Hill v. Canal Insurance Company et al
Filing
37
ORDER granting 6 Motion to Dismiss; denying 14 Motion to Remand to State Court; granting 30 Motion to Dismiss for Failure to State a Claim. The plaintiff's complaint is dismissed. Signed by Honorable Timothy M Cain on 8/1/2012.(gpre, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
SPARTANBURG DIVISION
Annie Hill,
)
)
Plaintiff,
)
)
v.
)
)
Canal Insurance Company and Buel, Inc.,
)
)
Defendants.
)
__________________________________________)
CA No. 7:12-330-TMC
ORDER
Plaintiff Annie Hill (Hill) filed this complaint against the defendants seeking a declaratory
judgment and damages for breach of contract and unfair trade practices in violation of the South
Carolina Unfair Trade Practices Act, S.C. Code Ann. § 39-5-10 through -560 (1985 & Supp.
2011). (Dkt. No. 1.) Before the court are motions to dismiss by defendants Canal Insurance Co.
(Canal) (Dkt. No. 6) and Buel, Inc. (Buel) (Dkt. No. 30) (collectively, the defendants) and a
motion to remand by Hill (Dkt. No. 14). The court grants both Canal's and Buel's motions to
dismiss and denies Hill's motion to remand.
I.
Canal is an insurance company based out of South Carolina. Buel is a motor carrier out of
North Carolina which purchased a commercial liability policy from Canal. At the time of the
alleged incident underlying this action, Hill and her husband Grady (Grady) were both
independent contractors working as tractor-trailer drivers for Buel. On October 2, 2007, Grady
was operating a tractor-trailer on behalf of Buel; Hill was riding as a passenger at the time. Grady
is diabetic and lost consciousness. A single-vehicle accident ensued, in which the tractor-trailer ran
off the road, across another lane of traffic, and into a field before rolling over. Hill allegedly
suffered numerous injuries and permanent disabilities and incurred over $100,000 in medical
bills.1 Hill filed a lawsuit against Grady and Buel in the Spartanburg County Court of Common
Pleas. Buel moved for summary judgment on the grounds that the statute of limitations had run,
which was granted. (Dkt. No. 30-4.)2
The policy issued by Canal to Buel in effect at the time of the incident allegedly included a
$1,000,000 single limit. The policy purportedly excludes claims by employees or spouses of
employees incurred during the course of employment. 3 Furthermore, the policy included an
MCS-90 endorsement, which is required of motor carriers under the Motor Carrier Act, 49 U.S.C.
§ 13101 et seq. (Dkt. No. 30-3.) Section 31139 of the Motor Carrier Act and 49 C.F.R. § 387.9
promulgated thereto require motor carriers, among other alternatives, to maintain at least $750,000
for public liability claims. The MCS-90 also excludes claims by "the insured's employees while
engaged in the course of their employment."
Hill filed this complaint in the Spartanburg County Court of Common Pleas, and it was
removed by Canal with Buel's consent on February 3, 2012. In her complaint, Hill alleges that (1)
she is a named insured or third-party beneficiary to the policy between Canal and Buel and both
parties "combined and in concert" breached the insurance contract by "by refusing to offer and/or
compensate" Hill according to the limits and (2) Canal and Buel violated the SCUPTA by
engaging in "illegal, unfair [,] and deceptive practices" by having no intention of honoring their
obligations under the insurance contract. Additionally, Hill seeks a declaratory judgment
1
Buel also maintained an occupational accident policy with Zurich, which paid approximately $150,000 in
benefits to Hill.
2
Hill's original complaint in state court, filed in January 2010, named only her husband, Grady. She amended
the complaint in March 2011 to include Buel, but the amendment occurred after the expiration of the statute of
limitations.
3
The court qualifies this language because no party has introduced the policy into the record.
determining the rights and obligations of herself, Canal, and Buel, and that liability coverage exists
such that she can recover up to its limits for her injuries. Both Canal (Dkt. No. 6) and Buel (Dkt.
No. 30) filed motions to dismiss.
By way of return, Canal argues (1) that Hill maintains no standing to enforce the insurance
contract because she was not a party to the contract; and (2) that there is no right of recovery
against Canal as an insurance company under the SCUPTA because insurance companies are
separately regulated and exempt from SCUPTA. Buel argues (1) that Hill's claims are preempted
by federal law; (2) Hill's claims are excluded under the MCS-90 endorsement and the policy at
issue; and (3) Buel is not an insurer and has not contracted to provide insurance and therefore
cannot be liable for failure to pay insurance benefits.
II.
The Federal Rules of Civil Procedure provide that a pleading must contain "a short and
plain statement of the claim showing that the pleader is entitled to relief." Rule 8(a)(2), Fed. R.
Civ. P. As the Supreme Court held, "the pleading standard Rule 8 announces does not require
'detailed
factual
allegations,'
but
it
demands
more
than
an
unadorned,
the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The rule requires more than
"labels and conclusions," "a formulaic recitation of the elements of a cause of action," or "naked
assertions devoid of further factual enhancement." Id. at 678 (citations omitted). As the court
explained in Iqbal, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (citing Twombly,
550 U.S. at 570).
III.
A.
Turning now to the motions to dismiss, the court holds that Hill does not maintain standing
as a non-party to the insurance contract. Therefore, the court grants Canal's and Buel's motions to
dismiss.
The defendants argue that they are entitled to dismissal of the breach of contract and
SCUPTA claims because Hill was not a party to the insurance contract between Canal and Buel.
