Beaufort County Sch. Dist. v. United Nat'l Ins. Co., Opinion No.   4794

CourtCourt of Appeals of South Carolina
PartiesBeaufort County School District, Respondent, v. United National Insurance Company, the South Carolina School Boards Insurance Trust, and the South Carolina School Boards Insurance Trust-Property/Casualty Trust Fund, Appellants.
Docket NumberOpinion No.   4794
Decision Date23 February 2011

Appeal From Beaufort County

Marvin Dukes, III, Special Circuit Court Judge

AFFIRMED

David M. Dolendi, Catalina J. Sugayan, and Kirk C. Jenkins, all of Chicago, Illinois, Edward K. Pritchard, III, of Charleston, and Thomas C. Salane, of Columbia, for Appellants.

Frank S. Holleman, III, David H. Koysza, and J. Theodore Gentry, all of Greenville, for Respondent.

SHORT, J.:

Beaufort County School District (Beaufort) filed this action against Appellants South Carolina School Boards Insurance Trust, South Carolina School Boards Insurance Trust – Property/Casualty Trust Fund (collectively, the Trust), and United National Insurance Company (United). Beaufort alleged breach of contract and bad faith, and sought compensatory and punitive damages, and a declaratory judgment regarding insurance coverage. The trial court granted Beaufort's motion for partial summary judgment on the issue of coverage. We affirm.

FACTS

Beaufort and a number of other South Carolina school districts formed the Trust to pool their resources to obtain insurance coverage. The Trust purchased a comprehensive general liability insurance policy (the policy) to cover its district members, including Beaufort, for the year beginning July 1, 2003, and ending July 1, 2004. The terms of the policy provide that United will cover losses in excess of $150,000 in a self-insured retention loss fund. The policy includes endorsements covering sexual abuse and sexual harassment.

In April and May 2004, seven students filed two lawsuits against Beaufort, alleging sexual molestation by an elementary school music teacher.1 Beaufort settled the claims for $4.75 million and sought coverage under the endorsements.

The sexual abuse endorsement provides:

[C]overage is extended to include the following:
Coverage is provided for CLAIMS (as defined within this endorsement)... arising out of SEXUAL ABUSE (as defined within this endorsement) by any employee or any volunteer worker of the NAMED ASSURED. This coverage is subject to... the following special conditions and limitations:

....

2. This coverage applies only if a CLAIM for damages, because of SEXUAL ABUSE, is "first made" against the ASSURED during the PERIOD OF INSURANCE.... All CLAIMS based on or arising out of one SEXUAL ABUSE shall be considered "first made" when the first of such CLAIMS is made to the ASSURED, regardless of:
a. The number of persons SEXUALLY ABUSED;

....

4. Limits: $500,000/$3,000, 000 Annual Aggregate not to exceed $500,000 per member excess of $150,000 SELF INSURED RETENTION each CLAIM....

....

8. The coverage extension under this endorsement does not apply to SEXUAL HARASSMENT, or to any CLAIMS arising from actual or alleged physical abuse arising out of SEXUAL HARASSMENT.

The sexual abuse endorsement includes a "DEFINITIONS" section as follows:

CLAIM: For the purposes of this endorsement only, CLAIM means all notices or SUITS demanding payment of money based on, or arising out of the same SEXUAL ABUSE or series of SEXUAL ABUSES by one or more employees or volunteer workers.
NAMED ASSURED: For the purposes of this endorsement only, NAMED ASSURED means the South Carolina School Board Insurance Trust Property/Casualty Trust Fund. NAMED ASSURED does not include any employee or volunteer worker.
SEXUAL ABUSE means any actual, attempted or alleged criminal sexual conduct of a person by another person, or persons acting in concert... which causes physical and/or mental injuries. SEXUAL ABUSE also includes actual, attempted or alleged criminal sexual molestation, sexual assault, sexual exploitation or sexual injury.
But SEXUAL ABUSE does not include SEXUAL HARRASSMENT.
All CLAIMS based on or arising out of the same SEXUAL ABUSE or a series of related SEXUAL ABUSES by one or more employees or volunteer workers shall be deemed one SEXUAL ABUSE. Only one policy issued by the Company, one SELF INSURED RETENTION, and one EXCESS LIMIT OF INSURANCE is applicable to any one SEXUAL ABUSE.
SEXUAL HARASSMENT means any actual, attempted or alleged unwelcome sexual advances....

....

But SEXUAL HARASSMENT does not include SEXUAL ABUSE.

(Capitalization in original; bold added.)2 The sexual harassment endorsement, using substantially the same language, provides limits of $850,000/$2,550, 000.

