United States District Court, D. South Carolina, Florence Division
matter is before the Court on Defendant's motion for
summary judgment. See ECF No. 64. The Court grants
in part and denies in part the motion for the reasons set
parties do not dispute the following facts. Plaintiff, HDMG
Entertainment, LLC, planned to sponsor and produce an
entertainment event known as the Swamp Fox Biker Bash (the
“Bash”) that was scheduled to occur at the Swamp
Fox Entertainment Complex in Marion, South Carolina between
May 8 and 15, 2015. Compl. at ¶ 3 [ECF No. 1-1]; Answer
at ¶ 3 [ECF No. 27]. As the Court has previously noted,
Plaintiff is a limited liability company organized under the
laws of Delaware and doing business in Marion County, South
Carolina; its principal place of business is in Milford,
Connecticut, and its managing member and president is Robert
Hartmann, Sr. (“Hartmann”), who is a citizen and
resident of Connecticut. [Jan. 25, 2017 Order at 1, ECF No.
14]. Plaintiff leased the Swamp Fox Entertainment Complex
from HSGCHG Investments, LLC (“HSGCHG”), a real
estate holding company in which Hartmann has a 90% ownership
interest. Hartmann Aff. at 1 [ECF No. 72-1].
order to produce the Bash, Plaintiff needed a communications
system in the venue to provide Internet access, phone
service, and other services crucial to the event's
success; without it, the Bash could not occur. Mem. in Supp.
of Mot. for Summ. J at 3. As owner of the venue, HSGCHG
entered into a contract with Time Warner Cable (“Time
Warner”) on January 23, 2015, to put a communications
system in the venue. Resp. Mem. in Opp'n to Def.'s
Mot. for Summ. J. at 10 (citing Time Warner Contract [ECF No.
72-6]). On January 29, 2015, as the work began, Time Warner
estimated a March 14, 2015 completion date for the
communications system. Mem. in Supp. of Mot. for Summ. J. at
5 (citing Jan. 29, 2015 Email [ECF No. 66-3]). However, this
initial estimate was not met. On April 6, 2015, Time Warner
told Plaintiff that the installation would occur on April 27.
[Apr. 6, 2015 Email, ECF No. 72-8]. However, on April 22,
2015, Time Warner informed Hartmann that “due to
unforeseen delays in construction[, ]” installation
would not be completed until after the Bash was scheduled to
occur, forcing cancellation of the Bash. [Apr. 22, 2015
Letter, ECF No. 72-11]; Compl. ¶ 6.
had sought event cancellation insurance for the Bash. On
February 18, 2015, Gabriel Gornell, executive producer of the
Bash, completed an event cancellation application (“the
Application”) with Ascend Insurance Brokerage
(“Ascend”) on Plaintiff's behalf.
See Application [ECF No. 67-4]. In response to
Question 12 on the Application-“Will the event require
construction work?”-Plaintiff answered in the negative,
noting that “[e]lements will require re-certification.
But the stage and buildings are fully constructed.”
Id. at 2. In response to Question 19-“Have all
necessary arrangements for the successful fulfillment of the
performance(s) or event(s) to be insured been
made?”-Plaintiff answered in the affirmative.
Id. at 3. In response to Question 26-“Are
there any other material facts or items of information with
regard to the proposed performance(s) or event(s) which
should be disclosed? (A material fact is one likely to
influence acceptance or assessment of this proposal by
Underwriters)”-Plaintiff answered in the negative.
Id. at 4. The Application includes a declaration
“that non-disclosures or misrepresentation of a
material fact will entitle the company to void the
[i]nsurance” and Plaintiff's affirmation that
“the information provided in this application . . . is
true” and no material facts were withheld. Id.
April 28, 2015, Defendant, Certain Underwriters at
Lloyd's of London Subscribing to Policy No. L009082,
issued Plaintiff an event cancellation insurance policy with
a March 26, 2015 effective date (the “Policy”) under
which Defendant agreed to indemnify Plaintiff up to $4, 490,
480.00 for losses resulting from cancellation of the Bash; in
exchange, Plaintiff paid a $47, 635.12 premium. Compl. at
¶ 4; Answer at ¶ 4; see Policy [ECF No.
72-2 at 2]. The Policy has certain requirements for coverage
to apply, as well as seventeen exclusions and nineteen
conditions. Policy [ECF No. 72-2 at 3, 5, 8-14]. The Policy
was underwritten by HCC Speciality Underwriters, Inc.
(“HCC”) from its office in Massachusetts and
delivered to Plaintiff's principal place of business in
Milford, Connecticut. [Jan. 25, 2017 Order at 2].
April 30, 2015, Plaintiff provided a notice of claim to HCC,
explaining that it was forced to cancel the Bash due to Time
Warner's failure to timely complete the communications
system. See Notice of Claim [ECF No. 68-1 at 3].
Defendant began to investigate Plaintiff's claim.
See June 20, 2015 Letter at 1 [ECF No. 68-4]. On
August 27, 2015, Plaintiff provided its proof of loss.
