South Carolina Electric and Gas Company v. Old Republic Insurance Company et al
ORDER denying 28 Motion for Partial Summary Judgment. Signed by Honorable Richard M Gergel on 04/14/2017. (egra, )
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
Civil Action No. 2: 16-2468-RMG
South Carolina Electric and Gas Company, )
Old Republic Insurance Company,
Emerson Electric Company, and
Emerson Process Management Power
and Water Solutions, Inc.,
ORDER AND OPINION
Plaintiff South Carolina Electric and Gas Company ("SCE&G") filed this lawsuit in July
2016 seeking a declaration that Old Republic Insurance Company ("Old Republic") has a duty to
defend and possibly indemnify SCE&G in connection with two underlying personal injury
lawsuits. This matter is before the Court on SCE&G's motion for partial summary judgment
(Dkt. No. 28) on its claims for a declaration that Old Republic has breached its duty to defend
SCE&G, that Old Republic should fully reimburse SCE&G for its prior defense costs, and that
Old Republic should pay for SCE&G's defenses in the underlying cases moving forward. For the
reasons set forth below, SCE&G's motion for summary judgment is denied.
The following facts are not in dispute. SCE&G owns and operates an electric plant in
Canadys, South Carolina (the "Canadys Plant"). On or around September 17, 2008, SCE&G
entered into a Master Agreement with Emerson Process Management Power and Water
Solutions, Inc. ("Emerson Process") under which Emerson Process agreed to update the turbine
control systems at the Canadys Plant. (Dkt. No. 1-1 at 11-22.) That Master Agreement included a
clause which required Emerson Process to "list SCE&G and its subsidiaries as an additional
insured subject to the limitations and restrictions set forth in Section entitled 'Limitation of
Liability,' and cover only third-party claims to the extent of the negligent acts or omissions of
Emerson" ((Id. at 21) (emphasis added).) Defendant Old Republic issued a Commercial General
Liability Policy (the "Policy") to Emerson Electric Company ("Emerson") and its subsidiaries
for two million dollars ($2,000,000). (Dkt. No. 32-1.) The Certificate oflnsurance indicates that
Emerson named SCE&G as an additional insured under the Policy subject to the following
limitations: "The Certificate Holder [SCE&G] is included as an Additional Insured on the
General Liability but only in respect to their interest in the operations of the Named Insured
[Emerson] and only for such terms and limits which are the lesser of the policies hereon or the
written requirements between the Named Insured and Certificate Holder." (Id. at 2.) The parties
agree that, under Certificate of Insurance and Master Agreement, SCE&G only qualifies as an
additional insured "to the extent of the negligent acts or omissions of Emerson."
On September 28, 2011, Mr. Samuel Washington was performing electrical work for
Emerson at the Canadys Plant when he came into contact with live wires and was injured from
an electrical shock? Mr. Washington filed a tort action against Emerson, SCE&G, and others in
the Colleton County Court of Common Pleas, and his wife filed a companion case for loss of
consortium3 (together, the "underlying cases"). The complaints allege negligence, negligent
supervision, and/or negligent training on behalf of SCE&G, Emerson, and others. (Dkt. No. 28
1.) Notably, the complaints make identical allegations against both Emerson and SCE&G, and
Emerson Process is a subsidiary of Emerson.
Mr. Washington was employed by Applied Control Technology, a subcontractor for Emerson
Electric. Applied Control Technology is not a defendant in the underlying cases.
3 See Complaints in Samuel Washington, Jr. v. s.c. Electric and Gas Company and Emerson
Electric Company d/b/a Emerson Network Power, and/or Emerson Network Power, C.A. No.:
2013-CP-15- 0411; Louise Washington. v. s.c. Electric and Gas Company and Emerson Electric
Company d/b/a Emerson Network Power, and/or Emerson Network Power, C.A. No.: 2013-CP
the allegations against SCE&G are direct - they do not rely on any theory of vicarious liability.
On March 7, 2017, SCE&G learned that Emerson had settled with the Washingtons in the
underlying cases which are both scheduled for trial in April 2017.
SCE&G claims that by March 1,2017, it had incurred expenses over $90,000 defending
the Washington cases. (Dkt. No. 28 at 6.) SCE&G has moved for summary judgment, asking this
Court to find that Old Republic breached its contractual duty to defend SCE&G as an additional
insured in the underlying cases and is responsible for reimbursing SCE&G for its prior defense
costs and for paying SCE&G's defense costs for the underlying cases going forward.
