Colony Insurance Company v. Hucks Pool Company Inc et al
Filing
34
ORDER : The Court GRANTS in part and DENIES in part Hucks Pool Company's [ECF No. 7 ] motion to dismiss. The motion to dismiss is granted with respect to the duty to indemnify issue. Colony's request for a declarat ion as to whether it has a duty to indemnify Hucks Pool Company is DISMISSED without prejudice. The motion to dismiss is denied as to the duty to defend issue. This declaratory judgment action will proceed on the issue of whether Colony has a duty to defend Hucks Pool Company against Jeffrey Mann's claim arising from the July 11, 2016 incident. Signed by the Honorable R Bryan Harwell on 02/15/2018. (lsut, )
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
Colony Insurance Company,
)
)
Plaintiff,
)
)
v.
)
)
Hucks Pool Company, Inc. and
)
Jeffrey Mann,
)
)
Defendants.
)
______________________________)
Civil Action No.: 4:17-cv-02014-RBH
ORDER
This matter is before the Court on Defendant Hucks Pool Company, Inc.'s [ECF No. 7]
motion to dismiss. For the reasons stated below, the Court grants in part and denies in part Hucks
Pool Company's motion to dismiss.1
Factual and Procedural Background
Colony issued Hucks Pool Company a Commercial General Liability Policy for the period of
June 21, 2016 through June 21, 2017. On or about July 11, 2016, Defendant Jeffrey Mann
("Mann") was allegedly injured at the Hucks Pool Company facility when a Hucks Pool Company
employee or associate activated a pressurized gun and shot Mann in the ear with a bleach solution.
Following the incident, Mann retained counsel.
In a letter dated November 23, 2016, Mann's counsel placed Hucks Pool Company on notice
of Mann's claim. The letter, addressed to Hucks Pool Company, stated:
As you know, on July 11, 2016 Mr. Jeffrey Mann was at your
facility when one of your associates activated a pressurized gun
and shot him in the ear with a bleach solution. Due to this incident
1
Under Local Civil Rule 7.08 (D.S.C.), “hearings on motions may be ordered by the Court in its
discretion. Unless so ordered, motions may be determined without a hearing.” Upon review of the briefs,
the Court finds that a hearing is not necessary.
my client had to seek medical attention and may possibly sustain
permanent hearing loss. Given the accident was due to the
negligent operation of equipment by one of your employees we are
placing you on notice that we are representing client for this
incident and shall submit our demand package accordingly. Please
contact me and provide me with the information regarding who
your general liability insurance carrier is.
[ECF No. 14-1]. Mann has not yet filed a lawsuit based on this claim.
On July 31, 2017, Colony filed the instant declaratory judgment action seeking a declaration
as to: 1) whether Colony's policy provides coverage for the July 11, 2016 incident involving Jeffrey
Mann; 2) whether Colony has a duty to indemnify Hucks Pool Company for the July 11, 2016
incident; and 3) whether Colony has a duty to defend Hucks Pool Company for the July 11, 2016
incident. [Complaint, ECF No. 1 at 4].
Hucks Pool Company filed a motion to dismiss [ECF No. 7] arguing that this matter is not
ripe for adjudication because Mann has not yet filed a complaint related to the underlying claim.
Hucks Pool Company also argues the amount in controversy is not met for purposes of diversity
jurisdiction under 28 U.S.C. § 1332.
Discussion
Article III of the United States Constitution limits the exercise of judicial power to “cases”
and “controversies.” U.S. CONST. art. III, § 2, cl. 1. In accordance with this constitutional mandate,
the Federal Declaratory Judgment Act provides that, “[i]n a case of actual controversy within its
jurisdiction...any court of the United States...may declare the rights and other legal relations of any
interested party seeking such declaration, whether or not further relief is or could be sought.” 28
U.S.C. § 2201(a).