The Trust paid $150,000 to Beaufort and United paid $500,000. The Trust and United deny further liability, arguing, inter alia, the seven settlements constitute one claim. The parties filed cross-motions for summary judgment. After a hearing, the trial court granted partial summary judgment to Beaufort, finding: (1) the seven settlements gave rise to seven claims; (2) the annual aggregate limits in each endorsement were available to Beaufort; (3) recovery under the sexual abuse endorsement did not preclude recovery under the sexual harassment endorsement for acts of sexual harassment; and (4) the Trust was required to pay the self-insured retention for each claim. Appellants filed a joint motion for reconsideration. After a hearing, the trial court denied the motion. This appeal followed.

ISSUES ON APPEAL
+------+--------------------------------------------------------------------------------------------+
                | I.   | Did the trial court err in holding Beaufort's settlements gave rise to seven claims?       |
                +------+--------------------------------------------------------------------------------------------+
                | II.  | Did the trial court err in holding Beaufort may access the entire aggregate annual limits? |
                +------+--------------------------------------------------------------------------------------------+
                | III. | Did the trial court err in holding Beaufort's settlements were covered by both the sexual  |
                |      | abuse and sexual harassment endorsements?                                                  |
                +------+--------------------------------------------------------------------------------------------+
                | IV.  | Did the trial court err in holding the Trust is liable to Beaufort for more                |
                |      | than one self-insured retention?                                                           |
                +------+--------------------------------------------------------------------------------------------+
                
Standard of Review

When reviewing the grant of a summary judgment motion, appellate courts apply the same standard that governs the trial court under Rule 56(c), SCRCP, which provides that summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), SCRCP; Fleming v. Rose, 350 S.C. 488, 493, 567 S.E.2d 857, 860 (2002). On appeal from an order granting summary judgment, the appellate court will review all ambiguities, conclusions, and inferences arising in and from the evidence in a light most favorable to the non-moving party. Willis v. Wu, 362 S.C. 146, 151, 607 S.E.2d 63, 65 (2004).

LAW/ANALYSIS
I. Seven Claims

Appellants argue the trial court erred in holding Beaufort's settlements gave rise to seven claims, contending the only reasonable interpretation of the endorsements, giving effect to each of the various provisions, is that the victims' claims constitute one claim because the same perpetrator committed each act of sexual misconduct. Beaufort contends, and the trial court found, there were seven claims because there were seven victims. We agree with Beaufort.

Insurance policies are subject to the general rules of contract construction. Century Indem. Co. v. Golden Hills Builders, Inc., 348 S.C. 559, 565, 561 S.E.2d 355, 358 (2002). "Courts must enforce, not write, contracts of insurance...." USAA Prop. & Cas. Ins. Co. v. Clegg, 377 S.C. 643, 655, 661 S.E.2d 791, 797 (2008) (quoting Sloan Constr. Co. v. Central Nat'l Ins. Co., 269 S.C. 183, 185, 236 S.E.2d 818, 819 (1977)). The cardinal rule of contract interpretation is to ascertain and give legal effect to the parties' intentions as determined by the contract language. Schulmeyer v. State Farm Fire & Cas. Co., 353 S.C. 491, 495, 579 S.E.2d 132, 134 (2003). If the contract's language is clear and unambiguous, the language alone, understood in its plain, ordinary, and popular sense, determines the contract's force and effect. Id. An insurance contract is read as a whole document so that "one may not, by pointing out a single sentence or clause, create an ambiguity." Yarborough v. Phoenix Mut. Life Ins. Co., 266 S.C. 584, 592, 225 S.E.2d 344, 348 (1976). However, an insurance contract which is "in any respect ambiguous or capable of two meanings must be construed in favor of the insured." Reynolds v. Wabash Life Ins. Co., 251 S.C. 165, 168, 161 S.E.2d 168, 169 (1968).

A. Definitions of the Terms of the Policy

Appellants argue the trial court's holding is not a reasonable interpretation of the policy's definition of "claim," or of the undefined terms "series" and "related." We disagree.

The policy's sexual abuse endorsement defines "sexual abuse" as "any actual, attempted or alleged criminal sexual conduct of a person by another person, or persons acting in concert...." The sexual abuse endorsement defines "claim" as "all notices or suits... based on, or arising out of the same sexual abuseor series of sexual abuses by one or more employees or volunteer workers." The endorsement also includes the following "related sexual abuses" clause: "All claims based on or arising out of the same sexual abuse or a series of related sexual abuses by one or more employees... shall be deemed one sexual abuse."3 Appellants rely on the phrases "series of sexual abuses" and "series of related sexual abuses" to assert there is only one claim arising from the...

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