Starr Indemnity & Liability Company v. JCW Holdings LLC et al

Filing 43

IT IS THEREFORE ORDERED that Plaintiff's Motion for Summary Judgment is GRANTED IN PART AND DENIED IN PART. Plaintiff's motion is DENIED with regard to the duty to defend. Plaintiff's motion is GRANTED with re gard to any medical payment coverage, as the Court finds that medical payments coverage is excluded for Jonathan's injuries. Plaintiff's motion is FURTHER GRANTED with regard to whether the policy insured the separate legal entity of Extrem e Fitness, LLC for the incident, as the Court finds that the policy does not insure Extreme. Plaintiff's motion is FURTHER GRANTED to the extent Defendants seek coverage under an amalgamation theory, as the Court finds that this theory lacks mer it. Finally, Plaintiff's motion is DENIED WITHOUT PREJUDICE with regard to the duty to indemnify because it is premature and because there is coverage for JCW and Jason in their capacities as commercial landlord and manager for the commercial la ndlord, and there are presently questions of fact regarding the landlord's responsibilities, if any, which need to be determined by the jury in the underlying suit. The Court is inclined to stay further proceedings in this case regarding inde mnity pending the outcome of the state court case and factual issues therein. Therefore, the Court requests both counsel file a statement concerning their position regarding a stay. Also, both counsel should advise the Court regarding any disposition of the underlying state case. Signed by the Honorable R Bryan Harwell on 6/23/2014. (hcic, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
Starr Indemnity & Liability
Company,
Plaintiff,
v.
JCW Holdings, LLC; Extreme
Fitness, LLC; Jason Weatherford;
and Jonathan Weatherford,
Defendants.

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Civil Action No.: 4:12-cv-3271-RBH

ORDER

Plaintiff Starr Indemnity & Liability Company (“Starr” or “Plaintiff”) filed this declaratory
judgment action on November 15, 2012 seeking a judicial determination of no coverage. See
Compl., ECF No. 1. This matter is before the Court on the motion for summary judgment of Starr,
filed on December 4, 2013.

See Pl.’s Mot., ECF No. 29.

Defendant Jonathan Weatherford

(“Jonathan”) responded to the motion on January 7, 2014, see ECF No. 35, and Defendants JCW
Holdings, LLC (“JCW”); Extreme Fitness, LLC (“Extreme”); and Jason Weatherford (“Jason”) also
filed a separate response on January 7, 2014, see ECF No. 36. A hearing was held before the
undersigned on May 28, 2014. For the reasons stated below, the Court grants in part and denies in
part Starr’s motion for summary judgment.
FACTUAL BACKGROUND
This case is a declaratory judgment action seeking a declaration as to whether there is
coverage under a policy issued by Starr Indemnity to JCW Holdings, LLC related to the allegations of
an underlying state action, see Jonathan H. Weatherford vs. JCW Holdings, LLC, et al., Civil Action
No. 2013-CP-21-1097. The Plaintiff in the underlying action, Jonathan Weatherford, alleges that he

was injured at a gym called “The Grind.” See State Compl., ECF No. 29-2 at ¶ 5–6. He alleges that
he was exercising on the gym’s premises when he slipped from a pull up bar and fell, causing him
“catastrophic” injuries. See id. He sued JCW Holdings, LLC and Jason C. Weatherford d/b/a “The
Grind” in the state action.1
“The Grind,” however, is not the name of the gym; rather, it is the name of an exercise class
operated by Extreme Fitness, LLC. Jason Weatherford Dep., ECF No. 29-3 at 9:14–25. Extreme
operates a health and fitness club, and is wholly owned by Jason. Id. at 5:14–21, 17:4–6. Extreme
offers a class called “The Grind” as part of its business. See Jason Weatherford Dep., ECF No. 37-1
at 9:14–10:4. Jason also wholly owns JCW Holdings, LLC with his wife. Id. at 17:1–3, 43:17–22.
JCW owns a strip mall that leases space to Extreme, along with several other entities. For example,
in 2008 there were four tenants: (1) Extreme, (2) JPT Imaging, (3) Young and Phillips Law Firm, and
(4) Carte-Ay Salon. See id. at 17:22–20:4.
The present dispute solely revolves around the insurance policy issued to JCW, and the only
question in this case is whether the policy issued to JCW provides coverage with regard to the
underlying state action.
SUMMARY JUDGMENT STANDARD
Summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(c). The moving party has the burden of proving that summary judgment is

