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GuideOne National Insurance Co. v. Western World Insurance Group, Inc.

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

January 8, 2020

GuideOne National Insurance Company, Plaintiff,
v.
Western World Insurance Group, Inc. and Church Mutual Insurance Company, Defendants.

          ORDER AND OPINION

          Margaret B. Seymour Senior United States District Judge.

         The Refuge at FPHC (“The Refuge”) owned a building located at 1410 4th Avenue in Conway, South Carolina (“the Property”). On March 13, 2014, The Refuge, as mortgagee, entered into a note and mortgage with Abundant Faith Lighthouse of Jesus Christ, Inc. (“Abundant Faith”), as mortgagor, to sell the Property for $328, 400.00. Under the terms of the mortgage, Abundant Faith was required to maintain insurance on the Property. Abundant Faith's insurance coverage lapsed. As a result, The Refuge obtained a policy of insurance from Defendant Western World Insurance Group (“Western World”) in the amount of $500, 000.00 to protect its mortgage interest in the Property. The Refuge notified Abundant Faith that it was in default under the mortgage.

         In order to cure the default, Abundant Faith contacted Plaintiff GuideOne National Insurance Company (“GuideOne”) and Defendant Church Mutual Insurance Company (“Church Mutual”) to secure coverage. Abundant Faith obtained a policy in the amount of $1, 500, 000.00 from GuideOne and paid a premium. The GuideOne policy listed Abundant Faith as insured and The Refuge as mortgagee.

         Abundant Faith also obtained a policy from Church Mutual in the amount of $795, 000.00. The Church Mutual policy listed Abundant Faith as insured, but did not list The Refuge as mortgagee.[1] Abundant Faith informed Church Mutual that it wished to cancel the Church Mutual policy, but was informed it was too late to cancel because underwriting already had commenced. Abundant Faith never paid a premium to Church Mutual or took further steps to terminate the policy.

         A fire occurred on the Property on July 24, 2016. The Refuge made a demand under the mortgagee clause of the GuideOne policy, to no avail. Church Mutual contacted Abundant Faith in order to discuss the fire loss and later by letter to obtain information regarding the GuideOne policy in the event GuideOne provided overlapping coverage for the damage. The Refuge learned of the Church Mutual policy after the fire and The Refuge contacted Church Mutual to have the policy revised to include The Refuge as mortgagee. Church Mutual took no action. Western World paid $282, 968.36, the amount due and owing on the note and mortgage, to The Refuge and received an assignment of the mortgage interest from The Refuge.

         On May 25, 2017, GuideOne filed a complaint for declaratory judgment against Western World and Church Mutual, contending that the “Other Insurance” clause in its policy rendered its coverage excess and that Western World and Church Mutual should each pay a pro rata share of any covered loss or damage. On July 7, 2017, Western World filed an answer, cross-claim, and counterclaim. Western World sought a declaration that the Church Mutual policy was a valid insurance contract at the time of the fire loss and that Church Mutual should be estopped to deny that The Refuge was added to its policy as a mortgagee nunc pro tunc. Western World further sought a declaration that GuideOne's policy is not an excess policy because the Western World policy covered a different interest from Western World's policy. In its filings, Church Mutual contended that its policy was rescinded and void from its inception because Abundant Faith did not intend to obtain a Church Mutual policy and did not pay any premiums. In the alternative, Church Mutual asserted that its policy did not cover The Refuge's interests because The Refuge was not listed as a mortgagee under the Church Mutual policy.

         The court issued an order on January 30, 2019, in which it determined that:

         1. The Western World policy obtained by The Refuge insured interests separate from the interests protected by the GuideOne and Church Mutual policies taken out by Abundant Faith. Therefore, Western World could not be required to make a pro rata contribution to the cost of the fire loss in conjunction with GuideOne and Church Mutual.

         2. The Church Mutual policy was enforceable because Church Mutual issued a policy naming Abundant Faith as insured and considered the policy to be in place at the time of the fire.

         3. The Western World policy was excess to the GuideOne and Church Mutual policies. As a result, payment of the fire loss on the Property should be apportioned between GuideOne and Church Mutual in the manner and amounts set forth in their respective policies had Abundant Faith been entitled to direct payment. The court noted that GuideOne's mortgagee clause made its policy proceeds payable directly to Western World, as assignee of The Refuge.

         4. Western World was entitled to an equitable lien on proceeds due to Abundant Faith under the Church Mutual policy.

         This matter now is before the court on Western World's motion for summary judgment with respect to attorney's fees and prejudgment interest, which motion was filed on May 21, 2019. Western World states that, at the time of the loss, Abundant Faith owed $282, 988.35 to The Refuge pursuant to the mortgage. Western World seeks $183, 942.43 from GuideOne to cover the policy benefits owed to The Refuge under GuideOne's mortgage, plus prejudgment interest in the amount of $45, 290.70, for a total of $229, 233.19. Western World seeks $99, 045.93 from Church Mutual to cover the policy benefits owed to The Refuge under Church Mutual's policy, plus prejudgment interest in the amount of $24, 380.98, for a total of $123, 426.91.[2] Western World further contends that it is entitled to attorney's fees in the amount of $191, 248.00 and costs in the amount of $1, 739.05. Western World seeks to collect from GuideOne a pro rata share of $124, 311.20 in attorney's fees and $1, 130.38 in costs. Western World seeks to collect from Church Mutual a pro rata share of $64, 792.00 in attorney's fees and $608.67 in costs.

         Church Mutual filed a response in opposition on June 28, 2019. On July 26, 2019, Church Mutual filed a motion for summary judgment, contending that Western World has transferred The Refuge's mortgage interest to GuideOne and therefore is not entitled to insurance proceeds from Church Mutual. In the alternative, Church Mutual moved for partial summary judgment as to Western World's claims for attorney's fees and prejudgment interest. Western World filed a response in opposition on August 1, 2019, to which Church Mutual filed a ...


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