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State Farm Fire and Casualty Co. v. Morningstar Consultants, Inc.

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

May 24, 2017





         This is an insurance declaratory judgment action filed by Plaintiff State Farm Fire and Casualty Company (State Farm) against Defendant Morningstar Consultants, Inc. (MCI). The Court has jurisdiction over the matter under 28 U.S.C. § 1332.

         Pending before the Court are two motions for summary judgment: one from MCI, asking the Court to dismiss State Farm's claim, and the other from State Farm, requesting the Court to hold MCI's insurance claim is excluded from coverage. Having considered the motions, the responses, the record, and the applicable law, it is the judgment of the Court it will deny MCI's motion and grant State Farm's motion.


         This case concerns whether State Farm has a duty to defend and cover MCI for eight state lawsuits (the state lawsuits) arising out of alleged property damage to certain construction projects of which MCI allegedly provided inspection services. In the state lawsuits, the plaintiffs brought allegations against MCI concerning its purported negligence in its rendering or failing to provide inspections of the building units. Centex Homes, the builder of all of the pertinent construction projects, hired MCI to conduct inspections of Centex's and its subcontractor's work.

         The parties agree there are two insurance policies at issue here (collectively, the two policies). The initial policy State Farm issued to MCI covered the time period February 9, 2000, to February 9, 2012 (the first policy). The first policy contains the following relevant language: “This insurance does not apply . . . to bodily injury, property damage or personal injury due to rendering or failure to render any professional services or treatments. This includes . . . supervisory or inspection services[.]” ECF No. 1 at 5.

         The other policy applies to the time period February 9, 2012 to February 9, 2016 (the second policy). It states: “[T]his insurance does not apply to . . . [b]odily injury[, ] property damage[, ] or personal and advertising injury arising out of the rendering or failure to render any professional service or treatment. This includes . . . [s]upervisory [and] inspection . . . activities[.]” Id. at 7 (internal quotation marks omitted).

         After MCI became aware of the state lawsuits, it gave timely notice to State Farm of them. State Farm then filed suit in this Court seeking a declaratory judgement it owes no duty to defend or indemnify MCI against the state lawsuits. Thereafter, each party filed their motions for summary judgment.

         MCI has agreed to allow State Farm's motion for summary judgment to serve as its response to MCI's motion; and State Farm has consented to having MCI's motion for summary judgment be construed as its response to State Farm's motion. The Court, having been fully briefed on the relevant issues, will now adjudicate both motions.


         A. Summary Judgment

         Summary judgment is appropriate only “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). In deciding whether a genuine issue of material fact exists, the evidence of the non-moving party is to be believed and all justifiable inferences must be drawn in his favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The moving party has the burden of proving summary judgment is appropriate. Once the moving party makes this showing, the opposing party is unable to rest upon mere allegations or denials, but rather must, by affidavits or other means permitted by the Rule, set forth specific facts showing that there is a genuine issue for trial. See F e d . R. Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A party asserting that a fact is genuinely disputed must support the assertion by “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.” Fed.R.Civ.P. 56(c)(1)(A). A litigant is unable to “create a genuine issue of material fact through mere speculation or the building of one inference upon another.” Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985). Therefore, “[m]ere unsupported speculation . . . is not enough to defeat a summary judgment motion.” Ennis v. Nat'l Ass'n of Bus. & Educ. Radio, Inc., 53 F.3d 55, 62 (4th Cir. 1995).

         “[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. 1996). “Summary judgment is proper only when it is clear that there is no dispute concerning either the facts of the controversy or the inferences to be drawn from those facts.” Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987). The Court must determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 251-52.

         B. Policy Interpretation

         Under South Carolina law, insurance policies are subject to the general rules of contract construction. Nationwide Mut. Ins. Co. v. Commercial Bank, 479 S.E.2d 524, 526 (S.C. 1996). The Court must afford policy language its plain, ordinary, and popular meaning. Diamond State Ins. Co. v. Homestead Indus. Inc., 456 S.E.2d 912, 915 (S.C. 1995). The meaning of a particular word or phrase is not determined by considering the word or phrase by itself, but by reading the policy as a whole and considering the context and subject matter of the insurance contract. Yarborough v. Phoenix Mut. Life Ins. Co., 225 S.E.2d 344, 349 (S.C. 1976).

         “[T]he Court will look to the reasonable expectations of the insured at the time when he entered into the contract if the terms thereof are ambiguous or conflicting, or if the policy contains a hidden trap or pitfall, or if the fine print takes away that which has been given by the large print. But the doctrine is not a rule granting substantive rights to an insured when there is no doubt as to the meaning of policy language.” Bell v. Progressive Direct Ins. Co., 757 S.E.2d 399, 407 (S.C. 2014) (citation omitted) (internal quotation marks omitted).

         To be clear, the insurer's duty under a policy of insurance is set forth by the terms of the policy and cannot be enlarged by judicial construction. S.C. Ins. Co. v. White, 390 S.E.2d 471, 474 (S.C. 1990). The Court is “without authority to alter a contract by construction or to make new contracts for the parties.” C.A.N. Enterps., Inc. v. S.C. Health & Human Servs. Fin. Comm'n, 373 S.E.2d 584, 587 (1988) (citation omitted). Instead, its “duty is limited to the interpretation of the contract made by the parties themselves[, ] regardless of its wisdom or folly, apparent unreasonableness, or failure to guard their rights carefully.” Id. (citation omitted) (internal quotation marks omitted) (alteration omitted). When ambiguous or ...

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