Charleston County School Dist. v. State Budget and Control Bd., 23850

• Court: United States State Supreme Court of South Carolina
• Writing for the Court: TOAL; HARWELL
• Citation: 313 S.C. 1,437 S.E.2d 6
• Parties: , 87 Ed. Law Rep. 297 CHARLESTON COUNTY SCHOOL DISTRICT, Appellant, v. STATE BUDGET AND CONTROL BOARD, Respondent. . Heard
• Docket Number: No. 23850,23850
• Decision Date: 17 February 1993

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437 S.E.2d 6 313 S.C. 1, 87 Ed. Law Rep. 297 CHARLESTON COUNTY SCHOOL DISTRICT, Appellant,
v.
STATE BUDGET AND CONTROL BOARD, Respondent. No. 23850. Supreme Court of South Carolina. Heard Feb. 17, 1993.
Decided May 3, 1993.
Refiled July 19, 1993.

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[313 S.C. 3] Robert N. Rosen and Alice F. Paylor, of Rosen, Rosen & Hagood, P.A., Charleston, for appellant.

Brad J. Waring, John Hamilton Smith, and Stephen P. Groves, of Young, Clement, Rivers & Tisdale, Charleston; and Charles R. Tuffley, Dennenberg, Tuffley & Jamison, Southfield, MI, for respondent.

TOAL, Justice:

The issues presented in this appeal are as follows: (1) is S.C.Code Ann. § 10-7-180 (1986), which sets forth an appraisal procedure for settling coverage disputes, applicable to insurance provided by the State Budget and Control Board; (2) if the appraisal procedure is applicable, did the State Budget and Control Board waive its right to the appraisal procedure; and (3) is the State Budget and Control Board subject to bad faith claims under Nichols v. State Farm Mutual Automobile Insurance Co., 279 S.C. 336, 306 S.E.2d 616 (1983).

FACTS

On September 21, 1989, Hurricane Hugo struck Charleston County, damaging the buildings owned by Charleston County School District (hereinafter "District") and its contents. The District's property was covered under four policies of insurance provided by the State Budget and Control Board (hereinafter "Board"). The District notified the Board of the loss and then began repairing the damage. The Board advanced some funds to the District for the repairs. When the District [313 S.C. 4] submitted a proof of loss claim, the Board asserted that the amounts claimed were, in part, based on costs to repair pre-existing damage due to the District's improper maintenance of the buildings, as well as other costs not covered by the policies, including architectural design fees, inspection fees, asbestos removal, and costs in excess of reasonable repairs or replacements. When the parties were unable to resolve their dispute, the District brought this breach of contract action and an action for bad faith refusal to pay benefits under the insurance contract. The Board answered the complaint denying the allegations and asserting several affirmative defenses. Some limited discovery took place, including the exchange of unspecified documents and the deposition of the Assistant Division Director of the Division of Insurance for the Board.

The Board subsequently filed a motion to invoke its right to the appraisal procedure prescribed in S.C.Code Ann. § 10-7-180 (1986) along with a motion to dismiss the bad faith claim. The trial court granted both motions. The District appeals.

ISSUES

(1) Is the statutory appraisal provision of section 10-7-180, of the South Carolina

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Code, inapplicable to insurance provided by the Board pursuant to section 1-11-140?

(2) Did the Board waive its right to invoke the statutory appraisal procedure by entering into an insurance contract with a different appraisal procedure or by failing to timely raise the appraisal provision?

(3) Did the trial court err in dismissing the bad faith claim?

LAW/ANALYSIS

Applicability of the Statutory Appraisal Provision to Contracts of Insurance Provided by the Board.

S.C.Code Ann. § 1-11-140 (1986 & 1992 Supp.) authorizes the Board to provide insurance for the listed public entities and hospitals within the statute. In 1989, the statute was amended to add authorization for the Board to provide insurance on state public buildings, state-supported institutions, highway department buildings, public buildings of incorporated municipalities, public buildings of counties, school buildings, and school buses "as prescribed in §§ 10-7-10 through 10[313 S.C. 5] -7-40, 59-67-710 and 59-67-790." S.C.Acts No. 389, Part II (1988). The District maintains that by expressly incorporating the above-cited sections, the legislature intended to exclude the applicability of §§ 10-7-50 through 10-7-230, which govern the methods for attaining insurance including the appraisal procedure of § 10-7-180, from insurance provided by the Board.

The cardinal rule of statutory construction is to ascertain and effectuate the intent of the legislature. Bankers Trust of South Carolina v. Bruce, 275 S.C. 35, 267 S.E.2d 424 (1980). It is clear the legislature's inclusion of §§ 10-7-10 through 10-7-40, 59-67-710, and 59-67-790 within the general provisions of § 1-11-140 was not intended to render all other provisions relating to insurance on public entities inapplicable, but merely delineated specific additional insurance coverage which the Board was authorized to provide. Additionally, finding the subsequent provisions inapplicable would lead to absurd results which would not be in the best interest of the Board. For example, the Board would lack the ability to reinsure the policies it issued as provided for by section 10-7-120, the premiums collected would not be...