Taylor v. Security National Insurance Co
OPINION AND ORDER denying in part and denying as moot in part as set out 26 Motion to Expedite and Motion for Preliminary Injunction; denying as moot 34 Motion for Judgment on the Pleadings; denying 57 Motion for Summary Judgment; denying 58 Motion for Summary Judgment; Signed by Honorable Donald C Coggins, Jr on 3/8/2017.(abuc)
IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE DISTRICT OF SOUTH CAROLINA
Security National Insurance Co.,
Civil Action No. 6:17-cv-2379-DCC
OPINION AND ORDER
This matter is before the Court on Plaintiff’s Motion to Expedite Review and for
Preliminary Injunction, Plaintiff’s Motion for Partial Judgment on the Pleadings, Defendant’s
Motion for Summary Judgment, and Plaintiff’s Motion for Partial Summary Judgment. ECF
Nos. 26, 34, 57, 58. With respect to the Motion to Expedite Review and for Preliminary
Injunction and the Motion for Partial Judgment on the Pleadings, all responses and replies
have been filed. ECF Nos. 33, 37, 42, 44. Plaintiff filed a Response in Opposition to
Defendant’s Motion for Summary Judgment on January 31, 2018, and Defendant filed a
Reply on February 5, 2018. ECF Nos. 62, 64. Defendant filed a Response in Opposition
to Plaintiff’s Motion for Partial Summary Judgment on January 31, 2018. ECF No. 63.
Accordingly, the Motions are ripe for review.
This action was filed on September 5, 2017, seeking a declaration that Defendant
is obligated under a liability insurance policy to appear, defend, and indemnify Plaintiff in
connection with criminal charges filed against him. ECF No. 1 at 1. The parties agree that
Defendant issued Directors and Liability Insurance Policy No. SDO1066435 04 (“the
Policy”) to GrandSouth Bank (“the Bank”) for the policy period from August 6, 2014,
through August 6, 2017. ECF No. 57-1. Plaintiff was a Vice-President of the Bank during
this time. ECF No. 57 at 2. Prior to issuance of the Policy, the Bank had been involved
in two civil actions, Aquent LLC v. Bruce Gregory Harrison, et al., C/A No. 09-cvs-9613
(N.C. 2009) and BHC Interim Funding II, LP v. Compensation Management Inc., et al., C/A
No. 11-cvs-6696 (N.C. 2012) (“the prior civil suits”) which involved an allegedly improper
factoring1 scheme executed between employees of the Bank and a bank customer. ECF
No. 58-1 at 2. Plaintiff was not named in either of the prior civil suits. Id. at 3–5.
On June 26, 2016, certain other employees of the Bank were indicted in the Middle
District of North Carolina. It appears Defendant initially determined coverage for these
individuals was appropriate under the Policy. However, on January 4, 2017, Defendant
denied coverage claiming that the prior civil suits and the criminal indictment were
considered a single claim because they constitute “interrelated wrongful acts,” as defined
in the Policy, and invoked the prior and pending litigation policy exclusion. ECF No. 16-3.
Therefore, according to the terms of the Policy, that claim was deemed to be made no later
than November 13, 2009, and so predated the Policy. Id. These other employees filed suit
and have now settled with Defendant. See C/A No. 6:17-cv-00011-MGL (D.S.C. 2017).
Plaintiff was charged in a third superseding indictment issued on August 29, 2017.
ECF No. 16-2 at 1. Defendant denied coverage for Plaintiff on September 27, 2017. ECF
No. 57-4. The indictment describes the prior factoring agreement between the Bank and
its customer and describes conduct dating back to 2003, with conduct of Plaintiff dating
Factoring “traditionally involves the sale of accounts receivable at a discounted
price.” Nickey Gregory Co., LLC v. AgriCap, LLC, 597 F.3d 591, 601 (4th Cir. 2010).
back to 2008. ECF No. 16-2. At issue in the present action is whether the prior civil suits
bar coverage for Plaintiff under the terms of the Policy.
