Harriman v. Associated Indus. Ins. Co.

• Decision Date: 16 June 2021
• Docket Number: No. 2:18-cv-2750-DCN,2:18-cv-2750-DCN
• Citation: 544 F.Supp.3d 605
• Parties: Susan HARRIMAN, Plaintiff, v. ASSOCIATED INDUSTRIES INSURANCE COMPANY, INC., Defendant.
• Court: U.S. District Court — District of South Carolina

544 F.Supp.3d 605

Susan HARRIMAN, Plaintiff,

v.ASSOCIATED INDUSTRIES INSURANCE COMPANY, INC., Defendant.

No. 2:18-cv-2750-DCN

United States District Court, D. South Carolina, Charleston Division.

Signed June 16, 2021

George J. Kefalos, George J. Kefalos Law Office, Oana D. Johnson, Oana D. Johnson Attorney at Law, Charleston, SC, for Plaintiff.

Alexander Asher Truitt, Pro Hac Vice, Winget Spadafora and Schwartzberg LLP, New York, NY, Catherine Love Hanna, Pro Hac Vice, Hanna and Plaut LLP, Austin, TX, Douglas Walker MacKelcan, III, Michael Christopher Masciale, Copeland Stair Kingma and Lovell LLP, Charleston, SC, for Defendant.

ORDER

DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

The following matter is before the court on defendant Associated Industries Insurance Company, Inc.’s ("Associated Industries") motion for summary judgment, ECF No. 76. For the reasons set forth below, the court grants the motion.

I. BACKGROUND

Susan Harriman ("Harriman") brings this insurance coverage action against Associated Industries related to two lawsuits in Texas. During the relevant time period, Harriman was a Registered Representative and Investment Advisor with IMS Securities, Inc. ("IMS"). In 2015, Harriman was sued in the United States District Court for the Western District of Texas by Palmaz Scientific ("Palmaz"), a medical technology company (the "federal underlying suit"). The complaint in the federal underlying suit alleges that in 2012 Harriman met with the CEO of Palmaz to solicit business on behalf of IMS. ECF No. 15-1 at ¶¶ 33–35. When Palmaz declined her offer, the complaint continues, Harriman became verbally abusive, threatening, and eventually set out on a "delusional and malicious campaign of economic terrorism" designed to sink Palmaz's business. Id. at ¶¶ 37–68. Palmaz specifically alleges, among other things, that Harriman made false and defamatory statements about Palmaz in her capacity as an IMS Registered Representative and Investment Advisor. The district court dismissed that action on jurisdictional grounds. Shortly thereafter, Harriman sued Palmaz in Texas state court, where Palmaz filed counterclaims against Harriman containing the same allegations as those asserted in the federal underlying suit (the "state underlying counterclaims") (together with the federal underlying suit, "the underlying suits").

Harriman was insured under IMS's professional liability insurance policy that was issued by Associated Industries and valid from July 15, 2015 to July 15, 2016 ("the AI Policy"). The AI Policy also incorporates IMS's previous insurance policy through an endorsement. That policy was issued by Endurance Specialty Insurance Co. ("the Endurance Policy"). The parties agree that the language of these two policies is largely the same, save for the inclusion of "Personal and Advertising Injury" as a "Wrongful Act" in the Endurance Policy. Pursuant to the terms of the AI Policy, Associated Industries has a duty to defend any claim against its insured to which the AI Policy applies. ECF No. 15-3 at 15. This duty to defend stems from the occurrence of a "Wrongful Act," which is defined in the AI Policy as

any actual or alleged negligent act, error, omission, misstatement, misrepresentation or breach of duty by an Insured, or by any person other than an Insured for whose actions the Insured is legally responsible, in rendering or in failing to render Professional Services for clients of the Broker/Dealer.

Id. at 18 (emphasis added).

