Opinion
C/A No. 1:01-2932-22
December 13, 2001
ORDER
This matter comes before the Court on the cross motions for Summary Judgment of the parties Liberty Mutual Insurance Company as subrogee of R.E. Phelon, Inc. and R.E. Phelon, Inc. (collectively "Liberty") and The Scottsdale Insurance Company ("Scottsdale"). Liberty initially brought this action to establish whether a policy of insurance, number CLS348191 (the "Policy"), Scottsdale issued to Regent Security Services, Inc. ("Regent") provided unlimited coverage for any liability Regent may incur as the result of a multiple fatality shooting at the R.E. Phelon, Inc. ("Phelon") plant near Aiken, South Carolina. Liberty contends that Scottsdale provided "unlimited coverage" to Regent for liability arising from its errors and omissions and seeks a declaration that Scottsdale be required to indemnify Regent for all sums for which it is found liable as a result of the incident. Scottsdale on the other hand contends that the policy only provides coverage in the amount of $1,000,000.00 per occurrence as stated in the policy declarations. After considering the Motions and supporting Memoranda, and considering the arguments of counsel, the Court enters this Order denying Liberty's Motion for Summary Judgment and Granting Scottsdale's Motion for Summary Judgment.
FACTUAL BACKGROUND
The underlying incident occurred on September 15, 1997 at the Phelon plant near Aiken. Regent had contracted with Phelon to provide security at the plant. Hastings Wise, a former Phelon employee, entered the Phelon facility and assaulted, killed, or injured several Phelon employees. Several lawsuits have been instituted against Regent by various Phelon employees. Liberty provided workers' compensation benefits to Phelon employees injured in the shootings, and is asserting a subrogation claim against Scottsdale.
Liberty argues that Regent affords "unlimited coverage . . . in addition to one million (dollars) available under the umbrella policy" (Plaintiffs' Memorandum of Law in Support of Motion for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment at p. 14). Liberty concedes that coverage is limited to one million dollars (plus one million dollars under the umbrella policy) by the language of the CGL Form. However, Liberty argues that the Errors and Omissions Endorsement provides unlimited coverage because it is not specifically referred to in the body of the CGL Form.
FACTS
The Policy included a section regarding the maximum limits of insurance. This section reads, in pertinent part:
SECTION III — LIMITS OF INSURANCE
1. The Limits of Insurance shown in the Declarations and the rules below fix the most we will pay regardless of the number of:
a. Insureds,
b. Claims made or "suits" brought, or
c. Persons or organizations making claims or bringing suits
The Policy also contains a section entitled: "COMMERCIAL GENERAL LIABILITY COVERAGE PART SUPPLEMENTAL DECLARATIONS" (the "Supplemental Declarations").
The Supplemental Declarations provide, in pertinent part:
LIMITS OF INSURANCE $3,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
General Aggregate (other than Products/Completed Operations) Personal and Advertising Injury Limit Each Occurrence Limit Fire Damage Limit Medical Expense Limit* * *
EXTRA FORMS AND ENDORSEMENTSCE-1 (1, 2, 3, 4, 5 6 (1/91), UTS-103g (9/92).
* * *
THIS SUPPLEMENTAL DECLARATIONS [sic] AND THE COMMERCIAL LIABILITY DECLARATIONS, TOGETHER WITH THE COMMON POLICY CONDITIONS, COVERAGE FORMS AND ENDORSEMENTS COMPLETE THE ABOVE NUMBERED POLICY.
Finally, Endorsement CE-1 (1/91) #2 ("Endorsement #2"), listed as an endorsement in the Supplemental Declarations and the endorsement at issue before the Court, provides:
1) SECTION I-COVERAGE D — ERRORS AND OMISSIONS IS ADDED:
Insuring Agreement Shall read:
We will pay on behalf of you all sums which you shall become legally obligated to pay as damages resulting from negligent acts, errors or omissions to which this insurance applies caused by an incident which occurs during the policy period, in the practice of your business.