Summary Judgment Standard
Rule 56 states, as to a party who has moved for summary judgment, “[t]he court
shall grant summary judgment if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). A fact is “material” if proof of its existence or non-existence would affect
disposition of the case under applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). An issue of material fact is “genuine” if the evidence offered is such that
a reasonable jury might return a verdict for the non-movant. Id. at 257. When determining
whether a genuine issue has been raised, the court must construe all inferences and
ambiguities against the movant and in favor of the non-moving party. United States v.
Diebold, Inc., 369 U.S. 654, 655 (1962).
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 movant 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. Id. at 324. Rather, the non-moving party must
demonstrate specific, material facts exist that give rise to a genuine issue. Id. Under this
standard, the existence of a mere scintilla of evidence in support of the non-movant’s
position is insufficient to withstand the summary judgment motion. Anderson, 477 U.S. at
252. Likewise, conclusory allegations or denials, without more, are insufficient to preclude
granting the summary judgment motion. Ross v. Commc’ns Satellite Corp., 759 F.2d 355,
365 (4th Cir.1985), overruled on other grounds, 490 U.S. 228 (1989). “Only disputes over
facts that might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment.
Factual disputes that are irrelevant or
unnecessary will not be counted.” Anderson, 477 U.S. at 248. Further, Rule 56 provides
in pertinent part:
A party asserting that a fact cannot be or is genuinely disputed
must support the assertion by:
(A) citing to particular parts of materials in the record,
including depositions, documents, electronically stored
information, affidavits or declarations, stipulations
(including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials;
(B) showing that the materials cited do not establish the
absence or presence of a genuine dispute, or that an
adverse party cannot produce admissible evidence to
support the fact.
Fed. R. Civ. P. 56(c)(1). Accordingly, when Rule 56© has shifted the burden of proof to
the non-movant, he must produce existence of a factual dispute on every element essential
to his action that he bears the burden of adducing at a trial on the merits.
Pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, a district court “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.” The Act, however, gives the court the
discretion to decline issuing the judgment. Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co.,
139 F.3d 419, 421 (4th Cir. 1998); Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995)
(The Declaratory Judgment Act “confer[s] on federal courts unique and substantial
discretion in deciding whether to declare the rights of litigants.”). “[W]hen a useful purpose
will not be served, statute and practice have established the rule that the judgment may be
refused when it is not necessary or proper at the time under all the circumstances.” Aetna
Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937) (internal quotation marks
South Carolina Law
A federal court exercising diversity jurisdiction applies state substantive law.
Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996) (citations omitted). It is
undisputed that the substantive law of the State of South Carolina applies to this matter.
Under the South Carolina law, insurance policies are subject to the general rules of
contract construction. B.L.G. Enters., Inc. v. First Financial Ins. Co., 514 S.E.2d 327 (S.C.
1999). The court must give policy language its plain, ordinary, and popular meaning. Id.
When a contract is unambiguous, clear, and explicit, it must be construed according to the
terms the parties have used. Id.; see Auto-Owners Ins. Co. v. Carl Brazell Builders, Inc.,
162–163, 588 S.E.2d 112, 115 (S.C. 2003). This court must enforce, not write, contracts
of insurance and must give policy language its plain, ordinary, and popular meaning. Id.
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. South Carolina Ins. Co. v. White, 390
S.E.2d 471 (S.C. Ct. App.1990).
A policy clause extending coverage must be liberally construed in favor of coverage.
Torrington Co. v. Aetna Cas. and Sur. Co., 216 S.E.2d 547 (S.C. 1975). Insurance policy
exclusions are construed most strongly against the insurance company, which also bears
the burden of establishing the exclusion's applicability. Owners Ins. Co. v. Clayton, 614
S.E.2d 611, 614 (S.C. 2005); Boggs v. Aetna Cas. and Sur. Co., 252 S.E.2d 565 (S.C.
1979). However, if the intention of the parties is clear, courts have no authority to torture
the meaning of policy language to extend coverage that was never intended by the parties.
Sphere Drake Ins. Co. v. Litchfield, 438 S.E.2d 275 (S.C. Ct. App. 1993); S.C. Farm
Bureau Mut. Ins. Co. v. Wilson, 544 S.E.2d 848, 850 (S.C. Ct. App. 2001).
