Morris et al v. Cary's Lake Homeowners Association et al

Filing 70

ORDER AND OPINION granting 23 Motion for Judgment on the Pleadings. Signed by Honorable J Michelle Childs on 12/29/2016.(asni, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
Stephen F. Morris and Martha Morris,

)
)
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Plaintiffs,
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v.
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Auto-Owners Insurance Company,
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Defendant.
)
____________________________________)

Civil Action No.: 3:16-cv-00880-JMC

ORDER AND OPINION

Defendant Auto-Owners Insurance Company (“Defendant”), pursuant to Fed. R. Civ. P.
12(c), filed a motion for judgment on the pleadings (ECF No. 23) on its counterclaim for
declaratory judgment against Plaintiffs Stephen F. and Martha Morris (“Plaintiffs”) (ECF No. 4 at
10-14) as well as on Plaintiffs’ claims for bad-faith refusal to pay, breach of contract, and breach
of contract with fraudulent intent against it (ECF No. 1-1 at 19-22). For the reasons that follow,
the court GRANTS Defendant’s motion for judgment on the pleadings (ECF No. 23).
I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs initiated this action by filing suit in the Court of Common Pleas for Richland
County, South Carolina, on February 24, 2016, against Defendant and against Cary’s Lake
Homeowners Association, Upper Rockyford Lake Owners Association, Inc., and Lake Elizabeth
Estates, Inc. (together, not including Defendant Auto-Owners Insurance Company, the “dam
Defendants”). (ECF No. 1-1.) In their complaint, Plaintiffs allege that “[o]n October 4, 2015, the
State of South Carolina experienced hours of intense rainfall as a result of the convergence of two
powerful weather systems” and that “[a]fter hours of rainfall, a dam in northeastern Richland
County cracked and then eventually broke completely, allowing a substantial amount of muddy

1

water to flow freely downstream through its earthen dike.” (Id. at 8.) Anticipating arguments raised
in the instant motion, Plaintiffs specifically allege that the “release of contained water was not due
to a breach of the dam because of the height of the water but rather due to the failed and eroded
construction of the body of the dam itself, as well as a lack of maintenance needed to protect its
integrity.” (Id.) Plaintiffs further allege that the waters continued to flow through Gills Creek
watershed causing several other dams owned or maintained by the dam Defendants to fail or break.
(Id.) “The effect of the dams’ breaking . . . was a powerful surge of an enormous amount of water
throughout the Columbia area,” which “sent an incursion of water . . . into Plaintiff[s’] home . . . .”
(Id. at 9.) Plaintiffs asserted claims for negligence, strict liability, and nuisance against the dam
Defendants based on their alleged failure to maintain, build, and/or operate the dams, the breaking
of which allegedly contributed to the damage of Plaintiffs’ property. (Id. at 8-24.)
Plaintiffs also allege that their home was covered by an insurance policy entered into
between Defendant and Plaintiffs and that Defendant refused to make payments to Plaintiffs
allegedly due under the policy’s terms on the basis that the policy excluded coverage for damage
caused by flooding. (Id. at 10; see ECF No. 1-2; ECF No. 1-3 at 1-13.) The exclusion at issue states
that Defendant
do[es] not cover loss to covered property caused directly or indirectly by any
of the following, whether or not any cause or event contributes concurrently or
in any sequence to the loss:
....
Water damage, meaning:
(a) regardless of the cause:
1) flood . . . .

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(ECF No. 1-2 at 93, 118.) The policy also contains a notice that purports to be required by the
South Carolina Department of Insurance, with the heading “LIMITATIONS OR EXCLUSIONS
UNDER THIS POLICY” and stating, “Flood—Flood damage is not covered under your policy.”
(ECF No. 1-3 at 2.)
In their complaint, Plaintiffs allege that the exclusion set forth above
does not apply to the circumstances leading to Plaintiffs’ losses to their home[,]
and payment should be made pursuant to the terms of the homeowner’s policy
in effect. The damage to the home was the direct result of broken manmade
dams due to failed construction and lack of maintenance; the negligence of
third-parties caused or greatly contributed to the damage to Plaintiffs’ home. It
was not the result of a flood as contemplated within the language of the
Exclusion for water damage.
(ECF No. 1-1 at 10.) Based on the allegations set forth above, Plaintiffs’ complaint includes a
claim for breach of contract against Defendant on the ground that Defendant failed to make
payments for the damages sustained by the home and a claim for breach of contract with fraudulent
intent based on the same failure to make payments. (Id. at 20-21.) The complaint also contains a
claim for bad-faith refusal to pay against Defendant based on an alleged breach of the implied
covenant of good faith and fair dealing again grounded on the same failure to make payments. (Id.
at 19-20.)
The action was removed to federal court pursuant to the court’s diversity jurisdiction (ECF
No. 1), and, following removal, the court entered an order severing the claims against the dam
Defendants, remanding them to state court, and retaining jurisdiction over the claims against
Defendant (ECF No. 37.) Defendant filed a counterclaim against Plaintiffs, seeking a declaratory
judgment, pursuant to 28 U.S.C. § 2201, et seq., “declaring that the [policy] does not provide
coverage for the flood damage to [Plaintiffs’ home] under the circumstances presented in
Plaintiffs’ civil action.” (ECF No. 4 at 14.)

