Mitchell v. Alea London Ltd.
| Decision Date | 04 February 2011 |
| Docket Number | C/A No. 2:09-CV-1740-MBS |
| Court | U.S. District Court — District of South Carolina |
| Parties | Mitchell and Laura Putnam, Plaintiffs, v. Alea London Limited, Defendant. |
This declaratory judgment action arises out of the 2005 construction of Mitchell and Laura Putnam's ("Mr. Putnam" and "Mrs. Putnam, " together, "Plaintiffs") modular home in Dorchester County, South Carolina. See Compl. ¶ 6, ECF No. 1. Plaintiffs maintain that Defendant Alea London Limited ("Defendant" or "Alea") is liable for a consent judgment agreed to by KLM Enterprises ("KLM"), the general contractor that constructed Plaintiffs' home, as part of a settlement of a state court action between Plaintiffs and KLM. See id. at ¶¶ 17-25. Plaintiffs and Defendant both filed motions for summary judgment. Def.'s Summ. J. Mot., ECF No. 25; Pls.' Resp. & Cross-Mot., ECF No. 27. The Court heard argument on January 13, 2011 and, at the conclusion of that hearing, GRANTED Defendant's motion for summary judgment, ECF No. 25, and DENIED Plaintiff's motion, ECF No. 27. This order sets forth the Court's reasoning.
In or around early 2005, KLM purchased the home that is at the center of this litigation from Haven Homes, a company in the business of selling modular homes. Sometime shortly thereafter, Plaintiffs entered into an agreement with KLM for the purchase and construction of the home.1 It is undisputed that, once KLM finished construction, there were major problems with the home. The record is rife with allegations about what went wrong, but at his deposition, Mr. Putnam focused on one particular long weekend that saw, what Mr. Putnam described as, "a monsoon [that lasted] for about three or four days." Putnam Dep. 8:6-7, ECF No. 25-18. Before KLM left for that weekend, Mr. Putnam claims they explicitly assured him that the newly erected roof "was dry, and it wouldn't matter if it rained[.]" Id.. at 8:1-16. However, that turned out not to be the case, and the rain that followed Id. at 8:6-7, 22-25. In an affidavit submitted in connection with these cross-motions for summary judgment, Mr. Putnam avers that, "[a]ll of the major damage to [the] residence arose as a result of the problems with the roof[.]" Putnam Aff. ¶ 2, ECF No. 27-1.2
The City of North Charleston issued a Certificate of Occupancy on November 7, 2005 and Plaintiffs moved into the home in December 2005. See Certificate of Occupancy/Completion, ECF No. 25-14 at 2; Putnam Dep. 17:8-13, ECF No. 25-18. On March 24, 2006, KLM filed suit against Plaintiffs in the Court of Common Pleas for Charleston County seeking $36,108.75 for work that KLM claimed had gone uncompensated (the "State Court Action").3 State Ct. Compl., ECF No. 252 at 2-8. Plaintiffs responded by counterclaiming for breach of implied warranty of workmanlike service, negligence, unfair trade practices, breach of contract, warranty of merchantability, negligence per se, and fraud and misrepresentation. See Pls.' State Ct. Answer & Countercl., ECF
Defendant came to be involved in this matter by virtue of its role as KLM's insurer, under Commercial General Liability policy number ALT 042969 (the "CGL Policy" or the "Policy"). See CGL Policy, ECF No. 25-15. KLM first notified Defendant of the State Court Action on August 3, 2007, by letter from its counsel Jennifer L. Queen. Ms. Queen enclosed the relevant pleadings from the State Court Action and requested Defendant's determination as to defense and coverage. See Letter from Jennifer Queen to Alea (Aug. 3, 2007), ECF No. 25-3. After reviewing the pleadings, Defendant's counsel Peter Dworjanyn informed Ms. Queen that it was Defendant's determination that the CGL Policy "does not provide coverage for the counterclaims, and therefore Alea will not be participating in the defense or indemnification of this claim." Letter from Peter Dworjanyn to Queen (Dec. 10, 2007), ECF No. 25-4.
