JAMES RIVER INSURANCE COMPANY

v.

ULTRATEC SPECIAL EFFECTS INC

20-11568 Opinion of the Court 3 Before JILL PRYOR, LUCK, and BRASHER, Circuit Judges. JILL PRYOR, Circuit Judge: Coleen McKenna Whorton, Aimee Cothran, and Virginia Marie Sanderson suffered catastrophic injuries from a pyrotechnic explosion at their workplace. Cothran and Sanderson died of their injuries. Their representatives and Whorton (the "Employees") sued their employer, Ultratec Special Effects HSV, Inc. (“Ultratec HSV"), its parent company, Ultratec Special Effects, Inc. (“Ultratec"), Ultratec's employee, Mike Thouin, and an associated business called MST Properties, LLC (“MST”). The Ultratec entities' insurer, James River Insurance Company, then filed this declaratory judgment action, asking the district court to determine the scope of James River's obligations, if any, to defend and indemnify the claims in the underlying lawsuit. The parties filed cross-motions for summary judgment, and the district court stayed the duty to indemnify claim and granted summary judgment in Ultratec's favor on the duty to defend claim, concluding that James River had a duty to defend Ultratec, as well as Thouin, and MST. James River appealed. After careful review, and with the benefit of oral argument, we affirm.

I. BACKGROUND

Ultratec HSV and Ultratec operate the Alabama pyrotechnics plant that was the site of the catastrophic explosion that killed two of the Employees and severely injured the third. The

20-11568 Opinion of the Court 5 The Policy provided commercial liability coverage for certain claims involving an occurrence of bodily injury. The Policy limited coverage through an "Employer's Liability Exclusion" (the "Exclusion"). The Exclusion read: "This insurance does not apply to any claim, suit, cost or expense arising out of 'bodily injury' to . . . [a]ny employee of any Insured arising out of and in the course of . . . [e]mployment by any insured[] or . . . [p]erforming duties related to the conduct of any insured's business.” Doc. 1-4 at 66.[fn 3] The parties agree the Exclusion means that the Policy does not cover the Employees' claims against Ultratec HSV. They disagree about whether the Exclusion excludes coverage for the Employees' claims against the Insureds. The Policy also contained a separation of insureds provision. Such provisions are also known as severability of interests provisions or severability clauses. The provision at issue in this case (the "Separation of Insureds Provision") stated: "[T]his insurance applies . . . [a]s if each Named Insured were the only Named Insured; and . . . [s]eparately to each insured against whom claim is made or 'suit' is brought.” Id. at 17. This case turns on the interpretation of these two provisions, the Exclusion and the Separation of Insureds Provision. James River, naming the Insureds and the Employees as defendants, sought a declaratory judgment that it had neither a duty

II. STANDARD OF REVIEW

We review de novo a district court's rulings on cross-motions for summary judgment, and we view the facts in the light most favorable to the nonmoving party on each motion. Chavez v. Mercantil Commercebank, N.A., 701 F. 3d 896, 899 (11th Cir. 2012). Summary judgment is appropriate when a movant shows that there is "no genuine dispute as to any material fact," such that "the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). "Once the movant adequately supports its motion, the burden shifts to the nonmoving party to show that specific facts exist that raise a genuine issue for trial.” Dietz v. Smithkline Beecham

20-11568 Opinion of the Court 7 Corp., 598 F. 3d 812, 815 (11th Cir. 2010). If the nonmovant's evidence is "not significantly probative,” summary judgment is appropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). A genuine dispute of material fact exists only when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. at 248. “The mere existence of a scintilla of evidence in support of the [nonmovant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmovant].” Id. at 252.

III. DISCUSSION

The parties do not contest our jurisdiction, but because we have an independent duty to ensure that we have jurisdiction, we begin our discussion with an examination of the basis for our jurisdiction over this interlocutory appeal from a declaratory judgment. Then we address the merits of whether James River has a duty to defend. We review Alabama's contract interpretation principles and case law before applying that law to the insurance policy before us.[fn⁴] After doing so, we affirm the district court's grant of summary judgment to the Defendants in the declaratory judgment action and hold that James River has a duty to defend the Insureds: Ultratec, MST, and Thouin.

