Baker v. AMERICAN INSURANCE CO. OF NEWARK, NEW JERSEY, AC/776.

• Decision Date: 04 January 1963
• Docket Number: No. AC/776.,AC/776.
• Citation: 212 F. Supp. 353
• Court: U.S. District Court — District of South Carolina
• Parties: David BAKER and Lee J. Baker, Plaintiffs, v. The AMERICAN INSURANCE COMPANY OF NEWARK, NEW JERSEY, Defendant.

212 F. Supp. 353

David BAKER and Lee J. Baker, Plaintiffs, v. The AMERICAN INSURANCE COMPANY OF NEWARK, NEW JERSEY, Defendant.

No. AC/776.

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

January 4, 1963.

Donald V. Richardson, III, Thomas E. McCutchen, Whaley & McCutchen, Columbia, S. C., for plaintiffs.

W. Ray Berry, J. Monroe Fulmer, Fulmer, Barnes & Berry, Columbia, S. C., for defendant.

WYCHE, District Judge.

The above case is now before me upon motion of the defendant to set aside the verdict entered in the above entitled matter on October 31, 1962, and the judgment entered thereon on November 7, 1962, and to enter judgment in favor of the defendant in accordance with the motion for a directed verdict made by the defendant at the close of all the testimony herein on the grounds that: "(a) Under the laws of this jurisdiction, the liability of the Defendant is to be determined by the pleadings in the action brought in the State Court and these pleadings show conclusively that the damages suffered by the adjoining landowners which gave rise to the liability of the Plaintiffs did not occur as the result of an accident. (b) The testimony is susceptible of but one conclusion and that is that the damages sustained by the adjoining landowners which gave rise to the liability of the Plaintiffs was the results of acts persistently and continuously done by the Plaintiffs, their servants and agents, and the damages to said landowners were the normal consequences thereof and the damages were therefore not caused by accident. (c) The testimony shows conclusively that the damage suffered by the adjoining landowners which gave rise to the liability of the Plaintiffs occurred over a long period of time and could, therefore, not have been the result of an accident and therefore not within the coverage of the insurance policy issued by this Defendant. (d) The testimony shows conclusively that the damages sustained by the adjoining landowners which gave rise to the liability of the Plaintiffs was the result of acts which were intentional, deliberate, long continued and unnecessary, consisting perhaps of negligence but devoid of any suggestion of accident and were, therefore, not within the coverage of the insurance policy issued by the Defendant."

And, "In the alternate, the Defendant moves the Court to set aside the verdict and the judgment entered thereon and grant the Defendant a new trial on the following grounds: (a) In that the Court erred in allowing the Plaintiffs to introduce testimony in that the liability of the Defendant, if any, is to be determined by the allegations of the Complaint of the landowners in such action. (b) In that the Court erred in refusing to charge Defendant's Request to Charge Nos. 1, 6 and 7."

Midland Shopping Center, consisting of seventeen acres, is located within the City limits of Columbia, South Carolina, and was developed by the plaintiffs Lee J. Baker and David Baker. The plaintiffs purchased from the defendant The American Insurance Company of Newark, New Jersey, a "comprehensive liability policy" of insurance, insuring the plaintiffs against such loss which they should become obligated to pay as damages because of injury to, or destruction of property caused by accident. The policy further provided that the defendant would defend any suit against the plaintiffs alleging such destruction and asking damages on account thereof, even if such suit be groundless, false or fraudulent. This policy was in effect at all times relevant to this action.

Prior to the preparation of the site for construction thereon of the shopping center, the plaintiffs engaged competent engineers to plan for the drainage of surface water from the building site. Detailed plans and specifications for the construction were submitted to the City of Columbia, as required for approval. The plaintiffs secured a building permit from the City of Columbia which authorized the drainage of surface water from the premises into Covenant Road (a paved public street) and into open drainage ditches maintained by the City of Columbia adjacent to the building area. It was necessary that the shopping center site be stripped of all vegetation prior to grading. Most of the terrain was uneven, unimproved and required the leveling and filling in of the area before buildings could be erected. While the work was in this critical and vulnerable state the City of Columbia experienced heavy, sustained and unprecedented rain between June, 1959, and October, 1959, which flowed over the plaintiffs' denuded seventeen acres resulting in water damage to the adjacent landowners. The rains during this four-month period of time were so severe that asphalt from the city streets washed out and covered the storm-sewers causing the surface water from the construction site to cross the street and flow downhill onto the land of the adjacent property owners. The open drainage ditch which was adjacent to Covenant Road and constituted the southern boundary of the shopping center area also completely filled with mud and debris causing the surface water from the shopping center area to flow across the city streets down onto the adjacent property owners. This drainage ditch was approximately three feet in depth and filled within a relatively short period of time because of the severe, heavy and unprecedented rain.

