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Flexi-Van Leasing, Inc. v. The Travelers Indemnity Co.

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

March 18, 2019




         This matter is before the court on defendant The Travelers Indemnity Company's (“Travelers”) motion for summary judgment, ECF No. 118. For the reasons set forth below, the court denies the motion for summary judgment without prejudice.

         I. BACKGROUND

         This declaratory action and insurance coverage case stems from an underlying action that was before this court, Vititoe v. Bridgestone Americas Tire Operations, Inc., Case No. 2:12-cv-01844-DCN (“underlying action”), where plaintiff Flexi-Van Leasing, Inc. (“Flexi-Van”) was a named defendant, among others. In the underlying action, Charles Vititoe (“Vititoe”) alleged that he was working on a semi-trailer's rim assembly on the truck's right rear tire when the rim assembly exploded and injured him. Vititoe and his wife brought several causes of action against Flexi-Van because the rim assembly that injured Vititoe was affixed to a chassis owned by Flexi-Van.

         At the time of Vititoe's injury, the chassis was on lease to Zim Integrated Shipping Services Company, Inc. (“Zim”). Zim contributed the chassis to the South Atlantic Consolidated Chassis Pool (“SACP”). Interstar North America, Inc., (“Interstar”) entered into a Master Maintenance and Repair Agreement (“the Agreement”) with Flexi-Van-as SACP manager-to be the SACP chassis maintenance and repair vendor. Pursuant to the Agreement, Interstar agreed to indemnify, defend, and hold harmless SACP and Flexi-Van as its manager from suits arising from or in connection with Interstar's negligence in complying with Interstar's duties under the Agreement. Appendix B of the Agreement required Interstar to name SACP and its manager as additional insureds on Interstar's insurance policy and maintain general liability insurance of at least $10, 000, 000 per occurrence. Interstar fulfilled this requirement by obtaining a written commercial insurance policy (“the Policy”) from Travelers and adding Flexi-Van as an additional insured.

         Pursuant to the Agreement and the Policy, Flexi-Van tendered its defense in the underlying action to Travelers. Initially Travelers agreed to defend and indemnify Flexi-Van and informed Flexi-Van that Mark Wall (“Wall”) would be Flexi-Van's attorney. On March 27, 2013, Travelers sent Flexi-Van a reservation of rights letter (“Reservation of Rights Letter”) that explained that Travelers would not defend or indemnify Flexi-Van for issues outside of Travelers's coverage. Travelers explained that this could occur if Flexi-Van was liable as a result of its own independent acts, omissions, or exclusions, or if the underlying action fell within the Policy's “Aircraft, Auto or Watercraft” exclusion. ECF No. 34-7 at 4. On June 28, 2013, Flexi-Van expressed its opinion that there was a conflict between Travelers and Flexi-Van so that Wall could no longer protect Flexi-Van's interests. In particular, Flexi-Van asked Wall to bring Interstar as a third-party defendant into the underlying action, and Wall failed to do so, stating that “Travelers has not directed me to start a 3rd party [action] against them and will not pay for it.” ECF No. 34-8 at 3. As a result, Flexi-Van terminated its representation with Wall and hired a substitute counsel. Id. at 2. On July 26, 2013, Travelers sent Flexi-Van a letter informing Flexi-Van that it would not pay for Flexi-Van's substitute counsel. ECF No. 34-10 at 2. As a result, Flexi-Van filed the instant suit on April 24, 2015. Flexi-Van's complaint brings the following causes of action: (1) a declaratory judgment that it is entitled to a defense and indemnity from Travelers for the claims asserted in the underlying action; (2) breach of contract for failing to defend and indemnify; and (3) breach of the implied obligation of good faith and fair dealing. Compl. ¶¶ 18-44.

         Travelers filed a motion for summary judgment on June 1, 2017, ECF No. 80, and Flexi-Van filed a motion for partial summary judgment or, in the alternative, for certification on June 2, 2017, ECF No. 81. The court issued an order on the motions on December 7, 2017, granting Travelers's motion with respect to the bad faith claim but denying it with respect to the breach of contract claim.[1] The court found there was “insufficient facts and evidence before the court to grant summary judgment” on Traveler's duty to indemnify because the underlying action was ongoing, making it “unclear what liability Flex-Van will incur and whether Travelers's duty to indemnify will be triggered.” ECF No. 95 at 18. As for the duty to defend, the court held that there was “a genuine issue of material fact as to whether an actual conflict arose such that Travelers breached its duty to defend.” Id. at 22.

         In the underlying action, Flexi-Van filed a third-party complaint against InterStar, bringing causes of action for (1) breach of contract for failure to defend and indemnify, (2) contractual indemnity, (3) equitable indemnity, (4) negligent hiring, (5) negligent supervision, and (6) negligent training (“third-party underlying action”). In response, InterStar brought a third-party counterclaim against Flexi-Van, alleging that Flexi-Van breached the Agreement by terminating the defense provided by Interstar. The third-party underlying action was bifurcated from the underlying action, and a trial on the third-party underlying action was held. On February 8, 2018, the jury in the third-party underlying action returned a verdict against Flexi-Van in Flexi-Van's breach of contract and contractual indemnity claims against InterStar.[2] After the jury also returned a verdict in favor of Interstar in Interstar's breach of contract counterclaim, Travelers renewed its motion for summary judgment for the breach of contract claim in the instant action. Travelers filed its motion on June 12, 2018. ECF No. 118. Flexi-Van responded on August 20, 2018, ECF No. 124, and Travelers replied on August 27, 2018, ECF No. 125. The court held a hearing on the motion on August 29, 2018.

         II. STANDARD

         Summary judgment shall be granted “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). “By its very terms, this standard provides that 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 v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Id. at 248. “[S]ummary judgment will not lie if the dispute about a material fact is ‘genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. “[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Id. at 249. The court should view the evidence in the light most favorable to the non-moving party and draw all inferences in its favor. Id. at 255.


         Before turning to the parties' arguments, the court finds it necessary to first discuss the jury verdicts in the third-party underlying action. In that action, Flexi-Van alleged that Interstar breached the Agreement by “failing to defend and indemnify and hold Flexi[-Van] harmless in breach of Section 6.2 of the [Agreement]” and that Flexi-Van was “entitled to contractual indemnify from Interstar pursuant to Section 6.2 of the [Agreement].” 12-cv-01844-DCN, ECF No. 49 at 18-19. The jury charge for Flexi-Van's breach of contract cause of action was as follows:

For its breach of contract claim, Flexi-Van must prove by a preponderance of the evidence: (1) there was a contract between the parties; (2) a breach of that contract; (3) damages flowing therefrom; and (4) ...

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