When a provision is ambiguous, the intent of the parties controls. See Holcombe
v. Orkin Exterminating Co., Inc., 317 S.E.2d 458 (S.C. Ct. App. 1984). Although the
interpretation of a contract is generally a matter of law, the intent of the parties becomes
a question of fact for the jury when the contract is ambiguous. Kumpf v. United Tel. Co.,
429 S.E.2d 869 (S.C. Ct. App. 1993). Accordingly, summary judgment is not appropriate
where, due to an ambiguity, the intent of the parties is at issue.
The Policy issued by Defendant is a “claims made” policy and provides coverage
for claims first made against the insured during the policy period. ECF No. 57-1 at 6. The
Policy was issued on August 6, 2014, and lapsed on August 6, 2017. Id. The Policy states
in relevant part, that the “Insurer will pay on behalf of an insured person, loss that is the
result of a claim for a management practices wrongful act first made through the policy
period.” ECF No. 57-1 at 14. An insured person is “any person, who was, now is, or shall
be a director, officer, . . . or employee of the company.” ECF No. 57-1 at 17. Loss is
defined as “any amount which any insured person . . . is legally obligated to pay as the
result of a claim, and includes . . . reasonable defense expenses.” ECF No. 57-1 at
The Policy defines a claim, in part, as “a criminal proceeding commenced by the
return of an indictment.” ECF No. 57-1 at 16. Management practices wrongful act means
“any actual or alleged, misstatement, misleading statement, error or omission, or neglect
or breach of duty by an insured person acting solely in their capacity as: director, officer,
. . . or employee of the company.” ECF No. 57-1 at 18.
The Policy further states that,”all claims involving interrelated wrongful acts shall
be considered a single claim and shall be deemed to have been first made when the
earliest claim was first made.” ECF No. 57-1 at 16. “Claims based upon or arising out of
the same wrongful act or interrelated wrongful acts committed by one or more insured
parties shall be considered a single claim, and only one retention and Limit of Liability shall
apply to such single claim. Each such single claim shall be deemed to be first made on
the date the earliest of such claims was first made, regardless of whether such date is
before or during the policy period.” ECF No. 57-1 at 24. Interrelated Wrongful Acts are
defined as “wrongful acts that have as a common nexus any fact, circumstance, situation,
event transaction or series of facts, circumstances, situations, events, or transactions.”
ECF No. 57-1 at 17.
The Policy also includes a Prior and Pending Litigation exclusion, which provides
The Insurer shall not be liable to make any payment for loss
in connection with any claim based upon, arising out of,
relating to, in consequence of, or in any way involving . . . any
claim arising out of or in any way involving any litigation
against the company or any insured person initiated prior to
the PPL Date set forth below, or arising out of or in any way
involving the same or substantially the same fact,
circumstance, or situation underlying or alleged in such prior
ECF No. 57-1 at 20 ,66.
Whether the Policy is Illusory and Ambiguous
Plaintiff argues first that the Policy is illusory because the Policy’s definition of
Interrelated Wrongful Acts and the language used in the Prior and Pending Litigation
exception are so broad that, if applied as written, these provisions would essentially
exempt coverage for any litigation expenses. ECF No. 57 at 7–8. Plaintiff further argues
that these provisions are ambiguous in that their literal interpretations are illusory;
accordingly, any other interpretation would be ambiguous. Id. at 8–9. Defendant asserts
that these provisions are neither illusory nor ambiguous under South Carolina and relevant
federal law. ECF No. 63 at 6–11.
The purpose of the illusory coverage doctrine is to protect insureds where the literal
terms of the policy excludes from coverage “the very risk contemplated by the parties.” Isle
of Palms Pest Control Co. v. Monticello Ins. Co., 459 S.E.2d 318, 321 (S.C. Ct. App. 1994),
writ granted in part on other grounds, decision aff'd, 468 S.E.2d 304 (S.C. 1996); accord
NGM Ins. Co. v. Carolina's Power Wash & Painting, LLC, C/A No. 2:08-cv-3378-DC, 2010
WL 146482, at *5 (D.S.C. Jan. 12, 2010) (“[T]he broad scope of the . . . exclusion in Isle
of Palms prevented coverage for the very purpose that the contractor sought a commercial
general liability policy.”), aff'd sub nom. NGM Ins. Co. v. Kuras, 407 F. App’x 653 (4th Cir.
