Orangeburg Sausage Co. v. Cincinnati Ins. Co.

Decision Date04 October 1993
Docket NumberNo. 2220,2220
Citation316 S.C. 331,450 S.E.2d 66
CourtSouth Carolina Court of Appeals
PartiesORANGEBURG SAUSAGE COMPANY, Respondent, v. CINCINNATI INSURANCE COMPANY and R.L. Bryant & Son, Appellants. . Heard

William O. Sweeny, III of Sweeny, Wingate, Murphy & Barrow; and I.S. Leevy Johnson of Johnson, Toal & Battiste, Columbia, for appellant Cincinnati Ins. Co.; Paul A. Dominick and Jay S. Masty both of Nexsen, Pruet, Jacobs, Pollard & Robinson, Charleston, for appellant R.L. Bryant & Son.

Kenneth M. Suggs of Suggs & Kelly, Columbia, for respondent.

HOWELL, Chief Justice:

Orangeburg Sausage Company (OSCO) sued Cincinnati Insurance Company (Cincinnati) for breach of contract, negligence, 1 and bad faith failure to pay insurance benefits following a claim for damages to OSCO's business resulting from Hurricane Hugo. OSCO also sued the insurance agent, R.L. Bryant & Son, Inc. (Bryant), for negligence in connection with the policy and claim. A jury awarded OSCO $800,000 actual damages on the negligence claim against both defendants, $254,029.73 against Cincinnati on the breach of contract claim, and $250,000 against Cincinnati on the bad faith claim. The jury responded to a special interrogatory and found the defendants acted recklessly, wilfully, wantonly, or in conscious disregard for OSCO's rights.

The trial court required OSCO to elect its remedy, and OSCO chose to recover under its negligence theory. By agreement the court then held a separate hearing on punitive damages. The jury returned a verdict for OSCO for $1,630,000 in punitive damages.

Cincinnati and Bryant moved for judgment notwithstanding the verdict, new trial absolute, or alternatively new trial nisi remittitur. In a thorough and detailed order, the trial court granted the new trial nisi remittitur motion, reducing the actual damages verdict to $595,216.00. The trial court denied all other motions, and Cincinnati and Bryant appeal. We affirm.

OSCO is a corporation engaged in the wholesale and retail sale of food products. OSCO's business complex surrounds the end of a dead end street. The office, slaughtering facilities and a retail market are on one side of the street. The freezer building is on the opposite side. Evidence showed that the entire business location has always been known as 597 High Street.

Cincinnati provided insurance on the contents of OSCO's freezers. Cincinnati wrote an initial policy covering the frozen foods products beginning July 1, 1983 and ending July 1, 1988. This policy listed "597 High Street" as the location of the insured premises. OSCO had requested coverage of $200,000.00 for the frozen food products alone, though Cincinnati wrote the policy to cover all contents.

In October 1986, three years into the initial policy, OSCO pledged its real estate and equipment located on High Street as collateral for a loan. The loan required that the collateral be covered by casualty insurance, so OSCO asked Bryant to add the necessary coverage. Bryant sent a memo to Cincinnati requesting an endorsement for the additional coverage. There was no evidence that an OSCO representative had ever seen this document before this lawsuit. This memo, for the first time, uses the erroneous "488 High Street" as a premises address, in addition to a reference to "597." Cincinnati issued an insurance binder adding coverage of $75,000.00 for each building and $30,000.00 for the "contents--equipment" located in each. 2 The binder describes one building as 597 High Street and the other as "across street from 597." The evidence was undisputed that there is no "488 High Street" and that the freezer building would not have that designation if assigned one by the Post Office. The trial court noted that the only credible evidence was that 488 first appeared on a form which the agent prepared, without the insured's signature or review.

About two years later, when the initial policy expired in 1988, Cincinnati issued a one-year policy. OSCO's witnesses classified this as a renewal. OSCO sought no changes in coverage between the 1986 loan and September 1989. The application for the renewal policy used both the 597 High Street and 488 High Street addresses, but was not signed by OSCO's representatives despite a blank for its signature.

OSCO's representatives said they did not read this policy, though Bryant's witness testified that a representative of Bryant delivered it and went over it with OSCO's vice president when it was received. Two experts testified that people generally do not read their insurance contracts and, if they do read them, they do not generally understand them. The insurance company drew this contract and chose its language.