We shall have the right and duty to defend any suit against you seeking damages because of such claims even if any of the allegations of the suit are groundless, false or fraudulent, that we deem expedient.
Endorsement #2 also lists several exclusions not at issue before the court, and then provides: "All other terms conditions, and provisions of this policy remain unchanged."
ANALYSIS
I. Summary Judgment Standard
As an initial matter, to prevail on a summary judgment motion, the moving party must demonstrate that there is no genuine issue as to any material fact, and that it is entitled to judgment as matter of law. Harleysville Mut. Ins. Co. v. Packer, 60 F.3d 1116, 1119 (4th Cir. 1995). Parties against whom summary judgment is sought cannot create a genuine issue of fact through mere speculation or the building of one inference upon another. Id. Summary judgment is a useful tool to dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). A summary judgment motion requires a district court to look beyond the pleadings and ask whether there is a genuine need for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The court must determine "whether the evidence presents a sufficient disagreement to require submission to the fact finder or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-53 (1986). If a defendant demonstrates the absence of evidence to support a claim, then plaintiff must come forward with evidence to show that there remains a genuine issue of material fact for trial. Celotex, 477 U.S. at 324-25. An issue of fact is "genuine" only if the evidence is such that a reasonable jury could return a verdict for plaintiff Anderson, 477 U.S. at 248. A "material" fact issue is one that might affect the outcome of the lawsuit under governing substantive law. Id.
II. Coverage Limits
Liberty's contention that the Policy provides "unlimited" insurance is based on two assertions. First, Liberty contends because the Policy's "Limits of Insurance" provides that the coverage limitations are limited by the Declarations AND the "rules below" (Section III of the Policy) if there is a situation that the "rules below" do not specifically address, then the limits contained in the Declarations are of no significance. (Plaintiffs' Memorandum at p. 9). Secondly, Liberty argues that because the "drafter" could have included an additional limitation clause in Endorsement #2, specifically referring to a per occurrence or aggregate limit, the Policy has been modified to remove any limits for the EO coverage. Both of these assertions are erroneous.
In a strikingly similar case, the Illinois Appellate Court held that a "laboratory endorsement" did not provide "unlimited coverage" as argued here. See Fidelity Cas. Co. of N.Y. v. Mobay Chem. Corp., 625 N.E.2d 151, 158-60 (Ill.App.Ct. 1992). Although not binding, the court finds this reasoning persuasive. There, the insured argued that a laboratory endorsement, itself silent on the limits of insurance, provided unlimited coverage. The court analyzed the laboratory endorsement in the context of an earlier version of an ISO policy and specifically addressed Section III, "Limitations of Liability." The court, analyzing the endorsement in the context of the policy's "Limitations of Liability," explained:
Clearly, the laboratory endorsement contains explicit and unambiguous language referencing coverage limits. As the laboratory endorsement itself does not contain any coverage limitations and is bereft of language providing for unlimited coverage, it is only reasonable to turn to the underlying policy and construe the endorsement with the whole of the policy and apply the coverage limitations contained therein.Id. at 158. (emphasis added). Thus, the court reversed the trial court and held that the coverage under the laboratory endorsement was in the amounts listed in the policy's declarations. Id. at 159.
Likewise, here, Endorsement #2 clearly states that all other terms of the Policy "remain unchanged." Endorsement #2 does not specifically provide coverage in any additional limits, much less "unlimited" coverage. Thus, Endorsement #2 does not grant unlimited coverage, but instead provides coverage subject to the limits stated in the Declarations.
