Cock-N-Bull Steak House, Inc. v. Generali Ins. Co.

Decision Date05 October 1995
Docket NumberCOCK-N-BULL,No. 24372,24372
Citation321 S.C. 1,466 S.E.2d 727
CourtSouth Carolina Supreme Court
PartiesSTEAK HOUSE, INC., Respondent, v. GENERALI INSURANCE COMPANY, a/k/a Generali--U.S. Branch, Generali Underwriters, Inc., Appellant. . Heard

T. Travis Medlock and Michael S. Pauley, both of Lide, Montgomery, Potts & Medlock, Columbia; Rudolph V. Pino, Jr. and John F. McKay, III, of Pino & Associates, White Plains, NY, for Appellant.

Kenneth M. Suggs, of Suggs & Kelly, Columbia; A.F. Carter, III, of The Carter Law Firm, Orangeburg, for Respondent.

TOAL, Acting Chief Justice:

In this action against an insurance company, the insured asserts claims of breach of contract and bad faith failure to pay insurance claim. The insurance company appeals the trial court's directed verdict on these two claims and the jury's award of punitive damages in favor of the insured. We affirm.

FACTUAL/PROCEDURAL BACKGROUND

Cock-N-Bull Steak House, Inc. ("Cock-N-Bull") was the owner of an Orangeburg, South Carolina restaurant which was destroyed by fire in May 1991. After the fire, Cock-N-Bull attempted to collect on its insurance policy with the Generali Insurance Company ("Generali"). The policy provided "Building" coverage of $500,000 and "Contents" coverage of $150,000. Cock-N-Bull claimed under the "Building" coverage separate losses of $275,000 and approximately $56,000. In addition, it claimed a loss of $150,000 under the "Contents" coverage. In January 1992, Generali paid Cock-N-Bull the $150,000 claim. Two months later, it paid the $275,000 claim with a check indicating "Full & Final Settlement of Entire Claim." Generali rejected the $56,000 "Building" claim because it contended that the claim exceeded the coverage limits for "Contents."

After Generali failed to respond to further requests by Cock-N-Bull to consider its claim, Cock-N-Bull brought this action asserting breach of contract and bad faith refusal to pay insurance claim. The judge directed a verdict for Cock-N-Bull as to both claims and awarded actual damages of approximately $52,000. The issue of punitive damages was submitted to the jury, which awarded Cock-N-Bull $1,500,000. Generali has appealed alleging numerous errors by the trial court.

LAW/ANALYSIS

A. Directed Verdict

Generali argues that the trial court erred in directing a verdict for Cock-N-Bull on the breach of contract and bad faith failure to pay claims. We disagree.

When viewed in the light most favorable to Generali, the evidence does not yield more than one inference; thus, a directed verdict was proper. See Strange v. South Carolina Dep't Highways & Pub. Transp., 314 S.C. 427, 445 S.E.2d 439 (1994). The insurance policy's language explicitly states what items fall within coverage. Although the Declarations section of the policy sets forth the coverage amounts by using the short-hand terms "Building" and "Contents," the portion of the policy defining coverage describes "Covered Property" in terms of two categories, "Building" and "Business Personal Property":

Covered Property, as used in this Coverage Part means the following types of property for which a Limit of Insurance is shown in the Declarations:

a. Building, meaning the building or structure described in the Declarations, including:

(1) Completed additions;

(2) Permanently installed:

(a) Fixtures;

(b) Machinery; and

(c) Equipment;

(3) Outdoor fixtures;

(4) Personal property owned by you that is used to maintain or service the building or structure or its premises, including:

(a) Fire extinguishing equipment;

(b) Outdoor furniture;

(c) Floor coverings; and

(d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering;

....

b. Your Business Personal Property located in or on the building described in the Declarations or in the open (or in a vehicle) within 100 feet of the described premises, consisting of the following unless otherwise specified in the Declarations or on the Your Business Personal Property--Separation of Coverage form:

(1) Furniture and fixtures;

(2) Machinery and equipment;

(3) "Stock";

(4) All other personal property owned by you and used in your business;

....

A comparison of the categories "Building" and "Business Personal Property" reveals that they are not mutually exclusive. Certain fixtures, machinery, and equipment fall within the definitions of both.

Cock-N-Bull's $56,000 claim, in addition to meeting the definition of "Business Personal Property," clearly fell under the definition of "Building" as Cock-N-Bull was claiming items such as fixtures, machinery, and equipment. Generali took the position, however, that such items constituted "Contents," not "Building." Generali attempted, in effect, to avoid payment by limiting the policy to the short-hand descriptions of "Building" and "Contents" used in the Declarations, while ignoring the detailed language of the contract which set forth the scope of the coverage. This is a clear breach of the contract. The evidence, when viewed in the light most favorable to Generali, does not yield more than one inference; accordingly, a directed verdict was proper. See Strange, 314 S.C. 427, 445 S.E.2d 439.

