National Specialty Insurance Company v. AIG Domestic Claims Inc et al

Filing 28

ORDER granting 18 Motion to Dismiss as to AIG Domestic Claims, Inc. and as to Second Cause of Action. Signed by Honorable Joseph F Anderson, Jr on 01/14/10.(bshr, )

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF SOUTH CAROLINA C O L U M B IA DIVISION N a tio n a l Specialty Insurance Company, ) in d iv id u a lly and as assignee of Trans ) S e le c t d/b/a Select Transport Systems, ) ) P l a in tif f , ) ) vs. ) ) A IG Domestic Claims, Inc.; and ) N a tio n a l Union Fire Insurance Company ) o f Pittsburgh, PA, ) ) D e f e n d a n ts . ) ) C / A No.: 3:09-1183-JFA

ORDER

T h is matter comes before the court on the defendants' motion to dismiss [dkt. # 18] p l a in t if f National Specialty Insurance Company's ("National Specialty") complaint as to d e f en d a n t AIG Domestic Claims ("AIG"), and to dismiss its bad faith claim against National U n io n Fire Insurance Company of Pittsburgh, PA ("National Union"). The parties fully b rie f ed the motion and the court held a hearing on January 7, 2010, where the motion was ta k e n under advisement. This order serves to announce the court's ruling. I. F a c tu a l and Procedural Background A t some point prior to 2004, Select Transportation Systems ("Select") purchased a c o n tra c t for liability insurance from National Specialty using the Jamison Group as its in s u ra n c e agent. Select thereafter purchased two trucks that were never added to the N a tio n a l Specialty policy. The trucks were involved in separate accidents on April 5, 2004 a n d October 30, 2004. National Specialty alleges that it became liable to indemnify Select

u n d e r Federal Motor Carrier Safety Administration regulations despite the trucks never being a d d e d to the policy. National Specialty settled the April 5, 2004 claim for $277,500.00, and th e October 30, 2004 claim for $105,574.62. Thereafter, National Specialty filed suit against th e Jamison Group asserting negligence and obtained a default judgment on April 29, 2008 in the amount of $417,434.56 in a suit captioned National Specialty Insurance Company, In d iv id u a lly and as assignee of Trans Select d/b/a Select Transportation Systems vs. The J a m is o n Group, Inc., and Marvin Williams, 2007-CP-23-3705. National Specialty filed the present case in the Richland County Court of Common P le a s on March 25, 2009 asserting claims for bad faith against National Specialty and AIG, a n d seeking declaratory relief to determine whether the errors and omissions insurance carrier o f the Jamison Group, National Union, provides coverage for the default judgment.. The c a se was removed on the basis of diversity jurisdiction to United States District Court on M a y 5, 2009. In its answer, National Union admits the existence of the errors and omissions p o lic y (the "National Union policy"), while maintaining denial of coverage. AIG admits that it is the authorized claims administrator for National Union. II. D is c u ss io n A. N a tio n a l Specialty Lacks Standing to Assert Bad Faith

T h e South Carolina Supreme Court, in Nichols v. State Farm Mut. Auto. Ins. Co., 306 S .E .2 d 616 (S.C. 1983), recognized the tort of bad faith refusal to pay benefits to named in s u re d s. South Carolina allows a first-party claim by the insured against the insurer for bad

2

f a ith in processing claims for benefits due under a "mutually binding contract of insurance," I d . , however it expressly disallows third-party bad faith claims. See Kleckley v.

N o rth w e ste rn Nat. Cas. Co., 526 S.E.2d 218 (S.C. 2000). In a similar vein, South Carolina d o e s not recognize a cause of action for bad faith by the insured against an independent a d j u s tin g company, any such claim is imputed to the insurer. Charleston Dry Cleaners & L au n d ry v. Zurich American Ins. Co., 586 S.E.2d 586, 588­89 (S.C. 2003). N a tio n a l Union argues that it is not party to any mutually binding contract for in su ra n c e with National Specialty. National Specialty admits as much, offering only its a sp ira tio n that it may one day secure an assignment of rights from the Jamison Group. In the a b se n c e of such an assignment, the court finds that National Specialty is a stranger to the N a tio n a l Union policy and lacks standing to pursue a bad faith claim under Nichols. See K lec k ley v. Northwestern Cas. Co., 526 S.E.2d 218 (S.C. 2000) (finding that a third party to a n insurance contract does not have standing to sue the insurer for bad faith); see also W h ittin g to n v. Nationwide Mut. Ins. Co., 208 S.E.2d 529 (S.C. 1974) (holding that a ju d g m e n t creditor possesses no independent authority to assert claim of insured absent a s s ig n m e n t) . The same rationale applies with equal force to National Specialty's bad faith claim a g a in s t AIG. Neither AIG nor National Specialty were party to the policy issued by National U n io n , and therefore National Specialty cannot establish the existence of a mutually binding c o n tra c t for insurance necessary to pursue its claim. Moreover, South Carolina does not

3

re c o g n ize a cause of action for bad faith against an independent adjusting company. For both o f these reasons, National Specialty's claim of bad faith against AIG is dismissed. B. A IG is not a Party to the National Union Policy

N a tio n a l Specialty seeks a declaration that the National Union policy covers the in c id e n ts giving rise to this matter. However, no allegation in the complaint asserts a basis b y which this claim could be vindicated against AIG. National Specialty has failed to p ro v id e evidence suggesting that AIG issued an insurance policy of any kind to any party to th is case. National Specialty has also failed to produce a legal theory by which AIG would b e liable to provide insurance coverage under the National Union policy. As argued in N a tio n a l Union and AIG's briefs--any insurance benefits owed under the National Union p o lic y are owed by National Union and not AIG. III. C o n c lu s io n F o r the foregoing reasons, National Union and AIG's motion to dismiss [dkt. # 18] is granted. The declaratory judgment action to determine coverage under the National Union p o licy remains as the only claim in this suit. IT IS SO ORDERED.

Jan u ary 14, 2010 C o lu m b ia , South Carolina

J o s e p h F. Anderson, Jr. U n ite d States District Judge

4