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Crossroads Convenience LLC v. First Casualty Insurance Group

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

March 27, 2017

Crossroads Convenience, LLC, as successor to TFL Associates LLC and assignee of Anderson Oil, Inc. and Varni, Enterprises, LLC, Plaintiff,
v.
First Casualty Insurance Group, Defendant.

          ORDER AND OPINION

         Before the court is a motion for summary judgment filed by Defendant First Casualty Insurance Group (“First Casualty”). (ECF No. 54.) For the reasons that follow, the court GRANTS the motion IN PART and DENIES it IN PART.

         I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

         Many of the underlying facts are not in dispute.[1] Plaintiff Crossroads Convenience, LLC (“Crossroads”) is the successor in interest to TFL Associates, LLC (“TFL”), which owned premises located at 324 Main Street North in Allendale, South Carolina (the “premises”). TFL leased the premises to Anderson Oil, Inc. (“Anderson Oil”), which operated a convenience store there. Crossroads alleges that, pursuant to the terms of the lease, Anderson Oil procured an insurance policy for the premises from Employers Mutual Casualty Company (“EMCC”) that “provided replacement cost coverage for the premises in the approximate amount of $669, 000.00.” (ECF No. 26 at 4).

         In 2007, Anderson Oil subleased the premises to Varni Enterprises, LLC (“Varni”). The sublease provided that Varni would maintain insurance policies for the premises “in such amounts as are reasonably necessary to protect [Anderson Oil] and such amounts shall be at least for the fair market value of the buildings and equipment.” (ECF No. 45-1 at 6.) Varni contracted with First Casualty, as an agent, to procure an insurance policy that would meet the requirements set forth in the sublease. (See ECF No. 26 at 4-5; ECF No. 33 at 2; see also ECF No. 1-2 at 45.) First Casualty procured for Varni an insurance policy for the premises from EMCC. Under the terms of the insurance policy, in the event of damage or loss to covered property, EMCC agreed to “[p]ay the value of the lost or damaged property” or to take equivalent action. (ECF No. 45-3 at 8.) The value of the covered property would be determined “[a]t replacement cost without deduction for depreciation, ” and “[i]f, at the time of loss, ” the coverage limit selected-here $420, 000-was “80% or more of the full replacement cost of the property immediately before the loss, ” then the amount EMCC paid would be capped at the least of $420, 000, the cost to replace the lost or damaged property with comparable property, or the amount actually spent on replacing or repairing or the lost or damaged property. (Id.; see ECF No. 45-2 at 11.) If, however, “at the time of loss, ” the $420, 000 coverage limit was less than 80% of the full replacement cost of the property immediately before the loss, ” then the amount EMCC paid would be the greater of the actual cash value (“ACV”) of the lost or damaged property, or a proportion of the cost to replace or repair the lost or damaged property, which proportion is equal to the ratio of $420, 000 to 80% of the cost to repair or replace, but in any event would be capped at $420, 000. (ECF No. 45-3 at 8.)

         On October 29, 2011, the convenience store located on the premises was destroyed by fire. On January 13, 2012, Varni executed a sworn statement in proof of loss that it submitted to EMCC, as required by the insurance policy. (See ECF No. 45-6; ECF No. 45-3 at 8-10.) In it, Varni stated that the estimated replacement cost of the building was $767, 653.21, that the insurance coverage limit needed to meet the 80% mark was thus $614, 122.57, that the coverage limit in the policy was $420, 000, that the ACV of the building was $498, 974.59, that the total ACV of loss and damage was $317, 027.71, and that, after its $35, 000 deductible, Varni claimed $282, 027.71 under the insurance policy. (See ECF No. 45-6 at 2-3.) EMCC paid Varni $282, 027.21 on January 18, 2012 (ECF No. 45-7), and stamped Varni's sworn statement in proof of loss as received on January 19, 2012 (ECF No. 45-6).

         On October 20, 2014, Anderson Oil and TFL filed a complaint against Varni, First Casualty, and EMCC in the Court of Common Pleas for Allendale County, South Carolina. (See ECF No. 1-2 at 1-14.) The complaint alleged that Varni had placed a special trust and confidence in First Casualty to select the proper insurance policy to meet the requirements of the sublease; that Varni had informed First Casualty that the policy would need to protect Anderson Oil's interest in the premises and cover an amount at least equal to the fair market value (“FMV”) of the premises; that First Casualty was aware that Anderson Oil had insured the premises for a replacement value of approximately $669, 000; and that Varni had reasonably relied on First Casualty's selection of insurance policy. (See Id. at 3-4) The complaint further alleged that First Casualty's selection of a policy with a coverage cap of $420, 000 and a provision that covers less than the full amount of property loss or damage if the cap fails to meet the 80% percent mark rendered the premises “significantly underinsured.” (Id. at 5.) The complaint asserted seven causes of action again First Casualty, including for breach of contract, negligence, negligent misrepresentation, promissory estoppel, constructive fraud, breach of fiduciary duty, and equitable indemnity. (See Id. at 6-13.) Each cause of action asserted, under different theories, that First Casualty was liable to Varni and, for this reason, was also liable to TFL and Anderson Oil as real parties in interest or “equitable subrogees.” (See id.) In the breach of contract and promissory estoppel causes of action, the complaint also asserted that First Casualty was directly liable to Anderson Oil and was therefore also liable to TFL as a real party in interest or equitable subrogee.