In addition to her employment with IMS, Harriman owns a consulting business called "3G Partners." Harriman, through 3G Partners, was also insured by a second policy, issued by Travelers Casualty Insurance Company ("Travelers"), for the period of May 30, 2014 to May 30, 2015 (the "Travelers Policy"). ECF No. 76-5. On October 4, 2017, Harriman tendered defense of the underlying suits to Travelers, who agreed to provide a defense under a reservation of rights on February 28, 2018. In the span of approximately one year, Travelers spent almost $4.2 million defending the claims against Harriman. ECF No. 76-7, Geoghegan Decl.; ECF No. 76-10. In November 2018, Travelers also paid the aggregate limits of its policy, $2 million, to obtain releases of the claims against Harriman and the claims against IMS. ECF No. 76-11. Associated Industries, the evidence indicates, remained unaware that Travelers provided Harriman with a defense in the underlying suits until November 2019, over a year after Harriman filed this suit against it.

In this action, Harriman asserts that because the underlying suits stem from Harriman's actions in her capacity as a Registered Representative and Investment Advisor with IMS, Associated Industries has a duty to defend Harriman pursuant to the AI Policy. Associated Industries has refused to do so. As a result, Harriman filed the instant case on October 9, 2018. Her amended complaint, now the operative complaint, asserts the following claims: (1) breach of contract for Associated Industries’ failure to defend Harriman; (2) bad faith for Associated Industries’ refusal to defend Harriman; and (3) a declaratory judgment seeking a declaration that Associated Industries owes Harriman a duty to defend and indemnify¹ the underlying suits. ECF No. 15, Amend. Compl.

On January 1, 2019, Associated Industries filed a motion to dismiss, arguing that it has no duty to defend Harriman because the AI Policy does not extend coverage to the conduct alleged in the underlying suits. ECF No. 17. After analyzing the relevant policy language and underlying allegations against Harriman, the court denied the motion, finding "that the allegations in the underlying suits create the possibility of coverage under the [AI] Policy, which invokes Associated Industries’ duty to defend." ECF No. 26 at 7. After nearly two years of discovery, Associated Industries filed a motion for summary judgment on March 8, 2021. ECF No. 76. On March 22, 2021, Harriman responded. ECF No. 78. On March 29, 2021, Associated Industries filed a reply. ECF No. 79. The court held a hearing on the matter on May 10, 2021. Accordingly, this motion is ripe for review.

II. STANDARD

Summary judgment shall be granted if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. at 248, 106 S.Ct. 2505. "[S]ummary judgment will not lie if the dispute about a material fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. "[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id. at 249, 106 S.Ct. 2505. In so doing, the court must view the evidence in the light most favorable to the non-moving party and draw all inferences in its favor. Id. at 255, 106 S.Ct. 2505.

"The party seeking summary judgment shoulders the initial burden of demonstrating to the district court that there is no genuine issue of material fact." Major v. Greenville Hous. Auth., 2012 WL 3000680, at *1 (D.S.C. Apr. 11, 2012). Nevertheless, "when a properly supported motion for summary judgment is made, the adverse party ‘must set forth specific facts showing that there is a genuine issue for trial.’ " Id. (quoting Fed. R. Civ. P. 56(e) ). The plain language of Federal Rule of Civil Procedure 56(c) "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who 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." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[C]onclusory allegations or denials, without more, are insufficient to preclude the granting of the summary judgment motion." Major, 2012 WL 3000680, at *1.

III. DISCUSSION

Associated Industries asserts four grounds for summary judgment. The court addresses the first three grounds in turn and, finding that summary judgment is warranted on the second and third, does not reach the fourth.

A. Coverage of the Underlying Suits

First, Associated Industries argues that "the allegations of the [underlying suits], even liberally construed, never triggered" its duty to defend. ECF No. 76 at 12. Specifically, Associated Industries contends that the underlying suits do not allege conduct that is covered by the AI Policy because the alleged conduct does not fall within the AI Policy's definition of "Professional Services." The court has already considered and rejected this exact argument in denying Associated Industries’ motion to dismiss, and Associated Industries gives the court no reason to reach a different conclusion here. Even after indulging it a second time, Associate Industries’ tired argument clearly fails.

Rather than relying on newfound evidence or directing the court to previously unconsidered law, Associated Industries acknowledges the court's earlier holding and urges reconsideration.² Associated Industries specifically contends:

In its Order [denying the motion to dismiss], the Court does not point to any specific allegations in the [underlying suits] as falling within "Professional Services," but hypothesizes that Harriman might have been

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