2011); W. World Ins. Co. v. Empire Fire & Marine Ins. Co., C/A No. 7:06-cv-217-RBH, 2006
WL 3337427, at *7 (D.S.C. Nov. 16, 2006) (“[I]f the auto exclusion in the . . . policy were
applied to deny a duty to defend in the case at bar, this would exclude the very risks that
American Trans Med was trying to insure.”).
The doctrine applies where the language of the policy “negate[s] virtually all
coverage for the insured,” Monticello Ins. Co. v. Mike's Speedway Lounge, Inc., 949 F.
Supp. 694, 699 (S.D. Ind. 1996), and the insurance contract, read literally , is “a delusion
to the insured.” Jostens, Inc. v. Northfield Ins. Co., 527 N.W.2d 116, 118 (Minn. Ct. App.
1995) (internal quotation marks omitted). In other words, the doctrine applies when
exclusions “in effect allow the insurer to receive premiums when realistically it is not
incurring any risk of liability.” Colorado Intergovernmental Risk Sharing Agency v. Northfield
Ins. Co., 207 P.3d 839, 843 (Colo. App. 2008); accord Jostens, 527 N.W.2d at 118; Mike's
Speedway, 949 F. Supp. at 699.
South Carolina courts have routinely held,
Whether the language of a contract is ambiguous is a question
of law for the court. A contract is ambiguous when the terms of
the contract are reasonably susceptible to more than one
interpretation. The uncertainty in interpretation can arise from
the words of the instrument, or in the application of the words
to the object they describe. Whether a contract is ambiguous
must be determined from the entire contract and not from any
isolated clause of the agreement.
Pee Dee Stores, Inc. v. Doyle, 672 S.E.2d 799, 803 (S.C. Ct. App. 2009) (internal citations
“Ambiguous or conflicting terms in an insurance policy must be construed liberally
in favor of the insured and strictly against the insurer.” USAA Prop. & Cas. Ins. Co. v.
Clegg, 661 S.E.2d 791, 797 (S.C. 2008) (citing Diamond State Ins. Co. v. Homestead
Indus., Inc., 456 S.E.2d 912, 915 (S.C. 1995)). “Where the words of an insurance policy
are capable of two reasonable interpretations, that construction will be adopted which is
most favorable to the insured.” Greenville Cty. v. Ins. Reserve Fund, a Div. of S.C. Budget
& Control Bd., 443 S.E.2d 552, 553 (S.C. 1994) (citing McPherson v. Michigan Mut. Ins.
Co., 426 S.E.2d 770, 771 (S.C. 1993)).
At this procedural posture and considering the applicable law on the issues, the
Court declines to find at this time whether as a matter of law the Policy is illusory or
ambiguous because it is not necessary for a determination of Plaintiff’s and Defendant’s
Motions. Accordingly, the Court will assume without deciding for purposes of only these
Motions that the Policy is neither illusory nor ambiguous and address the remaining
arguments from both parties.
Interrelated Wrongful Acts
Plaintiff argues that even if the Policy is not illusory or ambiguous, South Carolina
law requires that exclusions be narrowly construed against Defendant. ECF No. 57 at 9.
He asserts that under the language of the Policy, an event must share a “common nexus
[of] any fact, circumstance, situation, event, transaction or series of facts, circumstances,
situations, events, or transactions” and that “nexus” is defined by Black’s Law Dictionary
as “a connection or link, often a causal one.” Id. at 10. He contends that there is an
insufficient nexus of events between the prior civil actions and the pending criminal matter
using a four-part test articulated by the Northern District of Alabama. Id.; see also
Worthington Fed. Bank v. Everest Nat. Ins. Co., 110 F.Supp.3d 1211, 1230–31 (N.D. Ala.
