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Taylor v. Security National Insurance Co.

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

March 8, 2018

Robert Taylor, Plaintiff,
v.
Security National Insurance Co., Defendant.

          OPINION AND ORDER

          Donald C. Coggins, Jr. United States District Judge.

         This matter is before the Court on Plaintiff's Motion to Expedite Review and for Preliminary Injunction, Plaintiff's Motion for Partial Judgment on the Pleadings, Defendant's Motion for Summary Judgment, and Plaintiff's Motion for Partial Summary Judgment. ECF Nos. 26, 34, 57, 58. With respect to the Motion to Expedite Review and for Preliminary Injunction and the Motion for Partial Judgment on the Pleadings, all responses and replies have been filed. ECF Nos. 33, 37, 42, 44. Plaintiff filed a Response in Opposition to Defendant's Motion for Summary Judgment on January 31, 2018, and Defendant filed a Reply on February 5, 2018. ECF Nos. 62, 64. Defendant filed a Response in Opposition to Plaintiff's Motion for Partial Summary Judgment on January 31, 2018. ECF No. 63. Accordingly, the Motions are ripe for review.

         BACKGROUND

         This action was filed on September 5, 2017, seeking a declaration that Defendant is obligated under a liability insurance policy to appear, defend, and indemnify Plaintiff in connection with criminal charges filed against him. ECF No. 1 at 1. The parties agree that Defendant issued Directors and Liability Insurance Policy No. SDO1066435 04 (“the Policy”) to GrandSouth Bank (“the Bank”) for the policy period from August 6, 2014, through August 6, 2017. ECF No. 57-1. Plaintiff was a Vice-President of the Bank during this time. ECF No. 57 at 2. Prior to issuance of the Policy, the Bank had been involved in two civil actions, Aquent LLC v. Bruce Gregory Harrison, et al., C/A No. 09-cvs-9613 ( N.C. 2009) and BHC Interim Funding II, LP v. Compensation Management Inc., et al., C/A No. 11-cvs-6696 ( N.C. 2012) (“the prior civil suits”) which involved an allegedly improper factoring[1] scheme executed between employees of the Bank and a bank customer. ECF No. 58-1 at 2. Plaintiff was not named in either of the prior civil suits. Id. at 3-5.

         On June 26, 2016, certain other employees of the Bank were indicted in the Middle District of North Carolina. It appears Defendant initially determined coverage for these individuals was appropriate under the Policy. However, on January 4, 2017, Defendant denied coverage claiming that the prior civil suits and the criminal indictment were considered a single claim because they constitute “interrelated wrongful acts, ” as defined in the Policy, and invoked the prior and pending litigation policy exclusion. ECF No. 16-3. Therefore, according to the terms of the Policy, that claim was deemed to be made no later than November 13, 2009, and so predated the Policy. Id. These other employees filed suit and have now settled with Defendant. See C/A No. 6:17-cv-00011-MGL (D.S.C. 2017).

         Plaintiff was charged in a third superseding indictment issued on August 29, 2017. ECF No. 16-2 at 1. Defendant denied coverage for Plaintiff on September 27, 2017. ECF No. 57-4. The indictment describes the prior factoring agreement between the Bank and its customer and describes conduct dating back to 2003, with conduct of Plaintiff dating back to 2008. ECF No. 16-2. At issue in the present action is whether the prior civil suits bar coverage for Plaintiff under the terms of the Policy.

         APPLICABLE LAW

         Summary Judgment Standard

         Rule 56 states, as to a party who has moved for summary judgment, “[t]he court shall grant summary judgment 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). A fact is “material” if proof of its existence or non-existence would affect disposition of the case under applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue of material fact is “genuine” if the evidence offered is such that a reasonable jury might return a verdict for the non-movant. Id. at 257. When determining whether a genuine issue has been raised, the court must construe all inferences and ambiguities against the movant and in favor of the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962).

