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American Service Insurance Co. v. Ontime Transport LLC

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

August 22, 2019

American Service Insurance Company, Plaintiff,
OnTime Transport, LLC, Amy Harmon, Paul Weatherford, Kelli Rucker, and Kevin Smith, individually and as Personal Representative of the Estate of Barbara A. Rutledge Smith, and Matthew Blue, M.D. Defendants.


         Plaintiff American Service Insurance Company (“ASIC”) moves the court for summary judgment in this declaratory judgment action. (ECF No. 63.) ASIC argues that based on Defendant Kevin Smith's (“Smith”) allegations in the underlying state court action, the Commercial Automobile Insurance Policy (“Auto Policy”) and Commercial General Liability Policy (“CGL Policy”) (collectively, “Policies”), that ASIC issued to Defendant OnTime Transport, LLC (“OnTime”)[1] do not provide coverage for the death of Defendant Smith's mother, Barbara Ann Rutledge Smith (“R.S.”). (ECF No. 63 at 1-5.) ASIC is now seeking a declaration from this court that ASIC is not required, under either policy, to defend or indemnify OnTime for two state-court lawsuits that were brought against it and its employees.

         The court GRANTS IN PART and DENIES IN PART ASIC's Motion for Summary Judgment (ECF No. 63). The court also DISMISSES OnTime's first through eleventh counterclaims (ECF No. 49 at 1-14 ¶¶ 1-85). The court GRANTS IN PART and DENIES IN PART OnTime's twelfth counterclaim (ECF No. 49 at 14-15 ¶¶ 86-87). Specifically, as it concerns both ASIC's Motion for Summary Judgment and OnTime's counterclaims, the court finds that ASIC owes no duty of defense under the Auto Policy, but ASIC does owe a duty of defense under the CGL Policy.


         OnTime is, inter alia, an emergency and non-emergency medical transportation provider.[2](ECF No. 63 at 1.) On January 7, 2015, OnTime transported R.S. from her home in Orangeburg, South Carolina, to the Burn Center of Trident Medical Center (“Trident”) in Charleston, South Carolina, for treatment of facial burns she sustained in late December 2014. (ECF No. 1-1 at 7 ¶ 8.) Upon arrival at Trident, R.S. “had a seizure, [was] slumped over on her right side, and lost consciousness.” (Id. at 8 ¶ 18.) Shortly thereafter, R.S. died in Trident's Emergency Department. (Id. at 9 ¶ 20-21.) On February 16, 2017, Smith, individually and as Personal Representative of the Estate of R.S., filed a medical malpractice action in the First Judicial Circuit Court of Common Pleas in Orangeburg County, South Carolina, against OnTime, the Emergency Medical Technicians (“EMTs”)[3], and one of OnTime's administrative assistants, Kelli Rucker.[4] (ECF No. 1-1 at 5; ECF No. 63-7 at 2:13-14; ECF No. 76 at 16.)

         On March 5, 2018, Defendant Smith filed another medical malpractice action against Matthew Blue, M.D. (“Dr. Blue”) in the same forum. (ECF No. 42-1 at 4 ¶ 6.) Dr. Blue served as OnTime's “Medical Control Director” at the time. (Id.) Because the two actions were filed in the First Judicial Circuit Court of Common Pleas, the court consolidated them into one action (“Underlying Action”) at the consent of the parties. (ECF No. 63-3 at 2.) In the Underlying Action, Smith asserts several claims: (1) “[n]egligence/[g]ross [n]egligence - [s]urvival”; (2) “wrongful death”; and (3) “general negligence.” (ECF No. 1-1 at 10-16 ¶¶ 28-46.)

