STANDARD FIRE INS. v. MARINE CONTRACTING

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Docket Number

23187

Attorney(S)

Thomas J. Wills, IV, and Matthew H. Henrikson, Charleston, for third-party defendant/appellant. A. Arthur Rosenblum, and John M. Horlbeck, Charleston, for third-party plaintiffs/respondents.

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Smart Summary

Factual and Procedural Background

Tiller Construction Company, Inc. (Tiller), contracted with the Navy to perform dock construction work at the Charleston Naval Base. Tiller subcontracted with Marine Contracting and Towing Company (Marine Contracting), which in turn contracted with Jenkins Montgomery, doing business as Edisto Marine Contracting Company (Montgomery), to transfer wood pilings from a barge to Montgomery's floating crane. During this operation, the crane overturned, causing some pilings to fall into the water and damage Navy-owned underwater electrical cables. It was alleged that the damage resulted from Montgomery's negligence.

Standard Fire Insurance Company (Standard Fire), insurer of Tiller, paid the Navy over $100,000 for the damage and instituted a subrogation action against Montgomery and Marine Contracting. Montgomery was insured under a Great American Insurance Company (Great American) general liability policy at the time of the incident. Great American denied coverage based on an exclusion in the policy for property damage arising from the use of watercraft. Montgomery brought Great American in as a third-party defendant, contending the peril was covered.

The trial court denied Great American's motion for summary judgment and granted partial summary judgment to Montgomery, holding that Great American's policy provided coverage for the peril involved. Great American appealed this decision.

Legal Issues Presented

Whether the exclusion in Great American's general liability insurance policy for property damage arising from the use of watercraft applies to bar coverage for Montgomery's operation from a floating crane.
Whether the broad form endorsement and the insurer's conduct extended coverage beyond the policy's explicit exclusions, potentially through estoppel.
Whether the trial court properly granted partial summary judgment to Montgomery given the factual record and applicable legal standards for summary judgment.

Arguments of the Parties

Appellant's Arguments (Great American Insurance Company)

The insurance policy contains an exclusion precluding coverage for bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading, or unloading of any watercraft owned, operated, rented, or loaned to the insured or operated by any person employed by the insured.
Since Montgomery conducted the operation from a watercraft offshore and did not own, rent, or control the premises where the damage occurred, the exclusion applies.

Respondent's Arguments (Jenkins Montgomery, d/b/a Edisto Marine Contracting Company)

The broad form endorsement amended the policy to provide coverage for the peril involved.
The scope of risk was extended because Montgomery informed Great American (through its agent) of the desired coverage and intended use of the insurance.
Great American issued the policy with endorsements intended to cover such risks and was aware of Montgomery's operations prior to the loss.
Great American's conduct led Montgomery to reasonably believe he was fully covered for the subject peril, potentially invoking estoppel to extend coverage.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Gambrell v. Travelers Ins. Companies, 280 S.C. 69, 310 S.E.2d 814 (1983)	Insurance policies are subject to general rules of contract construction.	Used to affirm that policy terms must be construed liberally in favor of the insured and strictly against the insurer.
McCracken v. Government Employees Ins. Co., 284 S.C. 66, 325 S.E.2d 62 (1985)	Policy terms construed in favor of insured.	Supported the principle of liberal construction for coverage.
Kraft v. Hartford Ins. Companies, 279 S.C. 257, 305 S.E.2d 243 (1983)	Same as above: construction in favor of insured.	Reinforced the approach to policy interpretation.
Torrington Co. v. Aetna Cas. Sur. Co., 264 S.C. 636, 216 S.E.2d 547 (1975)	Court has no authority to alter clear insurance contracts or interpolate unstated conditions.	Supported the principle that clear contract terms must be enforced as written.
Blanton v. Nationwide Mut. Ins. Co., 247 S.C. 148, 146 S.E.2d 156 (1966)	Same as above regarding contract enforcement.	Reinforced the limits of judicial intervention in contract terms.
Allstate Ins. Co. v. Mangum, 299 S.C. 226, 383 S.E.2d 464 (App. 1989)	Same as above.	Affirmed contract interpretation principles.
Crescent Company of Spartanburg, Inc. v. Insurance Company of North America, 266 S.C. 598, 225 S.E.2d 656 (1976)	Scope of risk may be extended by estoppel if insurer misleads insured about coverage.	Used to consider whether estoppel applies to extend coverage beyond policy exclusions.
Spencer v. Republic National Life Insurance Company, 243 S.C. 317, 133 S.E.2d 826 (1963)	Same estoppel principle in insurance coverage.	Supported estoppel elements applied by the court.
Pitts v. New York Life Insurance Company, 247 S.C. 545, 148 S.E.2d 369 (1966)	Elements of estoppel: ignorance, misleading conduct, reliance, and prejudicial change of position.	Outlined criteria for estoppel invoked in coverage disputes.
LaMotte v. Punch Line of Columbia, Inc., 296 S.C. 66, 370 S.E.2d 711 (1988)	Summary judgment standard.	Applied to evaluate appropriateness of summary judgment in this case.
Tom Jenkins Realty, Inc., v. Hilton, 278 S.C. 624, 300 S.E.2d 594 (1983)	Burdens on party seeking summary judgment.	Used to affirm burden of proof on movant in summary judgment motions.
Eagle Construction Co. v. Richland Construction Company, Inc., 264 S.C. 71, 212 S.E.2d 580 (1975)	All inferences must be viewed in light most favorable to non-moving party.	Guided the court's review of the record for summary judgment.
Title Insurance Co. of Minnesota v. Christian, 267 S.C. 71, 226 S.E.2d 240 (1976)	Failure to show absence of genuine issue precludes summary judgment.	Supported reversal of summary judgment where record is insufficient.

