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DHW Purchasing Group, LLC v. Hub International Midwest Limited

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

November 4, 2019

DHW PURCHASING GROUP, LLC dba Carolina Pour House and DANIEL WELLS, Plaintiffs,


          CAMERON MCGOWAN CURRIE, Senior United States District Judge.

         Through this action, Plaintiffs Daniel Wells (“Wells”) and DHW Purchasing Group, LLC (“DHW”) (collectively “Plaintiffs”) seek recovery for claims arising from the purchase of insurance and subsequent denial of coverage for two lawsuits. These lawsuits arose from incidents at The Carolina Pour House (“Pour House”), a business owned and operated by DHW. Plaintiffs seek recovery from the insurer, The Burlington Insurance Company (“TBIC”), as well as Hub International Midwest Limited (“HUB”) and All Risks, LTD (“All Risks”), entities involved in the sale of the insurance policies.

         The Second Amended Complaint also purports to name a fourth Defendant, KeenanSuggs Insurance, which is described as “an independent South Carolina entity . . . until August 1, 2016.” ECF No. 22 ¶¶ 3, 4. Plaintiffs allege they purchased the policies at issue from an agency operating under this name, with the first policy taking effect in September 2014 followed by annual renewals in September 2015 and October 2016. ECF No. 22 ¶¶ 43, 49, 54, 55. No. such entity has been served.[1] Thus, only TBIC, All Risks, and HUB are properly named or joined.[2]

         The action is before the court on motions to dismiss filed by TBIC, HUB, and All Risks, all of which have been fully briefed. See ECF Nos. 28, 43, 46 (HUB's motion, Plaintiffs' response, and HUB's reply); ECF Nos. 44, 51, 56 (TBIC's motion, Plaintiffs' response, and TBIC's reply); ECF Nos. 47, 54, 55 (All Risks' motion, Plaintiffs' response, and All Risks' reply). For reasons set forth below, the motions are granted and the action is dismissed as to all causes of action. Dismissal is with prejudice as to the first through fourth and sixth causes of action. Dismissal is without prejudice as to the fifth (negligence) cause of action.



         Wells is the sole member of DHW. ECF No. 22 ¶¶ 1, 2. In 2014, DHW “purchased the assets of [an] establishment known as the Pour House[, ]” a business “licensed to serve alcoholic beverages.” Id. ¶ 14. Acting on behalf of himself and DHW, Wells contacted an insurance agency doing business as KeenanSuggs Insurance to obtain insurance covering DHW”s operations including the Pour House. Id. ¶¶ 15-17. Working through All Risks, which Plaintiffs describe as a “licensed insurance [b]roker” and “specialty broker” (id. ¶¶ 6, 34), the insurance agency obtained a commercial general liability policy (“CGL Policy”) with a Liquor License Endorsement (“Liquor Endorsement”) from TBIC. Id. ¶¶ 15, 18, 43-45. HUB began operating under the trade name KeenanSuggs Insurance on or about August 1, 2016, after an asset acquisition. See ECF No. 22 ¶ 5 (characterizing transaction as “purchase” of KeenanSuggs Insurance).

         Policy Issuance and Renewals.

         The first TBIC policy (“First Policy”) took effect September 5, 2014, and covered a one-year period (“First Policy Period”). ECF No. 22 ¶¶ 43-45. Plaintiffs began the renewal application process in August 2015, and obtained a renewal policy covering the period September 5, 2015, through September 5, 2016, which was later extended into October 2016 (“Second Policy Period”). Id. ¶¶ 49-54; see also ECF No. 11-1 (copy of policy No. HGL0042121 covering period September 5, 2015, to September 5, 2016 (“Second Policy”)). The renewal process was initiated and portions of the application were completed by agents working for the entity or entities then doing business as KeenanSuggs Insurance.[4] ECF No. 22 ¶ 50. Plaintiffs' insurance policy was first extended into October 2016 and then renewed with the new policy covering from October 22, 2016, to October 22, 2017 (“Third Policy Period”). Id. ¶ 55. This policy is numbered 740BW37405 (“Third Policy”). ECF No. 11-2 at 1, 2.[5]

         Incidents and Lawsuits.

