Sloan Const. Co., Inc. v. Central Nat. Ins. Co. of Omaha

• Decision Date: 09 August 1977
• Docket Number: No. 20484,20484
• Citation: 236 S.E.2d 818,269 S.C. 183
• Court: South Carolina Supreme Court
• Parties: SLOAN CONSTRUCTION CO., INC., Respondent, v. The CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA, Appellant.

Page 818

236 S.E.2d 818

269 S.C. 183

SLOAN CONSTRUCTION CO., INC., Respondent, v. The CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA, Appellant.

No. 20484.

Supreme Court of South Carolina.

Aug. 9, 1977.

Edward W. Laney, III and Elaine H. Beckham of Turner, Padget, Graham & Laney, Columbia, for appellant.

Hoover C. Blanton of Whaley, McCutchen & Blanton, Columbia, for respondent.

NESS, Justice.

Respondent, Sloan Construction Company, was the defendant in a civil action instituted by one Larry Cole Varner in January of 1966. That action arose from a collision between a dump truck being operated by an agent of Sloan and a vehicle driven by Varner. A jury verdict for Varner was subsequently reversed by this Court on the ground that Varner was contributorily negligent. Varner v. Ballenger Paving Company, Inc. and Sloan Construction Co., Inc., 254 S.C. 120, 173 S.E.2d 789 (1970). The total amount of costs and attorneys' fees incurred in defending the Varner action was $9.318.03.

Both the appellant, the Central National Insurance Company of Omaha, and Liberty Mutual Insurance Company had a mutual obligation to defend Sloan in the Varner action. Central had issued a comprehensive liability policy to Sloan's agent, the owner of the dump truck, and Liberty had issued a similar liability policy to Sloan.

Despite timely demands made upon Central, it refused to defend Sloan in the Varner action. Liberty undertook the defense of the action and engaged the services of a law firm. Costs of defending the suit were taxed against the losing plaintiff, but execution resulted in a "nulla bona" return. The attorneys' fees and costs were paid by Sloan with proceeds of a loan pursuant to a loan receipt agreement with Liberty. The loan is repayable only in the event Sloan is successful in collecting the amount from a third party.

Sloan now seeks to recover the amount of attorneys' fees and costs, plus interest, from Central. The lower court ordered Central to reimburse Sloan for the costs of defense. We disagree and reverse.

It is stipulated that both policies contained provisions affording Sloan a defense in the Varner action. Central admittedly breached its obligation to Sloan when it refused to tender a defense upon demand. It is uniformly held that when an insurer refuses to defend and the insured is compelled to conduct his own defense, the insured may recover from the insurer, the reasonable expenses of litigation, including costs and attorneys' fees. 45 C.J.S. Insurance § 926; 7A Appelman, Insurance Law and Practice, § 4691.

Insurance policies are subject to the general rules of contract construction. Courts must enforce, not write, contracts of insurance, and their language must be given its plain, ordinary and popular meaning. First National Bank of S. C. v. U.S.F. & G. Co., 373 F.Supp. 239 (D.C. 1974); Blanton v. Nationwide Mutual Ins. Co., 247 S.C. 148 146 S.E.2d 156 (1966); 5 Corbin on Contracts, § 1037.

A liability insurance policy contains two insuring provisions of major significance: one, providing for the payment by the insurer of sums the insured shall become obligated to pay, the other providing, in substance, for the defense of any suit alleging bodily injury or property damage and seeking damages payable under the terms of the policy. The latter clause also provides, as a rule, that such a defense will be furnished even if any of the allegations of the suit are groundless, false or fraudulent.

The duty to defend is separate and distinct from the obligation to pay a judgment rendered against the insured. American Casualty Co. v. Howard,187 F.2d 322, 327 (4th Cir. 1951). Although these duties are related in the sense that the duty to defend depends on an initial or apparent potential liability to satisfy the judgment, the duty to defend exists regardless of the insurer's ultimate liability to the insured.

The duty to defend is personal to each insurer. The obligation is several and the insurer is not entitled to divide the duty nor require contribution from another absent a specific contractual right. When Sloan was sued, it had the right to look to both Liberty and Central or to either of them for protection. When Central disclaimed coverage, Sloan demanded full protection from Liberty. When Liberty undertook the defense of the Varner action, it was doing no more than it was obligated to do under the terms of its contract with Sloan. The fact that Central also had a duty to defend was irrelevant to the rights and duties existing between Liberty and Sloan by reason of their insurance contract. Central's refusal to defend Sloan did not affect Liberty's obligations to Sloan, and when Liberty undertook the defense it was acting not for Central but for its insured, Sloan.

Each insurer contracted to defend, at its own expense, any suit within the terms of its policy. Liberty's expenses in defending Sloan were incurred in the fulfillment of its own obligation to its insured.

The attorneys employed to defend the Varner suit were selected by Liberty. Both parties concede that Sloan was never legally obligated to pay the attorneys' fees, and had it not done so through the loan proceeds supplied by Liberty, Liberty alone would have been liable for the payment. It follows that Sloan sustained no damage by Central's...