North American Specialty Insur v. Bull River Marina, LLC, et al
Filing
Opinion issued by court as to Appellant-Cross Appellee North American Specialty Insurance Company. Decision: Affirmed in part and Reversed in part. Opinion type: Non-Published. Opinion method: Per Curiam. 16-10817X The opinion is also available through the Court's Opinions page at this link http://www.ca11.uscourts.gov/opinions.
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Date Filed: 09/27/2017
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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-10738
Non-Argument Calendar
________________________
D.C. Docket No. 4:12-cv-00146-WTM-GRS
NORTH AMERICAN SPECIALTY INSURANCE COMPANY,
Plaintiff - Counter
Defendant - Appellant
Cross Appellee,
versus
BULL RIVER MARINA, LLC, et al.,
Defendants,
MARK ALLEN WELLS,
MR. DOUGLAS PITTS,
Defendants - Counter
Claimants - Appellees
Cross Appellants,
MS. YVONNE WELLS,
Defendant - Counter
Claimant - Appellee.
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Date Filed: 09/27/2017
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________________________
Appeals from the United States District Court
for the Southern District of Georgia
________________________
(September 27, 2017)
Before JORDAN, JULIE CARNES, and JILL PRYOR, Circuit Judges.
PER CURIAM:
North American Specialty Insurance Company, Mark Wells, and Douglas
Pitts, appeal the district court order granting in part and denying in part their
respective and opposing motions for summary judgment.
Bull River Marina, LLC held two North American insurance policies: a
commercial general liability policy (50C0005405-00) and a marina operators
policy (50M0005405-00). North American filed this action seeking a declaratory
judgment that neither policy required it to defend or indemnify Bull River in four
underlying state suits.1
Both sides moved for summary judgment, each contending that the 50C and
50M policies did or did not apply. The district court granted North American
1
The four state cases, in chronological order, are Mark Allen Wells v. Bull River Marina, et al.,
No. STCV1100788 (Chatham Cty. Ct. Apr. 7, 2011); Yvonne Wells v. Bull River Marina, et al.,
No. STCV1201594 (Chatham Cty. Ct. Sep. 4, 2012); Douglas Pitts v. Bull River Marina, et al.,
No. STCV1201585 (Chatham Cty. Ct. Sep. 13, 2012); Mark Allen Wells v. Christopher Tanner,
No. STCV1201595 (Chatham Cty. Ct. Sep. 17, 2012).
Yvonne Wells was a party in the district court. Although she joined the briefs and motions filed
by Mr. Wells and Mr. Pitts in the district court, she is not appealing the district court’s ruling that
North American was not required to defend or indemnify Bull River under both policies in her
state case.
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partial summary judgment after it determined that the two policies did not cover
the accident that generated the four state cases. The district court ruled, however,
that North American was estopped from denying coverage under the 50M policy in
Mark Allen Wells v. Bull River Marina, et al., No. STCV1100788 (Chatham Cty.
Ct. Apr. 7, 2011), and awarded Mr. Wells partial summary judgment on that
ground. After careful consideration, we affirm the partial summary judgment
granted to North American and reverse the partial summary judgment granted to
Mr. Wells.
I
This case largely turns on the language of the reservation-of-rights letters
sent by North American. For the most part, the relevant facts are undisputed.
A
Mr. Wells, Mr. Pitts, and others went on an offshore fishing trip provided by
Bull River. The excursion encountered rough seas. At one point, the expedition’s
catamaran, the Nauti-Dawg, collided with a large wave. The impact vaulted Mr.
Wells and Mr. Pitts from their seats, causing them serious physical injuries. This
incident, which occurred on September 19, 2009, is the genesis of the four state
cases against Bull River.
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B
Bull River, through its insurance broker, notified North American of the
incident by completing a standard form notice where it listed, as the only coverage
for the claim, the 50C policy. North American assigned Cheryl Moore as the claim
adjuster. She preliminarily discussed the incident with Fred Tanner, Bull River’s
chief executive officer, but closed the file after a period of no contact from Bull
River on the matter.