Summary judgment is appropriate if a party "shows that there is no genuine dispute as to
any material fact" and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(a). In other words, summary judgment should be granted "only when it is clear that there is
no dispute concerning either the facts of the controversy or the inferences to be drawn from those
facts." Pulliam lnv. Co. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987). "In determining
whether a genuine issue has been raised, the court must construe all inferences and ambiguities
in favor of the nonmoving party." HealthSouth Rehab. Hasp. v. Am. Nat 'I Red Cross, 101 F.3d
1005, 1008 (4th Cir. 1996). The party seeking summary judgment shoulders the initial burden of
demonstrating to the court that there is no genuine issue of material fact.
Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986).
Once the moving party has made this threshold demonstration, the non-moving party, to
survive the motion for summary judgment, may not rest on the allegations averred in his
pleadings. ld. at 324. Rather, the non-moving party must demonstrate that specific, material
facts exist that give rise to a genuine issue. ld. Under this standard, "[c]onclusory or speculative
allegations do not suffice, nor does a 'mere scintilla of evidence'" in support of the non-moving
party's case. Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir. 2002) (quoting
Phillips v. CSXTransp., Inc., 190 F.3d 285,287 (4th Cir. 1999)).
This Court has diversity jurisdiction under 28 U.S.C. § 1332. In diversity cases, federal
courts apply the choice of law rules of the states in which they are located. See Klaxton Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under South Carolina law, insurance policies
are subject to the general rules of contract construction. B.L. G. Enters., Inc. v. First Fin.
Ins. Co., 514 S.E.2d 327, 330 (S.C. 1999). "When a contract is unambiguous, clear, and explicit,
it must be construed according to the terms the parties have used." Id. The court must enforce,
not write, contracts of insurance and must give policy language its plain, ordinary, and popular
Duty to Defend and Indemnify
In South Carolina, the duty to defend is separate from the duty to indemnify. American
Casualty Co. v. Howard, 187 F.2d 322,327 (4th Cir.1951). "Although these duties are related in
the sense that the duty to defend depends on an initial or apparent potential liability to satisfy the
judgment, the duty to defend exists regardless of the insurer's ultimate liability to the insured. . .
Indemnity contemplates merely the payment of money. The agreement to defend contemplates
the rendering of services." Sloan Constr. Co. v. Central Nat 'I Ins. Co. of Omaha, 236 S.E.2d
818, 820 (1977) (citations omitted). South Carolina courts look to the allegations in the
complaint to determine the scope of an insurance company's duty to defend a claim brought
against its insured. CD. Walters Constr. Co. v. Fireman's Ins. Co. ofNewark, NJ, 316 S.E.2d
709 (S.C. Ct. App. 1984). If the underlying complaint creates a possibility of coverage under an
insurance policy, the insurer is obligated to defend unless the damage alleged was
unambiguously excluded by the policy. See USAA Prop. & Cas. Ins. Co. v. Clegg, 661 S.E.2d
791, 797 (S.C 2008); Gordon-Gallup Realtors, Inc. v. Cincinnati Ins. Co., 265 S.E.2d 38
The parties agree that, under the Policy and Master Agreement, SCE&G only qualifies as
an additional insured "to the extent of the negligent acts or omissions of Emerson." Old Republic
argues that this language limits SCE&G's coverage to the defense of allegations that it is
vicariously liable for the negligent acts or omissions of Emerson. Old Republic therefore
believes it has no duty to defend or indemnifY SCE&G because neither of the underlying
complaints seeks to hold SCE&G vicariously liable for the acts of Emerson. SCE&G argues first
that the Policy and Master Agreement do not limit its coverage to claims of vicarious liability
and second that the complaints do, in fact, seek to hold SCE&G liable for the negligence of
Emerson. The Court must determine (1) whether the language limits SCE&G's coverage to
vicarious liability for the acts of Emerson, and (2) whether the complaints create the possibility
that SCE&G could be held vicariously liable for the acts or omissions of Emerson.
The language at issue here - "to the extent of the negligent acts or omissions of Emerson"
limits SCE&G's coverage as an additional insured to the defense of allegations that it is
vicariously liable for the acts or omissions of Emerson. Courts across the country have
distinguished between policy language that covers additional insureds broadly (Le. for conduct
"arising from" or in connection with the acts of the named insured) and policy language that
covers additional insureds more narrowly (Le. only for vicariously liability based on the
negligence of the named insured). Courts have found that coverage for additional insureds is not
limited to vicarious liability for acts or omissions of the named insured when the policy at issue
covers the additional insured for claims that arise from or are connected to the work of the
named insured. See SFH, Inc. v. Millard Refrigerated Servs., Inc., 339 F.3d 738 (8th Cir. 2003)
(additional insured's coverage not limited to vicarious liability where policy covers any
underlying action that "arises out of' maintenance of the leased premises); Marathon Ashland
Pipeline, LLC, v. Maryland Cas. Co., 243 F.3d 1232, 1237 (10th Cir. 2001) (additional insured's
coverage not limited to vicarious liability where policy covered additional insured "with respect
to liability arising out of [named insured's] ongoing operations performed for [the additional]
insured."); Philadelphia Elec. Co. v. Nationwide Mut. Ins. Co., 721 F. Supp. 740, 742 (E.D. Pa.