See ECF No. 72-12. On April 15, 2016, before a
formal denial of the claim from Defendant, Plaintiff
initiated this action by filing a complaint in the Court of
Common Pleas for Marion County, South Carolina, asserting
causes of action for breach of contract, statutory bad faith,
and common law bad faith. Compl. at ¶¶ 11-22. On
May 6, 2016, after further investigation, Defendant denied
Plaintiff's claim, explained the grounds for denial,
provided a notice of rescission of the Policy due to alleged
material misrepresentations in the Application, and returned
Plaintiff's premiums paid. See Notice of
Rescission at 1 [ECF No. 68-10].
20, 2016, Defendant timely removed the action to this Court
under diversity jurisdiction. See ECF No. 1. On May
27, 2016, Defendant filed a motion to dismiss for improper
venue or in the alternative to transfer venue, which the
Court denied on January 25, 2017. See ECF No. 14.
Subsequently, on March 6, 2017, Defendant filed an answer and
counterclaim for: (1) a declaratory judgment that Defendant
had no duty to indemnify because no coverage was triggered
under the Policy; and (2) a declaratory judgment for
rescission of the Policy due to Plaintiff's alleged
intentional concealment and misrepresentation of material
facts. Answer & Countercl. at ¶¶ 22-60 [ECF No.
24]. On April 2, 2017, Plaintiff filed an answer to
Defendant's counterclaim. See ECF No. 27. On May
30, 2018, Defendant filed the instant motion for summary
judgment. On June 18, 2018, Plaintiff filed a response in
opposition, and on June 25, 2018, Defendant filed a reply
thereto. See ECF Nos. 72 & 73. The matter is now
ripe for the Court's consideration.
judgment is appropriate when no genuine issue of material
fact exists and the moving party is entitled to judgment as a
matter of law. Reyazuddin v. Montgomery Cty., Md.,
789 F.3d 407, 413 (4th Cir. 2015); see Fed. R. Civ.
P. 56(a) (“The 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.”). The moving party has the burden of
showing “that there is an absence of evidence to
support the nonmoving party's case.” Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Once the
movant makes this showing, the opposing party must “go
beyond the pleadings” to evince “specific facts
showing . . . a genuine issue for trial.” Id.
at 324. A genuine issue of material fact-one “that
might affect the outcome of the suit under the governing
law”-exists if, in viewing the record and all
reasonable inferences drawn therefrom in a light most
favorable to the non-moving party, a reasonable fact-finder
could return a verdict for the non-movant. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
nonmoving party is required to submit evidence of specific
facts by way of affidavits, depositions, interrogatories, or
admissions to demonstrate the existence of a genuine and
material factual issue for trial. Celotex, 477 U.S.
at 322. However, “the mere existence of some alleged
factual dispute between the parties will not defeat an
otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material
fact.” Anderson, 477 U.S. at 247-48.
Court should 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. Id. at 251-52. The Court should not
grant summary judgment “unless the entire record shows
a right to judgment with such clarity as to leave no room for
controversy and establishes affirmatively that the adverse
party cannot prevail under any circumstances.”
Campbell v. Hewitt, Coleman & Assocs, Inc., 21
F.3d 52, 55 (4th Cir. 1994) (citation omitted). In ruling on
a motion for summary judgment, the Court must not resolve
disputed facts, weigh the evidence, Russell v. Microdyne
Corp., 65 F.3d 1229, 1239 (4th Cir. 1995) (citation
omitted), or make determinations of credibility. Sosebee
v. Murphy, 797 F.2d 179, 182 (4th Cir. 1986). Inferences
that are “drawn from the underlying facts . . . must be
viewed in the light most favorable to the party opposing the
motion.” United States v. Diebold, Inc., 369
U.S. 654, 655 (1962) (per curiam).
moves for summary judgment pursuant to Federal Rule of Civil
Procedure 56 on the grounds that there is no genuine dispute
of material fact, entitling Defendant to judgment as a matter
of law in its favor on the complaint and Defendant's
counterclaim against Plaintiff. However, before determining
if there is a genuine dispute of material fact, the Court
must first determine what law governs the Policy.
contends that the parties agree that Connecticut law
“governs interpretation of the Policy.” Mem. in
Supp. of Mot. for Summ. J. [ECF No. 65] at 16. Although
Plaintiff “agrees Connecticut substantive law regarding
interpretation of the [Policy] applies[, ]” Resp. in
Opp'n [ECF No. 72] at 5, it also “submits that
South Carolina law applies” to its claims for statutory
and common-law bad faith. Id. at 31. For the reasons
discussed below, the Court holds that Connecticut law governs
the Policy and this dispute.
a diversity case, a district court applies the substantive
law of the forum state to resolve a plaintiff's state law
claims.” Russell v. McGrath, 135 F.Supp.3d
427, 430 (D.S.C. 2015) (citing Erie R.R. v.
Tompkins, 304 U.S. 64 (1938); Brown v. Am. Broad.