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Defendant filed the instant motion for judgment on the pleadings, pursuant to Rule 12(c),
arguing that it is entitled to judgment on its claim for declaratory judgment because the facts
alleged by Plaintiffs show that the policy does not provide coverage for the damage sustained by
Plaintiffs’ home and that Plaintiffs’ claims against Defendant fail as a matter of law because they
are all grounded on the allegation that the policy provides such coverage. (See ECF No. 23.)
Reduced to essentials, Defendants’ argument is that the term “flood,” as used in the policy and in
South Carolina law, encompasses the circumstances alleged by Plaintiffs and, therefore, that the
water damage sustained by the home is not covered by the policy. (See id.) Plaintiffs argue,
however, that the term “flood” in the policy is ambiguous and should be construed in its favor; that
the circumstances they allege do not amount to a “flood,” as that term is used in the policy; and
that the definition of the term advanced by Defendant would lead to absurd results. (See ECF No.
33.)
II. STANDARD OF REVIEW AND APPLICABLE LAW
Rule 12(c) provides that “[a]fter the pleadings are closed—but early enough not to delay
trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c). When a Rule 12(c)
motion challenges the sufficiency of a complaint, “[t]he standard of review for Rule 12(c) motions
is the same as that under Rule 12(b)(6).” Drager v. PLIVA USA Inc., 741 F.3d 470, 474 (4th Cir.
2014) (citing Butler v. United States, 702 F.3d 749, 751-52 (4th Cir. 2012)). “Therefore, a motion
for judgment on the pleadings ‘should only be granted if, after accepting all well-pleaded
allegations in the plaintiff’s complaint as true and drawing all reasonable factual inferences from
those facts in the plaintiff’s favor, it appears certain that the plaintiff cannot prove any set of facts
in support of his claim entitling him to relief.’” Id. (quoting Edwards v. City of Goldsboro, 178
F.3d 231, 244 (4th Cir. 1999)). “A Rule 12(c) motion tests only the sufficiency of the complaint

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and does not resolve the merits of the plaintiff’s claims or any disputes of fact.” Id. (citing Butler,
702 F.3d at 752).
Nevertheless, “a Rule 12(c) motion is designed to provide a means of disposing of cases
when the material facts are not in dispute between the parties,” such that “all material allegations
of fact are admitted or not controverted in the pleadings and only questions of law remain to be
decided by the district court.” 5C Charles A. Wright & Arthur R. Miller, Federal Practice &
Procedure § 1367 (3d ed. 2015). Thus, a Rule 12(c) motion is an appropriate vehicle “to obtain
declaratory judgments where the parties’ only dispute is the proper interpretation of contractual
terms.” Geoghegan v. Grant, No. DKC 10-1137, 2011 WL 673779, at *3 (D. Md. Feb. 17, 2011)
(citing Hous. Auth. Risk Retention Grp., Inc. v. Chi. Hous. Auth., 378 F.3d 596 (7th Cir. 2004);
A.S. Abell Co. v. Balt. Typographical Union No. 12, 338 F.2d 190 (4th Cir. 1964)); see Nat’l
Presbyterian Church, Inc. v. GuideOne Mut. Ins. Co., 82 F. Supp. 3d 55, 58 (D.D.C. 2015).
Under South Carolina law, 1 “[a]n insurance policy is a contract between the insured and
the insurance company, and the policy’s terms are to be construed according to the law of
contracts.” Williams v. Gov’t Emps. Ins. Co., 762 S.E.2d 705, 709 (S.C. 2014). “‘Where the
contract’s language is clear and unambiguous, the language alone determines the contract’s force
and effect.’” Id. (quoting McGill v. Moore, 672 S.E.2d 571, 574 (S.C. 2009)). “‘It is a question of
law for the court whether the language of a contract is ambiguous.’” Id. at 710 (quoting S.C. Dep’t
of Nat. Res. v. Town of McClellanville, 550 S.E.2d 299, 302-03 (S.C. 2001)). “‘A contract is
ambiguous when it is capable of more than one meaning when viewed objectively by a reasonably

