Houston Casualty Company v. St. Paul Fire & Marine Insuran
Filing
UNPUBLISHED AUTHORED OPINION filed. Originating case number: 3:09-cv-00926-CMC. Copies to all parties and the district court/agency. [998736933].. [10-1835]
Appeal: 10-1835
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Date Filed: 12/06/2011
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-1835
HOUSTON CASUALTY COMPANY,
Plaintiff - Appellant,
v.
ST. PAUL FIRE & MARINE INSURANCE COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the District of
South Carolina, at Columbia.
Cameron McGowan Currie, District
Judge. (3:09-cv-00926-CMC)
Argued:
October 25, 2011
Decided:
December 6, 2011
Before DAVIS, KEENAN, and DIAZ, Circuit Judges.
Affirmed by unpublished opinion.
Judge Keenan
opinion, in which Judge Davis and Judge Diaz joined.
wrote
the
ARGUED:
George
Trenholm
Walker,
PRATT-THOMAS
WALKER,
PA,
Charleston, South Carolina, for Appellant.
William Pearce
Davis, BAKER, RAVENEL & BENDER, LLP, Columbia, South Carolina,
for Appellee.
ON BRIEF: Clayton B. McCullough, Daniel S.
McQueeney, Jr., PRATT-THOMAS WALKER, PA, Charleston, South
Carolina, for Appellant.
Jenny A. Draffin, BAKER, RAVENEL &
BENDER, LLP, Columbia, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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BARBARA MILANO KEENAN, Circuit Judge:
In
this
insurance
coverage
dispute,
we
consider
whether
claims in an underlying personal injury suit brought against
McGriff,
Seibels
&
Williams,
Inc.
(McGriff),
an
insurance
broker, were covered under policies issued to McGriff by St.
Paul Fire & Marine Insurance Company (St. Paul).
Contending
that the claims were excluded from coverage, St. Paul refused to
participate in McGriff’s defense or to contribute to a final
settlement of the claims.
Thereafter, Houston Casualty Company
(Houston), McGriff’s professional liability carrier, filed the
present suit against St. Paul, claiming that St. Paul improperly
denied coverage and seeking contribution.
After the parties filed cross-motions for summary judgment,
the
district
court
Paul’s motion.
denied
Houston’s
motion
and
granted
St.
We affirm the district court’s judgment.
I.
In
2003,
Manuel
Salazar
suffered
catastrophic
injuries
while working on the Lake Murray Backup Dam Project in South
Carolina (the Project).
Salazar filed an action against South
Carolina Electric & Gas Company (South Carolina Electric), the
owner of the power lines that caused his injuries, and against
McGriff,
the
defendants.
insurance
broker
for
the
Project,
among
other
Only Salazar’s claims against McGriff are relevant
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to the present dispute between Houston, McGriff’s professional
liability
carrier,
and
St.
Paul,
which
had
issued
McGriff
a
commercial general liability policy and related umbrella excess
liability policy (collectively, the St. Paul policies).
alleged
that
in
addition
to
providing
insurance
Salazar
brokerage
services for the Project, McGriff was responsible for performing
inspections at the work site to ensure that it was reasonably
safe.
Salazar further alleged that McGriff failed to perform
such inspections.
The
evidence
in
the
record
established
that
McGriff
undertook certain safety-related obligations with regard to the
Project.
McGriff
had
procured
insurance
coverage
for
the
Project in the form of an “Owner-Controlled Insurance Program”
(OCIP), and, as part of the program, had provided a document
entitled “Manual of Insurance Procedures” (OCIP Manual) to South
Carolina Electric and to all contractors working at the Project
site.
The
OCIP
Manual
Representative,
in
[McGriff],
furnish
will
provided
conjunction
safety
that
with
the
“Owner’s
GENERAL
posters,
loss
Safety
CONTRACTOR
and
and
inspection
reports and provide overall supervision of the Project Safety
effort.”
Under
a
heading
entitled
“Project
Safety
(Loss
Control) Program,” the OCIP Manual also stated that: “A Project
Safety Program has been established by the General Contractor to
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conform with industry standards, and to meet the requirements of
all Local, State, and Federal standards, and will be supervised
and
reviewed
by
the
Owner’s
Safety
Representative
and
[McGriff].”
Houston, McGriff’s professional liability carrier, provided
a defense to McGriff in the suit brought by Salazar.
When
McGriff sought St. Paul’s participation in the defense, St. Paul
declined on the ground that Salazar’s claims were not covered
under the St. Paul policies.
The defendants in the personal
injury action ultimately agreed to settle Salazar’s claims for
$20
million,
and
McGriff’s
insurers,
including
Houston,
contributed McGriff’s share of $5 million.
Houston later filed the present action in a South Carolina
state court, alleging that based on the coverage provided by the
St. Paul policies, St. Paul had a duty to defend McGriff and to
contribute to the settlement.