Then, in April of 2011, Mr. Wells filed his first state suit against Bull River
(No. STCV1100788), prompting Bull River to contact North American again and
send it copies of the summons and complaint. North American sent Bull River its
first reservation-of-rights letter on May 19, 2011, which listed only the 50C policy
on the subject line and stated, in pertinent part:
Due to the allegations contained in the complaint, we need to
undertake an in depth review of the policy to determine if coverage is
triggered under these circumstances. . . . In the interim, we have
assigned [a law firm] to enter an appearance in court on your behalf
and to protect your interests in accordance with the terms of your
policy. However, we are providing a defense of this action under a
complete Reservation of Rights, including the right to withdraw from
the defense should it be determined no coverage is afforded. . . .
[T]he preceding statement of the company’s position with respect to
coverage is not intended, nor shall it be construed, as a waiver or
relinquishment of any term, provision, exclusion or condition of any
policy pertaining to this matter, nor of any other right or a defense the
company may have under the circumstances . . . .
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D.E. 82-1 at 1. The parties agree that the letter did not reference the 50M policy.
See Br. of Mr. Wells and Mr. Pitts at 13; Br. of North American at 10.
North American sent Bull River a second reservation-of-rights letter on
April 4, 2012. That second letter listed both the 50C and 50M policies on the
subject line, explained why North American believed neither applied, and
concluded by stating that “[a]lthough [North American] believes that the abovereferenced exclusions bar any coverage for the allegations made in [Mr.] Wells’
complaint, [North American] will continue to defend this matter subject to a strict
reservation of rights to deny coverage . . . .” D.E. 82-2 at 8. The April 4th letter
further “expressly reserve[d] . . . the right to assert any and all additional [policy]
provisions or parts thereof that might also apply.” Id.
In October of 2012, after the last three state cases were filed, North
American sent two more reservation-of-rights letters outlining its coverage position
under both policies. One letter was sent to Bull River and the other to Chris
Tanner, Bull River’s registered agent.2
C
North American filed this declaratory judgment action on May 23, 2012. It
moved for summary judgment on the ground that neither the 50C policy nor the
2
There is a factual dispute over whether the letters were sent to the correct addresses. Mr. Wells
and Mr. Pitts argue that, if the letters were mailed to the wrong address, the reservations are
ineffective. Because we agree with the district court’s legal resolution of this issue, we discuss
the dispute later in the opinion.
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50M policy required it to defend or indemnify Bull River on any of the claims
asserted in the four underlying state suits. See D.E. 60. Mr. Wells and Mr. Pitts
opposed that motion and filed a cross-motion for summary judgment, in which
they argued, among other things, that North American had waived, and was
estopped from asserting, its coverage defenses because its first reservation-ofrights letter was legally deficient and because it undertook the defense of Bull
River in the state cases without first adequately reserving its rights. See D.E. 75 at
2 ¶ 4; Br. of Mr. Wells and Mr. Pitts at 6.
The district court partially granted North American’s motion for summary
judgment, ruling that the insurance company was not required to defend or
indemnify Bull River in any of the four state cases under the 50C policy. The
district court also concluded that, to the extent estoppel did not apply, North
American likewise was not required to defend or indemnify Bull River in any of
the four state cases under the 50M policy.
But the district court did find that estoppel applied and granted Mr. Wells
partial summary judgment. The district court declared that North American was
estopped from arguing non-coverage under the 50M policy because the May 19th
reservation-of-rights letter had been ineffective. It also declared that estoppel
applied because North American had denied coverage under the 50M policy while
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simultaneously reserving its right to raise new grounds for non-coverage, in
violation of Hoover v. Maxum Indem. Co., 291 Ga. 402 (2012).
This appeal followed.