1

Although Jonathan Weatherford and Jason Weatherford share the same last name, both of these
parties state that they are unrelated. See ECF No. 29-1 at 1; ECF No. 35 at 1.
2

appropriate. Once the moving party makes the showing, however, the opposing party must respond
to the motion with “specific facts showing there is a genuine issue for trial.” Fed. R. Civ. P. 56(e).
When no genuine issue of any material fact exists, summary judgment is appropriate. Shealy
v. Winston, 929 F.2d 1009, 1011 (4th Cir. 1991). The facts and inferences to be drawn from the
evidence must be viewed in the light most favorable to the non-moving party. Id. However, “the
mere existence of some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the requirement is that there be no genuine issue
of material fact.” Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986)).
In this case, the moving party “bears the initial burden of pointing to the absence of a genuine
issue of material fact.” Temkin v. Frederick Cnty. Comm’rs, 845 F.2d 716, 718 (4th Cir. 1991)
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). If the moving party carries this burden,
“the burden then shifts to the non-moving party to come forward with fact sufficient to create a triable
issue of fact.” Id. at 718–19 (citing Anderson, 477 U.S. at 247–48).
Moreover, “once the moving party has met its burden, the nonmoving party must come
forward with some evidence beyond the mere allegations contained in the pleadings to show there is a
genuine issue for trial.” Baber v. Hosp. Corp. of Am., 977 F.2d 872, 874–75 (4th Cir. 1992). The
nonmoving party may not rely on beliefs, conjecture, speculation, of conclusory allegations to defeat
a motion for summary judgment. See id.; Doyle v. Sentry, Inc., 877 F. Supp. 1002, 1005 (E.D. Va.
1995). Rather, the nonmoving party is required to submit evidence of specific facts by way of
affidavits, depositions, interrogatories, or admissions to demonstrate the existence of a genuine and
material factual issue for trial. See Fed. R. Civ. P. 56(c), (e); Baber, 977 F.2d at 875 (citing Celotex,
477 U.S. at 324)). Moreover, the nonmovant’s proof must meet “the substantive evidentiary
3

standard of proof that would apply at a trial on the merits.” Mitchell v. Data Gen. Corp., 12 F.3d
1310, 1316 (4th Cir. 1993); DeLeon v. St. Joseph Hosp., Inc., 871 F.2d 1229, 1223 n.7 (4th Cir. 1989).
DISCUSSION
It is undisputed that Extreme did not have a policy of liability insurance coverage in its name
at the time of the accident. See ECF No. 37-1 at 34:6–18. Extreme is also not a named insured
under the Starr policy, and it is not a named Defendant in the underlying state case. Defendants
advance several theories as to why coverage is present for the defendants in the underlying state case.
There are three issues of coverage for this Court to determine: (1) coverage regarding the duty
to defend; (2) coverage regarding the duty to indemnify; and (3) medical payments coverage. Based
on the reasoning below, the Court denies Starr’s motion for summary judgment regarding the duty to
defend. The Court grants the motion with regard to any medical payment coverage. The Court also
grants the motion for summary judgment that the policy did not insure the separate legal entity of
Extreme Fitness, LLC for the incident. The Court further grants the motion for summary judgment
to the extent Defendants seek coverage under an amalgamation theory. Finally, the Court denies the
motion for summary judgment as to indemnity, as there is coverage for JCW and Jason but only in
their capacities as a commercial landlord and manager for the commercial landlord, and there are
presently questions of fact regarding the landlord’s responsibilities as to Paragraph 7(d) of the
underlying state court complaint which need to be determined by the jury in the underlying suit.
The Court will first set forth general principles of insurance law applicable to this matter, and
then will address whether there is coverage.

