Houston Casualty Company v. St. Paul Fire & Marine Insurance Company

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-1835
HOUSTON CASUALTY COMPANY,
Plaintiff - Appellant,
v.
ST. PAUL FIRE & MARINE INSURANCE COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the District of
South Carolina, at Columbia. Cameron McGowan Currie, District
Judge. (3:09-cv-00926-CMC)
Argued: October 25, 2011 Decided: December 6, 2011
Before DAVIS, KEENAN, and DIAZ, Circuit Judges.
Affirmed by unpublished opinion. Judge Keenan wrote the
opinion, in which Judge Davis and Judge Diaz joined.
ARGUED: George Trenholm Walker, PRATT-THOMAS WALKER, PA,
Charleston, South Carolina, for Appellant. William Pearce
Davis, BAKER, RAVENEL & BENDER, LLP, Columbia, South Carolina,
for Appellee. ON BRIEF: Clayton B. McCullough, Daniel S.
McQueeney, Jr., PRATT-THOMAS WALKER, PA, Charleston, South
Carolina, for Appellant. Jenny A. Draffin, BAKER, RAVENEL &
BENDER, LLP, Columbia, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.

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BARBARA MILANO KEENAN, Circuit Judge:
In this insurance coverage dispute, we consider whether
claims in an underlying personal injury suit brought against
McGriff, Seibels & Williams, Inc. (McGriff), an insurance
broker, were covered under policies issued to McGriff by St.
Paul Fire & Marine Insurance Company (St. Paul). Contending
that the claims were excluded from coverage, St. Paul refused to
participate in McGriff’s defense or to contribute to a final
settlement of the claims. Thereafter, Houston Casualty Company
(Houston), McGriff’s professional liability carrier, filed the
present suit against St. Paul, claiming that St. Paul improperly
denied coverage and seeking contribution.
After the parties filed cross-motions for summary judgment,
the district court denied Houston’s motion and granted St.
Paul’s motion. We affirm the district court’s judgment.
I.
In 2003, Manuel Salazar suffered catastrophic injuries
while working on the Lake Murray Backup Dam Project in South
Carolina (the Project). Salazar filed an action against South
Carolina Electric & Gas Company (South Carolina Electric), the
owner of the power lines that caused his injuries, and against
McGriff, the insurance broker for the Project, among other
defendants. Only Salazar’s claims against McGriff are relevant

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to the present dispute between Houston, McGriff’s professional
liability carrier, and St. Paul, which had issued McGriff a
commercial general liability policy and related umbrella excess
liability policy (collectively, the St. Paul policies). Salazar
alleged that in addition to providing insurance brokerage
services for the Project, McGriff was responsible for performing
inspections at the work site to ensure that it was reasonably
safe. Salazar further alleged that McGriff failed to perform
such inspections.
The evidence in the record established that McGriff
undertook certain safety-related obligations with regard to the
Project. McGriff had procured insurance coverage for the
Project in the form of an “Owner-Controlled Insurance Program”
(OCIP), and, as part of the program, had provided a document
entitled “Manual of Insurance Procedures” (OCIP Manual) to South
Carolina Electric and to all contractors working at the Project
site.
The OCIP Manual provided that the “Owner’s Safety
Representative, in conjunction with GENERAL CONTRACTOR and
[McGriff], will furnish safety posters, loss and inspection
reports and provide overall supervision of the Project Safety
effort.” Under a heading entitled “Project Safety (Loss
Control) Program,” the OCIP Manual also stated that: “A Project
Safety Program has been established by the General Contractor to

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conform with industry standards, and to meet the requirements of
all Local, State, and Federal standards, and will be supervised
and reviewed by the Owner’s Safety Representative and
[McGriff].”
Houston, McGriff’s professional liability carrier, provided
a defense to McGriff in the suit brought by Salazar. When
McGriff sought St. Paul’s participation in the defense, St. Paul
declined on the ground that Salazar’s claims were not covered
under the St. Paul policies. The defendants in the personal
injury action ultimately agreed to settle Salazar’s claims for
$20 million, and McGriff’s insurers, including Houston,
contributed McGriff’s share of $5 million.
Houston later filed the present action in a South Carolina
state court, alleging that based on the coverage provided by the
St. Paul policies, St. Paul had a duty to defend McGriff and to
contribute to the settlement. Thereafter, St. Paul removed the
suit to federal court, and the parties filed cross-motions for
summary judgment. After the district court ruled on the
parties’ motions and awarded judgment in favor of St. Paul,
Houston timely filed a notice of appeal.
II.
We review a district court’s order granting summary
judgment de novo. Providence Square Assocs., L.L.C. v. G.D.F.,

