Opinion
2:22-cv-03504-RMG
10-16-2023
USAA Casualty Insurance Company, Plaintiff, v. Mark Gordon and Christina Jones, Defendants.
ORDER AND OPINION
RICHARD MARK GERGEL, UNITED STATES DISTRICT JUDGE
This matter is before the Court on Plaintiff's Motion for Summary Judgment. (Dkt. No. 34). Defendant Gordon and Defendant Jones responded in opposition separately (Dkt. No. 36, 38), and Plaintiff replied (Dkt. No. 40). Defendant Jones also filed a sur-reply (Dkt. No. 43). And Plaintiff filed a sur-sur-reply. (Dkt. No. 45-1). For the reasons set forth below, the Court grants-in-part and denies-in-part Plaintiff's motion.
I. Background
This coverage dispute arises from a golf cart accident that occurred on August 20, 2022. (Dkt. No. 1, ¶¶ 7-9). Defendant Christina Jones was a passenger in the golf cart that Defendant Mark Gordon owned and was operating at the time of the accident. (Id., ¶¶ 7-10). Defendant Jones was injured as a result of the accident. (Id., ¶ 9).
Gordon has continuously held a motor vehicle insurance policy with Plaintiff USAA since before he purchased his golf cart in 2018. (Dkt. No. 14, ¶¶ 39-42). Defendant Jones requests payment for her injuries sustained in the accident through Plaintiff's liability coverage of Defendant Gordon. (Dkt. No. 1, ¶¶ 27, 31). Plaintiff has refused to make any payment under the policy to Defendant Jones and has denied coverage to Defendant Gordon. (Id., ¶ 32).
The Court has already determined that the insurance policy at issue excludes coverage for the accident. (Dkt. No. 29 at 7). What remains in the case are Defendants' equitable affirmative defenses of waiver, estoppel, unclean hands, and laches and Defendant Gordon's bad faith, negligent misrepresentation, negligent procurement, and contract reformation counterclaims.
Plaintiff now brings a motion for Summary Judgment seeking judgment on Defendant Gordon's counterclaims and both Defendants' defenses. (Dkt. No. 34). The motion is now ripe for the Court's review.
II. Standard
Summary judgment is appropriate if a party “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). A dispute is “genuine” if the evidence offered is such that a reasonable jury might return a verdict for the non-movant. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is “material” if proof of its existence or non-existence would affect disposition of the case under applicable law. See id. Therefore, summary judgment should be granted “only when it is clear that there is no dispute concerning either the facts of the controversy or the inferences to be drawn from those facts.” Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987).
“In determining whether a genuine issue has been raised, the court must construe all inferences and ambiguities in favor of the non-moving party.” HealthSouth Rehab. Hosp. v. Am. Nat'l Red Cross, 101 F.3d 1005, 1008 (4th Cir. 1996). The movant bears the initial burden of demonstrating that there is no genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has made this threshold demonstration, the non-moving party, to survive the motion for summary judgment must demonstrate that specific, material facts exist that give rise to a genuine issue. See id. at 324, 106 S.Ct. 2548. Under this standard, “[c]onclusory or speculative allegations do not suffice, nor does a ‘mere scintilla of evidence'” in support of the non-moving party's case. Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir. 2002) (quoting Phillips v. CSX Transp., Inc., 190 F.3d 285, 287 (4th Cir. 1999)). Moreover, the non-movant's proof must meet “the substantive evidentiary standard of proof that would apply at a trial on the merits.” Mitchell v. Data Gen. Corp., 12 F.3d 1310, 1316 (4th Cir. 1993).
III. Discussion
A key issue in this case is whether Defendant Gordon's wife, Nicole Gordon, called Plaintiff prior to the accident to confirm that their policy covered any injury claims arising from the use of the golf cart. (Dkt. Nos. 34 at 4-8, 11-13; 36 at 6-10; 38 at 3-6; 40 at 1-7; 43 at 1; 45-1 at 1). Defendants argue that the pre-accident call did occur in the Summer of 2018 and that Plaintiff made representations that Defendant Gordon maintained coverage for the use of his golf cart. Plaintiff argues that the call never occurred.
Defendants support their argument with testimony from Ms. Gordon that she remembers calling Plaintiff shortly after they purchased the golf cart in May or June of 2018 and asking Plaintiff about coverage. Ms. Gordon testified that she was advised that Plaintiff would cover use of the golf cart. Additionally, Defendants offer evidence of a July 2018 call from Princeton Mortgage, where Ms. Gordon worked in 2018, to USAA's main number. Defendants also argue that all calls are not captured by Plaintiff's log system because, based on testimony of Plaintiff's 30(b)(6) witness, a USAA representative can field and answer certain questions without accessing the insured's profile. Additionally, Defendants argue that Plaintiff instructs their representatives to state that there is coverage for golf cart claims when asked by an insured, which in the Defendants view is corroborating evidence of Ms. Gordon's version of events. Defendants also argue that a post-accident call on August 30, 2022 regarding coverage confirms Nicole Gordon's version of events because a USAA representative indicated that the golf cart accident would fall under the Gordon's liability coverage.