A. We Have Jurisdiction over This Appeal Despite Its Lack of

Finality Because of Its Injunctive Qualities. We are obligated to review sua sponte whether we have jurisdiction. Thomas v. Blue Cross & Blue Shield Assʼn, 594 F. 3d 814, 818 (11th Cir. 2010). We do so now. The order before us on appeal is nonfinal and interlocutory because James River's request for a declaratory judgment on the duty to indemnify remains pending before the district court. Ordinarily, we have jurisdiction only over final decisions, those that "end[] the litigation on the merits and leave[] nothing for the court to do but execute the judgment.” Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712 (1996) (internal quotation marks omitted); 28 U.S.C. § 1291. But insurers often seek declaratory judgments on their duty to defend and their duty to indemnify at the same time, before the duty to indemnify becomes ripe. See, e.g., Hartford Cas. Ins. Co. v. Merch. & Farmers Bank, 928 So. 2d 1006, 1013 (Ala. 2005).[fn 5] Recognizing that the duty to indemnify cannot be

20-11568 Opinion of the Court 9 determined at a “preliminary stage in the proceedings," district courts in our circuit have declined to address the duty to indemnify when determining whether there is a duty to defend. Pa. Nat'l Mut. Cas. Ins. Co. v. Hethcoat & Davis, Inc., 339 F. Supp. 3d 1248, 1256– 58 (N.D. Ala. 2017). Here, the district court stayed its decision on the duty to indemnify and addressed only the duty to defend. Thus, we must determine whether we have jurisdiction to review this nonfinal order. We have jurisdiction to review nonfinal orders in certain circumstances, including, as relevant here, when the nonfinal order grants an injunction. 28 U.S.C. § 1292(a)(1). We may review orders that do not expressly grant injunctions when they have certain qualities of injunctions that make them immediately appealablefor example, when the order is directed to a party, is enforceable by contempt, and provides relief on the merits.¹⁶ Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc. § 3922 (3d ed. 1977).

20-11568 Opinion of the Court 11 order declaring that the Insureds have a right to be defended by James River, the district court made the declaratory judgment akin to an injunction.[fn 7] See Wright & Miller, Fed. Prac. & Proc. § 3922. We therefore have jurisdiction to entertain this appeal from the order on the duty to defend even though it does not provide complete relief because the duty to indemnify claim remains pending before the district court.

B. James River Has a Duty to Defend Under the Policy Because

the Exclusion Is Ambiguous. The Employer's Liability Exclusion in the Policy excluded coverage for "any claim, suit, cost or expense arising out of bodily injury' to . . . [a]ny employee of any Insured arising out of and in the course of . . . [e]mployment by any insured[] or . . . [p]erforming duties related to the conduct of any insured's business.” Doc. 1-4 at 66 (emphasis added). James River argues that the Exclusion unambiguously applies equally to all the insureds—Ultratec HSV, Ultratec, MST, and Thouin. Because the Employees' claims arose out of bodily injury they suffered while employed by one of the insureds ("any Insured"), James River argues, none of the Employees

20-11568 Opinion of the Court 13 We now turn to Alabama caselaw to interpret the Policy.

1. Principles of Alabama Law Regarding Ambiguity in the

Interpretation of Insurance Contracts Alabama caselaw obliges us to conclude that James River has a duty to defend the Insureds. Insurance policies are contracts, and "like other cont[r]acts, [they are] governed by the general rules of contracts.” Twin City Fire Ins. Co. v. Alfa Mut. Ins. Co., 817 So. 2d 687, 691 (Ala. 2001). Courts must construe them to give effect to the intention of the parties. Id. To glean the parties’ intent, we examine “more than an isolated sentence or term”; instead, we “read each phrase in the context of all other provisions.” Id. (internal quotation marks omitted). If a policy’s terms are unambiguous, the court must enforce the policy as written. Johnson v. Allstate Ins. Co., 505 So. 2d 362, 365 (Ala. 1987). But when there is doubt about whether the policy provides coverage, we must construe the policy language for the benefit of the insured. St. Paul Mercury Ins. Co. v. Chilton–Shelby Mental Health Ctr., 595 So. 2d 1375, 1377 (Ala. 1992). A policy term is ambiguous only if, when applying the term’s ordinary meaning, it is reasonably susceptible to different constructions. Safeway Ins. Co. of Ala. v. Herrera, 912 So. 2d 1140, 1144 (Ala. 2005). In determining whether a term is ambiguous, we cannot consider the term in isolation; we must consider the policy as a whole. State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 309 (Ala. 1999).

