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QBE Insurance Corp. v. Ocean Keyes Development LLC

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

February 13, 2018

QBE INSURANCE CORPORATION, PLAINTIFF,
v.
OCEAN KEYES DEVELOPMENT, LLC; KEYE CONSTRUCTION COMPANY, INC.; KEYE COMMUNITIES, LLC; PINE BLUFF CONSTRUCTION CO.; KEYE REAL ESTATE, INC.; RUSSELL BALTZER; MARC HYMAN; BEACH VILLAS AT OCEAN KEYES PROPERTY OWNERS ASSOCIATION, INC.; SEASHORE VILLAS AT OCEAN KEYES PROPERTY OWNERS ASSOCIATION, INC.; LAKESIDE TOWNHOMES AT OCEAN KEYES HORIZONTAL PROPERTY REGIME, INC.; LAKESIDE TOWNHOMES AT OCEAN KEYES PROPERTY OWNERS ASSOCIATION, INC.; HARPER OCEAN KEYES, LLC; ROBERT F. MCKENNA; OLGA R. MCKENNA; ROBERT W. DISMORE; AND LUTHER A. BEAZLEY, III, TRUSTEE OF THE LUTHER A. BEAZLEY REVOCABLE TRUST, DEFENDANTS.

          Stephen L. Brown Mary S. Willis Young Clement Rivers, LLP and YARON & ASSOCIATES George D. Yaron Jenna E. Settino Attorneys for QBE Insurance Company.

          Andrew Preston Brittain The Brittain Law Firm PA Attorney for Beach Villas at Ocean Keyes Property Owners Association Inc.

          George Edward Mullen Mullen Wylie Law The Brittain Law Firm PA Robert L. Wylie, IV Allison Burke Thompson Attorneys for Beach Villas at Ocean Keyes Property Owners Association Inc. and Seashore Villas at Ocean Keyes Property Owners Association Inc.

          Luther O. McCutchen, III McCutchen Mumford Vaught O'Dea and Geddie Attorney for Lakeside Townhomes at Ocean Keyes Horizontal Property Regime Inc. and Lakeside Townhomes at Ocean Keyes Property Owners Association Inc.

          Phillip C. Thompson Thompson and Henry Attorney for Harper Ocean Keyes LLC, Luther A. Beazley, III, Olga R. McKenna, Robert W. Dismore and Robert F. McKenna.

          David B. Miller Holly M. Lusk Bellamy, Rutenberg, Copeland, Epps, Gravely & Bowers, P.A. Attorneys for Ocean Keyes Development, LLC, Keye Construction Company, Inc., Keye Communities, LLC, Pine Bluff Construction Co., Keye Real Estate, Inc., Marc Hyman and Russell Baltzer.

          CONSENT ORDER

          Honorable R. Bryan Harwell United States District Judge.

         I. BACKGROUND

         1. QBE Insurance Corporation (“QBE”) initiated this action on June 20, 2017 against the following Defendants: Ocean Keyes Development LLC (“Ocean Keyes”), Keye Real Estate, Inc. (collectively “Ocean Keyes Entities”); Keye Construction Co., Inc., Keye Communities, LLC, Pine Bluff Construction Co., Marc Hyman, Russell P. Baltzer (“Keye- Related Entities”); Beach Villas at Ocean Keyes Property Owners Association, Inc., Seashore Villas at Ocean Keyes Property Owners Association, Inc., Lakeside Townhomes at Ocean Keyes Horizontal Property Regime, Inc., Lakeside Townhomes at Ocean Keyes Property Owners Association, Inc., Harper Ocean Keyes, LLC; Robert F. McKenna, Olga R. McKenna, Robert W. Dismore, and Luther A. Beazley, III, Trustee of the Luther A. Beazley Revocable Trust (collectively “Homeowner Parties”).