II
We exercise plenary review over a district court’s grant of summary
judgment. See, e.g., Moton v. Cowart, 631 F.3d 1337, 1341 (11th Cir. 2011). In
doing so, we draw all inferences and review all of the evidence in the light most
favorable to the non-moving party. Id. The party moving for summary judgment
bears the burden of demonstrating that there is no genuine dispute of any material
fact and that it is entitled to judgment as a matter of law. Id.
III
The parties appeal the partial summary judgment granted to one another.
Mr. Wells and Mr. Pitts do not challenge the district court’s determination that, to
the extent estoppel does not apply, the 50C and 50M policies do not cover Bull
River for the underlying accident. Rather, the parties’ arguments concern whether
North American is subject to estoppel for undertaking Bull River’s defense in the
underlying state cases with defective reservation-of-rights letters. We first address
whether and to what extent North American is estopped from denying coverage
under the 50C policy. We then answer the same questions for the 50M policy.
A
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The district court determined that, as to Mr. Wells’ first suit (No.
STCV1100788), North American sufficiently reserved its rights under the 50C
policy with the May 19th letter. See D.E. 114 at 11–14. Mr. Wells insists that the
May 19th letter was ineffective. He contends that that letter was ambiguous
because it was unclear whether a defense was being provided under the 50C
policy, and that such ambiguity must be construed as a failure by North American
to effectively reserve its rights.
Mr. Wells also argues that the letter was
ineffective because it was only a “statement of future intent” to reserve rights. See
Br. of Mr. Wells and Mr. Pitts at 23. Neither argument is convincing.
Under Georgia law, an insurer can “avoid estoppel by giving timely notice
of its reservation of rights which fairly informs the insured of the insurer’s
position.” World Harvest Church, Inc. v. GuideOne Mut. Ins. Co., 287 Ga. 149,
152 (2010) (internal quotation marks omitted) (quoting State Farm Fire & Cas.
Co. v. Walnut Ave. Partners, LLC, 296 Ga. App. 648, 653 (Ct. App. 2009)). “At a
minimum, the reservation of rights must fairly inform the insured that,
notwithstanding [the insurer’s] defense of the action, it disclaims liability and does
not waive the defenses available to it against the insured.” Id. (alteration in
original) (internal quotation marks omitted) (quoting State Farm Mut. Auto. Ins.
Co. v. Anderson, 104 Ga. App. 815, 818 (Ct. App. 1961)).
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In this case, the May 19th letter sufficiently notified Bull River of North
American’s coverage position under the 50C policy. Mr. Wells’ argument—that it
was unclear what policy was being discussed—rings hollow. The letter clearly
referenced the 50C policy. In fact, North American authored the letter in response
to a claim submitted by Bull River pursuant to the 50C policy.
Even more
obviously, the 50C policy appeared on the letter’s subject line. It was the only
policy specifically referenced anywhere.
The letter also informed Bull River that North American was actively
assuming the defense of the underlying suit. The language of the letter belies the
argument that it spoke only to future intent. It specifically stated that North
American’s adjusters “have assigned [a law firm]” to represent Bull River and that,
although they “are providing a defense,” it is subject to a “complete [r]eservation
of [r]ights.” D.E. 82-1 at 1 (emphasis added). By styling the letter in past and
present tense, North American was clearly committing itself to a defense of Bull
River at that time.
Mr. Wells points to a portion of the letter explaining that North American
adjusters would “need to undertake an in depth review of the policy to determine if
coverage is triggered under [the circumstances alleged in the complaint].” Id. To
Mr. Wells, this indicates that no reservation of rights was actually made at that
time because North American had not yet determined whether there was even a
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basis for reservation. But this confounds making a reservation with providing the
basis for reservation. Although an insurer “should . . . inform the insured of the
specific basis for [its] reservations about coverage,” World Harvest, 287 Ga. at
152, it need not actually do so. The May 19th letter expressly stated, twice, that
North American’s defense of Bull River (through the assigned law firm) was under
a reservation of right to deny coverage and withdraw the defense. Other Georgia
appellate decisions—some relied upon by the Georgia Supreme Court in World
Harvest—have found similarly broad language to constitute an effective
reservation of rights. See generally Wellons, Inc. v. Lexington Ins. Co., 566 F.