20-11568 Opinion of the Court 15 the Exclusion, we conclude that the Exclusion is ambiguous and therefore must be construed in favor of the insured. 2. The Exclusion’s “Any Insured” Language Is Ambiguous. The Alabama Supreme Court’s Wyatt and Wilson decisions held that the phrase “any insured” was ambiguous when used in an employer’s liability exclusion. Wyatt was injured in the scope of his employment and sued his employer and its executive officers for his injuries. Wyatt, 417 So. 2d at 568. The employer corporation and the officers were insured by the same commercial general liability policy, which included an employer’s liability exclusion that read: “This insurance does not apply . . . [t]o any OCCURRENCE which caused BODILY INJURY to any employee of any INSURED arising out of or in the course of his employment by any INSURED.” Id. at 569 (emphases added). The policy defined both the corporation and its officers as insureds. Id. at 568. The parties agreed that Wyatt was an employee of the corporation but not of the officers. Id. at 570. When the officers demanded that the insurer defend them against Wyatt’s lawsuit, the insurer denied coverage. Id. at 568–69. It filed a declaratory judgment action in which it argued that “any insured” as used in the exclusion unambiguously meant that the policy covered claims against neither the corporation nor its officers when an employee was injured while working for the corporation, and thus the insurer had no duty to defend against Wyatt’s claims. Id. at 570. The trial court disagreed and concluded that “the term ‘any INSURED’ is ambiguous on its face” because it could refer to “any

20-11568 Opinion of the Court 17 Wilson found ambiguity in employer’s liability exclusions that included the term “any insured” when injured employees sued an insured who was not their employer. Wilson, 540 So. 2d at 751; Wyatt, 417 So. 2d at 572. In this case, the same ambiguity exists because the Employees sued insureds who were not their employer.[fn 9] According to Wyatt, “any insured” can be interpreted singularly as “any one of the insureds,” or collectively as “the whole group of insureds.” See Wyatt, 417 So. 2d at 571. Reading “any insured” singularly means that the Policy does not cover any claim arising out of bodily injury to any employees of Ultratec arising out of their employment with Ultratec. The Employees were not employed by Ultratec, so the Exclusion does not bar coverage for their claims against Ultratec for employment-related bodily injury. Under this reading, James River would have a duty to defend Ultratec. Reading “any insured” collectively produces the opposite result: the Policy excludes coverage for any claim for bodily injury to any employees of any of the four insureds, Ultratec, Ultratec HSV, MST, or Thouin, arising out of the course of their employment. Because the Employees were employed by one of those insureds, the Exclusion applies to their claims against all the insureds. Under this reading, James River would have no duty to defend.

20-11568 Opinion of the Court 19

3. The Separation of Insureds Provision Adds Ambigu-

ity. Regardless of whether the Exclusion taken on its own is ambiguous, we agree with the district court that the Exclusion does not unambiguously apply when we interpret it in conjunction with the Separation of Insureds Provision, also known as a severability of interests provision. James River argues that we should not read the provisions together. The district court disagreed, concluding that the Alabama Supreme Court's McCormick and Wyatt decisions required it to read the Policy and Exclusion as if each Insured had its own, separate policy. Based on this reading, the court determined that the Exclusion did not exclude coverage, and therefore James River had a duty to defend the Insureds. We agree. McCormick established that Alabama courts read employer's liability exclusions and severability of interests provisions together.[fn 11] In that case, as in this one, injured employees sued a

20-11568 Opinion of the Court 21 coverage.” Id. Applying Alabama law, we, too, read the provisions together. The Separation of Insureds Provision in the Policy is similar to the severability of interests provision in McCormick. It reads: “[T]his insurance applies . . . [a]s if each Named Insured were the only Named Insured; and . . . [s]eparately to each insured against whom claim is made or ‘suit’ is brought.” Doc. 1-4 at 17. As with the policies in the cases discussed above, this means that each named insured has a separate insurance policy; one insured’s conduct will not affect another insured’s coverage. Thus, we read the Policy as if it applies separately to Ultratec HSV, Ultratec, MST, and Thouin—as if each one is the only named insured. Applying this reading to the Exclusion, we conclude that the Policy does not apply to bodily injury to an employee of Ultratec arising out of and in the course of employment by Ultratec. But the Exclusion does not exclude coverage for Ultratec in this case because the Employees were not Ultratec’s employees. James River therefore has a duty to defend Ultratec. Substituting Thouin or MST for Ultratec leads to the same conclusion: James River has a duty to defend them.

IV. CONCLUSION

For the foregoing reasons, we affirm the district court’s order granting summary judgment in part in favor of the Defendants and holding that James River has a duty to defend the Insureds: Ultratec, MST, and Thouin.