Approximately four months later, the South Carolina Supreme Court decided Auto Owners Ins. Co., Inc. v. Newman, No. 26450, 2008 WL 648546 (S.C. Mar. 10, 2008). Believing that the Newman decision impacted Defendant's coverage decision, counsel for each of the parties to the State Court Action (Plaintiffs, Haven House, and KLM) wrote letters to Mr. Dworjanyn requesting that Defendant reconsider its denial of coverage. See Letter from Jeffrey J. Wiseman to Dworjanyn (Mar. 18, 2008), ECF No. 25-5; Letter from Steven Smith to Dworjanyn (Mar. 19, 2008), ECF No. 25-6; Letter from Queen to Dworjanyn (Apr. 4, 2008), ECF No. 25-7.4
In December 2008, Mr. Dworjanyn received a letter from Douglas E. Leadbitter, an attorney representing KLM, again requesting that Defendant reconsider its denial of coverage. See Letter from Douglas E. Leadbitter to Dworjanyn (Dec. 23, 2008), ECF No. 25-8. When Mr. Dworjanyn responded to Mr. Leadbitter, he noted that he was "under the impression" that the parties had since filed amended pleadings that he had not yet reviewed; Mr. Dworjanyn requested that KLM provide him with any such amended pleadings "immediately." Letter from Dworjanyn to Leadbitter (Jan. 8, 2009), ECF No. 25-9. The requested documents were provided to Mr. Dworjanyn on January 13, 2009 and, on February 10, 2009, Mr. Dworjanyn informed KLM's counsel that Defendant would undertake KLM's defense in the State Court Action under a forthcoming reservation of rights. See E-mail from Jennifer Anderson, paralegal, to Dworjanyn (Jan. 13, 2009), ECF No. 25-10; E-mail from Dworjanyn to Leadbitter (Feb. 10, 2009), ECF No. 25-12.
Alea assigned attorney Tom Hesse to defend KLM in the State Court Action. Six days later, Mr. Hesse informed Mr. Dworjanyn that the State Court Action had been settled. See Letter from Dworjanyn to Smith & Leadbitter (Feb. 16, 2009), ECF No. 25-13. On that same day, Mr. Dworjanyn sent a letter to counsel for Plaintiffs and KLM in which he summarized his understanding of the sequence of events and the current status of the action and requested that he be provided with a copy of any settlement documents (the "February 16th Letter"). Id.. at 1-2. In fact, when Mr. Dworjanyn wrote the February 16th Letter, the State Court Action had not yet settled, but neither KLM nor Plaintiffs informed Mr. Dworjanyn of this fact. Instead, they continued with settlement negotiations.
Plaintiffs and KLM ultimately executed a "Settlement Agreement Release And Assignment" on March 10, 2009 (the "Settlement Agreement"). See Pls.' Resp. To Def.'s Interrogs. ¶ 8, ECF No. 25-17; Settlement Agreement 6, ECF No. 1-1. Under the terms of the Settlement Agreement, KLM agreed to execute a confession of judgment in favor of Plaintiffs in the amount of $150,000, and to
assign[ ] all of its rights and interests to any causes of action or recovery that KLM might have against Alea Insurance Company, its successors or assigns, or any other person, entity, or corporation providing insurance coverage to KLM, for matters and claims arising out of this action or arising out of any claims brought by [Plaintiffs] or on behalf of any damage to or defective construction or workmanship in the construction of their residence....
Settlement Agreement 2, ECF No. 1-1.
On March 24, 2009, Plaintiffs' counsel sent Defendant a demand letter requesting that Defendant pay the $150,000 consent judgment within thirty days. Letter from Smith to Dworjanyn (Mar. 24, 2009), ECF No. 1-3. After Defendant refused, Plaintiffs filed the instant action. See Compl., ECF No. 1.
Summary judgment shall be granted "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). There is no genuine dispute of material fact when the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party under the applicable law. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). When faced with cross-motions forsummary judgment, the court "must review each motion separately on its own merits 'to determine whether either of the parties deserves judgment as a matter of law.'" Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (quoting Philip Morris, Inc. v. Harshbarger, 122 F.3d 58, 62 n.4 (1st Cir. 1997)).
Defendant argues that it is entitled to summary judgment because the Policy does not cover Plaintiffs' loss. In the alternative, Defendant argues that, even if the Policy could be read to cover Plaintiffs' loss, the Settlement Agreement is unenforceable against Defendant because (1) it does not comply with the Policy's consent-to-settle provisions; (2) it is patently unreasonable; and (3) KLM's assignment of its rights under the Policy was invalid per the Policy's anti-assignment provision. For the reasons discussed below, the Court finds that the Policy does not cover Plaintiffs' loss, but even if it did, the Settlement Agreement is unenforceable against Defendant under the Policy's own terms. The Court need not and does not reach Defendant's other arguments.
The parties agree that the CGL Policy is governed by South Carolina law, under which insurance agreements "are subject to general rules of contract construction." Fritz-Pontiac-Cadillac-Buick v. Goforth, 440 S.E.2d 367, 369 (S.C. 1994). Plaintiffs bear the burden of proving that their loss falls within the coverage afforded by the CGL Policy, while Defendant bears the burden of establishing exclusions to coverage. Boggs v. Aetna Cas. & Sur. Co., 252 S.E.2d 565, 568 (S.C. 1979); Gamble v. Travelers Ins. Co., 160 S.E.2d 523, 525 (S.C. 1968). Questions concerning the construction of a written contract are questions of law suitable for resolution on summary judgment if the language employed by the contract is plain and unambiguous. Moss v. Porter Bros., Inc.,...
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