Plaintiff notes that the prior civil cases and the pending criminal case are
distinguishable because they:
(1) involve claims made by different parties;
(2) involve claims that arose from a difference set of acts or omissions in that the
prior civil cases arose from the Bank’s failure to correctly prioritize repayments of its clients’
debts and the criminal proceedings arose from allegations that the defendants in that
action defrauded the Bank, embezzled Bank funds, and caused materially false entries in
the Bank’s books and records to deceive regulators; moreover, there is no causal or logical
connection between some of the bad acts alleged in the criminal proceedings and the
actions alleged in the prior civil actions;
(3) the acts alleged in each matter are not a part of a similar pattern of activity as
that term is used in insurance coverage because that term is generally used when a single
actor inflicts a repeated harm on the same victim;
(4) there was a significant time lapse between the alleged causes giving rise to the
complaints in the prior civil actions and the indictment in the criminal proceeding; and
(5) the claims arise from different injuries in that the claimants in the prior civil
actions alleged economic injuries and the criminal proceeding involves alleged criminal
Id. at 11–13.
Accordingly, Plaintiff argues, the prior civil actions and the criminal proceeding are
not connected under the Policy and the Interrelated Wrongful Acts provision2 should not
Defendant asserts that South Carolina courts have not adopted the test put forth by
Plaintiff. ECF No. 63 at 5. Moreover, a broad definition of interrelated wrongful acts is
appropriate and claims can be related “even if they involve distinct acts, affect separate
people, and occur at different times.” ECF No. 58-1 (quoting CAMICO Mut. Ins. Co. v.
Jackson CPA Firm, C/A No. 2:15-cv-1823, 2016 WL 7403959, at *10 (D.S.C. 2016)).
Defendant contends that the prior civil actions and the criminal proceeding share many
facts and circumstances, situations, and transactions in common. ECF No. 58-1 at 12
(listing 20 purported common facts between the prior civil cases and the pending criminal
proceeding). Defendant argues that because the pending criminal proceeding is related
to the prior civil suits, the claim predates the Policy’s effective date and there is no
The parties disagree about whether the Interrelated Wrongful Acts language should
be considered an exclusion or a provision of the Policy. See ECF No. 62 at 1–4 (Plaintiff’s
Response to Defendant’s Motion for Summary Judgment asserting that Defendant has
essentially argued that this language does not constitute an exclusion). Defendant
contends that this is not an exclusion and, accordingly, the rule of narrow or strict
construction related to exclusions are inapplicable. ECF No. 58-1 at 10.
The distinction is significant because, as previously stated in this Order, insurance
policy exclusions are construed most strongly against the insurance company, which also
bears the burden of establishing the exclusion's applicability. Owners Ins. Co. v. Clayton,
614 S.E.2d 611, 614 (S.C. 2005); Boggs, 252 S.E.2d 565.
Here, the Court notes that similar language was not considered an exclusion in
CAMICO Mutual Insurance Company v. Jackson CPA Firm, C/A No. 2:15-cv-1823-PMD,
2016 WL 7403959, at *10 (D.S.C. 2016). Accordingly, at this time and procedural posture,
the Court declines to consider the Interrelated Wrongful Acts provision as an exclusion
under the Policy.
coverage under the Policy.
The Fourth Circuit Court of Appeals has provided guidance on the interpretation of
interrelated wrongful acts. In W.C. and A.N. Miller Development Company v. Continental
Casualty Company, that Court found that a 2010 suit and a 2006 suit were interrelated
wrongful acts within the meaning of the policy; therefore, the 2010 suit was not covered
because it was deemed to predate the policy. 814 F.3d 171 (2015). The policy in that
case contained the same provision at issue here—that more than one claim involving
interrelated wrongful acts would be considered one claim made on the date on which the
earlier claim was made. It defined interrelated wrongful acts as “any Wrongful Acts which
are logically or causally connected by reason of any common fact, circumstance, situation,
transaction or event.” The Court stated that, under Maryland law, there is no rule “that
insurance contracts are to be construed most strongly against the insurer.” W.C., 814 F.3d
at 176 (quoting Catalina Enters., Inc. Pension Tr. v. Hartford Fire Ins., Co., 67 F.3d 63, 65
(4th Cir. 1995)). Further, it found that, under the broad definition of interrelated wrongful
acts used in the policy, the two lawsuits were sufficiently related by a common nexus of
fact. W.C., 814 F.3d at 177. Specifically, the Court determined that the two suits shared
several common facts, a common transaction, and a common circumstance. Id.