1

Because this action is premised on diversity jurisdiction, South Carolina choice of law rules
apply. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941); see also CACI Int’l,
Inc. v. St. Paul Fire & Marine Ins. Co., 566 F.3d 150, 154 (4th Cir. 2009). Both parties agree that
South Carolina law applies to the interpretation of the policy, and that is the law the court applies.
See Cosey v. Prudential Life Ins. Co., 735 F.3d 161, 169 n.7 (4th Cir. 2013).
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intelligent person who has examined the context of the entire integrated agreement and who is
cognizant of the customs, practices, usages and terminology as generally understood in the
particular trade or business.’” Id. (quoting Hawkins v. Greenwood Dev. Corp., 493 S.E.2d 875,
878 (S.C. Ct. App. 1997)). “‘Ambiguous or conflicting terms in an insurance policy must be
construed liberally in favor of the insured and strictly against the insurer.’” Id. (quoting Diamond
State Ins. Co. v. Homestead Indus., Inc., 456 S.E.2d 912, 915 (S.C. 1995). Moreover, in insurance
policies, exclusion clauses are to be narrowly construed, and inclusion clauses are to be broadly
construed. See Hutchinson v. Liberty Life Ins. Co., 743 S.E.2d 827, 829 (S.C. 2013); McPherson
ex rel. McPherson v. Mich. Mut. Ins. Co., 426 S.E.2d 770, 771 (S.C. 1993). However, these rules
of construction, inuring to the benefit of the insured, do not trump clear and unambiguous policy
terms because “if the intention of the parties is clear, courts have no authority to torture the
meaning of policy language to extend or defeat coverage that was never intended by the parties.
MGC Mgmt. of Charleston, Inc. v. Kinghorn Ins. Agency, 520 S.E.2d 820, 823 (S.C. Ct. App.
1999) (citing Diamond State, 456 S.E.2d at 915).
III. ANALYSIS
A. Defendant’s declaratory judgment counterclaim
The policy states that it excludes from coverage loss caused by “water damage,” which it
defines as meaning “regardless of the cause,” among other things, “flood.” (ECF No. 1-2 at 93,
118.) Defendant contends that this provision unambiguously excludes from coverage under the
policy the damage to Plaintiffs’ home resulting from the circumstances that Plaintiffs allege in
their complaint. (See ECF No. 23 at 8-11.) Defendants note that, although the policy does not
define the term “flood,” it does express an intent that neither the cause of flooding (see id. at 9
(citing ECF No. 1-2 at 118 (excluding coverage for water damage meaning flood, “regardless of

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cause”))) nor intervening or concurrent causes of loss aside from flooding (see id. (citing ECF No.
1-2 at 93 (excluding coverage “caused directly or indirectly” by flooding “whether or not any other
cause or event contributes concurrently or in any sequence to the loss”)) would defeat exclusion
of coverage for loss caused by flooding. Defendant also points out that the circumstances that
Plaintiffs allege caused damage to their home fit within the definition of “flood” set forth in M&M
Corp. of South Carolina v. Auto Owners Insurance Co., 701 S.E.2d 33 (S.C. 2010). (ECF No. 23
at 10.) The court agrees with Defendant.
It is well-settled that an insurance policy term is not ambiguous merely because the policy
does not provide a definition for the term. See Bardsley v. Gov’t Emps. Ins. Co., 747 S.E.2d 436,
440 (S.C. 2013) (“The provision also is not ambiguous merely because its terms are undefined in
the policy. . . . If policy language was rendered ambiguous simply because it was not defined,
insurance policies would need to contain definitions for every word in order to avoid ambiguity, a
requirement which would be absurd.”); see also 43 Am. Jur. 2d Insurance § 283 (2014) (“The fact
that an insurance policy does not define each term within it does not somehow make an undefined
term ambiguous. An undefined word or phrase in an insurance policy does not create an inherent
ambiguity . . . .” (footnote omitted)); 16 Richard A. Lord, Williston on Contracts § 49:17 (4th ed.
2014) (“A policy term will not be found to be ambiguous simply because it is not defined in the
policy . . . .”); 2 Steven Pitt, et al., Couch on Insurance § 21:14 (3d ed. 2014) (“[T]he lack of a
definition does not automatically establish that the undefined term is ambiguous.”). Moreover, a
term in an insurance policy is not ambiguous, and the rule construing ambiguities in favor of the
insured does not apply, when the term has been judicially defined. See City of Erie v. Guar. Nat’l
Ins. Co., 109 F.3d 156, 163 (3d Cir. 1997) (“Where . . . a term is not defined in an insurance policy
but possesses a clear legal or common meaning that may be supplied by a court, the contract is not