App’x 813, 821–22 (11th Cir. 2014) (discussing World Harvest and collecting
Georgia cases).
In summary, the May 19th letter did exactly what Georgia law required. It
informed Bull River that North American had actively assumed defense of the state
case, but that the defense was subject to a right to reject the 50C policy claim at
some point in the future. Accordingly, we affirm the partial summary judgment
declaring that North American adequately reserved its right to deny Bull River
coverage under the 50C policy in Wells v. Bull River Marina, No. STCV110078.
B
Mr. Wells and Mr. Pitts maintain that Bull River and Chris Tanner never
received the third reservation-of-rights letters issued by North American in
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October of 2012, thus rendering them ineffective.
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And, the argument goes,
because North American assumed the defenses of Pitts v. Bull River Marina, No.
STCV1201585, and Wells v. Christopher Tanner, No. STCV1201595, without
effective reservations, the insurance company is now estopped from denying
coverage under either policy.
The district court thoroughly disposed of these issues in its summary
judgment order. It explained, for instance, that North American mailed the letters
to Chris Tanner, as Bull River’s registered agent, at the address listed for him on
the Georgia Secretary of State’s website. See D.E. 114 at 18. This alone warrants
affirmance. See Ga. Code § 14-2-504 (providing for service of process to a
corporation’s registered agent); Ga. Code § 14-2-502 (placing the burden on the
corporation to update its registered address).
More problematically for Mr. Wells and Mr. Pitts, the district court’s
conclusion that North American had effectively reserved its rights through the
October 2012 letters also rested on a separate, independent ground. Specifically,
the district court ruled that North American’s motion to amend its complaint in the
declaratory judgment action also constituted notice of a reservation of rights under
World Harvest. See D.E. 114 at 19. Mr. Wells and Mr. Pitts’ initial brief failed to
challenge that alternative ground, so they cannot obtain reversal. See Sappuppo v.
Allstate Floridian Ins. Co., 739 F.3d 678, 683 (11th Cir. 2014) (requiring
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appellants to challenge all grounds on which a decision rests). Accordingly, we
affirm the district court’s declaration that, under both policies, North American
need not defend or indemnify Bull River in Douglas Pitts v. Bull River Marina, et
al., No. STCV1201585 (Chatham Cty. Ct. Sep. 13, 2012), and Mark Allen Wells v.
Christopher Tanner, No. STCV1201595 (Chatham Cty. Ct. Sep. 17, 2012).
C
The district court determined that North American was estopped from
denying coverage under the 50M policy in Mr. Wells’ first state suit (No.
STCV1100788) because it undertook Bull River’s defense without first reserving
its rights. This is how it arrived at that decision. The district court first found that
the May 19th letter was ambiguous. Then, it invoked World Harvest for the
proposition that ambiguities have to be construed in favor of the insured.
Construing the purportedly ambiguous May 19th letter in favor of Bull River, the
district court concluded that the letter failed to reserve North American’s rights
under the 50M policy.
And by the time North American sent its second
reservation-of-rights letter in April of 2012 (which specifically reserved rights
under the 50M policy), North American had already assumed Bull River’s defense,
so the district court concluded that estoppel applied. That conclusion rests on one
critical flaw: the notion that North American actually assumed Bull River’s
defense under the 50M policy before the April 4th letter.
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The general rule under Georgia law is that estoppel cannot create liability for
a risk not covered under an insurance contract. See Andrews v. Georgia Farm
Bureau Mut. Ins. Co., 226 Ga. App. 316, 317 (Ct. App. 1997). But when an
insurer, “without reserving its rights, assumes the defense of an action or continues
such defense with knowledge, actual or constructive, of noncoverage,” estoppel
prevents the insurer from denying coverage. See Prescott’s Altama Datsun, Inc. v.
