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Episcopal Church v. Church Ins. Co.

United States District Court, D. South Carolina, Charleston Division

September 22, 2014

The Episcopal Church in South Carolina, Plaintiff,
v.
Church Insurance Company of Vermont and the Church Insurance Company, Defendants

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[Copyrighted Material Omitted]

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For The Episcopal Church in South Carolina, Plaintiff: Thomas S Tisdale, Jr, LEAD ATTORNEY, Jason Severin Smith, Hellman Yates and Tisdale, Charleston, SC.

For Church Insurance Company of Vermont, Defendant: Peter Harris Dworjanyn, LEAD ATTORNEY, Collins and Lacy, Columbia, SC.

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ORDER

PATRICK MICHAEL DUFFY, United State District Judge.

This matter is before the Court upon Plaintiff The Episcopal Church in South Carolina's (" Plaintiff" or " TEC-SC" ) Motion for Summary Judgment on Supplemental Complaint (" Second Motion for Summary Judgment" ) (ECF No. 51). For the reasons that follow, the Court grants in part and denies in part Plaintiff's Second Motion for Summary Judgment.

BACKGROUND

This case arises out of a state court action pending in the Court of Common Pleas for the First Judicial Circuit in Dorchester County, South Carolina, Case No. 2013-CP-18-00013 (" Underlying Action" ). On March 5, 2013, the Underlying Action was filed by The Protestant Episcopal Church in the Diocese of South Carolina along with multiple break-away churches (collectively, " the Diocese" ) against The Episcopal Church a/k/a The Protestant Episcopal Church in the United States of America (" TEC" ) and Plaintiff TEC-SC.[1]

The Underlying Action arises from a purported doctrinal dispute between the Diocese, TEC, and Plaintiff TEC-SC. Although the Diocese disassociated from TEC, the Diocese continued to use the same intellectual, real, and personal property it had used prior to the split. Plaintiff and TEC also continued to use the same intellectual property, namely trade names, trademarks, services, and emblems. In order to clarify the ownership of the real, personal, and intellectual property, the Diocese filed the Underlying Action seeking a declaration from the state court that the Diocese's existence and its continued use of the disputed property were proper. The Diocese also sought an order enjoining Plaintiff and TEC from their continued use of the same property.

Effective as of January 1, 2013, TEC-SC has been insured by Policy No. VPP0012879 (" Policy" ), which was issued by Defendant Church Insurance Company of Vermont (" CIC-VT" ). In addition to other types of coverage, the Policy provides Commercial Liability Coverage, which specifically provides coverage for " Advertising Injury Liability" under Coverage P. The Policy further provides that CIC-VT has " the right and duty to defend a suit seeking damages which may be covered under the Commercial Liability Coverage. [CIC-VT] may make investigations and settle claims or suits [CIC-VT] decide[s] are appropriate." Commercial Liability Coverage 7, ECF 1-1 at 77 of 120. The Policy further provides that if CIC-VT defends a suit, it will pay, among other expenses, the " costs taxed to the insured" and the " expenses incurred by [CIC-VT]." Id. Under the section of the Commercial Liability Coverage titled " What Must Be Done In Case Of Loss," the Policy provides that an " insured must not make payments or assume obligations or other costs except at the insured's own cost," and that " [i]f a claim is made or suit is brought, the insured must: promptly send to [CIC-VT] copies of all legal papers, demands, and notices," and assist CIC-VT at its request. Id. at 11-12.

In August 2013, TEC-SC requested that CIC-VT defend and indemnify it in the Underlying Action. However, by letter dated August 29, 2013, CIC-VT denied coverage on numerous grounds, including

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that the claims in the Underlying Action were not covered by the Policy. On September 11, 2013, TEC-SC filed the instant action against CIC-VT.[2] Plaintiff's Complaint alleges three causes of action against the Defendants: (1) breach of contract; (2) insurance bad faith; and (3) declaratory judgment that Defendants have a duty to defend and indemnify TEC-SC in the Underlying Action.

CIC-VT filed a Motion to Dismiss all claims. Plaintiff responded by filing its First Motion for Summary Judgment as to all claims. On January 6, 2014, the Court denied CIC-VT's Motion to Dismiss and granted in part and denied in part Plaintiff's First Motion for Summary Judgment. Specifically, the Court declared that CIC-VT has a duty to defend Plaintiff in the Underlying Action, granted summary judgment in favor of Plaintiff on its breach-of-contract claim against CIC-VT, and denied summary judgment on Plaintiff's bad-faith claim. On March 4, 2014, the Court denied CIC-VT's Motion for Reconsideration.

On February 28, 2014, while its Motion for Reconsideration was still pending, CIC-VT sent Plaintiff a reservation of rights letter, providing in part:

The defense that the Company will afford to your clients is being provided subject to a complete reservation of the Company's rights to disclaim coverage and to withdraw from the defense in the event that Judge Duffy's Order is reversed, either via reconsideration or appeal, or based upon any other valid reason that may come to light. In that connection, we will advise you, shortly, of the name, address and telephone number of the firm we have appointed to defend the action. It must be understood that the Company has no obligation to, and will not, pay for the prosecution of TEC or TEC-SC's counterclaims that have been asserted in that action. Furthermore, the Company's obligation to pay for TEC's and TEC-SC's defense in the action is limited to the reasonable costs of defending the action from the date of their first tender of the defense to the Company.

CIC-VT Ltr. 2, ECF 51-2.

On March 27, 2014, Plaintiff filed a Motion for Leave to File a Supplemental Complaint. Following briefing from the parties, the Court granted Plaintiff's Motion for Leave on June 3, 2014. On June 8, 2014, Plaintiff filed its Supplemental Complaint, in which it alleges the following causes of action: (1) a claim for breach of contract; (2) a claim for insurance bad faith for refusing to pay benefits and to honor obligations due under the insurance contract; and (3) a claim for a declaratory judgment from the Court declaring that CIC-VT does not have a right to select counsel for Plaintiff in the Underlying Action, that CIC-VT's duty to defend includes reimbursement of all costs incurred by Plaintiff in the Underlying Action, and that CIC-VT's acts prior to and during this litigation constitute ongoing bad faith.

On July 7, 2014, Plaintiff filed the instant Motion for Summary Judgment on the Supplemental Complaint. CIC-VT filed its Response on July 24, 2014, and Plaintiff filed a Reply on August 4, 2014. The Motion is ripe for consideration.

STANDARD OF REVIEW

To grant a motion for summary judgment, a court must find that " there is no genuine dispute as to any material fact."

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Fed.R.Civ.P. 56(a). The judge is not to weigh the evidence but rather must determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). All evidence should be viewed in the light most favorable to the nonmoving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 124 (4th Cir. 1990). " [W]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, disposition by summary judgment is appropriate." Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 119 (4th Cir. 1991). Summary judgment is not " a disfavored procedural shortcut," but an important mechanism for ...


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