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I.

General Principles
“An insurer’s obligation under a policy of insurance is defined by the terms of the policy

itself, and cannot be enlarged by judicial construction.” MGC Mgmt. of Charleston, Inc. v. Kinghorn
Ins. Agency, 520 S.E.2d 820, 823 (S.C. Ct. App. 1999) (citing Nationwide Mut. Ins. Co. v.
Commercial Bank, 479 S.E.2d 524 (S.C. Ct. App. 1996)). Courts “must enforce, not write, contracts
of insurance,” and “must give the policy language its plain, ordinary, and popular meaning.” Id.
(citing Fritz-Pontiac-Cadillac-Buick v. Goforth, 440 S.E.2d 367 (S.C. 1994)). “[A]mbiguous or
conflicting terms in an insurance policy must be construed liberally in favor of the insured and strictly
against the insurer.” Id. (citing Diamond State Ins. Co. v. Homestead Indus., Inc., 456 S.E.2d 912
(S.C. 1995)). “However, if the intention of the parties is clear, courts should not torture the meaning
of policy language to extend or defeat coverage that was never intended by the parties.” Id. (citing
Diamond State, 456 S.E.2d 912). A party seeking coverage under a liability policy must be an
insured under the contract of insurance. Shelby Mut. Ins. Co. v. Askins, 413 S.E.2d 855, 859 (S.C.
Ct. App. 1992). Moreover, an insurance policy may contain exclusions, tailored to the business of
the particular insured, designed to limit the insurer’s risk exposure from hazards peculiar to that
business. B.L.G. Enters., Inc. v. First Fin. Ins. Co., 514 S.E.2d 327, 330 (S.C. 1999) (quoting Couch
on Insurance 3d, § 130:14 (1997)). “Although exclusions in an insurance policy are construed
against the insurer, insurers have the right to limit their liability and to impose conditions on their
obligations provided they are not in contravention of public policy or a statutory prohibition.” Id.
(citations omitted).
“[U]nder South Carolina law, ‘[q]uestions of coverage and the duty of a liability insurance
company to defend a claim brought against its insured are determined by the allegations of the
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[underlying] complaint.’” Auto Owners Ins. Co. v. Pers. Touch Med Spa, LLC, 763 F. Supp. 2d 769,
776 (D.S.C. 2011) (quoting City of Hartsville v. S.C. Mun. Ins. & Risk Fin. Fund, 677 S.E.2d 574, 578
(S.C. 2009)). In South Carolina, the duty to defend is broader than the duty to indemnify. Ross
Dev. Corp. v. Fireman’s Fund Ins. Co., 809 F. Supp. 2d 449, 457 (D.S.C. 2011). “If the underlying
complaint creates a possibility of coverage under an insurance policy, the insurer is obligated to
defend.” City of Hartsville, 677 S.E.2d at 578 (citing Gordon-Gallup Realtors, Inc. v. Cincinnati
Ins. Co, 265 S.E.2d 38 (S.C. 1980)) (emphasis added). As this Court has previously explained, this
means that “the duty to defend is triggered where the underlying complaint includes any allegation
that raises the possibility of coverage.”

Auto-Owners Ins. Co. v. Newsome, No.

