United States District Court, D. South Carolina, Charleston Division
C. NORTON UNITED STATES DISTRICT JUDGE
matter is before the court on defendant The Travelers
Indemnity Company's (“Travelers”) renewed
motion for summary judgment, ECF No. 128. For the reasons set
forth below, the court grants the motion.
declaratory judgment action and insurance coverage case stems
from an underlying action that was before this court,
Vititoe v. Bridgestone Americas Tire Operations,
Inc., No. 2:12-cv-01844-DCN (“underlying
action”), where plaintiff Flexi-Van Leasing, Inc.
(“Flexi-Van”) was one of the named defendants. In
the underlying action, Charles Vititoe
(“Vititoe”) alleged that he was working on a
semitrailer'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.
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
commercial insurance policy (“the Policy”) from
Travelers and adding Flexi-Van as an additional insured.
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 were 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 in 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 Wall's representation 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. Flexi-Van then 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.
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 commenced in February 2018. On February 8, 2018,
the jury in the third-party underlying action returned a
verdict against Flexi-Van on Flexi-Van's breach of
contract and contractual indemnity claims against InterStar,
finding that Flexi-Van did not prove by a preponderance of
the evidence that Interstar breached the Agreement by failing
to pay Flexi-Van's defense costs for its substitute
counsel. The jury also returned a verdict in favor of
Interstar on Interstar's breach of contract counterclaim,
finding that Flexi-Van breached the Agreement by hiring
parties in the instant case first filed their motions for
summary judgment in June 2017 before the trial in the
third-party underlying action. ECF Nos. 80-81. The court
granted in part and denied in part Travelers's motion and
denied Flexi-Van's motion. ECF No. 95. Then after the
jury rendered a verdict in the third-party underlying action,
Travelers filed a renewed motion for summary judgment on June
12, 2018. ECF No. 118. The court issued an order on March 18,
2019 that denied the motion without prejudice. ECF No. 127.
However, the court offered the parties an opportunity to
brief a related issue, discussed below, in a renewed motion
for summary judgment. As such, Travelers filed its renewed
motion for summary judgment on May 14, 2019. ECF No. 128.
Flexi-Van responded on June 26, 2019, ECF No. 133, and
Travelers replied on July 10, 2019, ECF No. 136. The motion
is fully briefed and ripe for review.
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.
have now been three rounds of briefing for summary judgment
in this case. The first round concluded with an order dated
December 7, 2017. That order left one discrete issue to be
tried, relating to the breach of contract and declaratory
judgment claims, which is discussed in more detail below. The
second round of summary judgment briefing involved Travelers
arguing that, after the jury verdict in the third-party
underlying action found that Flexi-Van breached the
Agreement, collateral estoppel required that the court also
find that Flexi-Van breached the Policy when Flexi-Van fired
Wall and hired substitute counsel. The court held on March
18, 2018 that collateral estoppel could not apply because the
Agreement and the Policy are two separate contracts, and the
jury findings in the third-party underlying action regarding
Flexi-Van's conduct were not specific enough to apply the
verdict about the Agreement to the Policy.
court then offered the parties the opportunity to brief the
issue of what impact a breach of the Agreement would have on
the Policy. Instead, Travelers filed a renewed motion for
summary judgment that largely reiterated arguments it made
during previous rounds of briefing. Therefore, the court
remains unconvinced that the jury verdict in the third-party
underlying action can be applied here to resolve this case.
remaining issue is whether Travelers breached its Policy by
failing to pay for Flexi-Van's independently obtained
counsel after Flexi-Van fired Wall. This hinges on whether an
actual conflict of interest existed in Wall representing
Flexi-Van while being paid by Travelers. If a conflict of
interest did exist, then Flexi-Van was justified in firing
Wall, and Travelers, pursuant to its duty to defend, would
still be obligated to pay the defense costs of
Flexi-Van's independently obtained counsel and indemnify
Flexi-Van for its settlement costs in the underlying action.
If no actual conflict of interest existed, then Travelers did
not breach its duty to defend or its duty to indemnify. In
the court's first summary judgment order, dated December
7, 2017, the court denied summary judgment as to the breach
of contract and declaratory judgment claims because it found
that a genuine issue of material ...