[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
JANUARY 9, 2007
No. 06-11155
THOMAS K. KAHN
CLERK
D. C. Docket Nos. 03-01101-CV-D-N
03-01102-CV-D-N
2:03-CV-01101
MILDRED LEMUEL,
Individually and as Administratrix of
the Estate of Darnell Eugene Lemuel, deceased,
Plaintiff-Defendant-Appellee,
versus
LIFESTAR RESPONSE OF ALABAMA, INC.,
d.b.a. Care Ambulance Service,
Defendant-Counter-Claimant-
Third Party-Plaintiff-Appellant.
__________________________________________________________________
2:03-CV-01102
ADMIRAL INSURANCE COMPANY,
Plaintiff-Appellee,
versus
MILDRED LEMUEL,
Individually and as Administratrix of
the Estate of Darnell Eugene Lemuel, deceased,
Defendant-Appellee,
LIFESTAR RESPONSE OF ALABAMA, INC.
d.b.a. Care Ambulance Service,
Defendant-Appellant.
Appeal from the United States District Court
for the Middle District of Alabama
(January 9, 2007)
Before DUBINA and WILSON, Circuit Judges, and CORRIGAN,* District Judge.
PER CURIAM:
In this appeal, the Admiral Insurance Company (“Admiral”) seeks to avoid
coverage on a default judgment entered against its insured, Lifestar Response of
Alabama, Inc. (“Lifestar”), on the ground that Lifestar failed to comply with the
policy’s notice provision. We must consider whether to give preclusive effect to a
prior state court’s determination as to when Lifestar received actual notice of the
_____________________
*Honorable Timothy J. Corrigan, United States District Judge for the Middle District of Florida,
sitting by designation.
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underlying claim. Furthermore, we must also consider whether Lifestar’s delay in
notifying Admiral of the claim was unreasonable as a matter of law so as to
preclude coverage under the policy. After a thorough review of the record and
with the benefit of the parties' briefs and oral arguments, we conclude that res
judicata applies and that Lifestar’s delay in notifying Admiral was unreasonable
as a matter of law. For these reasons, we affirm the district court's grant of
summary judgment.
I. BACKGROUND
In November of 1998, Lifestar purchased all the assets of Care Ambulance
Service of Alabama, Inc. (“Care”). However, after the acquisition, Lifestar
continued to operate ambulances and advertise in Care’s name. In November of
2000, Darnell Eugene Lemuel died after being transported to the hospital in a
Lifestar ambulance operating under the trade name Care. Mr. Lemuel’s widow,
Mildred Lemuel, filed a wrongful death action in an Alabama state circuit court
naming Care, instead of Lifestar, as the defendant. On January 7, 2003, Mrs.
Lemuel served personal process on Lifestar’s human resource manager at the
Montgomery, Alabama, office building shared by Care and Lifestar. Lifestar
failed to respond to the complaint, and Mrs. Lemuel filed an application for
default judgment. The state circuit court scheduled a hearing, and notice was sent
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to Lifestar’s place of business. Lifestar did not appear, and the state circuit court
entered a default judgment against Care awarding Mrs. Lemuel $5,000,000 in
punitive damages. It is undisputed that Lifestar did not notify Admiral of the suit
until June of 2003, after the state circuit court entered the default judgment against
Care.
On June 9, 2003, Mrs. Lemuel filed a motion in the state circuit court to
reflect that the judgment should also operate against “Lifestar Response Corp. of
Alabama, d/b/a Care Ambulance.” Shortly thereafter, attorneys filed notices of
appearance on behalf of both Care and Lifestar. On June 23, 2003, Mrs. Lemuel
moved to amend the judgment to substitute Lifestar for Care. On July 18, 2003,
Care and Lifestar moved to set aside the default judgment and objected to Mrs.
Lemuel’s motion to amend the judgment. The state circuit court convened a
hearing on the motions at which both Care and Lifestar were represented by
counsel. Lifestar argued that due to the mistaken identification of Care as the
defendant, it was not put on notice of the complaint. The state circuit court
rejected this argument and held that Lifestar received actual notice that a claim
had been filed for the negligence of its employees upon the personal service of
Lifestar’s representative at its place of business. According to the court, Lifestar’s
failure to appear and defend was the result of its own culpable conduct in
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knowingly and intentionally disregarding the notice of both the summons and
complaint and the notification of the default judgment hearing. In a published
opinion, the Supreme Court of Alabama affirmed the judgment of the state circuit
court. See Lifestar Response of Ala., Inc. v. Lemuel, 908 So. 2d 207 (Ala. 2004).
Mrs. Lemuel instituted garnishment proceedings against Admiral to collect
on the judgment. Admiral removed the action to federal court and filed an
additional action seeking a declaration that it was not liable to Lifestar under the
terms of its policy. Admiral claimed that Lifestar failed to comply with the notice
provision under the policy. The provision required, as a condition precedent to
coverage, that Lifestar give Admiral notice of any claim or lawsuit made against it
“as soon as practicable” and “immediately” forward any summons or lawsuit
papers it received.
The district court held that under the doctrine of res judicata, the issue of
when Lifestar received actual notice of Mrs. Lemuel’s claim had already been
decided by the state circuit court and affirmed on appeal by the Alabama Supreme
Court. The district court then held that since Lifestar had actual notice of the
claim on January 7, 2003, its failure to notify Admiral of the claim until after the
court had entered a default judgment was unreasonable as a matter of law.