In CAMICO, the Court considered whether two claims were interrelated under the
terms of the policy. 2016 WL 7403959. The policy in that case used the same “logically
or casually connected” language also used in W.C. The Court determined that the two
claims were related under the policy because they involved the same acts and omissions
of the same person, whose illness caused those acts and omissions. Id., at *11. The
Court recognized that, under the terms of that policy, claims that share even a single
logically connective fact, circumstance, or situation would be related sufficient to bar
As an initial matter, the Court recognizes that the policy language used in W.C. and
CAMICO was slightly different from the language at issue in the Policy in the present
action. Those cases use the term “logically or causally connected,” while the Policy at
issue here uses the phrase “common nexus.” The Court also notes that in CAMICO, the
related claims were made based on the acts and omissions of a single person whose
“disease-induced impairment” constituted the causal connection between the claims in the
court’s view of the facts. Id. In contrast, here Plaintiff was neither named nor were any of
the allegations made involving him in the allegedly related claims.
While the caselaw is helpful in an analysis of how other courts have construed terms
in other policies, there remains a genuine issue of material fact as to whether the acts
alleged in the criminal proceeding in this case are sufficiently related to the prior civil suits
so as to be “interrelated.” Moreover, neither the District of South Carolina nor the Fourth
Circuit Court of Appeals indicated that the relevant factors identified in the opinions cited
above were to be considered an exhaustive list of considerations to determine whether two
claims are sufficiently connected. Accordingly, based upon the limited factual record
provided to the Court at this time and in light of the language used in the Policy, genuine
issues of material fact remain as to whether there is a sufficient “common nexus” such that
the interrelated wrong acts provision would bar coverage in this case.3
This Court further notes that the CAMICO court did not reach its conclusion until
the record was fully developed at trial, having denied the parties’ cross-motions for
The Prior and Pending Litigation Exclusion
Plaintiff further argues that the Prior and Pending Litigation exclusion is likewise
inapplicable to the case at hand because the criminal proceeding did not “arise from” the
prior civil suits, as required by the language of the exclusion. ECF No. 57 at 15. Plaintiff
dismisses the remaining “or in any way involving” language from that provision by arguing
that he has already established that it is overbroad and illusory. Id. As previously stated
in this Order, for purposes of these Motions only, the Court will assume without deciding
that the Policy is neither illusory nor ambiguous. Thus, it is unnecessary to consider
whether the criminal proceeding arose from the prior civil suits without also considering
whether the criminal proceeding in any way involves the same or substantially the same
fact, circumstance, or situation as the prior civil suits.
The Court notes that the language of this exclusion is very broad; however, for the
reasons listed above in the discussion of whether the prior civil suits would bar coverage
as Interrelated Wrongful Acts, the Court finds there also remain genuine issues of material
fact with respect to whether the Prior and Pending Litigation Exception would apply,
particularly in light of the legal standard applicable to exclusions in contracts.
In his Response to Defendant’s Motion for Summary Judgment, Plaintiff also asserts
that the Defendant should be estopped from denying coverage. “Equitable estoppel occurs
where a party is denied the right to plead or prove an otherwise important fact because of
summary judgment due to the existence of genuine issues of material fact. See CAMICO,
2016 WL 7403959, at *1.
something which he has done or failed to do.” Parker v. Parker, 443 S.E.2d 388, 391 (S.C.
The elements of equitable estoppel as related to the party being estopped are:
(1) conduct which amounts to a false representation, or
conduct which is calculated to convey the impression that the
facts are otherwise than, and inconsistent with, those which
the party subsequently attempts to assert; (2) the intention that
such conduct shall be acted upon by the other party; and (3)
actual or constructive knowledge of the real facts. The party
asserting estoppel must show: (1) lack of knowledge, and the
means of knowledge, of the truth as to the facts in question; (2)
reliance upon the conduct of the party estopped; and (3) a
prejudicial change of position in reliance on the conduct of the
party being estopped.