         Two incidents occurred at the Pour House during the Second and Third Policy Periods that gave rise to lawsuits discussed below. ECF No. 22 ¶¶ 63-68, 76-79; see also ECF No. 11-3 (Complaint in “Chisolm Lawsuit”); ECF No. 11-4 (Complaint in “Yarborough Lawsuit”) (collectively “Underlying Lawsuits”).

         Chisolm Lawsuit.

         In April 2017, Ryan Chisolm filed a lawsuit against Wells, DHW, and others alleging he was injured in an incident at the Pour House in March 2017. ECF No. 22 ¶ 63; ECF No. 11-3.[6] Plaintiffs characterize this lawsuit as alleging Chisolm suffered injuries “when Wells, acting as an agent and employee of DHW, negligently allowed [Chisolm] to fall to the sidewalk after removing him from the inside of the building during a disturbance.” ECF No. 22 ¶ 66; see also Id. ¶ 64 (characterizing Chisolm Lawsuit as alleging “Wells was negligent in releasing [Chisolm] not realizing that he was unconscious”).

         The Complaint in the Chisolm Lawsuit characterizes the incident differently, alleging Chisolm witnessed an altercation in the Pour House and was the victim of a missed swing by an unknown male. ECF No. 11-3 ¶ 72. After these events, Wells and other agents of DHW began pushing everyone outside the establishment. Id. Chisolm alleges that, after he was outside, Wells approached him from behind and placed Chisolm in a chokehold that rendered Chisolm unconscious after which Wells “threw [Chisolm's] body down, ” causing him substantial injuries. Id. ¶¶ 74-76. Chisolm pursues a negligence claim “[a]gainst all Defendants” and multiple intentional tort claims against Wells. Id. ¶¶ 100-21.[7]

         Yarborough Lawsuit.

         In June 2017, Matthew Yarbrough filed a lawsuit against Wells (individually and as owner of DHW) and Michael Lawrence seeking recovery for injuries sustained “when another patron struck [Yarborough] on the premises during an altercation” (“Yarborough Lawsuit”). ECF No. 22 ¶¶ 76, 77; see also ECF No. 11-4 (Complaint in Yarborough Lawsuit). The Complaint in the Yarborough Lawsuit alleges the incident occurred on or about August 20, 2016, when Lawrence “physically assaulted [Yarborough] by striking him in the face several times.” ECF No. 11-4 ¶¶ 8, 12.[8] It alleges employees and agents of Pour House failed or refused to intervene and that Lawrence was acting as an agent and servant of Pour House. Id. ¶¶ 13, 16; see also Id. ¶ 9 (alleging Lawrence was behind the bar serving drinks prior to the incident). Yarborough seeks recovery under negligence and intentional tort theories, as well as a statutory claim for “dram shop liability” under S.C. Code § 61-4-580.

         Tender of Defense.

         Plaintiffs tendered the defense of the Chisolm and Yarborough Lawsuits to TBIC. ECF No. 22 ¶¶ 68, 79. TBIC denied coverage of both by letters dated May 11, 2017, and August 14, 2017, relying on similarly-worded Assault, Battery or Other Physical Altercation Exclusions (collectively “A&B Exclusion”) applicable to both the CGL Policies and Liquor Endorsements. Id. ¶¶ 70, 73, 80, 83; see also ECF No. 11-1 at 41, 67 (Second Policy exclusions); ECF No. 11-2 at 41, 67 (Third Policy exclusions). Plaintiffs allege TBIC did not contact Plaintiffs and either did not investigate or conducted only a “sham investigation” before denying coverage. ECF No. 22 at ¶¶ 71, 72, 81, 82; see also Id. ¶ 75 (characterizing denial of coverage of Chisolm Lawsuit as arbitrary, capricious, a violation of the insurance policy and public policy).

         Reliance on Agency Expertise.[9]

         Plaintiffs allege Wells “sought to purchase certain policies of insurance, including General Liability and Liquor Liability insurance policies.” ECF No. 22 ¶ 15. He was referred by “[f]riends and acquaintances” to KeenanSuggs Insurance, whose agents “undertook to assist [Plaintiffs] in procuring policies of insurance to protect them from all of the many hazards involved in the business of selling alcoholic beverages.” Id. ¶¶ 16, 17. The agents of KeenanSuggs Insurance “held themselves out to be independent insurance agents representing Insurance Companies and brokers including defendants [All Risks] and TBIC.” Id. ¶ 18. They also “assured [Wells] that they . . . were capable and able to provide the coverage that he needed for his protection and the protection of his landlord[.]” Id. ¶ 19; Id. ¶ 20 (both before and after KeenanSuggs Insurance was “acquired by” HUB, the insurance agency “held itself and its employees out as having the requisite expertise to assist Wells and DHW with their insurance needs”); see also Id. ¶ 21 (alleging KeenanSuggs Insurance represented its agents “‘listen to our clients to understand their business goals and risks to design insurance solutions for long-term success' and ‘[o]ur team understands the risks you face and the products you need to find the balance between price and protection of your family and assets'”).