Court's Reasoning and Analysis

The court analyzed the insurance policy's exclusion for damage arising from watercraft use, noting that Montgomery operated from a watercraft offshore and did not own or control the premises where the damage occurred, which would typically invoke the exclusion. However, Montgomery argued that the broad form endorsement and the insurer's prior knowledge and conduct extended coverage, potentially through estoppel.

The court affirmed the established principles of contract construction in insurance law, emphasizing that policy terms must be construed in favor of the insured but also that courts cannot alter clear contractual terms or add unstated conditions. The court recognized that estoppel could extend coverage if the insurer misled the insured regarding coverage, but found the record insufficient to resolve such factual questions.

Regarding the procedural posture, the court underscored the standards for summary judgment: it must be granted only when no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law. The court found the record deficient, lacking pleadings, affidavits, and key dates, and concluded that factual issues remain concerning the insurance policy's scope and Great American's knowledge and conduct.

Therefore, the court reversed the partial summary judgment granted to Montgomery, holding that summary judgment was inappropriate given the unresolved factual disputes.

Holding and Implications

The trial court's grant of partial summary judgment to Montgomery is REVERSED.

The direct effect of this decision is that the case must proceed beyond summary judgment to resolve factual disputes about the insurance coverage and the insurer's conduct. No new precedent altering insurance contract principles or estoppel doctrines was established. The decision reinforces the necessity of a sufficient factual record before summary judgment can be granted in coverage disputes involving policy exclusions and estoppel claims.

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STANDARD FIRE INSURANCE COMPANY, and Tiller Construction Company, Inc.,Plaintiffs v. MARINE CONTRACTING AND TOWING COMPANY and JenkinsMontgomery, d/b/a Edisto Marine Contracting Company, Defendants; andMARINE CONTRACTING AND TOWING COMPANY and Jenkins Montgomery, d/b/a EdistoMarine Contracting Company, Third-Party Plaintiffs/Respondents

Submitted May 16, 1989.

Decided April 2, 1990.

FINNEY, Justice:

Appellant Great American Insurance Company (Great American) appeals from the circuit court's order which granted partial summary judgment to respondent Jenkins Montgomery, d/b/a Edisto Marine Contracting Company (Montgomery). We reverse.

The original action was instituted by Tiller Construction Company, Inc. (Tiller), and its insurer, Standard Fire Insurance Company (Standard Fire), to recover compensation in excess of $100,000 paid by Standard Fire on behalf of Tiller for damage to underwater cable at the Charleston, South Carolina, Naval Base. Tiller contracted with the Navy to perform dock construction work at the naval base. Tiller subcontracted with Marine Contracting and Towing Company (Marine Contracting), who in turn contracted with Montgomery to transfer wood pilings from a barge to the deck of Montgomery's floating crane. During its operation, the crane overturned causing some of the piles to drop into the water and damage electrical cables owned by the Navy. It is alleged that the damage resulted from Montgomery's negligence.

Subsequently, Standard Fire paid the Navy and instituted a subrogation action against Montgomery and Marine Contracting. Montgomery was insured under a Great American general liability policy at the time of the incident. Great American denied coveraged based on policy provisions which allegedly exclude property damage arising from the use of watercraft. Great American was made a third-party defendant by Montgomery, who contended the peril was covered.