         On May 14, 2015, Varni assigned to Anderson Oil any rights Varni may have against First Casualty arising in connection with the insurance policy in exchange for Anderson Oil's agreement not to execute any judgment against Varni arising from the pending litigation. (See ECF No. 1-1.) On June 12, 2015, Anderson Oil and TFL filed an amended complaint in state court (see ECF No. 1-2 at 51-64) that repeated the allegations of the first complaint verbatim except to specify the insurance policy number and to add a paragraph noting Varni's assignment of rights to Anderson Oil (see Id. at 53, 55). Thereafter, on June 25, 2015, first Casualty filed a notice of removal to the district court. (See ECF No. 1.)

         On August 21, 2015, Anderson Oil filed a motion to amend the complaint (ECF No. 19), which the court granted (ECF No. 25). The amended complaint names Crossroads as the sole plaintiff and does not name Varni as a defendant. (ECF No. 26.) The motion as well as the amended complaint explained that Crossroads, having recently purchased TFL, is named as a plaintiff in its capacity as TFL's successor in interest. (See ECF No. 19 at 1; ECF No. 26 at 1.) The motion along with supplemental filings also explained that, effective May 15, 2015, Anderson Oil assigned to Crossroads any rights Anderson Oil may have against First Casualty arising in connection with the insurance policy, including the rights Anderson Oil had been assigned by Varni, in exchange for Crossroads' agreement not to execute any judgment against Anderson Oil arising from the pending litigation. (See ECF No. 19 at 1; ECF No. 20; ECF No. 26 at 7.) Accordingly, as the motion explains, the amended complaint names Crossroads as a plaintiff not only in its capacity as TFL's successor in interest but also in its capacity as assignee of Varni's and Anderson Oil's rights. (See ECF No. 19 at 1; ECF No. 26 at 1.)

         The amended complaint restates nearly verbatim many of the allegations contained in the previous versions. To a large extent, many of the amendments are non-substantive and only reflect Crossroads' status as the sole plaintiff in the capacities as TFL's successor in interest and Varni's and Anderson Oil's assignee and Varni's deletion as a defendant. Beyond that, the amended complaint adds paragraphs alleging that First Casualty knew that TFL and Anderson Oil were third-party beneficiaries of Varni's and First Casualty's contract to procure an insurance policy and that Anderson was expected to assign its interests in the litigation to Crossroads. (ECF No. 26 at ¶ 17, 24.) Although the amended complaint contains the same seven causes of action against First Casualty that were asserted in prior versions of the complaint, the amended complaint drops the “equitable subrogee” language and, instead, simply asserts First Casualty is liable to Crossroads based on Crossroads' status as TFL's successor in interest and as Varni's and Anderson Oil's assignee. (See Id. at 7-8, 10-18.) For each of the seven causes of action, the amended complaint asserts that First Casualty was liable to Varni and, for this reason, First Casualty is also liable to Crossroads, either because Varni is ultimately liable to Crossroads (see Id. at 7 ([First Casualty] refused . . . to compensate Varni for the amount of coverage that [First Casualty] should have procured for Varni. As a result, Varni is now liable to Anderson Oil, wh[ich] is in turn liable to [Crossroads] as TFL's successor . . . .”)) or because Varni ultimately assigned its rights against First Casualty to Crossroads (see Id. at ¶¶ 29, 39, 49, 54, 59, 63, 70). In addition, for all but the breach of contract cause of action, the amended complaint alleges that First Casualty is directly liable to Anderson Oil and, for this reason as well, is liable to Crossroads, either because Anderson Oil is ultimately liable to Crossroads or because Anderson Oil assigned its rights to Crossroads. (See Id. at 10-18.) Lastly the amended complaint adds an eighth cause of action against First Casualty for quantum meruit, which asserts First Casualty is liable to Crossroads vis-à-vis Varni. (See Id. at 18.)