A. General Rules of Policy Interaction
Under the substantive law of South Carolina, which this court is bound to apply, courts do not have the authority to change the contract or to interpolate into the contract a stipulation not contemplated by contract between the parties. Dean v. Am. Fire Cas. Co., 152 S.E.2d 247, 248 (S.C. 1967). A policy should not be interpreted to create an absurd result, but should be given a reasonable interpretation, consistent with the intent of the parties. Wickland v. Am. Travelers Life Ins. Co., 513 S.E.2d 657, 663 (W.Va. 1998). It is well settled that under South Carolina law the language of a policy should not be tortured to provide or extend coverage where none exists. Torrington Co. v. Aetna, 216 S.E.2d 547, 550 (S.C. 1975). See also Home Exterminating Co., Inc. v. Zurich-Am. Ins. Group, 921 F. Supp. 318, 324 (D. Md. 1996) (stating that "absurd results should be avoided"). Instead, the language of an insurance policy should be given its plain and ordinary meaning. Sloan Constr. Co., Inc. v. Cent. Nat'l Ins. Co. of Omaha, 236 S.E.2d 818, 819 (S.C. 1977); Deese v. Am. Bankers Life Assurance Co. of Fla., 208 S.E.2d 736, 737 (S.C. 1974). Finally, the meaning of a particular word or phrase is not to be determined by considering the word or phrase by itself, but by reading the policy as a whole and considering the context and subject matter of the policy. See Stewart v. State Farm Mut. Auto. Ins. Co., 533 S.E.2d 597, 601 (S.C.Ct.App. 2000); MGC Management of Charleston, Inc. v. Kinghorn Ins. Agency, 520 S.E.2d 820, 823 (S.C. 1999). See also Yarborough v. Phoenix Mut. Life Ins. Co., 225 S.E.2d 344, 348-49 (S.C. 1976).
Here, the Policy is clear and straightforward in Section III, "Limits of Insurance." The section reads: "The Limits of Insurance shown in the Declarations and the rules below [not at issue] fix the most we willpay . . . ." (emphasis added). The Supplemental Declarations specifically indicate coverage limits of $3,000,000 for "General Aggregate Liability" and $1,000,000 for "Each Occurrence." Finally, Endorsement #2, after providing E O coverage subject to certain limitations, then also provides: "All other terms, conditions, and provisions of this policy remain unchanged." (emphasis added).
The Declarations thus fix the maximum amount of coverage, and Endorsement #2 does not change that maximum amount. The fact that the "Limits of Insurance" section uses the word "AND" does not afford additional coverage beyond the limits of the Declarations. Rather the sentence, using the word "AND," means what it clearly and unambiguously states: the limitations of coverage are subject to both the limitations found in the Declarations and the "rules below." Under Liberty's construction of the Policy, if there were any scenario that the "rules below" did not address, then there would be no limit to the coverage. This is not the case under the plain reading of the Policy because the liability limits are also (AND) subject to the limits in the Declarations, in this case $1,000,000. Quite obviously, there may be any number of situations — contemplated by the ISO "drafters" or not — which the "rules below" may not address. However, the fact that the "rules below" do not address a given situation does not remove the application of the liability limits contained in the Declarations because the limit of coverage is also subject to the limits indicated there.
The principles of contract interpretation most applicable in this context are that an insurance contract should be interpreted according to its plain' ordinary, and popular meaning. Helton v. St. Paul Fire Marine Ins. Co., 332 S.E.2d 776, 777 (S.C.Ct.App. 1985). Further, the meaning of insurance policy language cannot be tortured to extend coverage that was never intended by the parties. Id. The construction of an insurance policy should not be "strained, arbitrary, unnatural, or forced, but, rather, it should be reasonable, logical, and practical, having reference to risks and purposes of the entire contract." Blake v. St. Paul Fire Marine Ins. Co., 248 S.E.2d 388, 390 (N.C.Ct.App. 1978) (citations omitted). The court declines to find an ambiguity where there is none, much less an ambiguity that would create such an absurd result as "unlimited coverage."
