R. A. Earnhardt Textile Machinery Division, Inc. v. South Carolina Ins. Co.

• Decision Date: 22 September 1981
• Docket Number: No. 21571,21571
• Citation: 277 S.C. 88,282 S.E.2d 856
• Court: South Carolina Supreme Court
• Parties: R. A. EARNHARDT TEXTILE MACHINERY DIVISION, INC., Appellant, v. SOUTH CAROLINA INSURANCE COMPANY, Respondent.

Page 856

282 S.E.2d 856

277 S.C. 88

R. A. EARNHARDT TEXTILE MACHINERY DIVISION, INC., Appellant, v. SOUTH CAROLINA INSURANCE COMPANY, Respondent.

No. 21571.

Supreme Court of South Carolina.

Sept. 22, 1981.

William V. Cummings, Spartanburg, for appellant.

James W. Hudgens, Spartanburg, for respondent.

PER CURIAM:

This appeal is from an order relieving respondent insurance company from liability under an insurance policy issued to appellant. We affirm.

Appellant sold a piece of textile machinery to a Honduras corporation and made certain representations as to the machine's condition. In July of 1978, the Honduras company commenced a lawsuit against appellant (the "Federal action") in the United States District Court in this State alleging that the equipment failed to conform to the agreement of the parties. In April of 1980, appellant first notified respondent of the Federal action. When respondent declined to undertake appellant's defense, appellant sought a declaratory judgment from the court below. On cross motions for summary judgment, the lower court held that the Federal complaint did not allege an "occurrence" or "property damage" as those terms are defined in the policy. The lower court also held that the policy specifically excluded coverage.

The subject policy contains the following provisions:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false, or fraudulent....

* * * "Property damage" means (1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period....

* * *

"Occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured....

We have held that, in general, the obligation of a liability insurance company under the policy provisions requiring it to defend an action is to be determined by the allegations of the complaint in such action. If the alleged facts in the complaint fail to bring the case within the policy coverage, the insurer is free of the obligation to defend. Stroup Sheet Metal Works, Inc. v. Aetna Casualty & Surety Co., 268 S.C. 203, 232 S.E.2d 885 (1977).

Three causes of action are alleged in the Federal action. The first is for breach of contract, the second for fraud, and the third for violation of the South Carolina Unfair Trade Practices Act, S.C.Code § 39-5-10, et seq. (1976).

In the contract cause of action, the Honduras company alleges that it contracted with appellant for the purchase of a fully reconditioned...