         On December 8, 2016, and, again, on February 22, 2018, ASIC sent Reservation of Rights letters (“ROR”)[5] to OnTime. (ECF No. 63-4 at 1; ECF No. 63- 5 at 1.) In these RORs, ASIC informed OnTime that ASIC “w[ould] be providing a defense to the claims [in the Underlying Action] under a full and complete [ROR].” (ECF No. 63-4 at 2; ECF No. 63-5 at 2.) ASIC further informed OnTime that:

The [CGL Policy] contains exclusions for claims of breach of medical professional services, health care professional services and punitive damages. The claims against you by Smith are grounded in medical and health care professional services. The endorsements containing the exclusions bar application of the duty of defense and duty of indemnity to the [Underlying Action].
The [Auto Policy] requires an accident. The [Underlying Action] does not include an accident. As such, the [Underlying Action] does not trigger the duty of defense or the duty of indemnity under the [Auto Policy].
Despite the policy language analyzed thus far indicating that no duty of defense or indemnity exists, we are providing a defense to you under a full and complete Reservation of Rights.

(ECF No. 63-4 at 7; ECF No. 63-5 at 7.)

         On April 28, 2017, ASIC filed a declaratory judgment action in this court “seeking declaration as to the rights and obligations of the parties pursuant to policies of insurance sold by ASIC to OnTime.” (ECF No. 1 at 1 ¶ 1.) On March 24, 2018, after Smith filed suit in state court against Dr. Blue, ASIC filed an Amended Complaint in this court, adding Dr. Blue as a Defendant. (ECF No. 42.) On April 18, 2018, Defendant Smith filed an Answer to ASIC's Amended Complaint. (ECF No. 48.) On May 9, 2018, OnTime filed an Answer and Counterclaim to ASIC's Amended Complaint. (ECF No. 49.)

         On December 17, 2018, ASIC filed the instant Motion for Summary Judgment. (ECF No. 63.) Regarding the Auto Policy, ASIC first contends that Smith's allegations in the Underlying Action do not trigger coverage because “OnTime was not involved in any automobile accident during its transport of [R.S.] to Trident, and Smith does not allege that OnTime was involved in any accident…” (ECF No. 63-1 at 7.) ASIC further contends that even if OnTime could show that an accident occurred, it cannot show that the accident arose out of the “ownership, maintenance or use” of its ambulance, as required by the Auto Policy. (Id. at 8 (quoting ECF No. 1-3 at 23, Section II(A)).)

         Regarding the CGL Policy, ASIC argues that coverage has not been triggered because “OnTime did not cause [R.S.]'s death.” (Id. at 9.) Therefore, since the CGL Policy “only provides coverage for damages which the insured becomes ‘legally obligated to pay, '” ASIC contends that it “cannot become legally obligated to pay for her damages.” (Id.). But, “[t]o the extent that coverage has been triggered under the CGL Policy, ” ASIC argues the CGL Policy's “Designated Professional Services” Exclusion and the “Services Furnished by Health Care Providers” Exclusion (collectively, “Exclusions”) preclude coverage, because in the Underlying Action, Smith alleges that OnTime was engaged in a professional service, and specifically, was providing a “medical service” to R.S. when OnTime transported her to Trident. (Id. at 9-11.) More specifically, ASIC argues that, while transporting R.S. to Trident, OnTime's workers were functioning as EMTs, which ASIC argues is a professional service under South Carolina law. (Id. at 11-17 (relying on W. Word Ins. Co. v. Empire Fire & Marine Ins. Co., No.7:06-cv-217, 2006 WL 3337427 (D.S.C. Nov. 16, 2006)).)

         As to Dr. Blue, ASIC argues that Smith's allegations that Dr. Blue “failed to properly train OnTime employees, including Weatherford and Harmon in medical assessment and treatment, ” are “specifically contemplate[d]” by the Designated Professional Services Exclusion. (Id. at 17.)

         Lastly, as to OnTime's counterclaims, ASIC maintains that “the Policies do not provide coverage for the claims asserted against OnTime, [therefore, ] OnTime's counterclaims necessarily fail since they are premised on the notion that the Policies provide coverage.” (Id. at 18.) ASIC also asserts that contrary to OnTime's counterclaim regarding the ROR, ASIC “cannot, and did not, waive any of its rights to contest coverage by providing a defense to OnTime that South Carolina law requires.” (Id. at 20.)