Motions for summary judgment were made by Great American and Montgomery. The trial court denied Great American's motion and granted Montgomery partial summary judgment, holding that Great American's policy afforded Montgomery coverage for the peril out of which this controversy arises.

Great American appeals, claiming that an exclusion in the general liability provisions of the policy protects them. This exclusion reads:

This insurance does not apply:

. . . . .

(e) to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of

(1) Any watercraft owned or operated by or rented or loaned to any insured, or

(2) Any other watercraft operated by any person in the course of his employment by an insured; but this exclusion does not apply to watercraft while ashore on premises owned by, rented to or controlled by the named insured;

. . . . .

It is undisputed that Montgomery conducted this operation from a watercraft offshore and that he did not own, rent or control the premises on which the damage occurred.

Montgomery contends the policy provided coverage for the peril involved due to the fact that (1) the broad form endorsement amended the policy to provide such coverage; and (2) the scope of risk was extended because a) Montgomery apprised Great American, through its agent, of the type coverage desired and the intended purpose of the insurance; b) Great American issued the general liability policy with endorsements intended to accomplish such purpose; and c) prior to the loss, Great American was aware of the nature and scope of its insured's operation and led Montgomery to believe that he was fully covered for the subject peril.

Insurance policies are subject to general rules of contract construction. Gambrell v. Travelers Ins. Companies, 280 S.C. 69, 310 S.E.2d 814 (1983). Terms of an insurance policy must be construed liberally in favor of the insured and strictly against the insurer. McCracken v. Government Employees Ins. Co., 284 S.C. 66, 325 S.E.2d 62 (1985); Kraft v. Hartford Ins. Companies, 279 S.C. 257, 305 S.E.2d 243 (1983). Moreover, if the intention of the parties is clear, courts have no authority to change insurance contracts in any particular or to interpolate a condition or stipulation not contemplated either by the law or by the contract between the parties. See Torrington Co. v. Aetna Cas. Sur. Co., 264 S.C. 636, 216 S.E.2d 547 (1975); Blanton v. Nationwide Mut. Ins. Co., 247 S.C. 148, 146 S.E.2d 156 (1966); Allstate Ins. Co. v. Mangum, 299 S.C. 226, 383 S.E.2d 464 (App. 1989).

Nevertheless, 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. See Crescent Company of Spartanburg, Inc. v. Insurance Company of North America, 266 S.C. 598, 225 S.E.2d 656 (1976); Spencer v. Republic National Life Insurance Company, 243 S.C. 317, 133 S.E.2d 826 (1963); Pitts v. New York Life Insurance Company, 247 S.C. 545, 148 S.E.2d 369 (1966). The essential elements of estoppel are: (1) ignorance of the party invoking it of the truth as to the facts in question; (2) representations or conduct of the party estopped which misled; (3) reliance upon such representation or conduct; and (4) prejudicial change of position as a result of such reliance. Pitts v. New York Life Insurance Company, supra, 247 S.C. at 552, 148 S.E.2d at 371.

A motion for summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See S.C.R.C.P. 56(c) (1989). LaMotte v. Punch Line of Columbia, Inc., 296 S.C. 66, 370 S.E.2d 711 (1988). Crescent Company of Spartanburg, Inc. v. Insurance Company of North America, supra.

The grant of summary judgment is appropriate only if it is clear that no genuine issue of material fact exists, that inquiry into the facts is not desirable to clarify the application of the law, and that the movant is entitled to judgment as a matter of law.

A party seeking summary judgment has the burden of clearly establishing by the record properly before the Court the absence of a triable issue of fact. See Tom Jenkins Realty, Inc., v. Hilton, 278 S.C. 624, 300 S.E.2d 594 (1983). All inferences from facts in the record must be viewed in the light most favorable to the party opposing the motion for summary judgment. Eagle Construction Co. v. Richland Construction Company, Inc., 264 S.C. 71, 212 S.E.2d 580 (1975). A party who fails to show the absence of a genuine issue of material fact is not entitled to summary judgment even though his adversary does not come forward with opposing materials. Title Insurance Co. of Minnesota v. Christian, 267 S.C. 71, 226 S.E.2d 240 (1976).

It is our opinion that the record in this case is insufficient to support partial summary judgment for Montgomery. Not only is the record devoid of pleadings and affidavits, but significant dates chronicling this controversy have been omitted. We find that there are questions of fact relating to the insurance policy as well as the extent and timeliness of Great American's knowledge of Montgomery's operation which preclude summary judgment.

The judgment of the trial court is reversed.

Reversed.

GREGORY, C.J., and HARWELL, CHANDLER and TOAL, JJ., concur.