Paradigm Consultants, LTD v. Builders Mut. Ins. Co.

• Decision Date: 16 July 2013
• Docket Number: No. COA12–1576.,COA12–1576.
• Citation: 745 S.E.2d 69
• Parties: PARADIGM CONSULTANTS, LTD, Plaintiff, v. BUILDERS MUTUAL INSURANCE CO., Defendant/Third Party Plaintiff, v. Charles G. Raymond and Kimberly G. Raymond, Third–Party Defendants.
• Court: North Carolina Court of Appeals

745 S.E.2d 69

PARADIGM CONSULTANTS, LTD, Plaintiff,

v.BUILDERS MUTUAL INSURANCE CO., Defendant/Third Party Plaintiff,

v.Charles G. Raymond and Kimberly G. Raymond, Third–Party Defendants.

No. COA12–1576.

Court of Appeals of North Carolina.

July 16, 2013.

Appeal by defendants from order entered 2 October 2012 by Judge Gary M. Gavenus in Watauga County Superior Court. Heard in the Court of Appeals 8 May 2013.

Shumaker, Loop & Kendrick, LLP, by Andrew S. Culicerto, Christian H. Staples & Michael G. Sanderson, for plaintiff-cross-appellant.

Nelson Levine de Luca & Hamilton, by John I. Malone, Jr. & David L. Brown, for defendant-appellants.

STEELMAN, Judge.

Where the trial court granted summary judgment to plaintiff as to one of defendant's defenses, but denied summary judgment as to the balance of the issues raised by plaintiff and defendant, the order of the trial court is interlocutory. Where the prior litigation was concluded, there is no substantial right to have the interlocutory appeal heard on the questions of whether defendant had a duty to defend the prior action or whether there was coverage for the claims raised in the prior action.

I. Factual and Procedural Background

On 18 August 2008, Paradigm Consultants, Ltd. (“Paradigm”) brought suit against Charles and Kimberly Raymond (“the Raymonds”), seeking payment for construction work performed by Paradigm on the Raymonds' residence. On 20 November 2008, the Raymonds filed an answer and counterclaim, alleging breach of contract, breach of a duty of workmanlike performance, unfair and deceptive trade practices, breach of implied warranty of workmanship, and negligence. On 21 November 2008, a copy of the answer and counterclaim was faxed to Matthew Collins (“Collins”), owner and president of Paradigm.On 13 March 2009, Collins contacted Paradigm's insurer, Builders Mutual Insurance Co. (“BMI”), and advised BMI of a dispute with the Raymonds, but did not advise BMI that a counterclaim had been filed against Paradigm.

On 15 December 2009, the Raymonds amended their counterclaim to add subcontractors who worked on their residence as third party defendants. On 19 February 2010, BMI received a copy of the Raymonds' Second Amended Answer and Counterclaim from a subcontractor's insurer. On 29 March 2010, BMI sent a reservation of rights letter to Paradigm, stating that BMI understood the following: that Paradigm had sought recovery from the Raymonds, who had filed counterclaims; that BMI had not previously been made aware of the counterclaims; that the claim originated from work commenced in 1998 and 1999 and continued until 2008; that BMI's insurance coverage was only for the time period from 28 August 2002 through 28 March 2008; that the policy did not cover anything outside of that time period; and that there was no written contract prior to suits between Paradigm and the Raymonds. BMI concluded that there was no coverage for the Raymonds' claims against Paradigm, pursuant to Exclusion L of the policy; that Exclusions J(5) and J(6) excluded from coverage any damage for work performed by Paradigm and its subcontractors; that neither the indemnity nor the defense clauses of the policy were triggered; that Paradigm should contact its current insurance carrier; and further that BMI was not promptly notified of the Raymonds' counterclaims as required by the policy. The letter explicitly reserved BMI's rights under the policy, and stated that it was referring the issue to outside counsel to determine whether any indemnity or defense duties existed under the insurance policy. On 21 October 2010, BMI's outside counsel confirmed that BMI had no duty to indemnify or defend Paradigm with respect to the Raymonds' claims.