To support its position, Plaintiff relies on their own internal logs and the cell phone records for the Gordons. Specifically, Plaintiff argues that the none of the 174 unique numbers that Ms. Gordon called in May and June of 2018 are associated with USAA. Plaintiff claims it verified this fact through a third-party vendor and by manually calling and internet searching the numbers. Plaintiff also argues that its log system, which automatically captures every time that a USAA employee accesses a member's policy profile, does not indicate that a call was made regarding Defendant Gordon's policy in May or June of 2018. Additionally, Plaintiff argues that the evidence of the call to USAA from Ms. Gordon's workplace is inconsistent with Ms. Gordon's testimony and thus unreliable. Plaintiff points out that Ms. Gordon testified to calling in May or June of 2018 before registering the golf cart in late June of that year and that the call from Ms. Gordon's workplace, which has multiple employees, took place in July of 2018.
The Court finds that whether the pre-accident call occurred is an issue of material fact for the factfinder to decide. To resolve the issue, the factfinder will have to make various credibility determinations. In light of this finding, the Court will now analyze each of Defendants' defenses and counterclaims.
A. Waiver
Defendants claim that Plaintiff waived its ability to decline a claim for the golf cart accident by making repeated representations of coverage after the accident on an August 30, 2022 call between a USAA representative and Ms. Gordon. On the call, Ms. Gordon informed the representative that Defendant Jones was injured when she fell off the back of the golf cart and inquired about coverage. (Dkt. No. 34-12 at 2:7-5:7). The representative told Ms. Gordon that she was “more than covered” because she has “a million dollars' worth of bodily injury” coverage. (Id.)
Waiver is the voluntary and intentional relinquishment of a known right. Janasik v. Fairway Oaks Villas, 307 S.C. 339, 344, 415 S.E.2d 384, 387 (1992). “Waiver is an intentional relinquishment of a known right and may be implied from circumstances indicating an intent to waive.” Bonnette v. State, 277 S.C. 17, 18, 282 S.E.2d 597, 598 (1981). Acts that are inconsistent with the continued assertion of a right may also give rise to a waiver. Bonnette, 282 S.E.2d at 598.
South Carolina courts, however, have generally disallowed waiver in insurance policy disputes. Campbell, Inc. v. Northern Ins. Co. of New York, 337 F.Supp.2d 764, 770 (D.S.C. 2004); see also Laidlaw Envtl. Servs. (TOC), Inc. v. Aetna Cas. & Sur. Co., 338 S.C. 43, 53, 524 S.E.2d 847, 852 (S.C. Ct. App. 1999) (“Waiver cannot create coverage and cannot bring into existence something not covered in the policy.”).
Here, the communication from the USAA representative does not rise to the level of a voluntary or intentional relinquishment of Plaintiff's right to deny coverage. The Court does not find this communication to be one in which it would be proper to set aside the general rule that disallows wavier in insurance policy disputes. Accordingly, Defendants' waiver defense fails as a matter of law and Plaintiff's motion for summary judgment is granted as to this defense.
B. Estoppel
Under South Carolina law, the general rule is that estoppel cannot be used to extend or create coverage. E.g, First Fin. Ins. Co. v. Brumbaugh, 553 Fed.Appx. 282, 285 (4th Cir. 2014) (citing Pitts v. N.Y. Life Ins. Co., 148 S.E.2d 369, 371-72 (S.C. 1966)); Canopius U.S. Ins., Inc. v. Keefe, No. 4:12-CV-3316-RBH, 2014 WL 587846, at *4 (D.S.C. Feb. 14, 2014); Campbell, Inc. v. N. Ins. Co. of New York, 337 F.Supp.2d 764, 769 (D.S.C. 2004). The South Carolina Supreme Court, however, has recognized exceptions to this general rule. See, e.g., Jost v. Equitable Life Assurance Soc'y of the U.S., 248 S.E.2d 778, 780 (S.C. 1978) (applying estoppel where the insurer knew coverage had expired but nevertheless demanded and collected premium payments from the insured). Under the exception relied on by Defendants, “the scope of risk under an insurance policy may be extended by estoppel if the insurer has misled the insured into believing the particular risk is within the coverage.” Standard Fire Ins. Co. v. Marine Contracting and Towing Co., et al., 392 S.E.2d 460, 462 (1990).