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ambiguous.”); id. at 163-64 (collecting cases); Order of United Commercial Travelers of Am. v.
Knorr, 112 F.2d 679, 682 (10th Cir. 1940) (“[T]he instruction that the meaning of a term or word
in a policy is most strictly construed against the [insurance] company . . . comes into operation
only where there is ambiguity as to the meaning of a term, and there can be no ambiguity when a
term has been judicially defined.”); Energynorth Nat. Gas, Inc. v. Continental Ins. Co., 781 A.2d
969, 972 (N.H. 2001) (“[A] term in a contract already clearly defined by judicial decision cannot
be considered ambiguous. Where judicial precedent clearly defines a term at issue, we need look
no further than that definition.” (internal citations, quotation marks, and brackets omitted)); 17A
Am. Jur. 2d Contracts § 385 (2014) (“A term in a contract already clearly defined by judicial
decision is not ambiguous; the court will look no further than that definition.”); 43 Am. Jur. 2d
Insurance § 299 (“Where the language to be construed has, by judicial construction, acquired a
clear and definite meaning, the rule of construction in favor of the insured does not apply since
there is no ambiguity in such case.”); 2 Pitt, et al., Couch on Insurance § 21:14 (“[T]here can be
no ambiguity within the meaning of the rule for strict construction against the insurer when a term
has been judicially defined.”); cf. WDI Meredith & Co. v. Am. Telesis, Inc., 597 S.E.2d 885, 888
(S.C. 2004) (finding term ambiguous and resolving ambiguity against drafter after explaining that
“[n]o South Carolina case or statutory provision has been cited to us which defines the term, nor
have we been successful in locating a definition in South Carolina jurisprudence”); Ex parte United
Servs. Auto. Ass’n, 614 S.E.2d 652, 654-55 (S.C. Ct. App. 2005) (finding term “operator,” not
defined by policy, to be unambiguous as applied to facts of the case because of its expansive
construction in prior Supreme Court decision).
Here, although the term “flood” is not defined by the policy, the parties agree that the South
Carolina Supreme Court has provided a controlling definition of the term in M&M Corp. (See ECF

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No. 23 at 2, 10; ECF No. 33 at 9.) In that case, workers had constructed an incomplete drainage
system on a lot next to a hotel, when four inches of rain fell in one day, resulting in water
discharging from the drainage system onto the hotel’s parking lot and damaging the hotel. 701
S.E.2d at 34. The hotel’s insurer, apparently the same insurer as in this case, denied coverage based
in part on the flood exclusion contained in the insurance policy, which, as in this case, did not
define the term “flood.” Id. at 34-35. The district court, where the underlying action was litigated,
certified questions to the South Carolina Supreme Court, asking, among other questions, whether,
under an all-risk insurance policy, “‘flood water’ encompasses water discharged from a stormwater
collection system in concentrated form, pooled, and that thereafter enters a building.” Id. at 35. In
answering that the waters in question were not flood waters, the Supreme Court explained:
[The insurer] asserts this Court should define “flood water” as a “great flow of
water over what is usually dry land,” thus qualifying the water at issue as flood
water and excluding the damage from coverage. While South Carolina courts
have not defined “flood water,” [the insurer]’s suggested definition is far too
broad. Flood waters are those waters that breach their containment, either as
a result of a natural phenomenon or a failure in a man-made system, such as
a levee or a dam. See Milbert v. Carl Carbon, Inc. 89 Idaho 471, 406 P.2d 113,
117 (1965) (“Flood waters are waters which escape, because of their height,
from the confinement of a stream and overflow adjoining territory; implicit in
the definition is the element of abnormality.”). In either case, there is an
element of fortuitousness. See Long Motor Lines v. Home Fire & Marine Ins.
Co. of Cal., 220 S.C. 335, 341, 67 S.E.2d 512, 515 (1951) (clarifying that in
an insurance policy that defined “flood” as “the rising of streams or navigable
waters,” “rising” necessarily connoted an abnormal rising of the waters). We
hold that the water in the present case is not flood water because it did not
breach containment, but instead it was deliberately channeled and cast upon
[the hotel]’s land.
Id. at 36 (emphasis added). Because it appears that the South Carolina Supreme Court set out to
define the term “flood” for purposes of insurance policies and because the parties agree that the
decision in M&M Corp. defines the term, the court concludes that the definition of “flood” in
M&M Corp. applies to the insurance policy at issue in this case.