         On January 11, 2019, OnTime filed a Response to ASIC's Motion. (ECF No. 76.) OnTime stresses that ambiguous terms and exclusions in an insurance contract are to be strictly construed against the insurer. (Id. at 6-7.) In that vein, OnTime maintains that several terms in the Policies are ambiguous, including the term “accident” as used in the Auto Policy. (Id. at 7.) OnTime argues that ASIC's definition of “accident” is “specific and narrowly scoped” and that the court should apply the broader, plain meaning of the word, which OnTime argues would establish coverage. (Id. at 8-10.) OnTime further argues that based on the testimony and evidence, there are genuine issues of material fact as to whether an accident occurred during the transport of R.S. Specifically,

whether an accident occurred when the [OnTime] ambulance went to North Charleston, rather than [Trident]. It can reasonably be inferred that because the trip took longer to travel to North Charleston, the patient went longer without what the Smith allegations say was the appropriate treatment, and if proven, this “continuous exposure” can be shown to have weakened her condition and resulted in her death.

(Id. at 11.)

         As to the CGL Policy, OnTime first addresses ASIC's argument that coverage has not been triggered under the Policy because OnTime did not cause R.S.'s death and, therefore, cannot become legally obligated to pay for her damages. (See ECF No. 63-1 at 9.) OnTime argues that “the language of the policy provid[ing] that [ASIC] will pay damages the insured is ‘legally obligated to pay'… creates a reasonable inference that the [U]nderlying [A]ction must first be adjudicated to determine the issues relating to coverage.” (ECF No. 76 at 14.) Therefore, OnTime asserts that ASIC's “outlandish claim”-essentially, that because [an insured] [denies liability] in a case and pursue[s] defenses, the [insured] somehow waives their right to coverage-is “unsupported, and evidences a dangerous level of bad faith.” (Id.)

         As to the CGL Policy's Designated Professional Service Exclusion, OnTime claims there is a genuine issue of material fact “as to whether the services provided and/or not provided by [OnTime] fall under the definition of ‘medical service.'” (Id. at 15.) More specifically, as to Dr. Blue, OnTime argues:

there has been no evidence that . . . Dr. Blue ever met with, treated, examined or was contacted about [R.S.], her transport or condition, and therefore, no Doctor-Patient relationship was formed on which [ASIC] can claim that either the [Professional Services] [E]xclusion or the . . . [H]ealth [C]are [P]roviders Exclusion apply.


         As to Weatherford and Harmon, OnTime argues that:

[w]hile the EMTs assigned to [transport R.S.] were professional, they are not considered medical professionals. Defendants Harmon and Weatherford were Basic EMTs, because they did not possess the requisite certification for intermediate EMT or paramedic. . . . Paramedics were hired by . . . OnTime to be able to provide Advance Life Support . . . versus just Basic Life Support . . ., as was the case here, where two basic EMTs staffed the vehicle, with one driving and one attending the patient. It can, therefore reasonably be inferred and argued that at times, Basic EMTs may provide medical services under the terms of the [P]olicy, and at times, do not. [T]here are genuine issues of material fact as to whether what the Basic EMTs did in this case can even be considered “medical service” which is undefined in the [P]olicy.

(Id. at 16-18 (citations omitted).)

         Finally, relying on the South Carolina Supreme Court's recent decision in Harleysville Group Ins. v. Heritage Communities., Inc., 803 S.E.2d 288 (S.C. 2017), OnTime argues “the [ROR] letters are ambiguous because they refer to the same ambiguous terms in the [P]olic[ies] [that are] susceptible to more than one interpretation, and under Harleysville, the letters must be strictly construed.” (Id. at 29.) OnTime further argues that the ROR letters are insufficient under Harleysville because they “never advised . . . [Defendants] in the [ROR] letters of the need for an allocated verdict as to covered vs. non-covered claims, which was a fatal flaw in Harleysville.” (Id. at 30.) OnTime also challenges whether the ROR letters were properly served:

although . . . OnTime was sent the [ROR] letters, and although [ASIC] had knowledge of all defendants named in [the Underlying Action], . . . [ASIC] has never sent [ROR] notices to any Defendants other than . . . OnTime, which no longer employs some of the named Defendants, clearly creating numerous issues of material fact as to whether all Defendants were given proper notice of [ASIC]'s position on coverage in the letters.