Although Liberty contends that Endorsement #2 could have contained an additional "simple clause" that it was subject to the same limits as the remainder of the Policy (Plaintiffs' Memorandum at 10-11), this was not necessary and would have been superfluous. As it reads, Endorsement #2 does not conflict with any language in the "Limits of Insurance" section, but rather is in harmony with that section. Where the immediate context in which words are used is not clearly indicative of the meaning intended, resort may be had to other portions of the policy, and all clauses of it are to be construed, if possible, so as to bring them into harmony. Wachovia Bank Trust Co. v. Westchester Fire Ins. Co., 172 S.E.2d 518, 522 (N.C. 1970). Further, in determining whether there is ambiguity in a policy provision, a policy must be evaluated as a whole, and language construed in harmony with plain and generally accepted meaning of words employed, unless intent of parties, as expressed in contract, indicates that alternative interpretation is intended. 2 Couch on Insurance § 22:39. The language of Endorsement #2 is sufficient to limit coverage to the amounts shown in the Declarations. Endorsement #2 clearly states: "All other terms . . . of this policy remain unchanged." Thus, the Limits of Insurance continue to be $3,000,000 general aggregate and $1,000,000 each occurrence.
B. The Terms "Occurrence" and "Incident"
Liberty makes oblique reference to the fact that the term "incident" is used in Endorsement #2 rather than the term "occurrence." (Plaintiffs' Memorandum at 9). This, however, is of no significance, because the term "incident" is synonymous with the term "occurrence." As outlined above, under long standing rules of contract interpretation, words in a contract are to be given their plain, ordinary and popular meaning. Helton 332 S.E.2d at 777. Here, "incident" is variously defined as "a definite and separate occurrence [or] event," see AMERICAN HERITAGE DICTIONARY 650 (2d ed. 1982) (emphasis added), and as "an occurrence or event." RANDOM HOUSE WEBSTER'S COLLEGE DICTIONARY 680 (1991) (emphasis added).
Several courts, although not in this specific context, have acknowledged that the terms are synonymous. See, e.g., U.S. Fidelity Guaranty Co. v. Giroux, 274 A.2d 487, 490 (Vt. 1971) (adopting definition of "occurrence" to mean "an incident which could subject [the insured] to legal liability to pay damages for bodily injury"); U.S. Fidelity Guaranty Co. v. Gable, 220 A.2d 165, 167 (Vt. 1966) (stating that ". . . we construe `occurrence,' under the coverage of the policy, to mean an incident which could subject the defendants to legal liability to pay damages for bodily injury"). See also U.S. Fidelity Guaranty Co. v. Dealers Leasing, Inc., 137 F. Supp.2d 1257, 1260 (D. Kan. 2001) (finding definitions for `occurrence' and `incident' were nearly identical). Given the ordinary meaning of "incident," the Declarations limit coverage to a million dollars "per incident."
The can be no real dispute that the words are synonymous in this context. However, even if they were not synonymous, it would not afford additional coverage under the Policy. The coverage limits are clearly defined in the "Limits of Insurance" and Declarations. Any perceived difference between these terms does not create an ambiguity in the "Limits of Insurance." Rather the limits "fix the most [Scottsdale] will pay regardless of the number of . . . insureds, claims made or `suits' brought, or persons or organizations making claims or bringing `suits.'" It does not matter whether an event is characterized as an "occurrence" or an "incident"; coverage is limited to $1,000,000 for any one of them and to $3,000,000 for as many of them as there are.
CONCLUSION
For the foregoing reasons, Plaintiffs' Motion for Summary Judgment is hereby DENIED. Further, Defendant's Motion for Summary Judgment is hereby GRANTED. In accordance with Defendant's Motion for Summary Judgment, the Court hereby enters DECLARATORY JUDGMENT as follows: Scottsdale Policy CLS348191 provides only coverage limits in the amounts listed in the Policy Declarations of $1,000,000 for the shootings that occurred on September 15, 1997 at the Phelon plant in Aiken, South Carolina.