4:12-cv-00447-RBH, 2013 WL 3148334, at *4 (D.S.C. June 19, 2013). An insurer whose duty to
defend has been triggered by a lawsuit against the insured “is not justified in refusing to defend the
entire case.” Town of Duncan v. State Budget & Control Bd., 482 S.E.2d 768, 773–74 (S.C. 1997);
see also Employers Mut. Liab. Ins. Co. v. Hendrix, 199 F.2d 53, 59 (4th Cir. 1952); Cincinnati Ins.
Co. v. Crossmann Cmtys. of N.C, Inc., No. 4:09-CV-1379-RBH, 2013 WL 1282017, at *11 (D.S.C.
Mar. 27, 2013) (“South Carolina law requires that a triggered insurer with a duty to defend the
policyholder in a suit must defend the policyholder against all claims in that suit, even those claims
that are not covered under the policy.”).
For purposes of determining whether an insurer has a duty to defend, “the allegations in the
[underlying c]omplaint must be applied to the policy in its entirety, which necessarily includes the
exclusions section.” USAA Prop. & Cas. Ins. Co. v. Clegg, 661 S.E.2d 791, 798 (S.C. 2008).
However, the duty to defend is not “strictly controlled” by the allegations of the complaint; rather, it
“may also be determined by facts outside the complaint that are known by the insurer.” Id. If an
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insurer has no duty to defend, it will know that it has no duty to indemnify. See Allstate Indem. Co. v.
Tilmon, No. 1:13-00690-JMC, 2014 WL 1154666, at *5 (D.S.C. Mar. 21, 2014).
“An insurer’s duty to defend is separate from its obligation to pay a judgment rendered against
an insured.” Ross Dev. Corp., 809 F. Supp. 2d at 457 (citing S.C. Med. Malpractice Liab. Ins. v.
Ferry, 354 S.E.2d 378, 380 (S.C. 1987). Under South Carolina law, a liability insurer’s duty to
indemnify is determined by the findings of the fact finder in the underlying case. Ellett Bros., Inc. v.
U.S. Fid. & Guar. Co., 275 F.3d 384, 388–89 (4th Cir. 2001) (citing Jourdan v. Boggs/Vaughn
Contracting, Inc., 476 S.E.2d 708, 711 (S.C. Ct. App. 1996)). In other words, “[t]here is no
obligation to defend until an action is brought and no obligation to indemnify until a judgment against
the insured is obtained.” See Howard v. Allen, 176 S.E.2d 127, 129 (S.C. 1970).
As previously noted, the underlying state complaint only asserts allegations against JCW and
Jason Weatherford d/b/a “The Grind.” However, as the Court has explained, “The Grind” was
merely an exercise class offered by Extreme. ECF No. 37-1 at 9:14–25. Jason owns both Extreme
and JCW, and JCW leases space to Extreme where Extreme operates the gym and conducts “The
Grind” class. Id. at 5:14–21, 9:14–10:4, 17:4–6, 43:17–22.
The disputed policy in this matter explicitly lists JCW Holdings, LLC as the sole named
insured. See ECF No. 1-1 at 1. The Commercial General Liability (“CGL”) coverage part states
that, if the insured named in the declarations is an LLC, the LLC is an insured, along with its
members, “but only with respect to the conduct of [its] business.” See id. at 41. Moreover,
managers are also insureds, “but only with respect to their duties as . . . managers [of the LLC].” Id.
Finally, the policy explains that no person or organization is an insured “with respect to the conduct of
any current or past partnership, joint venture, or limited liability company that is not shown as a
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Named Insured in the Declarations.” Id. at 42. Therefore, the key arguments by the Defendants
attempt to establish either (1) that Jason qualifies as an insured in his individual capacity with regard
to the gym’s operations, or (2) that the “conduct of [JCW’s] business” was in fact operating a gym.
Defendants advance an “amalgamation of interests” argument in support of both of these theories,
asserting that JCW, Extreme, and Jason were so commingled that they were essentially all involved in
running the gym. Thus, they argue, the policy should cover the allegations of the underlying
complaint.
The Court agrees with Plaintiffs, however, that this amalgamation argument fails to establish
a genuine issue of material fact.2 First and foremost, it is undisputed that JCW and Extreme were
legally distinct entities. See ECF No. 37-1 at 16:21–25. Moreover, it is also undisputed that
Extreme did not have its own liability insurance and was not a named insured on the policy. See ECF
No. 37-1 at 34:6–18. Jason’s actions in procuring the policy establish that he did not intend to
procure coverage for risks associated with Extreme. The coverage sought in the application was
“Lessor’s Risk,” and the business description for the insured was a “strip mall,” not a gym. See Aff.
of Sylvia Robinson, ECF No. 29-4 at ¶ 3; Application, ECF No. 29-4 at 4. Extreme Fitness was
merely listed on the application as one of several tenants of the building; it was not a named insured.
See Application, ECF No. 29-4 at 4. Jason denied on the application that JCW is a subsidiary of any
entity or that it has any subsidiaries, see id. at 5, and he represented to the producing agent that
Extreme was a separately organized legal entity, see Robinson Aff., ECF No. 29-4 at ¶ 5. Jason was
informed during the application process that Extreme Fitness would need a separate policy of