1989) (additional insured's coverage not limited to vicarious liability where policy provided
coverage "for any work performed by [named insured] on [additional insured's] behalf'; Dayton
Beach Park No.1 Corp. v. National Union Fire Ins. Co., 573 N.Y.S.2d 700, 701 (additional
insured's coverage not limited to vicarious liability where policy provided coverage for claims
"arising out of ... operations performed for the additional insured ... by the named insured").
By the same token, courts are quick to honor the parties' intent when contractual
language clearly limits the scope of coverage for additional insureds to vicarious liability for acts
or omissions of the named insured by referencing the negligence of the named insured. See
Harbor Ins. Co. v. Lewis, 562 F. Supp. 800, 805-06 (E.D. Pa. 1983) (additional insured's
coverage limited to liability based on negligence of the named insured when policy applied "only
to the extent of liability resulting from occurrences arising out of negligence of reading
Company"); Philadelphia Elec. Co. v. Nationwide Mut. Ins. Co., 721 F. Supp. 740, 742 (E.D. Pa.
1989) ("If the parties had intended coverage to be limited to ... vicarious liability ... , language
clearly embodying that intention was available" in Harbor.); Hormel Foods Corp. v. Northbrook
Prop. & Cas. Ins. Co., 938 F. Supp. 555, 559 (D. Minn. 1996), aff'd, 131 F.3d 143 (8th Cir.
1997) (finding policy that covered losses "arising out of the ownership, maintenance or use"
more broad than the "policy in Harbor Insurance [which] specifically provided additional insured
coverage only for the negligent acts of the principal insured"); Lancaster v. Ferrell Paving, Inc.,
397 S.W.3d 606,615 (Tenn. Ct. App. 2011) ("if the parties had intended to insure the additional
insured for vicarious liability . . . the endorsement could have simply referred to vicarious
liability or the negligence of the named insured',) (emphasis added). The contractual language
at issue here limits SCE&G's coverage as an additional insured "to the extent of the negligent
acts or omissions of Emerson," so the parties clearly intended to limit the scope of SCE&G's
coverage to vicarious liability for acts or omissions of Emerson.
Second, this Court must consider whether the complaints in the underlying cases create
the possibility that SCE&G could be held vicariously liable for the acts or omissions of Emerson.
SCE&G argues that the allegations of the complaints, which are identical for SCE&G and
Emerson, create the "possibility" of coverage because SCE&G has "arguably" been sued for the
tortious acts of Emerson. «Dkt. No. 28 at 11-12) ("Even if Plaintiffs were able to establish some
tort duty and breach of said duty by SCE&G as owner to Mr. Washington, SCE&G is still being
sued, in part, for the negligent acts or omissions of Emerson.")) SCE&G adds that it may be able
to present an empty chair defense at trial as to Emerson which would allow the jury to apportion
fault between Emerson and SCE&G. (Id. at 13.)
In Smuifit-Stone, the United States District Court for the Eastern District of Virginia held that
the additional insured (Smurfit-Stone) was not entitled to recover defense costs where Smurfit-Stone
was covered only to the extent that it was alleged to be vicariously (or derivatively) liable for the
named insured's actions, and the underlying complaint did not allege that Smurfit-Stone was
vicariously liable in any way. Smurfit-Stone Container Enterprises, Inc. v. Nat'i Interstate Ins. Co.,
No. 3:08CV093-HEH, 2008 WL 4153762, at *2-5 (E.D. Va. Sept. 5, 2008); see also Marks v.
Scottsdale Ins. Co., 791 F.3d 448,450 (4th Cir. 2015) (additional insured's defense not covered
when policy limited liability to claims based on negligence of the named insured, and complaint
did not seek to hold additional insured vicariously liable or liable for activities performed on the
named insured's behalf). Notably, the district court rejected Smurfit-Stone's assertion that the
underlying complaint's allegation that Smurfit-Stone and the named insured [Terminal] "joined and
concurred with the wrongdoing of one or more other Defendants" could be construed as an allegation
that Smurfit-Stone is vicariously liable for the actions of TerminaL ld. at *4 n.3.
For the reasons above, SCE&G's motion for summary judgment (Dkt. No. 28) is DENIED.
AND IT IS SO ORDERED.
April III ,2017
Charleston, South Carolina
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