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Inc., 211 F.3d 846, 850 (4th Cir. 2000). Summary judgment is
appropriate when there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law.
See Fed. R. Civ. P. 56(a).
Under South Carolina law,1
When an insurance policy contains ambiguous language, such
language is strictly construed against the insurer. Am. Credit
of Sumter, Inc. v. Nationwide Mut. Ins. Co., 663 S.E.2d 492, 495
(S.C. 2008). Likewise, policy exclusions are construed “most
strongly” against the insurer. Id. However, when exclusionary
language in a policy is stated unambiguously, insurers may
thereby limit their liability and impose conditions on their
insurance policies are subject to
general rules of contract construction. Century Indem. Co. v.
Golden Hills Builders, Inc., 561 S.E.2d 355, 358 (S.C. 2002).
Courts are required to interpret the language of an insurance
policy according to its “plain, ordinary, and popular meaning.”
M & M Corp. of S.C. v. Auto-Owners Ins. Co., 701 S.E.2d 33, 35
(S.C. 2010). When the language of an insurance policy is
“unambiguous, clear, and explicit,” courts have the duty to
apply the policy terms as stated. B.L.G. Enters., Inc. v. First
Fin. Ins. Co., 514 S.E.2d 327, 330 (S.C. 1999).
1 The parties do not dispute that South Carolina law governs
the present issue regarding whether St. Paul had a duty to
defend McGriff in the action brought by Salazar.

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obligations, provided that the policy terms do not contravene
either a statute or public policy. B.L.G. Enters., 514 S.E.2d
at 330. Therefore, if the allegations of liability against an
insured unambiguously fall within a policy exclusion, the
insurer does not have a duty to defend or to contribute to the
settlement of the claim. See id.
Questions regarding coverage and an insurer’s duty to
defend a claim brought against its insured are determined based
upon the allegations in the plaintiff’s complaint. City of
Hartsville v. S.C. Mun. Ins. & Risk Fin. Fund, 677 S.E.2d 574,
578 (S.C. 2009). However, an insurer’s duty to defend is not
“strictly controlled by the allegations” in the complaint, and
“may also be determined by facts outside of the complaint that
are known by the insurer.” USAA Prop. & Cas. Ins. Co. v. Clegg,
661 S.E.2d 791, 798 (S.C. 2008).
III.
We consider whether Salazar’s claims were excluded from
coverage under the St. Paul policies because they fell within
the endorsement entitled “Insurance and Related Work.” This
endorsement provided, in relevant part:
Insurance and related work. We won’t cover
injury or damage or medical expenses for
which the protected person may be held
liable because of:

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• any obligation assumed by any protected
person in connection with an insurance
contract or treaty; [or]
• any failure to carry out, or improper
carrying out of, any contractual or
other duty or obligation in connection
with an insurance contract or treaty.
(Emphasis added.)
Houston argues that the district court erred in concluding
that Salazar’s allegations against McGriff were based on duties
that arose “in connection with” an insurance contract.
According to Houston, McGriff’s alleged duty to inspect and
identify safety problems arose independently of any insurance
contract. Thus, Houston argues that Salazar’s claims against
McGriff were not subject to the Insurance and Related Work
endorsement. Alternatively, Houston asserts that this coverage
issue involved disputed issues of material fact. We disagree
with Houston’s arguments.
The allegations raised in Salazar’s complaint fell within
the plain language of this policy exclusion. In an introductory
paragraph in his complaint, Salazar identified McGriff as “the
insurance broker for [South Carolina Electric’s] Lake Murray
Backup Dam project,” and alleged that McGriff “had undertaken a
duty to inspect the facility to ensure a reasonably safe
environment in which to perform the construction work.”

