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McElveen v. The Cincinnati Insurance Co.

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

October 30, 2019

Perry Phillip McElveen, as assignee of Johnny Joe Jones, Plaintiff,
v.
The Cincinnati Insurance Company, Defendant.

          ORDER

          R. Bryan Harwell Chief United States District Judge.

         The matter before this Court is a breach of contract and bad faith action based on an alleged refusal by an insurance company to defend an insured in an underlying lawsuit. In the underlying lawsuit, Plaintiff Perry Phillip McElveen (“McElveen”) sued several defendants for injuries he sustained in an automobile collision that occurred on March 16, 2016 that he alleged was caused by Johnny Joe Jones (“Jones”). At the time of the collision, Jones was driving an automobile that had been recently repossessed by American Acceptance Corporation. American Acceptance Corporation (“American Acceptance”) sent the automobile to Jones so that he could detail the car prior to its sale at auction. American Acceptance Corporation is the named insured of a policy provided by The Cincinnati Insurance Company, which was in effect at the time of the collision. [ECF No. 1-1, ¶¶ 5-7]. In the underlying lawsuit, Jones never filed an answer or responsive pleading. McElveen obtained a sizeable judgment against Jones after default was entered. Thereafter, on July 17, 2019, Plaintiff Perry Phillip McElveen, as assignee of Johnny Joe Jones, filed a complaint in the State Court of Common Pleas of Horry County, alleging breach of contract and bad faith against Defendant The Cincinnati Insurance Company (“Cincinnati”). [ECF No. 1-1]. He alleges that Cincinnati never tendered a defense on behalf of Johnny Joe Jones in the underlying lawsuit seeking damages for Jones's negligence. [ECF No. 1-1, ¶¶ 21-24].

         On August 12, 2019, Cincinnati removed this case to federal court. [ECF No. 1]. Cincinnati then filed a Motion to Dismiss the Complaint, pursuant to Federal Rules of Civil Procedures 12(b)(1) and 12(b)(6). [ECF No. 4]. Cincinnati argues that the Complaint should be dismissed because the alleged assignor was not a party to the policy of insurance issued by Cincinnati to American Acceptance, and neither Jones nor the automobile are covered under the policy. Therefore, Cincinnati argues that McElveen fails to state a claim for relief in his Complaint. On September 3, 2019, Plaintiff filed a response in opposition to the Motion [ECF No. 8], and Defendant filed its reply on September 9, 2019. [ECF No. 9]. This matter is now before the Court for review.[1]

         Factual Background

         A. Policy of Insurance

         Cincinnati issued a policy of business automobile coverage to American Acceptance, Number FIA 141 76 57, with an effective date of November 1, 2014 (the “Policy”). The Policy contains the following provision:

“[w]e will pay all sums an “insured” legally must pay as damages because of ‘bodily injury' or ‘property damage' to which this insurance applies, caused by an ‘accident' and resulting from the ownership, maintenance or use of a covered ‘auto'.”

[ECF #4-2, p. 6].[2" name="FN2" id= "FN2">2] As alleged in the Complaint, the Policy defines “insured” as follows:

1. Who is an insured The following are “insureds”:
a. You for any covered “auto.”
b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except . . .
(3) Someone using a covered “auto” while he or she is working in a business of selling, servicing, repairing, parking, or storing “autos” unless that business is yours.
c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability.

[ECF #4-2, p. 6]. The Policy contains an endorsement titled “Repossessed Auto.” The endorsement contemplates coverage for approximately sixty repossessed automobiles, and contains the following:

A. Any “auto” you repossess is a covered ...

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