The general rule in Alabama is that a duty to indemnify cannot be determined before liability is established. But are there exceptions to that rule? In James Snell v. United States Insurance Co., 102 F.4th 1208 (11th Cir. 2024), the Eleventh Circuit weighed in and unequivocally answered “yes.”

Snell involved coverage under a commercial general liability insurance policy for a lawsuit alleging negligence/wantonness against an insured for an injury sustained as a result of the insured’s construction of an in-ground trampoline. The insured answered “no” to a question on the insurance application asking whether he constructed recreational or playground equipment. The insurer ultimately determined it had no duty to defend based on a “specific operations” provision that limited coverage to accidents resulting from landscaping work. After the insured filed suit, the trial court granted summary judgment for the insurer on both the duties to defend and indemnify. On appeal, the insured contended summary judgment on the duty to indemnify was premature until the underlying lawsuit was resolved.

The Eleventh Circuit held “the duty to indemnify under Alabama insurance law can, at least under some circumstances, be decided before the underlying action reaches judgment.” Snell, 102 F.4th at 1219. It determined summary judgment is appropriate where there is no dispute of material fact as to the duty to indemnify. It found the indemnity issue ripe because the insurance application expressly disclaimed the insured’s work and thus “forecloses any duty to indemnify for the same reason it forecloses any duty to defend,” irrespective of the allegations of the underlying complaint.

The Eleventh Circuit acknowledged, “under Alabama law, it is ‘often’ the case that ‘a court can only determine whether there is a duty to indemnify—based on facts adduced at the trial of the underlying action.” Id. at 1217 (quoting James River Ins. Co. v. Ultratec Special Effects Inc., 22 F.4th 1246, 1252 n.5 (11th Cir. 2022)). It also acknowledged there is nothing to indemnify unless liability is established. But, it determined the existing case law did not stand for the proposition that “a court can never grant summary judgment on the duty to indemnify before the underlying case goes to judgment.” Id. at 1218 (citing Ladner & Co. v. S. Guar. Ins. Co., 347 So. 2d 100, 104 (Ala. 1977) (Court declined to decide duty to indemnify because a different theory of liability could be covered under the policy); Home Ins. Co. v. Rice, 585 So. 2d 859, 861 (Ala. 1991) (ruling on duty to defend “did not necessarily foreclose any question of the duty to indemnify”); and Tapscott v. Allstate Ins. Co., 526 So. 2d 570, 573–75 (Ala. 1988) (Court granted summary judgment on duty to indemnify)).

Snell upholds the general rule but clarifies it is not absolute. Snell rejected nonbinding case law to the contrary (including its own prior dicta) and affirmed there are at least some circumstances where the duty to indemnify can be ripe before an underlying lawsuit is resolved. This includes situations where the court can determine there is no duty to indemnify irrespective of the outcome of the underlying claim. Whether a duty to indemnify can be established before liability is established likely turns on the specific facts of the case and should be evaluated by coverage counsel.