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As it pertains to the circumstances alleged in Plaintiffs’ complaint, the court concludes that
the term “flood,” as used in the policy and as defined in M&M Corp., is unambiguous. See 43 Am.
Jur. 2d Insurance § 283 (“[A]n ambiguity is detected claim by claim as a contract may be
ambiguous when applied to one set of facts but not another.”); 2 Pitt, et al., Couch on Insurance §
21:14 (“The fact . . . that terms of a policy of insurance may be construed as ambiguous where
applied to one set of facts does not make them ambiguous as to other facts which come directly
within the purview of such terms.”); cf. Thermal Eng’g Corp. v. Rasmussen Iron Works, Inc., No.
2004-MO-050, 2004 WL 6396017, at *3 (S.C. Sept. 15, 2004) (finding no ambiguity in definition
of contractual term “under the facts and circumstances presented in th[e] case”); Walde v. Ass’n
Ins. Co., 737 S.E.2d 631, 635 (S.C. Ct. App. 2012) (concluding that “the provisions of the
[insurance p]olicy, and the manner in which they apply under the allegations at issue, are
unambiguous” (footnote omitted)). Plaintiffs’ complaint alleges that, after hours of intense rainfall,
several dams cracked and broke in succession, resulting in a powerful surge of water in the
Columbia area and the incursion of water into Plaintiffs’ home, causing the damage underlying
their claims against the policy. (ECF No. 1-1 at 3-4.) These waters, as the complaint describes
them, fit precisely into the definition of flood waters that is provided by M&M Corp.: “waters that
breach their containment . . . as a result of . . . a failure in a man-made system, such as . . . a dam.”
701 S.E.2d at 36. Thus, as it applies to the allegations at issue here, there is no ambiguity in the
term “flood,” and the policy expressly excludes coverage for water damage caused by the
circumstances alleged in Plaintiffs’ complaint.
Plaintiffs’ attempts to avoid this result are unavailing. First, Plaintiffs argue that the focus
on the italicized sentence referenced above ignores other language in the M&M Corp. decision.
(ECF No. 33 at 6, 9-10.) Specifically, Plaintiffs point to the decision’s parenthetical quotation of

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language from the Idaho Supreme Court’s decision in Milbert (id. at 9), which states that “[f]lood
waters are waters which escape, because of their height, from the confinement of a stream and
overflow adjoining territory,” Milbert, 406 P.2d at 117. Relying on Milbert’s language, Plaintiffs
argue that the circumstances alleged in their complaint does not fit into the definition of flood in
M&M Corp. because it does not allege that the waters escaped their confinement because of their
height but because they passed through dams that broke due to negligence. (ECF No. 33 at 9.)
Plaintiffs’ reliance on Milbert’s language is misplaced. This court has elsewhere explained
the error and the danger of equating a tribunal’s quotation of another authority’s rule with the rule
expressed by the tribunal itself, especially when the tribunal’s rule and the other authority’s rule
are clearly not on all fours with each other. 2 Here, the M&M Corp. court expressly stated that flood
waters are those “waters that breach their containment,” including breaches that result from “a
failure of a man-made system, such as . . . a dam.” 701 S.E.2d at 36. The verb “breach” embraces
the idea of breaking through, or making a gap in, a barrier. See breach, Oxford English Dictionary