Co., 704 F.2d 1296, 1299 (4th Cir. 1983)). Furthermore,
when sitting in diversity, the court “appl[ies] the
forum state's choice of law rules.” Id.
(citing Francis v. Allstate Inc. Co., 709 F.3d 362,
369 (4th Cir. 2013)). In South Carolina, “if the
parties to a contract specify the law under which the
contract shall be governed, ” the Court must honor this
choice so long as the application of foreign law does not
violate South Carolina public policy. Nucor Corp. v.
Bell, 482 F.Supp.2d 714, 728 (D.S.C. 2007) (citations
Defendant points to Condition 13 of the Policy as evidence
that the parties intended for Connecticut law to govern the
Policy. See Mem. in Supp. of Mot. for Summ. J. at 16
(“Connecticut [l]aw [g]overns”). Plaintiff does
not oppose this interpretation of Condition 13. See
Resp. Mem. in Opp'n at 5 (“Under South Carolina
choice-of-law princip[le]s, [Plaintiff] agrees Connecticut
substantive law regarding interpretation of the insurance
policy applies.”). Condition 13, titled
“Conformity to Statute, ” provides that:
“[t]erms of this policy in conflict with the written
laws of any state in which this policy is issued, which are
applicable to this policy, are changed to conform to such
laws.” Policy [ECF No. 72-2 at 13]. Because the parties
do not dispute what this provision means, the Court need not
decipher Condition 13 to find the parties' intent.
Rather, because the parties' briefs make clear their
intention for Connecticut law to govern the Policy, the Court
holds that Connecticut law governs the Policy and the causes
of actions arising thereunder.
agreeing that Connecticut law governs the Policy, Plaintiff
still asserts that South Carolina law applies to its bad
faith claims. See Resp. Mem. in Opp'n at 31
(“[Plaintiff] respectfully submits South Carolina law
applies to its second claim . . .”). In seeking this
exception, Plaintiff provides no basis for why South Carolina
governs only the bad faith claims but not the breach of
contract claim. Because the parties' briefs interpret the
Policy as if it is governed by Connecticut law, the Court
believes that the parties intend for Connecticut law to apply
to the Policy and any causes of action arising under it;
Plaintiff's assertion to the contrary is not adequately
supported. See Fed. R. Civ. P. 56 (e)(2) (“If
a party fails to properly support an assertion of fact or
fails to properly address another party's assertion of
fact . . ., the court may . . . consider the fact undisputed
for purposes of the motion.”). However, because
Defendant is entitled to summary judgment on the bad faith
claims under South Carolina or Connecticut law, as explained
below, no further discussion is necessary regarding which law
applies to the bad faith claims. Next, the Court uses
Connecticut law to determine whether summary judgment is
appropriate on the breach of contract claim.
Breach of Contract
moving for summary judgment, Defendant does so on the basis
that Plaintiff's loss is not covered, meaning that
Plaintiff cannot prevail on its breach of contract and bad
faith claims. Mem. in Supp. of Mot. for Summ. J. at 2. Both
parties agree that the Bash was ultimately cancelled due to
Time Warner's failure to timely finish the communications
system. Mem. in Supp. of Mot. for Summ. J. at 14; Resp. Mem.
in Opp'n at 1; Reply at 1-2. However, the parties dispute
whether that failure was beyond Plaintiff's control.
Plaintiff alleges that the cancellation was beyond its
control, it suffered damages as a result, cancellation was a
covered event under the Policy, and that Defendant breached
its contract and refused to pay Plaintiff's claim in bad
faith. Compl. at ¶¶ 5-10. Conversely, Defendant
alleges that cancellation was not beyond Plaintiff's
control and the Policy does not cover the loss. Mem. in Supp.
of Mot. for Summ. J. at 1. Defendant also contends that even
if the loss is covered, several Policy exclusions apply.
Id. at 1-2. Finally, Defendant contends that
Plaintiff failed to meet three conditions of the Policy,
relieving Defendant of any obligation to indemnify.
trial, Plaintiff has the burden of proving that its claim is
covered under the Policy, then the burden shifts to Defendant
to prove that coverage is excluded. Nationwide Mut. Ins.
Co. v. Pasiak, 173 A.3d 888, 896 (Conn. 2017) (citation
omitted). As explained below, the Court finds that there are
genuine issues of material fact with respect to coverage and,
thus, must deny summary judgment on the breach of contract
cause of action.
moving for summary judgment, Defendant first asserts that
Plaintiff cannot show that its loss is covered by the Policy.
Mem. in. Supp. of Mot. for Summ. J. at 2. Plaintiff
disagrees. Resp. Mem. in Opp'n at 10.
coverage section of the Policy provides in pertinent part:
SECTION I - INSURING AGREEMENT
A. EVENT CANCELLATION
We will indemnify you, up to the Limit of Insurance, for your
loss as a direct result of cancellation,
postponement, or relocation
of the insured event to which this insurance applies.
B. APPLICATION OF COVERAGES
In order for insurance to apply to Section I, all of
the following ...