Under South Carolina law, “[t]he party asserting estoppel must demonstrate ‘(1) lack of knowledge, and the means of knowledge, of the truth as to the facts in question; (2) reliance upon the conduct of the party estopped; and (3) a prejudicial change of position in reliance on the conduct of the party being estopped.”' Brumbaugh, 553 Fed.Appx. at 285 (quoting Strickland v. Strickland, 650 S.E.2d 465, 470 (2007)).
Defendants argue that Plaintiff's representations that claims concerning the golf cart would be covered during the 2018 call with Ms. Gordon support their estoppel defense. Plaintiff argues that the call never occurred. Because the Court found that a genuine issue of material fact exists regarding whether the call occurred, the Court denies summary judgment on Defendants estoppel defense based on the alleged 2018 conversation between Ms. Gordon and Plaintiff.
Defendants further argues that post-accident misrepresentations on the August 30, 2022 call support their estoppel defense. Plaintiff argues that the misleading statements to an insured must occur before the loss occurs. In order to rely upon the conduct of the insurer, the conduct must have taken place before the loss occurs. See, e.g., Spencer v. Republic Nat. Life Ins. Co., 243 S.C. 317, 323-34 (S.C. 1963) (finding estoppel based on insurer's proposal for coverage, submitted before the policy came into effect, that state that all employees would be covered as of the effective date of the policy); Kelly v. South Carolina Farm Bureau Mut. Ins. Co., 316 S.C. 319 (S.C. Ct. App. 1994) (finding estoppel based on pre-loss representation by insurance agent). The Court, therefore, agrees with Plaintiff regarding the August 30, 2022 call and grants summary judgment on Defendants' estoppel defense based on post-accident misrepresentations.
C. Unclean Hands
Plaintiff argues that the unclean hands defense does not apply to declaratory judgment actions relating to obligations under insurance policies. (Dkt. No. 34 23-25). Defendants did not respond to that argument.
“The failure of a party to address an issue raised in summary judgment may be considered a waiver or abandonment of the relevant cause of action.” Jones v. Danek Medical, Inc., No. 963323, 1999 WL 1133272 at *3 (D.S.C. Oct. 12, 1999).
The Court finds that Defendants abandoned their unclean hands defense and grants Plaintiff's motion for summary judgment on the defense.
D. Laches
Laches is the negligent failure to act for an unreasonable period of time. Gibbs v. Kimbrell, 311 S.C. 261, 428 S.E.2d 725 (S.C. Ct. App. 1993). Under the doctrine of laches, if a party, knowing his rights, does not seasonably assert them, but by unreasonable delay suffers his adversary to incur expenses or otherwise detrimentally change his position, then equity will ordinarily refuse to enforce these rights. Id. 428 S.E.2d at 730. Delay alone in the assertion of a right does not constitute laches. Id. The party asserting laches must also satisfactorily show negligence, the opportunity to have acted sooner, and material prejudice before the bar in equity is complete. Wallace v. Timmons, 232 S.C. 311, 101 S.E.2d 844 (1958); Bell v. Mackey, 191 S.C. 105, 3 S.E.2d 816 (1939). As with waiver, laches arises upon the failure to assert a known right under circumstances indicating that the lached party has abandoned or surrendered the right. See Ex parte Stokes, 256 S.C. 260, 182 S.E.2d 306 (1971); Byars v. Cherokee County, 237 S.C. 548, 118 S.E.2d 324 (1961). The lached party must have had actual knowledge or inquiry notice of the facts forming the basis of its claim, and its failure to assert its right is irrelevant until there is a reason or situation that demands assertion. Ex parte Stokes, 256 S.C. 260, 182 S.E.2d 306; Mackey, 191 S.C. 105, 3 S.E.2d 816. The burden of proof is upon the person claiming laches. Id.
The parties dispute the applicable laches period. Defendants argue that the laches period is four years between the alleged 2018 phone call and the denial of coverage, and Plaintiff argues that the laches period is 20 days between the 2022 post-accident phone call and the denial of coverage.
The Court finds that four-year period between the 2018 phone call and the denial of coverage is not subject to the laches defense. Plaintiff had no reason to assert its right to deny coverage regarding the golf cart before an accident involving the golf cart occurred. It was not unreasonable for Plaintiff not to assert the right to deny golf cart coverage before an accident occurred. Plaintiff was not failing to act on any obligation during that time period.
The Court also finds that the 20-day delay between the 2022 post-accident phone call and the denial of coverage is not unreasonable. Plaintiff outlines in its motion, supported with exhibits, the activity it took during the 20-day period, which includes investigating the claim and corresponding with Defendant Jones's attorney. (Dkt. No. 34 at 22-23). Accordingly, Plaintiff was not neglecting its right deny coverage.