Strickland v. Strickland, 650 S.E.2d 465, 470 (S.C. 2007).
Plaintiff argues that Defendant knew of the prior civil suits and the pending criminal
indictments when it agreed to indemnify the Bank. ECF No. 62 at 12. Moreover, Plaintiff
asserts that the record creates a genuine issue of material fact with respect to whether
Defendant began denying coverage once it became evident that the costs would exceed
the initial estimate rather than based on any good faith interpretation of the Policy
The Court agrees with Plaintiff that a genuine issue of material fact exists regarding
whether equitable estoppel would apply in the current action.4 The Court notes that the
The Court notes that Plaintiff’s claim arose from the third superseding indictment
on August 29, 2017, which is after the Policy at issue had lapsed. See ECF No. 57-1 at
6 (the policy period encompassed August 6, 2014, through August 6, 2017). However,
because no dispute exists regarding the fact that the first indictment and the third
superseding indictment involve a common nexus of fact, coverage was triggered by the
return of the first indictment on June 26, 2016. See ECF No. 57-1 at 17 (providing the
Bank’s disclosures to Defendant in 2012 specifically included the two named prior civil
suits5 and the 2014 disclosures included a notation that “[t]he bank has an officer who has
been issued a target letter from the United States Department of Justice. A copy of this
letter is attached.” ECF No. 62-2 at 10. Accordingly, it appears that an argument could be
made that Defendant issued the Policy when it was aware that some bank employees, if
not Plaintiff personally, would shortly be making a claim for defense expenses. It is also
possible that Plaintiff could establish that Defendant’s issuance of the Policy under these
circumstances amounted to a false representation. See Standard Fire Ins. Co. v. Marine
Contracting and Towing Co., et al., 392 S.E.2d 460, 462 (1990) ( “[T]he scope of risk under
an insurance policy may be extended by estoppel if the insurer has misled the insured into
believing the particular risk is within the coverage.”). Thus, more facts are needed to
determine whether equitable estoppel is applicable in the present action.
As explained above, at this procedural posture, Plaintiff has not established that he
is likely to succeed on the merits of this case. Further, as Plaintiff has capable counsel
representing him in the underlying criminal indictment, he cannot show that he is likely to
suffer irreparable harm in the absence of injunctive relief. Accordingly, the Plaintiff’s
Motion for Preliminary Injunction is denied. See Winter v. Nat. Res. Def. Council, Inc., 555
U.S. 7, 20 (2008) (holding that a party seeking a preliminary injunction or temporary
restraining order must establish all four of the following elements: (1) he is likely to succeed
definition of Interrelated Wrongful Acts).
After disclosing the prior civil suits, the Bank noted that it “[did] not currently
anticipate insurance claims related to these cases.” ECF No. 62-1 at 10.
on the merits; (2) he is likely to suffer irreparable harm in the absence of preliminary relief;
(3) the balance of equities tips in his favor; and (4) an injunction is in the public interest);
see also the Real Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342,
346–47 (4th Cir. 2009), vacated on other grounds, 559 U.S. 1089 (2010), reissued in part,
607 F.3d 355 (4th Cir. 2010).
Plaintiff’s Motion to Expedite Review and Motion for Partial Judgment on the
Pleadings are moot as a result of this Order.
Wherefore, based upon the foregoing, Plaintiff’s Motion for Partial Summary
Judgment  and Defendant’s Motion for Summary Judgment  are DENIED.
Plaintiff’s Motion to Expedite Review and for Preliminary Injunction  is DENIED in part
and DENIED as MOOT in part, as explained above. Plaintiff’s Motion for Partial Judgment
on the Pleadings  is DENIED as MOOT.
IT IS SO ORDERED.
s/Donald C. Coggins, Jr.
United States District Judge
March 8, 2018
Spartanburg, South Carolina
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