The Raymonds and Paradigm subsequently entered into a settlement agreement that Paradigm would agree to pay the Raymonds $2.5 million in settlement of all claims. The Raymonds agreed to pay Paradigm $220,000.00 to address another dispute between the parties. The Raymonds further agreed to forego enforcement and collection of the $2.5 million if Paradigm agreed to seek coverage for the settlement amount from BMI. The Raymonds agreed to finance the litigation and have their attorneys represent Paradigm in the action against BMI, with the stipulation that the first $150,000.00 of any settlement with BMI would be paid to the Raymonds, and any other funds received would be divided 92.5% to the Raymonds and 7.5% to Paradigm.

On 24 May 2011, Paradigm brought this action against BMI, alleging breach of contract, bad faith, and unfair and deceptive trade practices. On 12 August 2011, BMI filed motions to dismiss, to transfer venue, to strike the portions of the complaint stating the amount of relief sought, and an answer. On 20 June 2012, Paradigm filed an amended complaint. On 10 July 2012, BMI answered the amended complaint, and on 6 August 2012, BMI filed a third-party complaint against the Raymonds. On 15 August 2012, Paradigm filed a motion for partial summary judgment on three issues: (1) that BMI breached its duty to defend Paradigm, (2) that BMI had waived the contractual exclusions it alleged in its answer, and (3) on BMI's champerty and maintenance defense. On 16 August 2012, BMI filed a motion for summary judgment on all issues. On 10 October 2012, the trial court entered an order denying BMI's motion for summary judgment and granting Paradigm's motion for summary judgment as to BMI's defense of champerty and maintenance. The balance of Paradigm's motion for summary judgment was denied.

On 15 October 2012, the trial court stayed further proceedings pending appeal. The trial court did not certify its order on summary judgment as a final order pursuant to Rule 54(b) of the North Carolina Rules of Civil Procedure.

BMI appeals. Paradigm cross-appeals.

II. Interlocutory Appeal

We must first determine whether any appeal from the trial court's interlocutory order is properly before us.

A. Standard of Review

A final judgment is one which disposes of the cause as to all the parties, leaving nothing to be judicially determined between them in the trial court. An interlocutory order is one made during the pendency of an action, which does not dispose of the case, but leaves it for further action by the trial court in order to settle and determine the entire controversy.

Veazey v. City of Durham, 231 N.C. 357, 361–62, 57 S.E.2d 377, 381 (1950) (citations omitted). “Generally, there is no right of immediate appeal from interlocutory orders and judgments.” Goldston v. Am. Motors Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990).

“[W]hen an appeal is interlocutory, the appellant must include in its statement of grounds for appellate review ‘sufficient facts and argument to support appellate review on the ground that the challenged order affects a substantial right.’ ” Johnson v. Lucas, 168 N.C.App. 515, 518, 608 S.E.2d 336, 338 (quoting N.C.R.App. P. 28(b)(4)), aff'd per curiam,360 N.C. 53, 619 S.E.2d 502 (2005).

“The appellants must present more than a bare assertion that the order affects a substantial right; they must demonstrate why the order affects a substantial right.” Hoke Cty. Bd. of Educ. v. State, 198 N.C.App. 274, 277–78, 679 S.E.2d 512, 516 (2009). “Admittedly the ‘substantial right’ test for appealability of interlocutory orders is more easily stated than applied. It is usually necessary to resolve the question in each case by considering the particular facts of that case and the procedural context in which the order from which appeal is sought was entered.” Waters v. Qualified Personnel, Inc., 294 N.C. 200, 208, 240 S.E.2d 338, 343 (1978).

B. Analysis

BMI contends that the trial court's interlocutory order affects a substantial right because it involves a liability insurer's duty to defend its insured. BMI contends that the issue of whether an insurer has a duty to defend the insured in an underlying action affects substantial rights that may be lost absent immediate appeal. BMI further contends that the trial court's order dismissed BMI's...