The third page inside the cover of the 1988 policy is entitled "Common Policy Declarations." OSCO is the insured and the address is "597 High Street." The eighth page of the policy is entitled "Commercial Property Coverage Part Declarations" and is the only page which refers to a "488 High Street" address. On that page, item numbers are separately stated for the locations and the coverage, but there is no explanation of the significance of the numbering system. The record contains a "Dealers Comprehensive Form," along with evidence that Cincinnati considered it included in the 1988 contract. This document can be read as providing coverage for products of the insured on property located anywhere, provided that the property was owned, leased, or regularly used by the insured in its business.

In September 1989, Hurricane Hugo damaged OSCO's property. An off-premises power outage cut OSCO's electricity, and wind damaged OSCO's plant, allowing rainwater to contaminate the frozen food products stored in separate units of the freezer building. Cincinnati adjusted the loss at more than $250,000.00, but disputed OSCO's claim for insurance benefits. After a delay of eight months, Cincinnati paid only slightly over $36,000.00, asserting first that OSCO had changed its position on the cause of loss after learning that the initial claim (off-premises power outage) was not covered, and second, that the largest amount of contents coverage was not for the freezer building.

When the claim was not paid, OSCO promptly hired an attorney. On November 14, 1989, the attorney forwarded to Cincinnati an itemization of losses totalling $231,505.12, including $198,260.13 for contaminated frozen food in the main freezer. The attorney also made a demand for the undisputed portions of the coverage.

Several Cincinnati adjusters were involved in the claim. OSCO provided affidavits and other materials, and Jim Guth, a Cincinnati adjuster, reviewed the claim and inspected the property. Guth's report indicated Cincinnati determined OSCO's claim to be valid and covered. Guth raised the reserves on the contents as of December 5, 1989, to $210,000.00 Dollars. On December 8, 1989, OSCO sent Guth information, along with another demand for prompt payment of the undisputed amounts. Shortly thereafter, Guth's involvement with the file was ended and yet another adjuster, Hendrickson, became involved.

OSCO supplied (or resupplied) more information on January 17, 1990. Despite Guth's findings and actions in raising the reserves, Cincinnati informed OSCO that the contents coverage for the freezer building was limited to $30,000.00. On February 20, 1990, five months and four adjusters after the hurricane, Cincinnati sent OSCO an itemization of what it would pay, reflecting the lower coverage level and imposing a coinsurance penalty.

Cincinnati claimed the only plausible reading of the 1988 policy is that the freezer building is 488 (even though the evidence shows that Cincinnati insured it as 597 for the preceding five years) and that the contents there are insured for only $30,000.00, while the building on the opposite side of the street had $230,000.00 coverage for contents (even though there was competent evidence that the risk of loss was far greater for the freezer building). Cincinnati asserted that if OSCO's representatives had only looked at the 1988 policy, they would clearly have seen that the coverages were switched from what they should have been.

On March 6, 1990, OSCO's attorney requested, for at least the fifth time, that Cincinnati pay the undisputed portions of the claim. Five and one-half months after the hurricane, the request for payment of the undisputed amounts was sent to the home office and, about two weeks thereafter, the adjuster was instructed to pay the undisputed portions of the claim and to set up a meeting to try to resolve the disputed portions. Two more months passed. When the meeting was held in May 1990, Cincinnati tendered payment for the undisputed portion of the claim conditioned upon OSCO's signing a receipt referring to losses at 597 and 488 High Street. The non-existence of 488, however, was in dispute. Upon OSCO's refusal to sign, Cincinnati withdrew payment of the check for $41,319.93. On May 23, 1990, Cincinnati deducted approximately $5,000.00 for some reason and sent OSCO a check for $36,006.89 for the undisputed amount. Thus, eight months passed between the hurricane loss and Cincinnati's payment of $36,006.89 towards a loss which Cincinnati adjusted at $254,029.23. In fact, on February 2, 1990, Cincinnati had offered to pay a total of $75,675.51. Two years passed before the case went to trial.


Cincinnati and Bryant argue the trial court erred in failing to grant its directed verdict motion on the ground that OSCO was contributorily negligent as a matter of law for failing to read its policy. Cincinnati and Bryant argue OSCO's principals' failure to read the policy precludes them from complaining about the coverage provided by the policy, under Doub v. Weathersby-Breeland Insurance Agency, 268 S.C. 319, 233 S.E.2d 111 (1977). We disagree.

In Doub, the plaintiff sought coverage for damage to his...

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