AFFIRMED.

[fn 1]: Ultratec has argued in state court that it and Ultratec HSV are a “single employer group" for workers' compensation purposes. Ex parte Ultratec Special Effects, Inc., 296 So. 3d 801, 805 (Ala. 2019). The state court found that there was an "abundance of disputed facts” as to whether they are separate entities and denied Ultratec's petition for immunity under the Workers' Compensation Act. Id. at 813. [fn²]: The parties dispute whether MST is an additional insured under the Policy, but this issue is not before us on appeal. Relevant on appeal is that fact that James River is defending MST in the underlying action under a reservation of rights and named it as a defendant here. [fn 3]: "Doc." numbers refer to district court docket entries. [fn⁴]: There is no dispute that Alabama law governs our interpretation of the insurance contract in this case. Although James River argued below that Ohio law applied, it now looks to Alabama law and thus has waived any argument that another state's law applies. [fn 5]: The duty to defend—to pay the insured's litigation costs in the underlying action—is broader than the duty to indemnify—to cover the damages ultimately awarded against the insured. See Ladner & Co. v. S. Guar. Ins. Co., 347 So. 2d 100, 102 (Ala. 1977). Under Alabama law, the duty to defend is determined primarily on the allegations in the complaint in the underlying action against the insured. Hartford Cas. Ins. Co., 928 So. 2d at 1009. But often a court can only determine whether there is coverage under the insurance policy— and thus a duty to indemnify-based on facts adduced at the trial of the underlying action. Id. at 1013. And there will be nothing to indemnify unless and until damages are assessed against the insured in that action. See Ladner, 347 So. 2d at 104 (declining to decide whether the insurer had a duty to indemnify because the plaintiffs in the underlying lawsuit could change the theory of liability and obtain judgment on a claim covered by the policy). [fn⁶]: District courts in our circuit have withheld ruling on the duty to indemnify in different ways. See, e.g., Am. Nat'l Prop. & Cas. Co. v. Gulf Coast Aerial, LLC, 533 F. Supp. 3d 1110, 1113 (S.D. Ala. 2021) (staying decision on the duty to indemnify claim); Auto-Owners Ins. Co. v. Toole, 947 F. Supp. 1557, 1565– 67 (M.D. Ala. 1996) (dismissing without prejudice the duty to indemnify claim); Guar. Nat'l Ins. Co. v. Beeline Stores, Inc., 945 F. Supp. 1510, 1514–16 (M.D. Ala. 1996) (denying without prejudice the duty to indemnify claim). [fn 7]: James River points out that the order is not expressly enforceable by contempt; however, Wright & Miller sets out examples of characteristics that indicate injunctive qualities rather than absolute requirements. See Wright & Miller, Fed. Prac. & Proc. § 3922. And we doubt that, should James River fail to comply with the order by not paying defense costs, there would be no consequences. Indeed, in that event James River likely would be subject to contempt proceedings, as the parties acknowledged during oral argument. [fn⁸]: Wilson interpreted an exclusion that used the phrase “an insured.” Wilson, 540 So. 2d at 750–51 (emphasis added). But because “an insured' unambiguously means 'any insured,” according to the Alabama Supreme Court, we equate Wilson's interpretation of “an insured” with Wyatt's interpretation of "any insured." See State Farm Fire & Cas. Co. v. Davis, 612 So. 2d 458, 466 (Ala. 1993) (internal quotation marks omitted). [fn 9]: It is undisputed that the Exclusion excludes coverage under the Policy for the Employees’ claims against their employer, Ultratec HSV, and therefore James River has no duty to defend Ultratec HSV. [fn¹⁰]: We are bound by the decisions of the Alabama Supreme Court on questions of Alabama law. See Gonzalez v. Governor of Ga., 978 F. 3d 1266, 1271 (11th Cir. 2020) (citing 28 U.S.C. § 1652). [fn 11]: James River contends that the district court erred in assuming Alabama would follow the minority rule for interpreting a severability of interests provision and an exclusion excluding coverage for “any insured.” True, most courts that have addressed the issue have concluded that a separation of insureds provision in a general policy does not nullify an exclusion's “any insured" language contained in an endorsement that changes the general policy. See Doc. 169 at 17 n.17 (collecting cases). But other courts have concluded otherwise, holding that a separation of insureds provision requires the whole policy, including exclusions and other endorsements, to be read as if each individual seeking coverage is the only insured. See id. at 17–18. The Alabama