COMMERCIAL GENERAL LIABILITY ASSET SEIZURE DEEMED INTENTIONAL, NOT ACCIDENTAL, RESULTING IN NO COVERAGE

Commercial General Liability	Occurrence
Accident

Merchants & Farmers Bank (Merchant) obtained a security interest in Bridge's Warehouse Furniture’s inventory and equipment and all revenue from the sale of the inventory because of a loan agreement between the two of them. Bridges defaulted on its debt to Merchants. Merchants discovered that Bridges had entered into an agreement with a third-party furniture retailer, Barnett & Brown, Inc. (Barnett). Barnett placed its inventory in Bridges' store as part of a liquidation sale. Merchants found that Barnett had not filed a financing statement concerning property placed in Bridges' store as required by the Uniform Commercial Code so that Barnett had not secured its interest in the inventory. Merchants' lawyers therefore concluded that Barnett's furniture located in Bridges' store was for sale under consignment and that Merchants had a security interest superior to Barnett's in that property and in the proceeds from the sale of it. Merchants notified Barnett of its position by letter. Before they could act, Barnett sued both Merchants and Bridges.

Barnett alleged that Merchants improperly seized Barnett's merchandise and money and breached a duty owed to Barnett. Merchants turned to its commercial general liability insurer, Hartford Casualty Insurance Company (Hartford) for defense of Barnett's action and indemnification if required. Hartford denied the claim and said the allegations did not meet the policy definition of an occurrence, bodily injury or property damage. Merchants filed a declaratory-judgment action against Hartford and named Barnett as a defendant.

The trial court concluded that Merchant's actions constituted an occurrence without specific intent to cause damage to Barnett. It found no policy exclusions that would apply and declared that Hartford was obligated to defend and potentially indemnify Merchants. Hartford appealed and argued that nothing in the case was an occurrence within the meaning in the policy that would obligate it to defend or indemnify.

The appellate court found the allegations of the complaint did not establish a duty to defend. The court then determined that Merchants knew that its conduct would assert a contested claim to certain property and moneys and yet it took such action. Merchants was unable to show any unexpected, unintended or unforeseen result. While errors may have been made, no accident had occurred and without an accident, there is no occurrence. The trial court judgment was reversed and remanded for proceedings consistent with this opinion.

Hartford Casualty Insurance Company, Appellant, v. Merchants & Farmers Bank, Appellee. Alabama Supreme Court. No. 1031883. Filed September 2, 2005. Appeal from the Tuscaloosa Circuit Court. Reversed and remanded. 2005 CCH Personal and Commercial Liability Cases. Paragraph 8,129.