The plaintiffs were subsequently sued in the State Court by adjacent property owners who sustained damage during the period of unprecedented rainfall, allegedly as a result of the changed condition of plaintiffs' property at the construction site. The plaintiffs timely tendered the suit papers and made demand upon the defendant to defend these suits against them under the aforesaid policy of insurance, but the defendant refused, contending that the losses were not "caused by accident". The plaintiffs then employed counsel and undertook their own defense. The actions by the adjoining landowners were subsequently settled by the plaintiffs, after demand upon the defendant to settle the same, which the defendant refused to do.

The plaintiffs thereafter brought suit in this court for the recovery of the sums spent by them in the defense of the State Court actions and for the sums spent in the settlement of those actions. Upon trial the jury returned a verdict for the plaintiffs and the defendant now moves for judgment notwithstanding the verdict or in the alternative for a new trial upon the grounds heretofore stated.

The principal questions to be determined by me are whether or not the defendant was bound to defend the State Court actions and whether or not the testimony sustains the inference that the loss of the plaintiffs was caused "by accident".

The duty of an insurance company to defend is only against litigation in which a recovery is sought against the insured for a cause of action arising within the coverage of the policy. An insurance company is under no obligation to defend a suit where the allegations of the complaint do not state facts to bring the case within the coverage of the policy, or when the cause of action alleged in the complaint is not one on which the insurance company would be liable in the event judgment were recovered in that action. Lumbermens Mut. Casualty Co. v. C. Y. Thomason Co., 87 F.Supp. 889 (D.C.S.C.1950), affirmed, 183 F.2d 729 (C.A. 4, 1950); Glens Falls Indemnity Co. v. Atlantic Bldg. Corp., 199 F.2d 60 (C.A. 4, 1952); Stout v. Grain Dealers Mutual Insurance Company, 307 F.2d 521 (C.A. 4, 1962).

The first suit brought against the Bakers in the State Court alleged in the First Cause of Action that the Bakers had knowledge of the surrounding terrain and that they deliberately and wilfully altered their seventeen-acre-lot of land so as to cause surface water to be discharged on and over their land; the Second Cause of Action alleged that the Bakers were negligent and wilful in grading their seventeen-acre-lot; in grading, ditching, constructing a concrete wall, in failing to provide adequate facilities for carrying off surface water, in failing to avoid injury to adjacent landowners after notice and constructing a concrete wall, ditches and driveways when they knew that the drainage systems of the City of Columbia were inadequate, in failing to have a general contractor, and in constructing the shopping center in wilful disregard of the rights of others; in the Third Cause of Action the adjoining landowners alleged that the acts complained of constituted a nuisance. The complaint sought a total judgment against the Bakers for $100,000.00, actual and punitive damages.

"Negligence" is not synonymous with the word "accident", however, that does not mean that negligence precludes a loss from being accidental. C. Y. Thomason Co. v. Lumbermens Mutual Casualty Co., 183 F.2d 729 (C.A. 4, 1950).

Since the complaint in the State Court action alleged a cause of action for negligence the defendant was bound to defend. Lumbermens Mut. Casualty Co. v. C. Y. Thomason Co., 87 F.Supp. 889 (D.C.S.C.1950), affirmed, 183 F.2d 729 (C.A. 4, 1950); Iowa Mutual Insurance Co. v. Fred M. Simmons, Inc., 128 S.E.2d 19 (N.C.1962). Each count of the complaint constitutes a complete cause of action on which the adjoining landowners could have recovered whether the allegations of wilfulness, recklessness or wantonness were included or left out of the pleading. In other words, it was obvious to the insurer upon the reading of the complaint that it was not essential to recovery that the Bakers wilfully, recklessly or wantonly caused the damage to the adjacent landowners, because they could recover damages from the Bakers based solely upon negligence. Employers Mut. Liability Ins. Co. of Wis. v. Hendrix, 199 F.2d 53 (C.A. 4, 1952), 41 A.L.R.2d 424. The adjoining landowners could also have recovered from the Bakers even though something unforeseen, unexpected or unusual occurred, which produced the injury after...