2

Recently, in Companion Prop. & Cas. Inc. Co. v. U.S. Bank Nat’l Ass’n, No. 3:15-cv-01300JMC, 2016 WL 6781057 (D.S.C. Nov. 16, 2016), the court explained:
The rulings of other courts that are conveyed during . . . a canvassing [of their
case law] should not be confused with [a c]ourt’s own ruling. It would be
strange if, by merely canvassing the extant authorities and citing some more
favorably than others, the express rule adopted by a court could be usurped by
the expressions of the authorities favorably cited. It would be stranger still for
the [the court] to have intended to adopt a rule in all points equal to that created
by another court but, when it came to expressing the rule it adopted, to have
stated it in such a way that “at first blush” it operates much differently than the
other court’s rule. . . . [T]he [court] could not have been unaware that the rule
it adopted was not on all fours with the rules expressed [by the other courts
whose decisions it cited]; in fact, the facial dissimilarity between the rule
adopted [by the court] from the rules expressed [by the other courts] should
caution against bootstrapping the latter into the former.
2016 WL 6781057, at *18.
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(“To make a breach in (a wall, defence, natural boundary, etc.); to break through.”),
http://www.oed.com/view/Entry/22880?rskey=1Yhpbl&result=2#eid (last visited Dec. 28, 2016);
breach, Oxford Dictionaries (“Make a gap in and break through (a wall, barrier, or defense)”),
http://oxforddictionaries.com/definition/american_english/breach (last visited Dec. 28, 2016); 3
breach, Merriam-Webster Unabridged Dictionary (“a : to make a breach in : smash a gap through
: make a hole in by attrition[4] . . . c : to wear or cut an opening in especially by erosion”),
http://unabridged.merriam-webster.com/unabridged/breach (last visited Dec. 28, 2016). Relevant
definitions of the noun “failure,” in conjunction with the word “dam,” can contemplate breakage.
See failure, Merriam-Webster Unabridged Dictionary (“a collapsing, fracturing, or giving way
under stress : inability of a material or structure to fulfill an intended purpose”),
http://unabridged.merriam-webster.com/unabridged/breach (last visited Dec. 28, 2016). To the
extent that Milbert defined flood so as to include only those waters that escape containment by
overflowing their barriers due to their height and to exclude those waters that escape their
containment due to their breaking through their barriers, this restriction is not contemplated by the
definition of flood expressed by M&M Corp. The court rejects Plaintiffs’ argument, which would
supplant M&M Corp.’s definition of flood with Milbert’s definition. The court likewise rejects any
attempt to distinguish this case from M&M Corp. on the basis that the water is alleged to have
accumulated as a result of breaking through the dams rather than overflowing them.

3

As examples of the word being used with this definition in mind, the Oxford Dictionaries include,
“the river breached its banks;” “Last year’s floods in Gowdall led to over 100 properties being
flooded after a barrier bank was breached by the River Aire;” “That includes bringing back the 10acre lake built in the 1740s, but drained in 1922 when the dam wall was breached;” and
“Restoration of a lake that drained away when a dam wall was breached is a major part of the
plan.” Synonyms include “break (through), burst (through), rupture[;] informal bust (through).”

4

The Merriam-Webster Unabridged Dictionary includes the phrase “breaching a dam” as an
example of the word being used with this definition.
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Next, Plaintiffs argue that the definition of flood in M&M Corp. does not extend to
circumstances, such as are alleged in their complaint, in which the waters breached their
containment due to negligence of a third party. (ECF No. 33 at 8-9.) The M&M Corp. decision
does not address whether waters that have breached their containment due to negligence may
nonetheless constitute flood waters. Aside from its primary definition of flood waters, it held only
that they do not include waters that are “deliberately channeled and cast upon” another’s land. 701
S.E.2d at 36. The court’s limitation on the definition—that the cause of the breach of containment
not be deliberate—was spurred by its determination, relying on Milbert and Long Motor Lines,
that there must be “an element of fortuitousness” rather than an intentional act. See id. Nothing in
this limitation suggests that a breach resulting from negligence would lack the requisite element
of fortuity or would equate to a deliberate casting of water. Moreover, Plaintiffs have pointed to
nothing suggesting that a reasonably intelligent person would understand the term flood to not
apply when waters breach their containment through negligence, and no definition of flood the
court has reviewed turns on whether the inundation of water at issue was caused by human
negligence. See generally In re Katrina Canal Breaches Litig., 495 F.3d 191(5th Cir. 2007). 5

5

Although In re Katrina concerned Louisiana law, the issue faced by the Fifth Circuit was
substantially similar to the issues presented here. Hurricane Katrina dumped tremendous amounts
of water on the Louisiana coast, and the levees along several New Orleans canals ruptured,
resulting in water damage to numerous buildings after the city was inundated with water. 495 F.3d
at 195. The buildings’ owners sued their insurers who had denied coverage, relying on the flood
exclusion provisions in the policies. Id. at 196. The flood exclusion provisions at issue there were
similar to the provision in this case, stating “[w]e do not insure for loss caused directly or indirectly
by any of the following. Such loss is excluded regardless of any other cause or event contributing
concurrently or in any sequence to the loss. . . . We do not insure for loss . . . [c]aused by water
damage, meaning . . . [f]lood.” Id. at 203. The policies did not define the term flood. Id. at 209.
Under Louisiana law, ambiguity in the policy is to be construed in the insured’s favor, and the
primary issue was whether the flood exclusions were ambiguous. Id. at 207-08. “The plaintiffs
contend[ed] that their policies’ flood exclusions d[id] not unambiguously exclude coverage for
losses caused by an inundation of water resulting from a breached levee where the breach occurred
in part because the levee was negligently designed, constructed, or maintained.” Id. at 208.
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Lastly, Plaintiffs argue that reading the term “flood” as broadly as advanced by
Defendant’s definition would lead to unreasonable or absurd results, as demonstrated by several
hypothetical examples they offer. (ECF No. 33 at 11-12.) The court rejects this argument for two
reasons. First, Plaintiffs provide no authority for the proposition that the court should refuse to
enforce an insurance policy’s otherwise unambiguous terms on the ground that they may lead to
unreasonable or absurd results, and the court notes that there is case law suggesting the contrary.
See Evanston Ins. Co. v. Watts, 52 F. Supp. 3d 761, 769 (D.S.C. 2014) (“‘We are without authority
to alter a contract by construction or to make new contracts for the parties. Our duty is limited to
the interpretation of the contract made by the parties themselves, regardless of its wisdom or folly,
apparent unreasonableness, or failure to guard their rights carefully.’” (quoting C.A.N. Enters., Inc.
v. S.C. Health & Human Servs. Fin. Comm'n, 373 S.E.2d 584, 587 (1988))); Williams, 762 S.E.2d
at 709 (“‘Where the contract’s language is clear and unambiguous, the language alone determines
the contract’s force and effect.’” (quoting McGill, 672 S.E.2d at 574)). Such a proposition is even