The court agrees. The South Carolina Supreme Court and the South Carolina Court of Appeals
"have repeatedly denied actions for bad faith refusal to pay claims to third parties who are not
named insureds." Kleckley v. Northwestern Nat'l Cas. Co., 338 S.C. 131, 135, 526 S.E.2d 218, 219
(2000); see, e.g., Carter v. American Mut. Fire Ins. Co., 279 S.C. 368, 307 S.E.2d 227 (1983);
Cook v. Mack's Transfer & Storage, 291 S.C. 84, 352 S.E.2d 296 (Ct.App.1986); Swinton v.
Chubb & Son, Inc., 283 S.C. 11, 320 S.E.2d 495 (Ct.App.1984). In Kleckley, the Supreme Court
affirmed that principle: "A tort action for an insurer's bad faith refusal to pay benefits does not
extend to third parties who are not named insureds." 338 S.C. at 134, 526 S.E.2d at 219. By Hill's
own statements in the complaint, the contract was an agreement between Canal and Buel: "[T]he
defendant, Canal Insurance Company . . . sold . . . a Commercial Liability and Property Insurance
Policy . . . to . . . Buel . . . . (Dkt. No. 1-1 at 2; see also id., passim.) However, the Supreme Court
has recognized a limited exception, the necessities doctrine, in which the plaintiff is allowed to
stand as a derivative policyholder when the actual policyholder is unable to enforce his rights. Id.
at 135, 220 (citing Ateyeh v. Volkswagen of Florence, Inc., 288 S.C. 101, 341 S.E.2d 378 (1986)).
In Ateyeh, the Supreme Court allowed the plaintiff, a widow, to stand in place of her deceased
husband, the actual policyholder, as a derivative policy holder. 288 S.C. at 103, 341 S.C.2d at 380.
No such necessity exists here—Buel is the actual policyholder and is able to pursue an action for
breach of contract against Canal if necessary. As a result, Hill fails to have standing to pursue an
action for bad faith breach of contract against Canal.4
Additionally, Hill may not maintain an action under the SCUPTA. Insurance providers are
separately regulated under South Carolina law and are not subject to the SCUPTA. See S.C. Code
Ann. § 39-5-40(c) (stating that the SCUTPA is inapplicable to trade practices regulated by §§
38-57-10 through -320, which is the codification of the Insurance Trade Practices Act). The
preamble to Insurance Trade Practices Act states,
The purpose of this chapter is to regulate trade practices in the business of
insurance . . . by defining, or providing for the determination of, all the practices in
this State which constitute unfair methods of competition or unfair or deceptive
acts or practices and by prohibiting the trade practices so defined or determined.
Id. § 38-57-10; see Trustees of Grace Reformed Episcopal Church v. Charleston Ins. Co., 868
F.Supp. 128, 130–131 (D.S.C. 1994) ("[A]ll unfair trade practices regarding the insurance
business are regulated by the Insurance Trade Practices Act, §§ 38–57–10 et seq., and are exempt
from the coverage of SCUTPA."). Accordingly, Hill's breach of contract and SCUTPA claims are
dismissed.
B.
Additionally, Buel's motion to dismiss is granted in the alternative because Buel is not an
insurer and has not contracted to provide insurance. As stated above, Hill claims that Buel (1)
"combined and in concert" with Canal breached the commercial liability policy "by refusing to
offer and/or compensate" Hill with the policy limits; and (2) violated the SCUPTA by engaging in
4
As noted in Kleckley, the appropriate avenue of relief is to bring an action against the first-party beneficiary,
which may then pursue an action against the insurer if a judgment is obtained. Id. at 136, 526 S.E.2d at 220. Here, of
course, Hill pursued an action against Buel in state court that was dismissed.
"illegal, unfair [,] and deceptive practices" by having no intention of honoring its obligations under
the insurance contract.
Buel is not a provider of insurance; it is a trucking and transportation company that
purchased commercial liability coverage from Canal. As a purchaser of insurance coverage, Buel's
sole responsibility under the insurance contract was to pay the premiums to Canal. Further, Buel is
not in a position to deny coverage to Canal—any claim for coverage would be made to Canal, not
to Buel. As such, Hill's claims are unsupported by law or fact and constitutes nothing more than
"the-defendant-unlawfully-harmed-me accusation[s]." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Accordingly, the court holds
that Hill does not "'state a claim to relief that is plausible on its face'" and grants Buel's motion to
dismiss. Id. (citing Twombly, 550 U.S. at 570).5
C.
Finally, the court dismisses Hill's declaratory judgment. S.C. Code Ann. § 15-53-20 (2005)
("Courts of record within their respective jurisdictions shall have power to declare rights, status
and other legal relations whether or not further relief is or could be claimed.") While the court
hesitates to address the rights and obligations of the parties under an insurance contract that has not
been included in the record, standing is a necessary component of bringing a declaratory judgment
action. South Carolina Electric & Gas Co. v. South Carolina Public Service Authority, 215 S.C.
193, 215, 54 S.E.2d 777, 787 (1949) ("The existence of an actual controversy is essential to
jurisdiction to render a declaratory judgment."). Because the court has held that Hill does not have
standing to pursue this action, no justiciable controversy exists such that the court could entertain
the declaratory judgment. Therefore, the declaratory judgment action is dismissed.
5
In light of the court's holding, it is unnecessary to address the remainder of Buel's arguments in support of
dismissal.
IV.
In light of the foregoing reasoning, the court GRANTS the motions to dismiss by Canal
(Dkt. No. 6) and Buel (Dkt. No. 30). In light of that holding, the plaintiff's motion to remand is
DENIED as moot. (Dkt. No. 14). The plaintiff's complaint is hereby DISMISSED.
IT IS SO ORDERED.
s/Timothy M. Cain
Timothy M. Cain
United States District Judge
Anderson, South Carolina
August 1, 2012
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