         Following the court's order granting the motion to amend the complaint, Varni filed a motion seeking to be dismissed with prejudice as a defendant on the ground that the amended complaint did not name Varni as a defendant and sought no recovery from Varni. (See ECF No. 32.) The court agreed and, on February 2, 2016, entered an order granting the motion to dismiss and dismissing Varni from the action with prejudice. (See ECF No. 36.)

         On March 4, 2016, First Casualty filed the instant motion for summary judgment.[2] (See ECF No. 45.) In its motion, First Casualty advances three arguments supporting judgment in its favor. First, it argues that all the claims asserted against it in the amended complaint are barred by the three-year statute of limitations found in S.C. Code Ann. § 15-3-530 (1), (5) (2016). (See Id. at 8-10.) In First Casualty's view, each of the eight causes of action against it are premised on its liability to Varni. (See Id. at 6 & n.4.) Varni, First Casualty argues, was aware or should have been aware of any claim it had against First Casualty based on First Casualty's alleged failure to select an insurance policy with a higher coverage limitation at the latest by January 19, 2012, when Varni submitted to EMCC the sworn statement in proof of loss. (See Id. at 4, 8-9.) Thus, under South Carolina's discovery rule, First Casualty contends that the limitations period commenced on January 19, 2012 (see Id. at 8 (citing S.C. Code Ann. § 15-3-535 (2016); RWE NUKEM Corp. v. ENSR Corp., 644 S.E.2d 730, 733 (S.C. 2007))), and that Varni's failure to bring an action asserting these claims against First Casualty within three years after January 19, 2012, bars Crossroads, as Varni's assignee, from bringing Varni's claims for the first time in its August 21, 2015 amended complaint, after the three-year period expired (see Id. at 8-10).

         Second, First Casualty argues that, because all the claims against it are premised not only on its liability to Varni but also on Varni's liability to Anderson Oil (which is in turn liable to Crossroads as TFL's successor in interest) (see Id. at 10), Varni's dismissal from the action with prejudice extinguished any potential liability Varni could have to Crossroads, and, consequently, Crossroads cannot plausibly allege a cognizable injury to Crossroads flowing from First Casualty's actions allegedly injuring Varni (see Id. at 11-12).

         Third, First Casualty argues that all claims against it fail on their merits. (See Id. at 12-14.) As First Casualty rightly points out, all eight claims against it are based on the allegation that it failed to procure an insurance policy for Varni that met the requirements for such a policy set forth in the sublease between Varni and Anderson Oil. (See Id. at 12.) First Casualty emphasizes that the sublease required Varni to obtain insurance “‘for at least the [FMV] of the buildings and equipment'” on the premises. (Id. (quoting ECF No. 45-1 at 6).) First Casualty points out that it has proffered evidence-in the form of the sworn statement in proof of loss and the $282, 027.71 check from EMCC to Varni-demonstrating that the policy it procured covered the ACV of the damaged property. (See id.) It also points to numerous legal authorities positing that FMV and ACV are equivalents. (See Id. at 12-13.) Accordingly, First Casualty argues that the only evidence available shows that it procured for Varni an insurance policy that met the sublease's requirement that the policy cover the premises' FMV and that, therefore, summary judgment in its favor on the merits is warranted. (See Id. at 13-14.)

         In response to First Casualty's statute of limitations argument, Crossroads points out that many of its claims are asserted not solely based in Crossroads' capacity as Varni's assignee but also as Anderson Oil's assignee and that First Casualty has not asserted that claims brought by Crossroads vis-à-vis Anderson Oil's interest are time-barred. (See ECF No. 52 at 5-9.) Crossroads also argues that its equitable indemnification cause of action, as a claim sounding in equity, is not subject to the three-year statute of limitations on which First Casualty relies. (See Id. at 9 (citing Robinson v. Estate of Harris, 705 S.E.2d 41, 48 (S.C. 2011)).) Crossroads further argues that the limitations period should be equitably tolled because Varni's pleadings were defective in that they failed to assert crossclaims against First Casualty and because extraordinary circumstances- Crossroads' inability to assert Varni's claims until Varni assigned its claims to Crossroads- prevented it from timely asserting the claims. (See Id. at 10.)

         In response to First Casualty's argument based on Varni's dismissal with prejudice, Crossroads appears to argue that its causes of action do not depend on Varni being held liable to Anderson Oil or TFL's successor. Instead, Crossroads asserts, many of its claims are also based on First Casualty's direct liability to Anderson Oil as a third-party beneficiary of the contract between First Casualty and Varni. (See Id. at 8-9.) Because Anderson Oil assigned its interest in this litigation to Crossroads, including any interest in claims of First Casualty's ...


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