A court's discretion to grant declaratory relief “should be liberally exercised to effectuate the
2
purposes of the [Declaratory Judgment Act] and thereby afford relief from uncertainty and
insecurity with respect to rights, status and other legal relations.” Aetna Cas. & Sur. Co. v. Quarles,
92 F.2d 321, 324 (4th Cir.1937). The Supreme Court has stated that the case or controversy
requirement will be met where "the facts alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal interests, of sufficient immediacy and
reality to warrant the issuance of a declaratory judgment." Medimmune, Inc. v. Genentech, Inc., 549
U.S. 118, 127 (2007). "[A] declaratory judgment action is appropriate when the judgment will serve
a useful purpose in clarifying and settling the legal relations in issue, and...when it will terminate
and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding."
Penn-America Ins. Co. v. Coffey, 368 F.3d 409, 412 (4th Cir.2004).
Relying on Union Ins. Co. v. Soleil Group, Inc., 465 F. Supp. 2d 567 (D.S.C. 2006), Hucks
Pool Company argues that this case is not ripe for adjudication because no complaint has been filed
on behalf of Jeffrey Mann against Hucks Pool Company.
In Union Ins. Co. v. Soleil Group, Inc., the court dismissed a declaratory judgment action for
lack of subject matter jurisdiction on ripeness grounds. 465 F. Supp. 2d at 574-75. First, the court
noted that in South Carolina "an insurer's duty to defend is determined by the allegations of the
underlying complaint." Id. at 572. The court then held the duty to defend issue was not ripe because
no complaint had been filed against the Soleil Group and with no complaint, the court could not
"compare the allegations in the complaint to the policy language in order to determine whether
Plaintiff has a duty to defend the Soleil Group." Id. at 574. As to the duty to indemnify, the court
noted that the duty to indemnify is "based on evidence found by the factfinder" in the underlying
lawsuit. Id. at 573. Because no underlying lawsuit had been filed, the court found the declaratory
3
judgment action regarding the duty to indemnify was also not ripe.
While this Court understands the reasoning behind the court's decision in Union Ins. Co. v.
Soleil Group, Inc., the Court also notes that the law regarding duty to defend has evolved somewhat
since Union Ins. Co. was decided in 2006. In City of Hartsville v. South Carolina Mun. Ins. & Risk
Financing Fund, the South Carolina Supreme Court stated:
Although the cases addressing an insurer's duty to defend generally
limit this duty to whether the allegations in a complaint are
sufficient to bring the claims within the coverage of an insurance
policy, an insurer's duty to defend is not strictly controlled by the
allegations in the complaint. Instead, the duty to defend may also
be determined by facts outside of the complaint that are known by
the insurer.
City of Hartsville v. South Carolina Mun. Ins. & Risk Financing Fund, 677 S.E.2d 574, 578 (S.C.
2009). Thus, in determining whether an insurer owes a duty to defend, the court is not limited or
constrained by the allegations in the complaint.2
In this case, with respect to the duty to defend issue, the facts alleged, under all the
circumstances, show that there is a substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. See
Medimmune, Inc., 549 U.S. at 127. The demand letter written by Mann's counsel indicates an
imminent claim against Hucks Pool Company. The demand package Mann's counsel sent to Colony
reflects a demand in the amount of $500,000.00. The claim arose on the Hucks Pool Company
2
In South Carolina, an insurer's duty to defend is broader than its duty to indemnify. Liberty Life
Ins. Co. v. Comm. Union Ins. Co., 857 F.2d 945, 950 (4th Cir. 1988). Historically, the duty to defend was
determined by simply determining whether the facts alleged in the underlying complaint brought the case
within the policy coverage. R.A. Earnhardt Textile Mach. Div., Inc. v. S.C. Ins. Co., 282 S.E.2d 856, 857
(S.C. 1981)). “If the underlying complaint creates a possibility of coverage under an insurance policy, the
insurer is obligated to defend.” Isle of Palms Pest Control Co. v. Monticello Ins. Co., 459 S.E.2d 318, 319
(S.C. Ct. App. 1994)
4
premises and alleges injury arising from the alleged negligence of a Hucks Pool Company
employee. Based on these facts, the Court finds the case or controversy requirement has been met
as to the duty to defend issue, and the duty to defend issue is ripe for adjudication. See, e.g., Aetna
Cas. & Sur. Co. v. Gen. Dynamics Corp., 968 F.2d 707, 711 (8th Cir.1992) (jurisdiction present
even though insured had not yet been sued with respect to several potential claims because insured
“had made a clear demand for payment of defense and indemnity costs” and insurer “disputed those
demands”); Firemen's Ins. Co. v. Kline & Son Cement Repair, Inc., 474 F. Supp. 2d 779, 786
(E.D.Va. 2007) (court had jurisdiction in declaratory-judgment action brought by insurer even
though insured had not yet been sued because injured party had been pursuing a claim, and facts
relevant to coverage had been stipulated to by insured and insurer); Icarom, PLC v. Howard Cnty.,
Md., 904 F. Supp. 454, 458 (D.Md. 1995) (coverage dispute regarding future claims was ripe
because “[a]ll the salient facts establishing a right to declaratory relief ha[d] already occurred,”
several injured third parties had submitted claims, and settlement negotiations with seven injured
parties had begun); T.H.E. Ins. Co. v. Dowdy's Amusement Park, 820 F.Supp. 238, 240 (E.D.N.C.
