A Federal District Court judge in South Carolina has determined that material questions remain for trial in a complex insurance matter tied to an underlying construction defect class action against Dan Ryan Builders, LLC.
Dan Ryan Builders West Virginia, LLC et al. v. Main Street America Assurance Co., No. 2:18-cv-00589-SCN (D.S.C.), arose from a dispute between Dan Ryan Builders and a class of homeowners living in allegedly damaged houses in a South Carolina subdivision known as Foxbank. The construction company hired several subcontractors to construct Foxbank, and the subcontractors’ insurers are the defendants ultimately sued to defend and indemnify Dan Ryan Builders in the underlying class action. One such subcontractor was Firm Foundations, which was insured by The Cincinnati Insurance Company. Dan Ryan Builders moved for summary judgment for its indemnity, bad faith, and promissory estoppel claims against Cincinnati Insurance, and the insurer cross-motioned.
The dispositive issue in Cincinnati Insurance’s cross motion for summary judgment motion was whether Dan Ryan Builders was an “additional insured” under Firm Foundations’ Cincinnati Insurance policy. The court held that the contractor’s claim that it was an additional insured “may be viable,” and dismissed Cincinnati Insurance’s motion.
According to the court, per Firm Foundations’ policy with Cincinnati Insurance, Dan Ryan Builders can establish that it was an additional insured by proving that there was a written contract or an oral agreement between Dan Ryan Builders and Firm Foundations, through which Firm Foundations validly added “an additional insured to the Cincinnati policy.” Dan Ryan Builders also must show that it was issued “a certificate of insurance espousing additional insurance coverage.” Although the parties did not dispute that Dan Ryan Builders had been issued four insurance certificates from Firm Foundations’ insurance agent, there was an outstanding question of fact for trial regarding the existence of an adequate contract or agreement between Dan Ryan Builders and Firm Foundations.
Dan Ryan Builders’ bad faith claim was dismissed from the suit because, according to the court, Cincinnati Insurance had reasonable grounds to refuse to defend Dan Ryan Builders in the construction defect class action suit. Specifically, the court found that Dan Ryan Builders had failed to produce a written contract or sufficient evidence of an oral agreement with Firm Foundations, which is required to establish that it was entitled to coverage as an additional insured. Because Cincinnati Insurance acted reasonably in denying coverage, the court held that it could not have acted in bad faith as a matter of law.
The court further dismissed Dan Ryan Builders’ promissory estoppel claim, which was based on the contractor receiving four certificates of insurance from Firm Foundation’s insurance agent. Noting that “courts outside of South Carolina are split regarding whether an insurer can be estopped from denying coverage to a certificate holder where the certificate of insurance purports to extend additional insured coverage,” the Court found that Ryan Builders’ reliance on the certificates was unreasonable because the certificates “expressly included a disclaimer that they are for information purposes only and do not amend the respective policies of insurance.”
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