         On January 17, 2019, ASIC submitted a Reply to OnTime's Response. (ECF No. 77.) And on May 13, 2019, the court held a hearing on ASIC's Motion. (ECF No. 83.)


         The court has diversity jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a) based on ASIC's allegations that the action is between citizens of different states and the amount in controversy exceeds the sum of $75, 000.00. (See ECF No. 42 at 1-2 ¶¶ 2-9.) Specifically, ASIC alleges that it is an Illinois insurance company, with its principal place of business in Illinois, and has authorization to sell insurance policies in South Carolina. (Id. at 1 ¶ 2.) OnTime is a South Carolina limited liability company. (Id. at 2 ¶ 3; ECF No. 49 at 2 ¶ 3.) ASIC brings this diversity action pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201, and Federal Rule of Civil Procedure 57. (ECF No. 1 at 1.)


         Summary judgment is a drastic remedy and “should not be granted unless it is perfectly clear that there are no genuine issues of material fact in the case.” Ballinger v. N. C. Agr. Extension Serv., 815 F.2d 1001, 1004-05 (4th Cir. 1987). See also 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.”). A fact is “material” if proof of its existence or non-existence would affect the disposition of the case under the applicable law. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248-49 (1986). A genuine question of material fact exists when, after reviewing the record as a whole, the court finds a reasonable jury could return a verdict for the non-moving party. Newport News Holdings Corp. v. Virtual City Vision, 650 F.3d 423, 434 (4th Cir. 2011).

         When ruling on a summary judgment motion, a court must view the evidence in the light most favorable to the non-moving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 123- 24 (4th Cir. 1990). The non-moving party may not oppose a summary judgment motion with mere allegations or denial of the movant's pleading, but instead must “set forth specific facts” demonstrating a genuine issue for trial. See Fed. R. Civ. P. 56(e). See also Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Anderson, 477 U.S. at 252; Shealy v. Winston, 929 F.2d 1009, 1012 (4th Cir. 1991). All that is required to survive summary judgment is that “sufficient evidence supporting the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial.” Anderson, 477 U.S. at 249. “Under the Declaratory Judgment Act, a district court, in a case or controversy otherwise within its jurisdiction, ‘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.'” Columbia Ins. Co. v. Reynolds, 225 F.Supp.3d 375, 379 (D.S.C. 2016) (quoting 28 U.S.C. § 2201(a)). “[A] declaratory judgment action is appropriate ‘when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and . . . when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.'” Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256 (4th Cir. 1996) (quoting Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937)). But, “[w]hen a related state court proceeding is pending, however, ‘considerations of federalism, efficiency, and comity' should inform the district court's decision whether to exercise jurisdiction over a declaratory judgment action.” Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 412 (4th Cir. 2004) (quoting Centennial Life Ins. Co., 88 F.3d at 257).

         IV. ANALYSIS

         At the outset, the parties agree, and the law establishes, that South Carolina law applies to the interpretation of the Policies at issue. See Stahle v. CTS Corp., 817 F.3d 96, 99-100 (4th Cir. 2016) (“Because federal jurisdiction in this matter rests in diversity, our role is to apply the governing state law.” (footnote omitted)); Volvo Const. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 599-600 (4th Cir. 2004) (“A federal court exercising diversity jurisdiction is obliged to apply the substantive law of the state in which it sits.”); Nat'l Quarry Servs., Inc. v. First Mercury Ins. Co., Inc., 372 F.Supp.3d 296, 301 (M.D. N.C. 2019) (“A federal court sitting in diversity or supplemental jurisdiction generally applies the relevant substantive law of the state in which the court sits, while applying federal procedural law.” (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 72-73, 79-80 (1938))). (See also ECF No. 63-1 at 6-7; ECF No. 76 at 6-7.)

         South Carolina follows the rule of lex loci contractus, which provides that the law of the state where the contract was made governs the interpretation of the contracts. See Unisun Ins. Co. v. Hertz Rental Corp., 436 S.E.2d 182, 184 (S.C. Ct. App. 1993) (“Unless the parties agree to a different rule, the validity and interpretation of a contract is ordinarily to be determined by the law of the state in which the contract was made.” (citation ...

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