Thereafter, St. Paul removed the
suit to federal court, and the parties filed cross-motions for
summary
judgment.
parties’
motions
After
and
the
awarded
district
judgment
in
court
favor
ruled
of
on
St.
the
Paul,
Houston timely filed a notice of appeal.
II.
We
review
judgment de novo.
a
district
court’s
order
granting
summary
Providence Square Assocs., L.L.C. v. G.D.F.,
4
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Inc., 211 F.3d 846, 850 (4th Cir. 2000).
Summary judgment is
appropriate when there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law.
See Fed. R. Civ. P. 56(a).
Under South Carolina law, 1 insurance policies are subject to
general rules of contract construction.
Century Indem. Co. v.
Golden Hills Builders, Inc., 561 S.E.2d 355, 358 (S.C. 2002).
Courts are required to interpret the language of an insurance
policy according to its “plain, ordinary, and popular meaning.”
M & M Corp. of S.C. v. Auto-Owners Ins. Co., 701 S.E.2d 33, 35
(S.C.
2010).
When
the
language
“unambiguous,
clear,
and
explicit,”
apply the policy terms as stated.
of
an
insurance
courts
have
policy
the
duty
is
to
B.L.G. Enters., Inc. v. First
Fin. Ins. Co., 514 S.E.2d 327, 330 (S.C. 1999).
When an insurance policy contains ambiguous language, such
language is strictly construed against the insurer.
Am. Credit
of Sumter, Inc. v. Nationwide Mut. Ins. Co., 663 S.E.2d 492, 495
(S.C. 2008).
Likewise, policy exclusions are construed “most
strongly” against the insurer.
language
in
a
policy
is
Id.
stated
However, when exclusionary
unambiguously,
insurers
may
thereby limit their liability and impose conditions on their
1
The parties do not dispute that South Carolina law governs
the present issue regarding whether St. Paul had a duty to
defend McGriff in the action brought by Salazar.
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obligations, provided that the policy terms do not contravene
either a statute or public policy.
at 330.
insured
B.L.G. Enters., 514 S.E.2d
Therefore, if the allegations of liability against an
unambiguously
fall
within
a
policy
exclusion,
the
insurer does not have a duty to defend or to contribute to the
settlement of the claim.
Questions
See id.
regarding
coverage
and
an
insurer’s
duty
to
defend a claim brought against its insured are determined based
upon
the
allegations
in
the
plaintiff’s
complaint.
City
of
Hartsville v. S.C. Mun. Ins. & Risk Fin. Fund, 677 S.E.2d 574,
578 (S.C. 2009).
However, an insurer’s duty to defend is not
“strictly controlled by the allegations” in the complaint, and
“may also be determined by facts outside of the complaint that
are known by the insurer.”
USAA Prop. & Cas. Ins. Co. v. Clegg,
661 S.E.2d 791, 798 (S.C. 2008).
III.
We
consider
whether
Salazar’s
claims
were
excluded
from
coverage under the St. Paul policies because they fell within
the
endorsement
entitled
“Insurance
and
Related
Work.”
endorsement provided, in relevant part:
Insurance and related work.
We won’t cover
injury or damage or medical expenses for
which the protected person may be held
liable because of:
6
This
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•
any obligation assumed by any protected
person in connection with an insurance
contract or treaty; [or]
•
any failure to carry out, or improper
carrying out of, any contractual or
other duty or obligation in connection
with an insurance contract or treaty.
(Emphasis added.)
Houston argues that the district court erred in concluding
that Salazar’s allegations against McGriff were based on duties
that
arose
According
“in
to
connection
Houston,
with”
McGriff’s
an
alleged
insurance
duty
to
contract.
inspect
and
identify safety problems arose independently of any insurance
contract.
McGriff
Thus, Houston argues that Salazar’s claims against
were
endorsement.
not
subject
to
the
Insurance
and
Related
Work
Alternatively, Houston asserts that this coverage
issue involved disputed issues of material fact.
We disagree
with Houston’s arguments.
The allegations raised in Salazar’s complaint fell within
the plain language of this policy exclusion.
In an introductory
paragraph in his complaint, Salazar identified McGriff as “the
insurance
broker
for
[South
Carolina
Electric’s]
Lake
Murray
Backup Dam project,” and alleged that McGriff “had undertaken a
duty
to
inspect
the
facility
to
ensure
a
reasonably
environment in which to perform the construction work.”
7
safe
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In his negligence claim against McGriff, Salazar alleged
that McGriff “undertook a duty to inspect the facility on a
regular basis, and to identify and correct any potential safety
problems” on the construction site, but was negligent by failing
to do so.
In his breach of contract claim against McGriff,
Salazar similarly alleged that McGriff “contracted with [South
Carolina Electric] to inspect the facility on a regular basis
and to identify for correction any potential safety problems,”
and
that
plain
McGriff
language
breached
of
these
this
contractual
two
claims,
obligation.
when
considered
The
in
conjunction with the introductory paragraph describing McGriff’s
role as insurance broker for the Project, concerns obligations
that McGriff assumed “in connection with” an insurance contract.