Louisiana case law had not defined flood in the context of a flood exclusion provision and did not
address the relevance of inundation of water resulting from natural causes as opposed to man-made
causes or inundation caused by human negligence. Id. at 208. To determine whether the definition
of flood was ambiguous on the ground that it might depend on such causes of inundation, the Fifth
Circuit canvassed dictionary definitions, treatises, and case law from other jurisdictions and
considered the arguments raised by the insureds. Id. at 210-21. After exhaustive review, the court
“conclude[d] . . . that even if the plaintiffs can prove that the levees were negligently designed,
constructed, or maintained and that the breaches were due to this negligence, the flood exclusions
in the plaintiffs’ policies unambiguously preclude their recovery.” Id. at 196.
This court would embark on a similar path—asking whether dictionary definitions,
treatises, and case law from other jurisdictions suggests that whether inundating waters constitute
flood waters depends on whether the inundation is caused by human negligence. Because that path
has been so well hewn by the Fifth Circuit, the court declines to duplicate the effort. The court
agrees with the Fifth Circuit that whether the inundation was due to human negligence is irrelevant:
to a reasonably intelligent person, an inundation of waters caused by the failure of a dam following
hours of intense rainfall is a flood, without regard as to whether the failure resulted from
negligence.
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more dubious when the purported unreasonable or absurd results would occur not under the
circumstances of the case under review but rather under hypothetical circumstances that are not
before the court. See Bishop v. Nat’l Health Ins. Co., 344 F.3d 305, 308 (2d Cir. 2003) (“When
examining an insurance contract for ambiguity, a court must look to the situation before it, and not
to other possible or hypothetical scenarios.”); Clarendon Am. Ins. Co. v. Embers, Inc., 273 F.3d
1107, at *3 (5th Cir. 2001) (unpublished table decision) (“When analyzing an insurance contract
for ambiguity, the relevant facts are those of the instant case, not any possible hypothetical that
may eliminate the ambiguity at a theoretical level.” (citing Lee R. Russ, Couch on Insurance §
21:11 (3d ed. 1995))); see also 43 Am. Jur. 2d Insurance § 283; 2 Pitt, et al., Couch on Insurance
§ 21:14; cf. Thermal Eng’g Corp., 2004 WL 6396017, at *3; Walde, 737 S.E.2d at 635. Second,
although Plaintiffs’ argument is ostensibly directed at Defendant’s interpretation of the term flood
in the policy, it is more properly understood as a challenge to the breadth of the South Carolina
Supreme Court’s definition of flood in M&M Corp., as each of the purported absurdities result
from that definition. As Defendant rightly points out, this court has no authority to alter South
Carolina law. Grayson v. Anderson, 816 F.3d 262, 272 (4th Cir. 2016); Fleming v. Asbill, 42 F.3d
886, 890 (4th Cir. 1994); Burris Chem., Inc. v. USX Corp., 10 F.3d 243, 247 (4th Cir. 1993);
Cincinnati Ins. Co. v. Crossmann Comtys. of N.C., Inc., No. 4-09-1379-RBH, 2013 WL 1283381,
at *2 (D.S.C. 2013).
In sum, the court concludes that the terms of the policy unambiguously exclude coverage
for water damage caused by flood, a term which, according to South Carolina law, encompasses
the circumstances alleged by Plaintiffs’ complaint. Accordingly, Defendant is entitled to judgment
declaring that the policy does not provide coverage for the flood damage to Plaintiffs’ home under
the circumstances presented in Plaintiffs’ complaint.