2

Even if there was some evidence, the Court questions the appropriateness of Defendants’
amalgamation theory in this context, as was argued by Plaintiff in its Reply Brief at pages 8 and 9.
8

insurance. See ECF No. 29-3 at 34:6–18. He admits that he received a quote for coverage for
Extreme, but that he declined it because he could not afford it. See id. He explained that Extreme
intended to rely on its hold harmless or waiver agreements to protect itself from liability. See id. at
30:1–4.
Defendants, however, argue that Jason used the gym to conduct JCW business. They claim
there is a factual dispute as to whether Jason co-mingled Extreme and JCW, such that an injury at the
gym is “with respect to the conduct” of JCW’s business. Defendants note that at one point in his
deposition, Jason testified he was Extreme’s sole owner and officer, that it had no employees, and that
he felt “[t]he gym and me was one.” See Jason Weatherford Dep., ECF No. 35-1 at 12:4–13, 13:4–
8, 14:25–15:8, 17:4–6. Moreover, he testified that there was no written lease or contract between
JCW and Extreme, and JCW never charged Extreme rent. See id. at 14:6–8, 17:15–18, 49:16–22,
58:4–8, 62:14–16. At one point he also asserted that JCW was the source of funds that bought
equipment for the gym, and helped pay for the gym’s maintenance, upkeep, and workers. See id. at
55:4–56:16, 58:18–25.

Defendants cite Jason’s testimony that he purchased the JCW policy

assuming that it provided liability coverage on the gym because he owned both the building and the
gym. See id. at 35:11–17. Moreover, they cite his testimony that he was not told that the policy
would not cover the gym, even though the agent knew JCW owned the gym’s contents. See id. at
46:22–47:15, 49:2–15, 57:8–17; Report, ECF No. 35-2; Binder, ECF No. 35-3. They also point out
that the policy specifically identified “health or exercise facilities – commercially operated” as part of
JCW’s underwriting information. See Binder, ECF No. 35-3. Defendants note that neither JCW
nor Extreme had any business meetings, office meetings, or shareholders meetings. See ECF No.
35-1 at 43:23–44:9. Finally, they point out that when Jason applied for coverage, he testified he told
9

the agent that he wanted coverage for the business and property owned by JCW, and they argue that
she was aware there was a health and fitness facility in operation at the building JCW owned. See
Jason Weatherford Dep., ECF No. 37-2 at 45:10–19.
The Court finds that the evidence cited by Defendants is insufficient to create a genuine issue
of material fact regarding amalgamation. The Court agrees with the Plaintiff that JCW is not an
insured with respect to the conduct of Extreme under the terms of the policy, and that the policy does
not provide coverage to Extreme. To hold otherwise would be to allow coverage for a risk that Jason
specifically rejected.

Jason explicitly declined an offer of liability coverage for Extreme.