1993) (suit had not been filed against insured, but injured party had retained attorney who gave
insurer notice of intent to pursue a claim; failure to resolve coverage would affect settlement
discussions and investigation of claims); State Farm Mut. Auto. Ins. Co. v. Sampson, 305 F.Supp.
50, 52 (M.D. Fla. 1969) (lack of a pending claim by injured parties was not a barrier to jurisdiction
because it was “obvious that suit [was] imminent pending the outcome of this litigation”);
Manhattan Fire & Marine Ins. Co. v. Nassau Estates II, 217 F.Supp. 196, 198 (D.N.J.1963)
(jurisdiction present even though injured party had not yet sued insured because the insurer was “on
actual notice of the occurrence of the accident, and of the severity of the injuries,” and insurer could
5
otherwise be put to an unnecessary burden of investigating the accident).
While the duty to defend issue is ripe for adjudication, the Court finds that the duty to
indemnify issue is not ripe. See Ellett Bros., Inc. v. U.S. Fidelity & Guar. Co., 275 F.3d 384, 388
(4th Cir. 2001) (stating "under South Carolina law," the duty to indemnify is based on evidence
found by the factfinder . . . [b]ecause no findings of fact have been made in the four lawsuits against
Ellett, the indemnity claim is not ripe and the district court correctly dismissed it"). Because no suit
has been filed in the underlying action and no findings of fact have been made, the duty to
indemnify issue is not yet ripe. See id.
As to Hucks Pool Company's argument that the amount in controversy is not met for
diversity jurisdiction purposes, "in actions seeking declaratory or injunctive relief, it is well
established that the amount in controversy is measured by the value of the object of the litigation."
Francis v. Allstate Ins. Co., 709 F.3d 362, 367 (4th Cir. 2013). Jeffrey Mann has alleged a claim
seeking $500,000.00 for injuries and damages arising from the July 11, 2016 incident. The policy at
issue contains a liability coverage limit of $2,000,000.00. Practical experience establishes that
defense costs in defending a $500,000.00 injury claim could potentially exceed $75,000.00.
Accordingly, the Court finds the amount in controversy is met for purposes of diversity jurisdiction
under 28 U.S.C. § 1332.
Conclusion
For the reasons stated above, the Court GRANTS in part and DENIES in part Hucks Pool
Company's [ECF No. 7] motion to dismiss. The motion to dismiss is granted with respect to the
duty to indemnify issue. Colony's request for a declaration as to whether it has a duty to indemnify
Hucks Pool Company is DISMISSED without prejudice.
6
The motion to dismiss is denied as to the duty to defend issue. This declaratory judgment
action will proceed on the issue of whether Colony has a duty to defend Hucks Pool Company
against Jeffrey Mann's claim arising from the July 11, 2016 incident.
IT IS SO ORDERED.
February 15, 2018
Florence, South Carolina
s/ R. Bryan Harwell
R. Bryan Harwell
United States District Judge
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?