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B. Plaintiffs’ claims for breach of contract, breach of contract with fraudulent intent, and
bad-faith refusal to pay
Having concluded that the policy excluded coverage for the damage to Plaintiffs’ home
caused by the circumstances alleged in Plaintiffs’ complaint, the court is compelled to conclude
that Plaintiffs’ claim against Defendant for breach of contract, which is premised on the allegation
that the policy provides coverage for the damage caused by the circumstances alleged in the
complaint (see ECF No. 1-1 at 20-21), must fail as a matter of law. Defendant is not obligated to
make payments for damage not covered by the policy; thus, a claim for breach of contract based
on Defendant’s failure to make such payments cannot be maintained.
The court also concludes that Plaintiffs’ claim for breach of contract with fraudulent intent
must fail as a matter of law. “To prevail on a breach of contract with fraudulent intent claim, there
must first be a breach of contract.” Holloman v. S.C. Dep’t of Mental Health, No. 3:14-1136-MBSPJG, 2016 WL 1128023, at *4 (D.S.C. March 23, 2016) (citing Edens v. Goodyear Tire & Rubber
Co., 858 F.2d 198, 202 (4th Cir. 1998)). Here, the only breach of contract Plaintiffs allege in their
complaint was Defendant’s failure to make payments for the damage to their home caused by the
circumstances alleged in the complaint. (See ECF No. 1-1 at 21.) Because the court has concluded
that Plaintiffs cannot proceed with this allegation of breach, they cannot maintain their claim for
breach of contract with fraudulent intent, which is based upon it. See Amason v. PK Mgmt., LLC,
No. 3:10-1752-JFA, 2011 WL 1100169, at *6 (D.S.C. March 23, 2011) (concluding that claim for
breach of contract accompanied by fraudulent act “fails at the outset” if the plaintiff fails to
sufficiently plead an underlying breach of contract); Temple v. Med. Univ. of S.C., No. 2:02-201418, 2004 WL 3317660, at *11 (D.S.C. Feb. 6, 2004) (“In order to recover for breach of contract
with fraudulent intent, plaintiff must first prove breach of contract. . . . [A] claim for breach of
contract with fraudulent intent fails as a matter of law in absence of a breach.”). As the lack of an
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underlying breach of contract is enough to warrant judgment in Defendant’s favor, the court
declines to address the parties’ arguments regarding whether the complaint sufficiently pleads
dishonesty in fact. (See ECF No. 23 at 12-14; ECF No. 33 at 12-13.)
The court also concludes that Plaintiffs’ claim against Defendant for bad-faith refusal to
pay must also fail as a matter of law. The parties agree (see ECF No. 23 at 15; ECF No. 33 at 12)
that the elements of claim against an insurer for bad-faith refusal to pay benefits are “‘(1) the
existence of a mutually binding contract of insurance between the plaintiff and the defendant; (2)
refusal by the insurer to pay benefits due under the contract; (3) resulting from the insurer's bad
faith or unreasonable action in breach of an implied covenant of good faith and fair dealing arising
on the contract; (4) causing damage to the insured.’” Cock-N-Bull Steak House c. Generali Ins.
Co., 466 S.E.2d 727, 730 (S.C. 1996) (quoting Crossley v. State Farm Mut. Auto. Ins. Co., 415
S.E.2d 393, 396-97 (1992)). Plaintiffs’ claim fails at the second element. Their claim is based on
the allegation that Defendant refused to make payments for damages to their home caused by the
circumstances alleged in the complaint. (See ECF No. 1-1 at 19-20) Because the court has already
concluded as a matter of law that no such payments were due under the policy, Plaintiffs may not
maintain this cause of action. See CAMICO Mut. Ins. Co. v. Jackson CPA Firm, No. 2;15-cv-1823PMD, 2016 WL 7403959, at *14 (D.S.C. Dec. 22, 2016).
IV. CONCLUSION
For the reasons set forth above, Defendant’s motion for judgment on the pleadings,
pursuant to Rule 15(c), (ECF No. 23) is GRANTED. Defendant is entitled to a declaration that
the policy excludes coverage for the flood damage to Plaintiffs’ home under the circumstances
presented in Plaintiffs’ complaint. Additionally, Defendant is entitled to judgment in its favor on
Plaintiffs’ claims against Defendant for breach of contract, breach of contract with fraudulent

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intent, and bad-faith refusal to pay (ECF No. 1-1 at 19-21). Accordingly, it is ORDERED that
judgment be entered in favor of Defendant.
IT IS SO ORDERED.

United States District Court Judge
December 29, 2016
Columbia, South Carolina

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