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Founders Insurance Co. v. Richard Ruth's Bar & Grill LLC

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

November 12, 2019

FOUNDERS INSURANCE COMPANY, Plaintiff,
v.
RICHARD RUTH'S BAR & GRILL LLC, RICHARD RUTH, SR., JANE RUTH, and GEORGE GIANNARAS, as guardian for EMMANUEL KEHAGIAS, Defendants. RICHARD RUTH'S BAR & GRILL LLC, RICHARD RUTH, SR., and JANE RUTH, and GEORGE GIANNARAS, as guardian for EMMANUEL KEHAGIAS, Plaintiffs,
v.
FOUNDERS INSURANCE COMPANY, BROWN & BROWN, INC., HULL & COMPANY, INC., and UTICA MUTUAL INSURANCE COMPANY, Defendants.

          ORDER

          DAVID C. NORTON UNITED STATES DISTRICT JUDGE.

         The following matter is before the court on plaintiff George Giannaras, as guardian for Emmanuel Kehagias's (“Kehagias”), motion to alter or amend the court's order, ECF No. 265 in 13-cv-03035 and ECF No. 199 in 14-cv-03272.[1] For the reasons set forth below, the court denies the motion.

         I. BACKGROUND

         The facts of this case have been recited several times by the court and can be found in the court's August 6, 2019 order. The particular facts relevant to the current matter before the court are as follows. After summary judgment rulings by this court and an appeal to the Fourth Circuit, the remaining issue for trial was whether defendant Hull & Company, Inc.'s (“Hull”) allegedly negligent failure to forward the initial notice of representation (“NOR”) to defendant Founders Insurance Company (“Founders”) could be imputed through agency principles to Founders, such that Founders could be liable for negligence. Hull is an insurance wholesaler who sold the Founders insurance policy at issue in this case. The court instructed the parties to submit supplemental briefing on this issue, which both parties did on April 15, 2019. ECF Nos. 184-185.

         The court then issued an order on August 6, 2019 finding that Kehagais's negligence claim was unsupported by South Carolina law. The court considered whether Founders, as the defendant in the negligence claim, owed any duty that could have been breached by Hull's failure to forward the NOR. The court ultimately found that no such duty existed. In considering whether the allegedly negligent acts of Hull, as the purported agent of Founders, could be imputed to Founders, the court thoroughly analyzed Charleston Dry Cleaners & Laundry, Inc. v. Zurich Am. Ins. Co., 586 S.E.2d 586 (S.C. 2003). Charleston Dry Cleaners held that “in a bad faith action against the insurer, the acts of the adjuster or adjusting company (agent) may be imputed to the insurer (principal).” 586 S.E.2d at 589. After analyzing this case, the court concluded that Charleston Dry Cleaners only applied to bad faith claims, and that South Carolina law does not permit an insured party to bring a negligence claim against an insurance company for the allegedly negligent acts of the insurance company's agent, particularly for the act of failing to forward the NOR. In other words, Founders could not be liable for Hull's allegedly negligent failure to process the NOR. The court explained that

South Carolina law does not enable an insured to sue her insurance agent or intermediary wholesale broker in a negligence action for the failure of those intermediary parties to pass along the legal papers from an underlying lawsuit. The additional fact that insurance companies do not themselves have any duty to ensure that they are sent the necessary legal papers creates a “gap” of liability that culminates in insured parties being deprived of a defense and coverage merely because they presume that their insurance agent or intermediary broker has passed along the requisite information. While the court encourages South Carolina courts to consider whether insurance agents and intermediary insurance brokers should owe a common law duty to insured parties if they undertake to be a middleman for communication between the insured and the insurance company, the court here is unwilling to create new legal duties that do not already exist in South Carolina.

ECF No. 197 at 21-22. As such, the court dismissed the remaining claim. Kehagias filed a motion to alter or amend the court's order on September 3, 2019. ECF No. 199. Hull and Founders both responded on September 17, 2019. ECF Nos. 201-202. The court held a hearing on the motion on October 24, 2019. The motion is now ripe for review.

         II. STANDARD

         Federal Rule of Civil Procedure 59(e) governs motions to alter or amend a judgment. Though the rule does not provide a standard under which a district court may grant such motions, the Fourth Circuit has recognized “three grounds for amending an earlier judgment: (1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or prevent manifest injustice.” Pac. Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998) (citations omitted). Rule 59(e) provides an “extraordinary remedy that should be used sparingly.” Id. (citation omitted); Wright v. Conley, 2013 WL 314749, at *1 (D.S.C. Jan. 28, 2013). Importantly, Rule 59(e) “motions may not be used to raise arguments which could have been raised prior to the issuance of the judgment or to argue a case under a novel legal theory that the party had the ability to address in the first instance.” Holland v. Big River Minerals Corp., 181 F.3d 597, 605 (4th Cir. 1999) (quotations omitted); Pac. Ins. Co., 148 F.3d at 403; City of Charleston, SC v. Hotels.com, LP, 586 F.Supp.2d 538, 541 (D.S.C. 2008).

         III. DISCUSSION

         Kehagias argues that the court should amend its order and permit his remaining negligence claim to proceed to trial because the court improperly drew a distinction between a negligence cause of action and a bad faith cause of action under South Carolina law. In his motion, Kehagias did not clarify under which ground of Rule 59 he seeks relief, but at the hearing on the motion, counsel for Kehagias argued that relief under Rule 59(e) is warranted to correct a clear error of law or prevent manifest injustice and based a potential intervening “interpretation” of the law. Kehagias also asks that, in the alternative, the court certify two questions to the Supreme Court of South Carolina. The court finds that relief is not warranted under either ground of Rule 59 and denies Kehagias's request to certify.

         A. Intervening “Interpretation” of the Law

         The court first addresses Kehagias's argument regarding Rule 59 relief based on an intervening “interpretation” of the law, as it can be quickly disposed of. Kehagais did not present this argument in his motion and raised it for the first time at the hearing, arguing that there was change in the interpretation in the law in one of Judge Richard M. Gergel's cases, which counsel for Kehagias identifies as “Trotter.” Kehagias argues that while the law did not change, Judge Gergel's order did change the interpretation of the existing law.

         This argument fails because there was no intervening change in the time period relevant here. The court first clarifies that Judge Gergel's case was Walker v. Lyndon S. Ins. Co., Inc., 2019 WL 1110797 (D.S.C. Mar. 11, 2019), and the case interpreted Trotter v. State Farm Mut. Auto. Ins. Co., 377 S.E.2d 343, 347 (S.C. Ct. App. 1988). Rule 59's “intervening change in controlling law” ground exists for instances in which a court issues an order and then the law changes such that revision of the order is warranted. Walker is dated March 11, 2019, and the court filed its order on August 6, 2019. As such, Walker was not an intervening change in the law because Walker was issued before, and not after, the court's order. Indeed, not only did Walker exist ...


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