Moreover, the risk specified in the CGL coverage part was “Shopping Centers – buildings or premises
not occupied by the insured (lessor’s risk only).” See ECF No. 35-3. In the application, Jason
represented that JCW does not provide recreational facilities, and that JCW is not active in any joint
ventures and does not share employees with any entities. See Application, ECF No. 37-2 at 40. As
Plaintiff correctly explained, the underwriting information describing a “health and fitness facility”
was necessary for underwriting purposes so the insurance company would know the type of property
covered and could estimate an accurate replacement cost. The mere fact that the types of businesses
run by JCW’s various tenants were listed on the policy does not mean that Starr intended to provide
liability coverage for each of those separate business operations. JCW had multiple tenants, ranging
from a gym, to a hair salon, to a law firm. Moreover, Jason’s purported confusion about whether the
JCW policy would cover Extreme’s liability is questionable, as he specifically noted that he discussed
separate liability coverage for Extreme with an agent. See ECF No. 37-1 at 34:6–18. He admitted
that the agent did not give him any reason to believe that the JCW policy would cover Extreme. Id.
at 35:2–10. Jason was provided a written quote but specifically rejected and declined CGL coverage
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for Extreme Fitness at the same time he took out the JCW policy, which strongly negates his
“assumption” that the JCW policy would cover claims like Jonathan’s at Extreme Fitness where “the
Grind” class was taking place. Furthermore, this “assumption” is particularly questionable in light
of the fact that Jason indicated Extreme intended to rely on its hold harmless agreements in lieu of
insurance if faced with any potential liability. See id. at 30:1–4.
Additionally, the Court finds that the operation of a gym did not constitute “the conduct” of
JCW’s business operations, as JCW’s business was limited to owning and leasing a building, not
operating a gym. Jason repeatedly testified in his deposition that Extreme owned and maintained all
of the exercise equipment, and that Extreme upfit the leased space for use as an exercise facility and
purchased the necessary equipment. See ECF No. 37-1 at 8:18–20; 13:17–21, 21:3–8, 22:11–9. He
also acknowledged that JCW “does not operate a health or fitness club” and that JCW is “strictly the
landlord and owner of the building.” Id. at 9:5–10. Upon cross-examination, however, Jason was
confronted with documentation indicating that he previously represented that JCW owns the contents
of the building, and responded yes to the question “[i]sn’t it a true statement that JCW owns the
contents of the fitness center?” See Report, ECF No. 37-2; Weatherford Dep., ECF No. 37-2 at
45:15–47:15.

Moreover, on cross examination he testified that Extreme may have paid for

equipment and other expenses through funds obtained from a mortgage loan to JCW, and Extreme
may have made some of JCW’s mortgage payments. This contradiction establishes that there may
have been some degree of commingling funds between these entities, but the Court finds that this falls
short of establishing a genuine issue of fact as to whether JCW was actually operating a gym. Jason
consistently represented that these entities were separate and maintained them as such. See ECF No.
37-2 at 62:17–63:15. Particularly unfavorable to Defendants’ case is the fact that Jason specifically
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indicated JCW had no subsidiaries, was not involved in any joint ventures, and did not provide any
recreation facilities. See ECF No. 29-4 at 4, 9. Therefore, the Court finds that operating a gym was
not “the conduct” of JCW’s business operations. Construing the policy to cover liability for the
gym’s activities would constitute “torturing” the language of the policy to extend coverage which
Jason specifically declined. See MGC Mgmt., 520 S.E.2d at 823 (S.C. Ct. App. 1999).
Accordingly, the Court finds that this policy was intended to insure JCW alone with regard to
its business as a commercial landlord. Therefore, the policy only covers the allegations asserted
against JCW as a commercial landlord, and only covers Jason in relation to his involvement as a
member and/or manager of JCW.
II.

