Founders Ins. Co. v. Richard Ruth's Bar & Grill LLC

• Decision Date: 08 June 2016
• Docket Number: No. 2:14-cv-03272-DCN,No. 2:13-cv-03035-DCN,2:13-cv-03035-DCN,2:14-cv-03272-DCN
• Court: U.S. District Court — District of South Carolina
• Parties: FOUNDERS INSURANCE COMPANY, Plaintiff, v. RICHARD RUTH'S BAR & GRILL LLC, RICHARD RUTH, SR., JANE RUTH, and GEORGE GIANNARAS, as guardian for EMMANUEL KEHAGIAS, Defendants. RICHARD RUTH'S BAR & GRILL LLC, RICHARD RUTH, SR., and JANE RUTH, and GEORGE GIANNARAS, as guardian for EMMANUEL KEHAGIAS, Plaintiffs, v. FOUNDERS INSURANCE COMPANY, BROWN & BROWN, INC., UTICA MUTUAL INSURANCE COMPANY, and HULL & COMPANY, INC., Defendants.

FOUNDERS INSURANCE COMPANY, Plaintiff, v. RICHARD RUTH'S BAR & GRILL LLC, RICHARD RUTH, SR., JANE RUTH,and GEORGE GIANNARAS, as guardian for EMMANUEL KEHAGIAS, Defendants.

RICHARD RUTH'S BAR & GRILL LLC, RICHARD RUTH, SR., and JANE RUTH,and GEORGE GIANNARAS, as guardian for EMMANUEL KEHAGIAS, Plaintiffs, v. FOUNDERS INSURANCE COMPANY, BROWN & BROWN, INC.,UTICA MUTUAL INSURANCE COMPANY, and HULL & COMPANY, INC., Defendants.

No. 2:13-cv-03035-DCN

No. 2:14-cv-03272-DCN

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

June 8, 2016

ORDER

This matter comes before the court on declaratory judgment action (2:13-cv-03035-DCN) defendant and bad faith action (2:14-cv-03272-DCN) plaintiff George Giannaras as Guardian for Emmanuel Kehagias's ("Kehagias") motion for partial summary judgment, ECF No. 155, and declaratory judgment action plaintiff and bad faith action defendant Founders Insurance Company's ("Founders") motion for summary judgment, ECF No. 159. For the reasons set forth below, the court denies Kehagias's motion and grants Founders's motion.

I. BACKGROUND¹

This is a consolidated matter that involves two separate but related actions. The first is a declaratory judgment action, 2:13-cv-03035, in which plaintiff Founders requests that the court declare that it is not required to provide coverage under a general liability policy ("the Policy")² because the insureds failed to provide timely notice of the underlying personal injury lawsuit. The second action is a bad faith action, 2:14-cv-03272, filed by declaratory judgment action defendants and bad faith action plaintiffs Richard Ruth's Bar & Grill LLC ("Richard's Bar"), Richard Ruth, Sr. ("Mr. Ruth"), Jane Ruth ("Ms. Ruth") (collectively "the Ruths"), and Kehagias, as the Ruths' assignee,alleging that Founders, Utica Mutual Insurance Company ("Utica"),³ Hull & Company, Inc. ("Hull"), and Brown & Brown, Inc. ("Brown")⁴ failed to properly handle the underlying personal injury claim.⁵

On September 29, 2012, a patron of Richard's Bar struck Kehagias during a pool game, and Kehagias suffered severe injuries and permanent brain damage as a result. After the incident, George Giannaras ("Giannaras"), Kehagias's brother-in-law, was appointed to serve as Kehagias's Guardian. On November 21, 2012, the Anastopoulo Law Firm sent Mr. Ruth a letter ("notice letter") notifying him that Kehagias retained the firm to represent him in connection with the injuries he sustained at the bar. Kehagias's Mot. Summ. J. Ex. 1. The notice letter asked that Mr. Ruth "[p]lease forward this letter to any and all insurance carriers with policies applicable to Richard's Bar and Grill, Richard Ruth, and the building housing Richard's Bar and Grill immediately." Id. On November 26, 2012, Ms. Ruth sent the notice letter to their local agent, Cherie Dumez ("Dumez") at the Cherie Dumez Agency. Ex. 17. The following day, Dumez emailed the notice letter to Hull. Ex. 18. Kehagias filed the underlying injury suit on December 19, 2012 in the Court of Common Pleas for the Ninth Judicial Circuit.⁶ Ex. 7. Ms. Ruth was served with the Summons and Complaint on January 8, 2013.⁷ Dumez emailed the notice letter to Hull a second time on January 9, 2013. Ex. 19.

Kehagias contends that the Ruths notified Dumez and that Dumez in turn notified Hull, the insurance broker. Kehagias further contends that "Hull either failed to forward the letter to Founders, or, if they did, Founders failed to process it." Kehagias Mot. for Summ. J. 7. Neither the Ruths, nor anyone on their behalf, filed an answer, and on February 22, 2013, the court entered an Order for Entry of Default against the Ruths in the underlying action. Ex. 26. Founders received notice of the underlying lawsuit on May 15, 2013 when Hull sent the notice letter to Founders. Ex. 20 (email from Hull to Founders describing the claim as a "new claim" and requesting the "claim number ASAP as the agent originally submitted in January"). Founders disputes Kehagias's claims that the Ruths notified Dumez after being served and that Dumez notified Hull. Founders's Resp. 5 n.5. Upon receiving notice, Founders assigned the claim to adjustor Carlos Ortiz ("Ortiz"), and he began an investigation. Founders "escalated" the claim after learning of the severity of the injuries, opened a separate "coverage" file, and assigned adjustor Alberta Squalls ("Squalls") to investigate the late notice issue.

