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Owners Insurance Co. v. Warren Mechanical, LLC

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

January 11, 2018

OWNERS INSURANCE COMPANY, Plaintiff,
v.
WARREN MECHANICAL, LLC, d/b/a WARREN MECHANICAL, Defendant.

          ORDER

          DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

         The following matters are before the court on Defendant Warren Mechanical's (“Warren”) motion for reconsideration on the court's September 29, 2017 order (“the order”). ECF No. 46. For the reasons set forth below, the court grants the motion for reconsideration.

         I. BACKGROUND

         The instant action arises out of an insurance coverage dispute between Owners Insurance Company (“Owners”) and its insured, Warren, regarding certain alleged misrepresentations in Warren's January 21, 2015 application for workers' compensation insurance. ECF No. 28-3, Application. Warren is a medium-sized construction company that specializes in the propane and natural gas industry. ECF No. 28-1, Steve Dep. 12:11-14. Warren was founded in 2006 by Steve Warren (“Steve”), who is its sole owner. In 2014, one of Warren's major customers required it to obtain an “anti-subrogation endorsement” in its workers' compensation policy. ECF No. 37 at 3. Warren contacted its insurance agent, the Creech Roddy & Watson Insurance Agency (“CRW”), which informed Warren that it would need to switch insurers to obtain the required coverage. Id. Warren's primary contact at CRW, Robert Nalley (“Nalley”), suggested Owners as a replacement insurer. Id.

         Warren maintains that Steve and Nalley met a few days before CRW submitted Warren's application for the new policy, but Nalley forgot to bring the application to the meeting. Steve Dep. 22:10-24:3. Rather than retrieve the application, Nalley asked Steve a number of questions and told Steve he would fill out the application later. Id. Nalley could not provide Steve with a quote for the policy without first completing the application, so the pair arranged for Steve's wife, Raynee Warren (“Raynee”), to deliver a check for the premium amount on the policy to CRW's office at a later date. Id. at 35:14-36:1.

         Nalley did not personally prepare the application. In fact, Nalley was not even present at the time the application was completed. Instead, Aura Lewis (“Lewis”), a newly hired CRW employee, completed the application based on information provided to her through communications with Nalley. Lewis Dep. 9:6-10:23, 34:11-20. A more senior employee of CRW, Rebecca Hipp (“Hipp”), was also present when Lewis completed the application. Id. at 36:4-7. It was Hipp who ultimately signed the application on CRW's behalf. Application at 4.

         When Raynee arrived at CRW's office to drop off Warren's premium check, the CRW receptionist instructed her to sign the application. ECF No. 37-6, Raynee Dep. 11:6-20. Raynee asked CRW whether it was appropriate for her to sign the application, and was told that it was, at which point she signed the application. Id. at 12:20-25. Raynee now claims that she did not have the authority to sign the application, and only did so because she was “in haste” and “didn't think about it.” Id. at 13:1-6. Indeed, Raynee testifies that she did not even read the application, and that CRW pressured her to sign it by telling her that Warren would not be allowed on a job site unless the application was signed immediately. Id. at 13:20-14:21. The application stated that:

(1) [Warren's] business operations consisted of “PLUMBING”;
(2) [Warren] had only two full-time employees - one “Plumbing NOC & Drivers” employee under National Council on Compensation Insurance (“NCCI”) classification code 5183 and one “Clerical Office Employees NOC” employee under NCCI classification code 8810;
(3) [N]one of [Warren's] work was performed above 15 feet; and
(4) [Warren's] business did not give rise to “[a]ny exposure to radioactive materials, flammables, explosives, caustics, fumes, landfills, asbestos, wastes, fuel tanks, etc.”

         Application at 2-3. Steve has unambiguously stated that the latter three of these representations were inaccurate. Steve Dep. 29:2-21, 31:3-21. As noted above, Steve has also described Warren as a construction company that specializes in the propane and natural gas industry. Id. at 12:11-14. While this work certainly involves pipes, Warren has admitted-through its failure to respond to Owners's requests for admission-that neither Warren nor Steve are “licensed plumber[s]” pursuant to S.C. Code § 40-11-410. ECF No. 28-17, Requests for Admission.

         Owners-unaware of these misrepresentations-issued a policy providing the requested coverage for the period of January 22, 2015 to January 22, 2016 (the “Policy”). ECF No. 10 ¶ 11. Around a month after the Policy was issued, Warren hired Scott Gerhard (“Gerhard”). Gerhard was injured on December 7, 2015 when nitrogen was released from a propane tank he was working on nearly twenty feet above the ground, causing him to fall and suffer second degree burns. ECF No. 28 at 4-5; ECF No. 34 at 6.

         Gerhard made a claim to Owners for workers' compensation benefits, which Owners denied on the ground that there was no valid policy in place. ECF No. 37-10, Owners's Denial Letter. Gerhard then filed a hearing request with the South Carolina Workers' Compensation Commission (“SCWCC”). Despite denying coverage, Owners initially hired an attorney to represent Owners and Warren in connection with Gerhard's claim. ECF No. 37-11, Email to Aura Lewis. On April 7, 2016, another attorney appeared in Gerhard's SCWCC case solely on Owners's behalf, and asked the court to find that the Policy did not cover Gerhard's claim. ECF No. 37 at 6. Owners later filed a motion in the SCWCC proceedings to have the Policy declared void ab initio. Id. The SCWCC denied this motion, leaving it to be addressed at the merits hearing that would be scheduled after the parties conducted discovery. ECF No. 37-12, SCWCC ...


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