         2. QBE's Complaint alleged that the Defendant Homeowner Parties claimed construction defects at their respective condominium and townhouse projects, including to their individual units and the project common areas against some or all of the Ocean Keyes Entities and the Keye-Related Entities in the following underlying lawsuits:

a. Beach Villas at Ocean Keyes Property Owners Association, Inc. v. Ocean Keyes Development, LLC, et al. in the Fifteenth Judicial Circuit in the Court of Common Pleas of Horry County, South Carolina, No. 2014-CP-26-6573 (“the Beach Villas action”).
b. Seashore Villas at Ocean Keyes Property Owners Association, Inc. v. Ocean Keyes Development, LLC, et al. in the Fifteenth Judicial Circuit in the Court of Common Pleas of Horry County, South Carolina, No. 2015-CP-26-8308 (“the Seashore Villas action”).
c. Lakeside Townhomes at Ocean Keyes Horizontal Property Regime, Inc., et al. v. Ocean Keyes Development, LLC, et al. in the Fifteenth Judicial Circuit in the Court of Common Pleas of Horry County, South Carolina, No. 2015-CP-26-5585 (“the Lakeside Townhomes action”);
d. Harper Ocean Keyes, LLC, et al, v. Ocean Keyes Development, LLC, et al., in the Fifteenth Judicial Circuit in the Court of Common Pleas of Horry County, South Carolina, No. 2015-CP-26-4599 (“the Harper Ocean action”)

         3. Collectively, the Beach Villas lawsuit, Seashore Villas lawsuit, Lakeside Townhomes lawsuit, and Harper Ocean lawsuit are collectively referred to as the “Underlying Actions”.

         4. The Defendant Homeowners alleged in the Underlying Actions that Ocean Keyes was the developer and/or general contractor of their homes.

         5. QBE's Complaint alleged that QBE issued Policy Number JCG23468, which was effective from June 29, 2010 to June 29, 2011 (“2010-2011 policy”) and Policy Number JCG23468-1, which was effective from June 29, 2011 to June 29, 2012 (“2011-2012 policy”) (collectively, referred to as the “QBE policies”).

         6. QBE agreed to defend Ocean Keyes against the Underlying Actions under a “reservation of rights”.

         7. QBE's Complaint alleged the following regarding the QBE policies:

         a. Both of the Declaration Pages in the QBE policies list “Keye Real Estate, Inc.” and “Ocean Keyes Development, LLC” as Named Insureds, and identify them in the business description as: “real estate agent”. The Declaration Pages state that the classification and annual premium calculation ($1, 479) was based on the following: (1) real estate agents payroll, and (2) approximately 10, 028 square feet of building or premises, classified as: “bank, office-merc, mfg (lessor's risk only).”

         b. Each of the QBE policies contain a Commercial General Liability Coverage Part, which has a General Aggregate Limit of $2, 000, 000, a Products - Completed Operations Aggregate Limit of $2, 000, 000, and an “Each Occurrence” Limit of $1, 000, 000.

         c. The Insuring Agreement in the QBE policies provide as follows:

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit” seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result. But:
(1) The amount we will pay for damages is limited as described in Section III - Limits Of Insurance; and
(2) Our right and duty to defend ends when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C.

         No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments - Coverages A and B.

         b. This insurance applies to "bodily injury" and "property damage" only if:

(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";
(2) The "bodily injury" or "property damage" occurs during the policy period; and
(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II - Who Is An Insured and no "employee" authorized by you to give or receive notice of an "occurrence" or claim, knew that the "bodily injury" or "property damage" had occurred, in whole or in part. If such a listed insured or authorized "employee" knew, prior to the policy period, that the "bodily injury" or "property damage" occurred, then any continuation, change or resumption of such "bodily injury" or "property damage" during or after the policy period will be deemed to have been known prior to the policy period.
c. "Bodily injury" or "property damage" which occurs during the policy period and was not, prior to the policy period, known to have occurred by any insured listed under Paragraph 1. of Section II - Who Is An Insured or any "employee" authorized by you to give or receive notice of an "occurrence" or claim, includes any continuation, change or resumption of that "bodily injury" or "property damage" after the end of the policy period.
d. "Bodily injury" or "property damage" will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph 1. of Section II - Who Is An Insured or any "employee" authorized by you to give or receive notice of an "occurrence" or claim:
(1) Reports all, or any part, of the "bodily injury" or "property damage" to us or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the "bodily injury" or "property damage"; or
(3) Becomes aware by any other means that "bodily injury" or "property damage" has occurred or has begun to occur.
e. Damages because of "bodily injury" include damages claimed by any person or organization for care, loss of services or death resulting at any time from the "bodily injury".

         d. Both of the QBE policies contain an Additional Insured - Managers or Lessors of Premises Endorsement, written on Form CG ...


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