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In his negligence claim against McGriff, Salazar alleged
that McGriff “undertook a duty to inspect the facility on a
regular basis, and to identify and correct any potential safety
problems” on the construction site, but was negligent by failing
to do so. In his breach of contract claim against McGriff,
Salazar similarly alleged that McGriff “contracted with [South
Carolina Electric] to inspect the facility on a regular basis
and to identify for correction any potential safety problems,”
and that McGriff breached this contractual obligation. The
plain language of these two claims, when considered in
conjunction with the introductory paragraph describing McGriff’s
role as insurance broker for the Project, concerns obligations
that McGriff assumed “in connection with” an insurance contract.
Houston argues, nevertheless, that St. Paul was required to
defend McGriff against Salazar’s claims, because his complaint
does not indicate that either cause of action against McGriff
depended upon the existence of an insurance contract. According
to Houston, the negligence claim was based upon a common law
duty arising from a voluntary undertaking, while the breach of
contract claim did not refer specifically to an insurance
contract.
We find no merit in this argument. The plain language of
the endorsement excludes from coverage claims arising from “any
failure to carry out, or improper carrying out of, any

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contractual or other duty or obligation in connection with an
insurance contract.” (Emphasis added). Thus, Salazar’s
contract claims against McGriff would be excluded from coverage
if they concerned an obligation that arose “in connection with”
an insurance contract, even though the contract at issue was not
itself an insurance contract. Likewise, assuming that Salazar’s
negligence claim against McGriff was based on a common law duty
to perform voluntarily-assumed obligations with reasonable care,
that claim still would be excluded from coverage if the duty
arose “in connection with” an insurance contract.
In his complaint, Salazar explicitly stated that McGriff
was “the insurance broker for [South Carolina Electric’s] Lake
Murray Backup Dam project, and had undertaken a duty to inspect
the facility to ensure a reasonably safe environment in which to
perform the construction work.” Salazar also alleged that
McGriff contracted with South Carolina Electric to inspect the
Project and to identify for correction potential safety
problems. As the district court concluded, “there is no
allegation or suggestion in the complaint that McGriff assumed
any safety-related duties except in this role.”
Additionally, we observe that certain facts in the record,
which were known to St. Paul when it decided to deny coverage,
provide further support for the district court’s judgment. The
OCIP Manual, which McGriff provided to South Carolina Electric

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and to all contractors at the Project, expressly identified
McGriff’s safety-related obligations. The Manual provided that
the “Owner’s Safety Representative, in conjunction with GENERAL
CONTRACTOR and [McGriff], will furnish safety posters, loss and
inspection reports and provide overall supervision of the
Project Safety effort.” Further, under the heading entitled
“Project Safety (Loss Control) Program,” the OCIP Manual
provided that “[a] Project Safety Program has been established
by the General Contractor to conform with industry standards,
and to meet the requirements of all Local, State, and Federal
standards, and will be supervised and reviewed by the Owner’s
Safety Representative and [McGriff].” Because these safety-
related obligations assigned to McGriff were set forth in the
Manual of Insurance Procedures for the specific insurance
program at issue in this case, which McGriff itself had secured,
these obligations arose “in connection with” an insurance
contract.
Our conclusion is not altered by Houston’s further
assertion that the OCIP Manual is not a contract. Even if
Houston’s assertion in this regard is correct, the Manual
nevertheless was prepared and provided as a part of the
insurance program brokered by McGriff for the Project, and the
safety-related obligations assigned to McGriff in the Manual
related to the Project. Claims based on those obligations,

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including the alleged failure to properly perform them,
undoubtedly arose “in connection with” an insurance contract,
irrespective whether the Manual itself was part of an insurance
contract.
Finally, we reject Houston’s assertion that any obligations
McGriff may have incurred did not stem from an insurance
contract but instead arose from a common law duty to perform
voluntarily-assumed obligations with reasonable care. This
contention ignores that such a duty also necessarily arose “in
connection with” an insurance contract, because the obligations
undertaken by McGriff were clearly related to the Project and
stemmed from McGriff’s initial involvement in procuring
insurance coverage for it. Moreover, that McGriff may have
assumed these obligations voluntarily does not make them any
less connected with an insurance contract.
IV.
In conclusion, we hold that the district court correctly
determined that Salazar’s claims were excluded by the Insurance
and Related Work endorsement.2
2 Because Salazar’s claims against McGriff concerned safety-
related obligations “in connection with” an insurance contract,
and thus were excluded from coverage under the Insurance and
Related Work endorsement, we need not address whether such
claims were also excluded as “insurance professional services,”
Therefore, we affirm the district
(Continued)

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court’s judgment determining that St. Paul did not have an
obligation to defend McGriff or to contribute to McGriff’s
portion of the global settlement of Salazar’s claims.
AFFIRMED
or excluded under the “Appraisers, Inspectors, or Surveyors
Professional Services” endorsement.

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