         Both initially and “at each renewal” Wells “requested ‘full coverage' which he understood to cover the complete spectrum of risks which DHW would be exposed to in operating its business” and he “understood and expected that he would be protected from simple negligence that occurred and from reasonably foreseeable risks including those that might customarily occur in his business including injuries caused to patrons as a result of negligence by the business or its employees.” Id. ¶ 22 (also stating Wells' “purpose in acquiring the policies of insurance was to protect himself and the business from losses that might occur in the ordinary course of business.”).

         Plaintiffs allege Wells “explained DHW's needs and wishes fully to KeenanSuggs representatives each time he purchased or renewed coverage.” Id. ¶ 24. “When Wells purchased coverage, he explained that he needed full coverage for both general and liquor liability which would include dram shop type claims as well as claims for physical injury on and about the premises.” Id. ¶ 28. Plaintiffs allege on information and belief that “KeenanSuggs representatives were aware of this information and communicated the same to their principals and agents[] defendants [All Risks] and TBIC.” Id. ¶ 29. They also allege “Wells knew that sometimes altercations could occur in establishments where alcohol is sold and understood and expected with the issuance of each policy that the policy issued covered DHW and Pour House for that type of occurrence.” Id. ¶ 30. Plaintiffs allege Wells was “neither an experienced businessman or purchaser of insurance” and all Defendants “were aware of Wells['] status as a first-time business owner as well as his youth and inexperience.” Id. ¶¶ 31, 32.

         Plaintiffs allege All Risks' website advertised the following statement “[a]s agent of KeenanSuggs and [TBIC]”

Restaurants, bars, taverns, and nightclubs have more to worry about than daily specials and what's on tap, such as accidents in the kitchen and slips and falls from customers. Over-served patrons who get behind the wheel present a liquor liability. Fights among patrons or those with security personnel account for numerous assault and battery claims. Throw in a misguided dart, an unsuccessful mechanical bull ride or a fall on the dance floor and the recipe for risk increases. All Risks is a leading restaurant insurance wholesale broker with specialists who can help you craft the best coverage for your clients.

Id. ¶ 36 (emphasis added); Id. ¶ 37 (alleging All Risks “advertised these precise dangers on [its] website until 2018”).

         Plaintiffs assert the above-quoted statement on All Risks' website demonstrates All Risks “recognized the risks” articulated. Id. ¶ 37.[10] While Plaintiffs suggest they could have relied on the statement, they do not expressly allege they did so or were even aware of it when insurance was procured. See, e.g., Id. ¶ 51 (“Wells had information available to him, including [All Risks'] website and assurance of the agents of all of the defendants that the policy covered . . . against all risks including personal injury to a party on the premises because of contact with another individual.” (emphasis added)); Id. ¶ 58 (asserting information on All Risks' website “would lead any reasonable person to believe that when the insurance agent procured restaurant bar and nightclub coverage through [All Risks, ] . . . their business was covered for risks including a situation where there was a ‘fight among patrons or those with security personnel.'” (emphasis added)). Plaintiffs also allege Wells “asked and received assurances that he was covered for all potential losses that [Plaintiffs] might incur in their normal and reasonable operations.” Id. ¶ 40.

         Agency Allegations.