Monarch Ins. Co. of Ohio, 253 Ga. 317, 318 (1984).
This is not a situation that falls within the narrow exception announced in
Prescott’s. Even assuming that the statement in the May 19th letter—“[North
American’s assignment of a law firm to defend Bull River] is not intended, nor
shall it be construed, as a waiver or relinquishment of any term, provision,
exclusion or condition of any policy pertaining to this matter,” D.E. 82-1 at 1
(emphasis added)—was too ambiguous to reserve North American’s rights under
the 50M policy, we do not believe the letter was ambiguous as to which policy
North American was assuming the defense under.
As explained earlier, the
letter—issued in response to a notice of claim that only listed the 50C policy—had
the 50C policy as its subject. The letter also stated that North American had
retained a law firm “to protect [Bull River’s] interests in accordance with the terms
of [its] policy”—not policies. Id. (emphasis added). Because the 50C policy was
the sole policy mentioned in the letter, we believe that the only reasonable
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interpretation of this language is that the law firm was hired pursuant to the 50C
policy. The May 19th letter, therefore, does not establish that North American
assumed Bull River’s defense under the 50M policy.
In addition to the letter, Mr. Wells cites testimony from Ms. Moore as
evidence that North American assumed the defense of his first suit under the 50M
policy. See Br. of Mr. Wells and Mr. Pitts at 30. But, as Mr. Wells himself notes,
Ms. Moore admitted that she could not specifically recall anything she had said to
Fred Tanner other than what the May 19th letter communicated.
Her
communications to Fred Tanner, then, were essentially a recitation of the May 19th
letter.
In summary, we conclude that there is no evidence that North American
defended Bull River against Mr. Wells’ first suit under the 50M policy. We
therefore decide, contrary to the district court, that the coverage-by-estoppel
principle announced in Prescott’s does not apply because North American never
actually defended Bull River in Mark Allen Wells v. Bull River Marina, et al., No.
STCV1100788 (Chatham Cty. Ct. Apr. 7, 2011), under the 50M policy without
first reserving its rights.
D
The district court’s second basis for concluding that estoppel precluded
North American from denying coverage under the 50M policy in Mr. Wells’ first
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suit (No. STCV1100788) is that the insurance company violated the principle
articulated in Hoover. The district court explained that, under Hoover, North
American could not argue that the 50M policy did not cover the boating accident
and at the same time issue the April 4th letter purporting to reserve the right to
assert other defenses under that policy. See D.E. 114 at 15.
To be clear, the contention that the May 19th letter denied coverage under
the 50M policy has been North American’s litigation position. Everyone agrees
that the May 19th letter did not mention the 50M policy. In its initial brief, North
American argued that the May 19th letter’s failure to mention the 50M policy
could not amount to an ineffective reservation of rights under that policy when
there was no reason for the letter to mention the 50M policy in the first place.
According to North American, the letter did not mention the 50M policy because
“[t]he [p]olicy [w]as [n]ot [i]mplicated.” Br. of North American at 12. That is the
same argument the insurance company made below. See D.E. 89 at 5 ¶ 24.
The district court reasoned that, if the 50M policy “was never triggered,
which [according to North American] justifies the absence of a reference to the
policy in the May 19, 2011 letter,” then North American had denied coverage in
May of 2011 and then tried to reserve the right to raise other defenses under that
same policy in the April 4, 2012 letter. D.E. 114 at 15. This, the district court
held, violated Hoover. See id.
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In Hoover, an employee sued his employer after suffering an injury at work.
See Hoover, 291 Ga. at 402. The employer filed a claim with its insurer, which the
insurer denied on the ground that the policy excluded liabilities owed to employees
because of workplace injuries.
The letter denying coverage also contained
language purportedly reserving the right to assert other defenses. Later on, the
insurer attempted to avoid coverage by raising a different defense—that the
employer had failed to comply with the policy’s notice requirement. The Supreme
Court of Georgia held that the insurer had waived the notice defense by failing to
assert it in the initial denial letter. That first letter’s reservation of right (which
should have allowed the insurer to raise the notice defense) was ineffective
because an insurer could not both deny coverage on one ground and reserve the
right to assert a different defense at some later time. See id. at 404–06.