Generali's attempt to evade payment not only constituted breach of contract, but was also in bad faith. The elements of an action for bad faith refusal to pay benefits under an insurance contract include: "(1) the existence of a mutually binding contract of insurance between the plaintiff and the defendant; (2) refusal by the insurer to pay benefits due under the contract; (3) resulting from the insurer's bad faith or unreasonable action in breach of an implied covenant of good faith and fair dealing arising on the contract; (4) causing damage to the insured." Crossley v. State Farm Mut. Auto. Ins. Co., 307 S.C. 354, 359-60, 415 S.E.2d 393, 396-97 (1992). "An insured may recover damages for a bad faith denial of coverage if he or she proves there was no reasonable basis to support the insurer's decision to deny benefits under a mutually binding insurance contract." Dowling v. Home Buyers Warranty Corp., 303 S.C. 295, 297, 400 S.E.2d 143, 144 (1991) (citing Varnadore v. Nationwide Mut. Ins. Co., 289 S.C. 155, 345 S.E.2d 711 (1986); Nichols v. State Farm Mut. Auto. Ins. Co., 279 S.C. 336, 306 S.E.2d 616 (1983)). In the present case, there clearly existed a mutually binding contract under which the insurer refused to pay benefits. This refusal resulted from the insurer's bad faith and caused damage to the insured.

At trial Generali did not present evidence as to why the claim was denied. In fact, two of Generali's own witnesses testified to the unreasonableness of Generali's position. Joe Eudy, who had conducted an appraisal for Generali, admitted that Generali owed the insured more money and that Generali had improperly excluded certain items from coverage:

Q: There's absolutely no question that this insurance company, Generali, owes more money on this claim right now; isn't that true?

A: In my opinion, they do.

Q: There's no way that a Delfield Double Refrigerator is not an appliance that's used for refrigeration; isn't that true?

A: That's correct.

The second of Generali's witnesses Richard Domato also testified about the impropriety of Generali's position:

Q: Sir, do you have any reason to believe that five fire extinguishers are not fire extinguishing equipment?

A: No, I have no reason to believe that.

Q: Do you have any reason to believe that the Delfield Single Refrigerator is not a piece of appliance used for refrigeration?

A: No.

Q: Can you give this jury one single reason that this kind of stuff should not have been paid under the language you just read?

A: Not being an expert in property, no; but I cannot give a reason it should not have been paid.

These statements by Generali's own witnesses provide clear evidence of the unreasonableness of Generali's refusal to pay Cock-N-Bull's claim.

Generali argues that the record demonstrates a number of indicia of "good faith." However, under the bad faith denial standard discussed in Crossley and Dowling, we need only determine whether there existed a reasonable basis for the denial. Because there was no reasonable basis to support Generali's denial of benefits, the trial court was correct in directing a verdict in favor of Cock-N-Bull on its bad faith denial claim.

B. Testimony of Baldwin

Generali claims that the trial court erred in allowing Cock-N-Bull's appraiser to testify on the issues of breach of contract and of bad faith. We disagree.

The only issue preserved by Generali is that Baldwin testified that the "insurance company handled the claim [not] very well." Generali asserts that this statement constituted a legal conclusion, one which violates Rule 43(m), SCRCP. This statement is an opinion on how well Generali handled the claim; it does not constitute a legal conclusion. See Shields v. South Carolina Dep't Highways & Pub. Transp., 303 S.C. 439, 401 S.E.2d 185 (Ct.App.),cert. denied, (1991) (expert witness's statement that Highway Department's placement of signs "border[ed] on criminal negligence" was not a comment on the law).

C. Testimony of Dr. Wood

Generali alleges that the trial court erred in admitting the testimony of Dr. Oliver Wood, Jr. regarding the amount of punitive damages that would "get the attention of Generali." It argues that Dr. Wood was not qualified because he never served on the board of an insurance company and that his testimony invaded the province of the jury. Qualification of an expert witness and the admissibility of his testimony are matters within the trial court's discretion. Lee v. Suess, 318 S.C. 283, 457 S.E.2d 344 (1995). " '[D]efects in the amount and quality of education or experience go to the weight of the expert's testimony and not its admissibility.' " McMillan v. Durant, 312 S.C. 200, 204, 439 S.E.2d 829, 831 (1993) (quoting State v. Schumpert, 312 S.C. 502, ----, 435 S.E.2d 859, 861 (1993...

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