Duty to Defend
As previously noted, the Court found that there is no coverage with regard to the allegations

related to Extreme’s operation of the gym. JCW and Extreme were sufficiently distinct such that
coverage is clearly not contemplated for these activities. Thus, to the extent the allegations of the
underlying complaint relate to the operation of a gym, there is no coverage. Moreover, Jason is only
covered in his individual capacity with regard to his duties as a member and/or manager of JCW.
Coverage is excluded with regard to the allegations relating to the operation of the gym, which the
Court finds solely involved Extreme, and Jason’s involvement with that business.
However, as Court explained above, the duty to defend is broader than the duty to indemnify.
The underlying complaint alleges at Paragraph 5 that the Plaintiff “slipped off [a] pull up bar and fell,
causing his head to strike an unpadded brick or concrete wall adjacent to the pull up bar.” ECF No.
29-2, at ¶ 5.

Moreover, the Paragraph 7(d) sub-specification of negligence alleges that the

12

Defendants were negligent in “creating and/or allowing a dangerous and defective condition to exist
at Defendants’ premises.” Id. at ¶ 7(a), (d).
The Court finds that Defendants have presented enough evidence to establish a genuine issue
of material fact as to whether “the underlying complaint creates a possibility of coverage” under the
insurance policy. City of Hartsville v. S.C. Mun. Ins. & Risk Financing Fund, 677 S.E.2d 574, 578
(S.C. 2009) (citing Gordon–Gallup Realtors, Inc. v. Cincinnati Ins. Co., 265 S.E.2d 38 (S.C. 1980))
(emphasis added). The underlying action can be construed to sufficiently allege a lessor-liability
claim against JCW Holdings. It alleges that JCW Holdings owns the property where the injury
occurred, and created and/or allowed a dangerous and defective condition on its premises by failing to
pad the brick or concrete walls. See ECF No. 29-2 ¶¶ 2, 5, 7(d). As the Supreme Court of South
Carolina explained in Byerly v. Connor, “[i]n the absence of an agreement to the contrary, the lessor
surrenders possession and control of the land to the lessee.” 415 S.E.2d 796, 798 (1992). “After the
premises are surrendered in good condition, the lessor is typically not responsible for hazardous
conditions which thereafter develop or are created by the lessee.” Id. (emphasis added). Although
it is undisputed that Extreme and JCW had an unwritten lease agreement, see ECF No. 31-1 at 5:14–
19, 14:6–8, it is unclear which entity was presumed to have control over the maintenance of the leased
premises. Similarly, there is also a genuine issue of fact as to whether the alleged hazardous
condition was created by the lessee or lessor. Jason testified at one point during his deposition that
Extreme “upfit” the premises and determined the floor plan and placing of equipment. See ECF No.
37-1 at 22:6–25. However, at another place in his deposition he indicated that JCW provided the
money to purchase the gym and for maintenance and upkeep of the gym. See id. at 56:1–14.

13

Because the duty to defend is invoked based on the allegations of the underlying complaint,
the Court finds that Starr’s motion for summary judgment on the duty to defend should be denied.
The limited allegations above from the underlying Complaint can be said to sufficiently assert a claim
for premises liability against JCW in its capacity as a commercial landlord. Although coverage is
only present for this narrow issue, an insurer whose duty to defend has been triggered by a lawsuit
against the insured “is not justified in refusing to defend the entire case,” Town of Duncan v. State
Budget & Control Bd., 482 S.E.2d 768, 773–74 (S.C. 1997); see also Employers Mut. Liab. Ins. Co. v.
Hendrix, 199 F.2d 53, 59 (4th Cir. 1952); Cincinnati Ins. Co. v. Crossmann Cmtys. of N.C, Inc., No.
4:09-CV-1379-RBH, 2013 WL 1282017, at *11 (D.S.C. Mar. 27, 2013) (“South Carolina law
requires that a triggered insurer with a duty to defend the policyholder in a suit must defend the
policyholder against all claims in that suit, even those claims that are not covered under the policy.”).
Thus, Plaintiff must still continue to defend the entire underlying matter on behalf of JCW in its
capacity as a commercial landlord and Jason in his individual capacity as a member and/or manager
of JCW as a commercial landlord.
III.