This case is different than Hoover.
Accepting that North American’s
contention—that the May 19th letter failed to reference the 50M policy because it
was “[n]ot [i]mplicated”—is tantamount to a denial of coverage under the 50M
policy—meaning that any purported reservation of rights in the May 19th letter
was ineffective, see id. at 405 (explaining that a reservation of rights “is only
available to an insurer who undertakes a defense”)—we fail to see how Hoover
mandates, as a remedy, that North American be estopped from denying coverage
altogether. It seems to us that Hoover would only prohibit North American from
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asserting a policy defense under 50M that it should have raised the first time
around. See id. at 405 (“[The insurance company] failed to properly reserve its
rights to assert a notice defense when it [initially] denied [its insured’s] claim on
the grounds of [a policy exclusion] and refused to undertake a defense.”) (emphasis
added).
But the April 4th letter, in so many words, gave the same reason for noncoverage as North American did to explain why the May 19th letter had not
mentioned the 50M policy: that the underlying accident is outside the 50M policy’s
scope of coverage.
Because that has been North American’s basis for non-
coverage from the beginning, it is not subject to waiver or estoppel under Hoover.
And so, we reverse the district court’s determination that North American is
estopped from denying coverage under the 50M policy. 3
IV
3
Hoover is distinguishable for another reason. In Hoover, the Supreme Court of Georgia held
that the insurer waived a policy defense (the notice requirement) that it had failed to assert in its
initial denial letter. North American, by contrast, is refusing to defend Bull River on the ground
that the underlying accident is not covered by the terms of the 50M policy. The Supreme Court
of Georgia has previously drawn a distinction between raising policy defenses and contesting
coverage altogether. See S. Guar. Ins. Co. v. Dowse, 278 Ga. 674, 676 (2004). In Dowse, the
Georgia Supreme Court explained that an insurer that refuses to defend its insured waives certain
policy protections, such as provisions prohibiting an insured from settling claims without the
insurer’s approval, but not the “right to contest its insured’s assertion that the insurance policy
provides coverage for the underlying claim. Obviously, if the underlying claim is outside the
policy’s scope of coverage, then [the insurer’s] refusal to indemnify or defend was justified . . . .
This question of whether the policy provides coverage for the claim is separate from the legal
consequences of an insurer’s refusal to indemnify or defend.” Id. (emphasis added and footnote
omitted).
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No one has appealed the district court’s determination that, as a matter of
contractual interpretation, the 50C and 50M policies did not cover the underlying
boating accident. The only questions on appeal are whether North American was
estopped, for one reason or another, from denying coverage under the two policies.
We affirm the district court’s partial summary judgment in favor of North
American declaring that it need not defend or indemnify Bull River in any of the
state cases under the 50C policy. We also affirm the district court’s conclusion
that North American need not defend or indemnify Bull River in Douglas Pitts v.
Bull River Marina, et al., No. STCV1201585 (Chatham Cty. Ct. Sep. 13, 2012),
and Mark Allen Wells v. Christopher Tanner, No. STCV1201595 (Chatham Cty.
Ct. Sep. 17, 2012), under the 50M policy. 4
We reverse, however, the partial summary judgment granted to Mr. Wells
declaring that North American is estopped from denying Bull River coverage
under the 50M policy in the case of Mark Allen Wells v. Bull River Marina, et al.,
No. STCV1100788 (Chatham Cty. Ct. Apr. 7, 2011).
AFFIRMED IN PART AND REVERSED IN PART.
4
Again, Yvonne Wells did not appeal the district court’s decision against her regarding Yvonne
Wells v. Bull River Marina, et al., No. STCV1201594 (Chatham Cty. Ct. Sep. 4, 2012).
18
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