed
v. Brunson,
527 So. 2d 102, 119 (Ala. 1988) (quotation omitted); ac-
cord Thermal Components v. Golden,
716 So. 2d 1166, 1168 n.2
(Ala. 1998) (“‘Wantonness’ is the conscious doing of some act or
the omission of some duty under knowledge of existing conditions
[while] conscious that from the doing of such act or omission of
such duty injury will likely or probably result.” (quotation omit-
ted)).
Here, the Bartons could recover from Nationwide only if Al-
liston could recover under the insurance policies. See Price-Wil-
liams, 129 So. 3d at 997. Alliston’s policies with Nationwide pro-
vided that Nationwide would “pay those sums” that Alliston be-
came “legally obligated to pay as damages because of ‘bodily in-
jury’ or ‘property damage’ to which th[e] insurance applie[d].” Ac-
cording to the policies, the insurance applied “only if . . . [t]he ‘bod-
ily injury’ or ‘property damage’ [wa]s caused by an ‘occurrence.’”
The policies defined an “occurrence” as “an accident.” Alliston’s
policies didn’t define “accident,” but in Alabama insurance law,
“[t]he term ‘accident’ has been variously defined as something un-
foreseen, unexpected, or unusual.” U.S. Fid. & Guar. Co. v. Bonitz
Insulation Co.,
424 So. 2d 569, 572 (Ala. 1982). “When the insured
makes an error in judgment but at all times act[s] in a deliberate
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14 Opinion of the Court 21-11009
and purposeful manner, its conduct does not constitute an accident
or occurrence.” St. Catherine of Siena Par., 790 F.3d at 1178 (quo-
tation omitted).
The state court granted summary judgment to the Bartons
in a brief order that did not specify any injuries. Thus, it was ap-
propriate for the district court to review the Bartons’ summary
judgment motion to determine the specific injuries for which they
were awarded damages so that the district court could determine
whether the injuries were covered under the policies. See id. at
1180. The Bartons moved for summary judgment as to both neg-
ligence and wantonness. The Bartons argued that Alliston’s
“knowing failure to construct [the Bartons’] home to applicable
code standards constitute[d] wantonness under Alabama law” be-
cause Alliston “knew it was not following applicable building
codes[] and therefore knew that damages were likely to result.”
The Bartons cited the deposition of Alliston’s corporate representa-
tive to support that Alliston knew that “it was ultimately responsi-
ble for the direction and supervision of all employees and subcon-
tractors who performed work on [the Bartons’] home” and “was
fully aware that it was not following the applicable building codes.”
The district court concluded that the Bartons’ wantonness
claims “alleged conscious acts with an expectation of causing in-
jury” and thus could not support coverage under the policies. On
appeal, the Bartons’ wantonness argument is only that no record
evidence showed that Alliston acted intentionally in its mismanage-
ment of its subcontractors. But, even if this is so, the Bartons also
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21-11009 Opinion of the Court 15
point to no evidence of the opposite (that is, that Alliston did not
act intentionally). The Bartons had the burden to establish that
coverage applied. See id. And coverage applied only if the dam-
ages resulted from an accident—from something unusual that Al-
liston didn’t foresee or expect, see Bonitz Insulation Co.,
424 So. 2d
at 572—and not from something that Alliston was “fully aware”
was “likely to result.”
Like the district court, we cannot determine how much the
state court awarded the Bartons damages for Alliston’s negligence
(potentially covered) versus its wantonness (not covered). Because
the Bartons did not satisfy their burden to establish coverage, the
district court did not err when it entered judgment for Nationwide.
See Ala. Hosp. Ass’n Tr. v. Mut. Assurance Soc’y,
538 So. 2d 1209,
1216 (Ala. 1989) (explaining that, because the person seeking cov-
erage had the burden of proof, “the trial court correctly resolved
[the coverage] issue against [that person]” when the potential bases
for the judgment in the underlying action included grounds cov-
ered and not covered under the policy and it was “impossible” to
determine which of the grounds supported the jury’s finding of li-
ability).
CONCLUSION
Because the Bartons did not meet their burdens of proving
estoppel or coverage, the district court did not err in finding for
Nationwide.
AFFIRMED.