Duty to Indemnify
The Court notes, however, that the duty to indemnify will solely involve JCW’s ultimate

liability, or lack thereof, as a commercial landlord. A determination regarding the duty to indemnify
would be premature at this stage though—and therefore summary judgment is inappropriate
regarding indemnity—because a liability insurer’s duty to indemnify is determined by the findings of
the fact finder in the underlying case. Ellett Bros., 275 F.3d at 388–89 (citing Jourdan, 476 S.E.2d at
711). Several factual questions would need to be resolved by the fact-finder in the underlying case.
First, were the Defendants negligent under the Paragraph 7(d) sub-specification of negligence?
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Furthermore, as noted in Byerly, while the lessor generally surrenders control of the premises to the
lessee, was there an agreement to the contrary here regarding the lessor’s maintenance of the tenant
space? See Byerly, 415 S.E.2d at 798. Finally, was the alleged hazardous condition created by the
lessor or the lessee? See id.
IV.

Medical Payments Coverage
The parties do not appear to seriously dispute whether there is medical payments coverage for

Jonathan’s injuries. The Starr policy specifically excludes medical payments coverage for bodily
injury “to a person . . . injured while participating in any physical exercises . . . .” See ECF No. 1-1 at
40. In the Complaint, Plaintiff requested a declaration that Jonathan is not entitled to medical
payments coverage under the Starr policy due to this exclusion, as he was injured while participating
in physical exercise. See Compl., ECF No. 1 at ¶¶ 44–47. The parties did not address medical
payments coverage in their briefing on summary judgment. However, Defendants do not appear to
contend that medical payments coverage would apply to Jonathan’s injuries. Accordingly, the Court
grants summary judgment on this issue, and finds that medical payments coverage is excluded based
on the language of the policy.
CONCLUSION
The Court has thoroughly reviewed the entire record, including Plaintiff’s Motion for
Summary Judgment, Defendant Jonathan’s Response in Opposition to Plaintiff’s Motion, Defendants
JCW, Jason, and Extreme’s Response in Opposition to Plaintiff’s Motion, Plaintiff’s Reply to these
responses, and the applicable law. For the reasons stated above, the Court grants in part and denies
in part Plaintiff’s motion.

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IT IS THEREFORE ORDERED that Plaintiff’s Motion for Summary Judgment is
GRANTED IN PART AND DENIED IN PART. Plaintiff’s motion is DENIED with regard to the
duty to defend. Plaintiff’s motion is GRANTED with regard to any medical payment coverage, as
the Court finds that medical payments coverage is excluded for Jonathan’s injuries. Plaintiff’s
motion is FURTHER GRANTED with regard to whether the policy insured the separate legal entity
of Extreme Fitness, LLC for the incident, as the Court finds that the policy does not insure Extreme.
Plaintiff’s motion is FURTHER GRANTED to the extent Defendants seek coverage under an
amalgamation theory, as the Court finds that this theory lacks merit. Finally, Plaintiff’s motion is
DENIED WITHOUT PREJUDICE with regard to the duty to indemnify because it is premature
and because there is coverage for JCW and Jason in their capacities as commercial landlord and
manager for the commercial landlord, and there are presently questions of fact regarding the
landlord’s responsibilities, if any, which need to be determined by the jury in the underlying suit.
The Court is inclined to stay further proceedings in this case regarding indemnity pending the
outcome of the state court case and factual issues therein. Therefore, the Court requests both counsel
file a statement concerning their position regarding a stay. Also, both counsel should advise the
Court regarding any disposition of the underlying state case.
IT IS SO ORDERED.
s/ R. Bryan Harwell
R. Bryan Harwell
United States District Judge
Florence, South Carolina
June 23, 2014

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