The Court, therefore, grants Plaintiff's summary judgment motion as to Defendants' laches defense.
E. Bad Faith
“The elements of a bad faith refusal to pay action are: (1) the existence of a contract of insurance between the parties; (2) refusal by the insurer to pay benefits due under the contract; (3) resulting from the insurer's bad faith or unreasonable action; and (4) causing damage to the insured.” Snyder v. State Farm Mut. Auto. Ins. Co., 586 F.Supp.2d 453, 457 (D.S.C. Feb. 22, 2008).
If an insurance policy excludes coverage for the claimed loss, the insured “cannot maintain [a] cause of action for bad faith refusal to pay because no payment was due under the policy.” Calyton v. Nationwide Mut. Ins. Co., 360 F.Supp.3d 514, 521 (D.S.C. Jun. 1, 2017). Courts have reasoned that, in such a scenario, insurance companies have a reasonable basis for denying a claim. Moss v. Minnesota Life Ins. Co., No. 15-cv-1679, 2017 WL 5635449, at *8 (D.S.C. Mar. 29, 2017).
Here, injuries arising from use of the golf cart are unambiguously excluded from coverage. (Dkt. No. 29 at 7). Accordingly, Defendants cannot maintain their cause of action for bad faith refusal to pay. The Court grants Plaintiff's summary judgment as to Defendants bad faith claim.
F. Negligent Misrepresentation
A duty to exercise reasonable care in the giving of information may arise when the defendant has a pecuniary interest in the transaction. Gilliland v. Elmwood Properties, 301 S.C. 295, 391 S.E.2d 577 (1990). To state a claim for negligent misrepresentation, the plaintiff must allege: (1) the defendant made a false representation to the plaintiff; (2) the defendant had a pecuniary interest in making the statement; (3) the defendant owed a duty of care to see that he communicated truthful information to the plaintiff; (4) the defendant breached that duty by failing to exercise due care; (5) the plaintiff justifiably relied on the representation; and (6) the plaintiff suffered a pecuniary loss as the proximate result of his reliance upon the representation. Fields v. The Melrose Limited Partnership, 312 S.C. 102, 439 S.E.2d 283, 285 (Ct.App.1993); AMA Management Corp. v. Strasburger, 309 S.C. 213, 420 S.E.2d 868 (Ct.App.1992).
Like Defendants' arguments on their estoppel defense, Defendants argue that Plaintiff's representations that claims concerning the golf cart would be covered during the 2018 call with Ms. Gordon support their negligent misrepresentation claim. Plaintiff argues that the call never occurred. The Court, above, found that a genuine issue of material fact exists regarding whether the call occurred. Similarly, whether Plaintiff justifiably relied on the alleged misrepresentation is a disputed fact for the factfinder to decide. The Court, therefore, denies summary judgment on Defendants negligent misrepresentation claim.
G. Negligent Procurement
Plaintiffs argue that Defendants negligent procurement claim fails as a matter of law because, inter alia, there is no evidence that the Gordon's made a clear request for coverage for the golf cart. Defendants did not respond to Plaintiff's arguments.
Because Defendants did not respond to Plaintiffs arguments regarding Defendants negligent procurement claim, the Court finds that Defendants abandoned this claim and grants Plaintiffs motion for summary judgment.
H. Contract Reformation
“A court of equity may reform a contract” for unilateral mistake where that mistake was either (1) “induced by the fraud, deceit, misrepresentation, concealment or imposition in any form of the party [that opposes] reformation without negligence on the part of the party [seeking reformation]”; or (2) “where the mistake is accompanied by very strong and extraordinary circumstances showing imbecility or something which would make it a great wrong to enforce the agreement.” Crosby v. Protective Life Ins. Co., 359 S.E.2d 298, 301 (S.C. Ct. App. 1987). These circumstances are not present where the claimed “mistake” would have been easily resolved by reading the written instrument. Id. (finding no grounds for reformation in part because the insured had not read the policy when he received it and “had no trouble ascertaining the meaning of the relevant term when he read it after the claim arose”).
Here, as in Crosby, Plaintiffs do not and cannot argue reading the policy would not have alerted them to the exclusion. It follows that they cannot seek reformation, whether under their contract or any other claim. Accordingly, The Court grants Plaintiff's motion for summary judgment on Defendants contract reformation claim.
IV. Conclusion
For the reasons set forth above, Plaintiff's Motion for Summary Judgment (Dkt. No. 34) is GRANTED-IN-PART and DENIED-IN-PART. Defendants' estoppel defense and negligent misrepresentation counterclaim remain. The Court will conduct a status conference in the near future to set this case for trial.