Consequently, the district court granted summary judgment for Admiral and
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declared that Admiral was not obligated to indemnify Lifestar or pay any portion
of the $5,000,000 default judgment in the Lemuel lawsuit.1 Lifestar now
challenges the district court’s application of res judicata as well as its conclusion
that Lifestar’s late notice to Admiral precluded coverage under the policy.2
II. STANDARDS OF REVIEW
This court reviews a grant of summary judgment de novo, drawing all
reasonable inferences in favor of the nonmoving party. Fin. Sec. Assurance, Inc.
v. Stephens, Inc., 450 F.3d 1257, 1269 (11th Cir. 2006). Summary judgment is
appropriate when “there is no genuine issue as to any material fact and the moving
party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). “We also
review de novo a district court’s determination of res judicata.” E.E.O.C. v.
Pemco Aeroplex, Inc., 383 F.3d 1280, 1285 (11th Cir. 2004).
1
The parties argued in the district court whether Alabama or New York law governs the
dispute, but do not challenge the district court’s determination that no conflict exists between the two
bodies of law. When there is no conflict in the governing bodies of law, the court need not
determine which state’s law governs. See Scott v. Prudential Sec. Inc, 141 F.3d 1007, 1012 (11th
Cir. 1998).
2
We conclude that Lifestar’s estoppel argument is without merit. Lifestar argues that
Admiral acknowledged, appeared, and defended against Mrs. Lemuel’s claim, and as a result, should
be estopped from denying coverage. However, an insurer’s defense of an insured does not preclude
the insurer from later disclaiming coverage if the insurer adequately reserves its right to do so. See
Burt Rigid Box, Inc. v. Travelers Prop. Cas. Corp., 302 F.3d 83, 95 (2d Cir. 2002) (applying New
York law); Home Indem. Co. v. Reed Equip. Co., Inc., 381 So. 2d 45, 52 (Ala. 1980). It is
undisputed that Admiral reserved its rights on three separate occasions. Therefore, Lifestar’s
estoppel argument fails.
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III. DISCUSSION
The preclusive effect of the state court’s decision in this diversity case is
governed by Alabama law. See Wesch v. Folsom, 6 F.3d 1465, 1471 (11th Cir.
1993) (holding that federal courts apply the law of the state in which they sit with
respect to the doctrine of res judicata). “Under Alabama law, the essential
elements of res judicata are (1) a prior judgment on the merits, (2) rendered by a
court of competent jurisdiction, (3) with substantial identity of the parties, and (4)
with the same cause of action presented in both suits.” Id. (italics added). “If
these elements are present, then any issue that was, or could have been,
adjudicated in the prior action cannot be litigated in a subsequent action.” Waters
v. Jolly, 582 So. 2d 1048, 1053 (Ala. 1991).
Lifestar argues that res judicata does not apply because the state court did
not render a prior judgment on the merits, and a different cause of action is
presented in the declaratory judgment suit. However, we conclude that because
the precise issue in the present litigation was decided in a manner subject to
appeal, and in fact affirmed on appeal, there was a prior judgment on the merits.
See Walker v. Blackwell, 800 So. 2d 582, 587 (Ala. 2001) (holding that a motion
to vacate default judgment was barred by res judicata where the movant’s prior
motion to vacate judgment was denied on merits after consideration of arguments
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of both parties). Furthermore, although Alabama law is unsettled on whether res
judicata encompasses both claim and issue preclusion, we conclude from the
record that the same cause of action, as defined by the Alabama Supreme Court,
was presented in both suits.
In assessing whether the same cause of action is presented, “the
determinative inquiry is whether the claims in both actions arise out of, and are
subject to proof by, the same evidence.” Equity Res. Mgmt., Inc. v. Vinson, 723
So. 2d 634, 637 (Ala. 1998); see also Waters, 582 So. 2d at 1053 (noting that the
same cause of action exists when the same evidence is applicable in both actions).
Here, the same evidence was relevant in both suits: evidence proving (1) when
Lifestar received notice and (2) Lifestar’s justification for failing to act upon
receiving notice. Therefore, the district court properly held that both suits
presented the same cause of action. The four elements of res judicata were
therefore fulfilled, and the state circuit court’s decision as to when Lifestar
received actual notice of Mrs. Lemuel’s claim was properly precluded from
relitigation.
By virtue of res judicata, we are bound by the state court’s finding that
Lifestar received actual notice of Mrs. Lemuel’s claim on January 7, 2003. This
determination disposes of Lifestar’s only excuse, that it lacked notice of the claim
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until June of 2003. The length of the delay and the reason for the delay are the
only two factors for the court to examine in making its reasonableness
determination. S. Guar. Ins. Co. v. Thomas, 334 So. 2d 879, 883 (Ala. 1976); Sec.
Mut. Ins. Co. of New York v. Acker-Fitzsimons Corp., 293 N.E.2d 76, 78-79 (N.Y.
1972). Therefore, the district court correctly held that Lifestar’s unexcused failure
to notify Admiral of Mrs. Lemuel’s claim until June of 2003 was unreasonable as
a matter of law. See Thomas, 334 So. 2d at 885 (applying Alabama law and
holding that in the absence of a reasonable excuse, insured’s six-month delay in
notifying insurer was unreasonable as a matter of law); Utica Mut. Ins. Co. v.
Fireman's Fund Ins. Companies, 748 F.2d 118 (2d Cir. 1984) (applying New York
law and holding that insured’s unexcused six-month delay was unreasonable as a
matter of law).
IV. CONCLUSION
For the above-stated reasons, we affirm the district court’s grant of
summary judgment.
AFFIRMED.
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