Auto-Owners Ins. Co. v. Travelers Cas. & Sur. Co. of Am., Civil Action No.: 4:12-cv-3423-RBH

• Decision Date: 22 July 2014
• Docket Number: Civil Action No.: 4:12-cv-3423-RBH
• Court: U.S. District Court — District of South Carolina
• Parties: Auto-Owners Insurance Company, Plaintiff, v. Travelers Casualty and Surety Company of America, Defendant.

Auto-Owners Insurance Company, Plaintiff, v. Travelers Casualty and Surety Company of America, Defendant.

Civil Action No.: 4:12-cv-3423-RBH

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA FLORENCE DIVISION

Dated: July 22, 2014

ORDER

Plaintiff Auto-Owners Insurance Company ("Auto-Owners" or "Plaintiff") filed this declaratory judgment action on December 3, 2012, seeking a declaration that Defendant Travelers Casualty and Surety Company of America ("Travelers" or "Defendant") has a duty to defend in an underlying state court action captioned John Schuler, et al. v. Hyperion Towers Homeowners Association, Inc., et al., 2011-CP-26-5465 (the "underlying state action"). See Compl., ECF No. 1 at 2. This matter is before the Court on Travelers' motion to dismiss, filed on October 31, 2013, and motion for summary judgment, filed on March 31, 2014. See Def.'s Mot. to Dismiss, ECF No. 34; Def.'s Mot. for Summ. J., ECF No. 50. Plaintiff filed a response to the motion to dismiss on November 18, 2013, see ECF No. 35, and filed a response to the motion for summary judgment on April 17, 2014, see ECF No. 51. Travelers filed a reply in support of its motion to dismiss, after receiving an extension, on December 17, 2013, see ECF No. 41, and filed a reply in support of its motion for summary judgment on April 28, 2014, see ECF No. 52. For the reasons stated below, the Court grants Travelers' motion for summary judgment.¹

FACTUAL BACKGROUND

Despite the parties' best efforts to obfuscate the issue, the entire purpose of this lawsuit can be distilled down to Auto-Owners seeking an order requiring Travelers to assist in the defense of the underlying state action. The plaintiffs in the underlying action owned condominiums in the Hyperion Towers Horizontal Property Regime, and brought suit against the Hyperion Towers Homeowners' Association ("HOA"), the Hyperion Towers Board of Directors, and the individual board members for breach of various duties. Am. Compl., ECF No. 26 at ¶¶ 13, 15-18. Auto-Owners insured the Hyperion Towers HOA pursuant to a Commercial General Liability Policy from October 15, 1991 through February 7, 2000.² See ECF No. 51 at 2; Auto-Owners Policy, ECF No. 26-4. Travelers also insured the Hyperion Towers HOA pursuant to a Non-Profit Management and Organization Liability Insurance Policy from February 7, 2007 through February 7, 2010. See ECF No. 50 at 3; Travelers Policy, ECF No. 26-3. Auto-Owners asserts that it is currently providing the Hyperion Towers HOA, the Hyperion Towers Board of Directors, and the individual defendants with a defense in the underlying action. See ECF No. 26 at ¶ 21. Auto-Owners claims that Travelers acknowledges a duty to defend the underlying action, yet has refused to do so. Id. at ¶ 23. Travelers, on the other hand, argues that Auto-Owners cannot seek to compel it to defend theunderlying suit, and that, even if Auto-Owners could seek such relief, any duty Travelers may owe its insured is excess to that of Auto-Owners. See ECF No. 50 at 6; ECF No. 52 at 1-2.

Auto-Owners brought the present action seeking a declaration that Travelers has a duty to defend the underlying action. Travelers argues that this relief cannot be sought by Auto-Owners, and, even assuming Auto-Owners could seek such a declaration, it would have no duty to defend because Travelers' coverage is excess to Auto-Owners' coverage. Therefore, Auto-Owners also seeks a declaration that the Travelers policy is not "excess" to the Auto-Owners policy. Finally, Auto-Owners asserts equitable causes of action for contribution, unjust enrichment, and equitable subrogation, claiming that it would be unfair for the Court to allow Travelers to continue refusing to defend the underlying action.

SUMMARY JUDGMENT STANDARD

Travelers' motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("FRCP") and motion for summary judgment are both pending before the Court. Because the parties have presented matters outside the pleadings and the Court has considered this evidence, the Court will proceed under the Rule 56 standard. See Fed. R. Civ. P. 12(d) ("If, on a motion under Rule 12(b)(6) . . . matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.").

Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party has the burden of proving that summary judgment is appropriate. Once the moving party makes the showing, however, the opposing party must respondto the motion with "specific facts showing there is a genuine issue for trial." Fed. R. Civ. P. 56(e).

When no genuine issue of any material fact exists, summary judgment is appropriate. Shealy v. Winston, 929 F.2d 1009, 1011 (4th Cir. 1991). The facts and inferences to be drawn from the evidence must be viewed in the light most favorable to the non-moving party. Id. However, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)).

In this case, the moving party "bears the initial burden of pointing to the absence of a genuine issue of material fact." Temkin v. Frederick Cnty. Comm'rs, 845 F.2d 716, 718 (4th Cir. 1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). If the moving party carries this burden, "the burden then shifts to the non-moving party to come forward with fact sufficient to create a triable issue of fact." Id. at 718-19 (citing Anderson, 477 U.S. at 247-48).

Moreover, "once the moving party has met its burden, the nonmoving party must come forward with some evidence beyond the mere allegations contained in the pleadings to show there is a genuine issue for trial." Baber v. Hosp. Corp. of Am., 977 F.2d 872, 874-75 (4th Cir. 1992). The nonmoving party may not rely on beliefs, conjecture, speculation, of conclusory allegations to defeat a motion for summary judgment. See id.; Doyle v. Sentry, Inc., 877 F. Supp. 1002, 1005 (E.D. Va. 1995). Rather, the nonmoving party is required to submit evidence of specific facts by way of affidavits, depositions, interrogatories, or admissions to demonstrate the existence of a genuine and material factual issue for trial. See Fed. R. Civ. P. 56(c), (e); Baber, 977 F.2d at 875 (citing Celotex, 477 U.S. at 324)). Moreover, the nonmovant's proof must meet "the substantive evidentiarystandard of proof that would apply at a trial on the merits." Mitchell v. Data Gen. Corp., 12 F.3d 1310, 1316 (4th Cir. 1993); DeLeon v. St. Joseph Hosp., Inc., 871 F.2d 1229, 1223 n.7 (4th Cir. 1989).

DISCUSSION

I. Introduction

The parties devote much of the briefing to arguing over whether the "other insurance" clauses of the respective insurance policies should apply, and whether or not application of these clauses establishes one of the policies as "excess" coverage.³ As the Supreme Court of South Carolina has noted, these clauses have been described as "'the catacombs of insurance policy English, a dimly lit underworld where many have lost their way.'" S.C. Ins. Co. v. Fid. & Guar. Ins. Underwriters, Inc.,489 S.E.2d 200, 202 (S.C. 1997) (quoting Ins. Co. of N. Am. v. Home & Auto Ins. Co., 628 N.E.2d 643, 644 (Ill. Ct. App. 1993)). However, the Court is somewhat perplexed as to why the parties did not devote the most significant portions of their briefing to the issue of whether the relief sought by Auto-Owners can even be granted by this Court under existing South Carolina law. As more fully set forth below, the Court finds that it cannot grant the relief sought by Auto-Owners, namely, a declaration requiring Travelers to join in the defense of the underlying suit. Accordingly, Travelers' motion for summary judgment must be granted.

II. Standing Under the Declaratory Judgment Act

A threshold argument made by Travelers is whether Auto-Owners has standing to bring this action under the Declaratory Judgment Act. Although it is articulated as a "standing" issue, Travelers' argument in essence relates to whether the Court has the ability to award Auto-Owners its requested relief. Travelers asserts that Auto-Owners does not have "standing" to seek a declaration with regard to Travelers' duty, if any, to defend the Hyperion Towers HOA, the Hyperion Towers Board of Directors, and/or the individual board members. As Auto-Owners correctly notes, however, jurisdictional standing under the declaratory judgment act is a different question than what Travelers is arguing, which goes more towards the merits of Auto-Owners' declaratory judgment claim. This argument is discussed in Part III below.

The Declaratory Judgment Act provides that "[i]n a case of actual controversy . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201. As the Supreme Court of the United States has explained, "[b]asically the question is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy andreality to warrant the issuance of a declaratory judgment." Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Here there is a substantial controversy. Auto-Owners avers it has spent several hundred thousand dollars in defending the underlying lawsuit. See Affidavit, ECF No. 51-1 at ¶ 14. If the Court were to find Travelers also has a duty to defend the underlying lawsuit, it would result in considerable financial ramifications to...