         Plaintiffs allege all Defendants are both agents and principals of each other, thus supporting imputation of knowledge, actions, or inactions by each of them to all of them. E.g., ECF No. 22 ¶ 33 (“As agents and principals of each other, Defendants all had actual or imputed knowledge of Wells' status and naivete in matters concerning insurance.”). Beyond basic allegations KeenanSuggs Insurance and HUB acted as independent insurance agents (albeit in different time frames), All Risks' acted as broker, and TBIC acted as insurer, Plaintiffs offer only conclusory allegations of agency relationships. E.g., Id. ¶ 6 (describing All Risks as “principal of KeenanSuggs and [HUB] and agent of TBIC” (emphasis added)); Id. ¶ 34 (alleging All Risks “as an agent of KeenanSuggs, [HUB] and TBIC . . . represented itself as being a specialist in ‘Restaurant Insurance including Bar, Tavern & Nightclub” (emphasis added)); Id. ¶ 84 (alleging “KeenanSuggs dba HUB” acted “as agent of KeenanSuggs and TBIC”); Id. ¶ 94 (seeking alternative ruling “TBIC's agents KeenanSuggs, HUB and [All Risks] made representations that bound TBIC”); Id. ¶ 96 (alleging All Risks acted as “Principal and Agent of the other defendants” in publishing its marketing materials).


         A motion under Federal Rule of Civil Procedure 12(b)(6) should be granted only if, after accepting all well-pleaded allegations in the complaint as true, it appears certain that the plaintiff cannot prove any set of facts in support of its claims that entitles it to relief. See Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999). Although the court must take the facts in the light most favorable to the plaintiff, it “need not accept the legal conclusions [the plaintiff would draw] from the facts.” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000)). The court may also disregard any “unwarranted inferences, unreasonable conclusions, or arguments.” Id.

         The Rule 12(b)(6) standard has often been expressed as precluding dismissal unless it is certain that the plaintiff is not entitled to relief under any legal theory that plausibly could be suggested by the facts alleged. See Mylan Labs., Inc. v. Markari, 7 F.3d 1130, 1134 (4th Cir. 1993). Nonetheless, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (quoted in Giarratano, 521 F.3d at 302).

         In applying Rule 12(b)(6), the court also applies the relevant pleading standard. Despite the liberal pleading standard of Rule 8, a plaintiff in any civil action must include more than mere conclusory statements in support of a claim. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (court need only accept as true the complaint's factual allegations, not its legal conclusions); see also McCleary-Evans v. Maryland Dept. of Trans., 780 F.3d 582, 587 (4th Cir. 2015) (noting “Iqbal and Twombly articulated a new requirement that a complaint must allege a plausible claim for relief, thus rejecting a standard that would allow a complaint to survive a motion to dismiss whenever the pleadings left open the possibility that a plaintiff might later establish some set of [undisclosed] facts to support recovery.” (emphasis and alteration in original, internal quotation marks omitted)); Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citing Robertson v. Sea Pines Real Estate Companies, Inc., 679 F.3d 278 (4th Cir. 2012) for proposition plaintiff need not forecast evidence sufficient to prove the elements of a claim, but must allege sufficient facts to establish those elements).


         I. Contract-Based Claims

         A. Breach of Contract


         In their first cause of action, Plaintiffs allege Defendant(s) breached contractual duties owed under a policy of insurance by denying coverage of the Underlying Lawsuits. See ECF No. 22 ¶ 98 (alleging “Defendants . . . fail[ed] to perform a contractual promise to honor the parties' insurance policy” (emphasis added)). Defendants argue this claim fails as a matter of law because the A&B Exclusion clearly precludes coverage of claims asserted in the Underlying Lawsuits. For reasons explained below, the court agrees.


         “Insurance policies are subject to general rules of contract construction” and policy language must be given “its plain, ordinary and popular meaning.” Diamond State Ins. Co. v. Homestead Indus., Inc., 456 S.E.2d 912 (S.C. 1995). While “ambiguous or conflicting terms . . . must be construed liberally in favor of the insured, ” courts may not “torture the meaning of policy language to extend or defeat coverage that was never intended by the parties.” Id. (holding trial court erred in construing policy to provide coverage beyond the policy limits).

         Under South Carolina law, “[i]nsurers have the right to limit their liability and to impose conditions on their obligations provided they are not in contravention of public policy or a statutory prohibition.” B.L.G. Enter. v. First Fin. Ins. Co.,514 S.E.2d 327, 330 (S.C. 1999). Applying this principle, South Carolina courts have given effect to dram shop liability and assault and battery exclusions. Id. (rejecting argument dram shop exclusion made coverage illusory and holding insurer had no duty to defend claim that fell within that exclusion); Sphere Drake Ins. Co. v. Litchfield,438 S.E.2d 275, 276 (S.C. Ct. App. 1993) (holding insurer had no duty to defend insured for actions of its bouncers in removing patron following a disturbance because policy excluded ...

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