Houston argues, nevertheless, that St. Paul was required to
defend McGriff against Salazar’s claims, because his complaint
does not indicate that either cause of action against McGriff
depended upon the existence of an insurance contract.
According
to Houston, the negligence claim was based upon a common law
duty arising from a voluntary undertaking, while the breach of
contract
claim
did
not
refer
specifically
to
an
insurance
contract.
We find no merit in this argument.
The plain language of
the endorsement excludes from coverage claims arising from “any
failure
to
carry
out,
or
improper
8
carrying
out
of,
any
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contractual or other duty or obligation in connection with an
insurance
contract.”
(Emphasis
added).
Thus,
Salazar’s
contract claims against McGriff would be excluded from coverage
if they concerned an obligation that arose “in connection with”
an insurance contract, even though the contract at issue was not
itself an insurance contract.
Likewise, assuming that Salazar’s
negligence claim against McGriff was based on a common law duty
to perform voluntarily-assumed obligations with reasonable care,
that claim still would be excluded from coverage if the duty
arose “in connection with” an insurance contract.
In his complaint, Salazar explicitly stated that McGriff
was “the insurance broker for [South Carolina Electric’s] Lake
Murray Backup Dam project, and had undertaken a duty to inspect
the facility to ensure a reasonably safe environment in which to
perform
the
construction
work.”
Salazar
also
alleged
that
McGriff contracted with South Carolina Electric to inspect the
Project
problems.
and
to
As
identify
the
for
district
correction
court
potential
concluded,
“there
safety
is
no
allegation or suggestion in the complaint that McGriff assumed
any safety-related duties except in this role.”
Additionally, we observe that certain facts in the record,
which were known to St. Paul when it decided to deny coverage,
provide further support for the district court’s judgment.
The
OCIP Manual, which McGriff provided to South Carolina Electric
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and
Document: 38
to
all
Date Filed: 12/06/2011
contractors
at
the
Page: 10 of 12
Project,
McGriff’s safety-related obligations.
expressly
identified
The Manual provided that
the “Owner’s Safety Representative, in conjunction with GENERAL
CONTRACTOR and [McGriff], will furnish safety posters, loss and
inspection
reports
and
provide
Project Safety effort.”
“Project
Safety
(Loss
overall
supervision
of
the
Further, under the heading entitled
Control)
Program,”
the
OCIP
Manual
provided that “[a] Project Safety Program has been established
by the General Contractor to conform with industry standards,
and to meet the requirements of all Local, State, and Federal
standards, and will be supervised and reviewed by the Owner’s
Safety
Representative
and
[McGriff].”
Because
these
safety-
related obligations assigned to McGriff were set forth in the
Manual
of
Insurance
Procedures
for
the
specific
insurance
program at issue in this case, which McGriff itself had secured,
these
obligations
arose
“in
connection
not
altered
with”
an
insurance
contract.
Our
conclusion
is
by
Houston’s
assertion that the OCIP Manual is not a contract.
Houston’s
assertion
nevertheless
was
in
this
prepared
regard
and
is
provided
correct,
as
a
further
Even if
the
part
Manual
of
the
insurance program brokered by McGriff for the Project, and the
safety-related
related to
the
obligations
Project.
assigned
Claims
10
to
based
McGriff
on
in
those
the
Manual
obligations,
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Document: 38
including
the
Date Filed: 12/06/2011
alleged
failure
Page: 11 of 12
to
properly
perform
them,
undoubtedly arose “in connection with” an insurance contract,
irrespective whether the Manual itself was part of an insurance
contract.
Finally, we reject Houston’s assertion that any obligations
McGriff
may
have
incurred
did
not
stem
from
an
insurance
contract but instead arose from a common law duty to perform
voluntarily-assumed
obligations
with
reasonable
care.
This
contention ignores that such a duty also necessarily arose “in
connection with” an insurance contract, because the obligations
undertaken by McGriff were clearly related to the Project and
stemmed
insurance
from
McGriff’s
coverage
for
initial
it.
involvement
Moreover,
that
in
McGriff
procuring
may
have
assumed these obligations voluntarily does not make them any
less connected with an insurance contract.
IV.
In conclusion, we hold that the district court correctly
determined that Salazar’s claims were excluded by the Insurance
and Related Work endorsement. 2
Therefore, we affirm the district
2
Because Salazar’s claims against McGriff concerned safetyrelated obligations “in connection with” an insurance contract,
and thus were excluded from coverage under the Insurance and
Related Work endorsement, we need not address whether such
claims were also excluded as “insurance professional services,”
(Continued)
11
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court’s
Document: 38
judgment
obligation
to
Date Filed: 12/06/2011
determining
defend
McGriff
that
or
Page: 12 of 12
St.
to
Paul
did
contribute
not
to
have
an
McGriff’s
portion of the global settlement of Salazar’s claims.
AFFIRMED
or excluded under the “Appraisers,
Professional Services” endorsement.
12
Inspectors,
or
Surveyors
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