On May 22, 2013, J.D. Smith ("Smith"), retained by Founders to represent the Ruths in the underlying action, filed a motion to set aside the default. On August 27, 2013, the Anastopoulo Law Firm sent an offer of compromise ("Offer") to Smith. Ex. 33. The letter included a demand "for payment of policy limits" and stated: "At 5:00 p.m. EDT on September 9, 2013, this offer will be withdrawn and we will obtain an excess judgment against your insured." Id. The offer did not include a specific amountand stated that "[i]f any condition is not met, or if any additional condition is imposed by [Founders], including but not limited to conditions of indemnification or the waiver of any rights or claims not specified herein, this offer of compromise will be withdrawn." Id. In response to the Offer, Smith sent Kehagias's attorney an email inquiring about the specific amount demanded, stating: "I understand that this policy has limits of $50,000 and want to make sure we are on the same page with the limits before I forward the demand to the carrier." Ex. 35. Kehagias's attorney responded that he understood the policy limits to be $1,005,000.00 and was therefore demanding that amount. Id.

On September 3, 2013, Squalls responded to the offer of compromise, rejecting the offer but providing a counteroffer of $50,000.00. Ex. 40. On September 10, 2013, Kehagias's attorney sent a notice of the withdrawal of the offer of compromise because no payment had been received. Ex. 42. On October 29, 2013, Squalls sent Kehagias's attorney a second offer of compromise. Ex. 50. Squalls stated that "[b]ased on [Founders's] re-examination of its Policy provisions as may apply to this claim, Founders has determined that the maximum available coverage which could potentially be afforded to its insureds" was $105,000.00. Id. Kehagias's attorney never responded to Founders's second offer. Kehagias filed an opposition to the Ruths' motion to set aside the entry of default on October 24, 2013, and the state court conducted a hearing on the motion on October 30, 2013. Founders filed the present declaratory judgment action on November 6, 2013.

On January 17, 2014, Judge Nicholson denied the Ruths' motion to set aside the entry of default in the underlying state court action. Ex. 45. Judge Newman held a damages hearing on March 19, 2014, and on April 29, 2014, entered a default judgmentagainst the Ruths in the amount of $5,000,000.00. Ex. 55. At the Ruths' request, Smith appealed Judge Newman's default judgment on May 28, 2014. That same day, the Ruths executed an agreement with Kehagias under which Kehagias agreed not to execute the judgment against the Ruths, and the Ruths assigned their right to sue Founders and Hull for bad faith to Kehagias. Ex. 49.⁸ On May 29, 2014, one day after the assignment, the Ruths' personal counsel advised Founders that the Ruths no longer wished to appeal. Ex. 50. Kehagias, as the Ruths' assignee, filed the bad faith action on August 14, 2014.⁹ On August 20, 2014, the Ruths' personal counsel directed Founders to dismiss the appeal. Ex. 52. Founders thereafter authorized Smith to dismiss the appeal in accordance with the Ruths' request. Ex. 53.

Kehagias filed a partial motion for summary judgment in the declaratory judgment action on October 14, 2015. ECF No. 155, at 2-3.¹⁰ Founders also filed a motion for summary judgment in the declaratory judgment action on October 14, 2015.ECF No. 159.¹¹ On October 22, 2014, Founders dismissed the appeal, Ex. 54, and a final judgment was entered on November 25, 2014, Ex. 55.

Founders asks this court to declare that it is not required to indemnify the Ruths because they breached their duty to provide notice of the underlying claim and to forward the legal documents from the underlying suit. Founders alternatively asks that, should the court find that it must indemnify the Ruths, the court declare that the amount of coverage is limited to $105,000.00. The Ruths and Kehagias (hereafter collectively "Kehagias") filed a joint response in opposition to the motion on November 12, 2015. ECF No. 180. Founders filed a joint response in support of various motions on December 1, 2015. ECF No. 193. Founders and Utica (referred to collectively in this order as "Founders") filed a joint response in opposition to Kehagias's motion for summary judgment on November 12, 2015.¹² The motions have been fully briefed and are ripe for the court's review.

II. STANDARD

A. Summary Judgment

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "Rule 56(c) of the Federal Rules of Civil Procedure requires thatthe district court enter judgment against a party who, 'after adequate time for discovery . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Stone v. Liberty Mut. Ins. Co., 105 F.3d 188, 190 (4th Cir. 1997) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). Any reasonable inferences are to be drawn in favor of the nonmoving party. See Webster v. U.S. Dep't of Agric., 685 F.3d 411, 421 (4th Cir. 2012). However, to defeat summary judgment, the nonmoving party must identify an error of law or a genuine issue of disputed material fact. See Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); see also Bouchat v. Balt. Ravens Football Club, Inc., 346...