         The party seeking summary judgment shoulders the initial burden of demonstrating to the court that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has made this threshold demonstration, the non-moving party, to survive the motion for summary judgment, may not rest on the allegations averred in his pleadings. Id. at 324. Rather, the non-moving party must demonstrate specific, material facts exist that give rise to a genuine issue. Id. Under this standard, the existence of a mere scintilla of evidence in support of the non-movant's position is insufficient to withstand the summary judgment motion. Anderson, 477 U.S. at 252. Likewise, conclusory allegations or denials, without more, are insufficient to preclude granting the summary judgment motion. Ross v. Commc'ns Satellite Corp., 759 F.2d 355, 365 (4th Cir.1985), overruled on other grounds, 490 U.S. 228 (1989). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Anderson, 477 U.S. at 248. Further, Rule 56 provides in pertinent part:

         A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:

(A) 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; or
(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.

Fed. R. Civ. P. 56(c)(1). Accordingly, when Rule 56© has shifted the burden of proof to the non-movant, he must produce existence of a factual dispute on every element essential to his action that he bears the burden of adducing at a trial on the merits.

         Declaratory Judgment

         Pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, a district court “may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” The Act, however, gives the court the discretion to decline issuing the judgment. Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 421 (4th Cir. 1998); Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995) (The Declaratory Judgment Act “confer[s] on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.”). “[W]hen a useful purpose will not be served, statute and practice have established the rule that the judgment may be refused when it is not necessary or proper at the time under all the circumstances.” Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937) (internal quotation marks omitted).

         South Carolina Law

         A federal court exercising diversity jurisdiction applies state substantive law. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996) (citations omitted). It is undisputed that the substantive law of the State of South Carolina applies to this matter. Under the South Carolina law, insurance policies are subject to the general rules of contract construction. B.L.G. Enters., Inc. v. First Financial Ins. Co., 514 S.E.2d 327 (S.C. 1999). The court must give policy language its plain, ordinary, and popular meaning. Id. When a contract is unambiguous, clear, and explicit, it must be construed according to the terms the parties have used. Id.; see Auto-Owners Ins. Co. v. Carl Brazell Builders, Inc., 162-163, 588 S.E.2d 112, 115 (S.C. 2003). This court must enforce, not write, contracts of insurance and must give policy language its plain, ordinary, and popular meaning. Id. An insurer's obligation under a policy of insurance is defined by the terms of the policy itself and cannot be enlarged by judicial construction. South Carolina Ins. Co. v. White, 390 S.E.2d 471 (S.C. Ct. App.1990).

         A policy clause extending coverage must be liberally construed in favor of coverage. Torrington Co. v. Aetna Cas. and Sur. Co., 216 S.E.2d 547 (S.C. 1975). Insurance policy exclusions are construed most strongly against the insurance company, which also bears the burden of establishing the exclusion's applicability. Owners Ins. Co. v. Clayton, 614 S.E.2d 611, 614 (S.C. 2005); Boggs v. Aetna Cas. and Sur. Co., 252 S.E.2d 565 (S.C. 1979). However, if the intention of the parties is clear, courts have no authority to torture the meaning of policy language to extend coverage that was never intended by the parties. Sphere Drake Ins. Co. v. Litchfield, 438 S.E.2d 275 (S.C. Ct. App. 1993); S.C. Farm Bureau Mut. Ins. Co. v. Wilson, 544 S.E.2d 848, 850 (S.C. Ct. App. 2001).

         When a provision is ambiguous, the intent of the parties controls. See Holcombe v. Orkin Exterminating Co., Inc., 317 S.E.2d 458 (S.C. Ct. App. 1984). Although the interpretation of a contract is generally a matter of law, the intent of the parties becomes a question of fact for the jury when the contract is ambiguous. Kumpf v. United Tel. Co., 429 S.E.2d 869 (S.C. Ct. App. 1993). Accordingly, summary judgment is not appropriate where, due to an ambiguity, the intent of the parties is at issue.

         DISCUSSION

         The ...


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