SC Farm Bureau v. Berlin

In this insurance case, we must decide whether damage to Repsondents’ home

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT

BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING

EXCEPT AS PROVIDED BY RULE 239(d)(2),
SCACR.

THE STATE OF SOUTH CAROLINA

In The Court of Appeals

South Carolina Farm Bureau Mutual Insurance Company,       
Appellant,

v.

Henry Berlin and Terry Berlin,       
Respondents.

Appeal From Charleston County

R. Markley Dennis, Jr., Circuit Court
Judge

Unpublished Opinion No. 2005-UP-062

Submitted December 1, 2004 – Filed January 25, 2005

REVERSED

Andrew Steven Halio, of Charleston, for Appellant.

Claron A. Robertson, III, and Paul E. Sperry, both of Charleston,
for Respondents.

PER CURIAM: In this declaratory judgment
action concerning insurance coverage, we are asked to determine the efficacy
of an exclusion from coverage for “loss . . . caused by . . . insects” in a
homeowner’s insurance policy.  The insured’s home was damaged as a result of
honey seeping into the ceilings and walls of their home from a honeybee hive. 
While we recognize the rule of construction requiring clauses of exclusion in
an insurance policy to be narrowly interpreted, and clauses of inclusion to
be broadly construed, we find—based on the stipulated facts—that the loss sustained
by the homeowners was “caused by” insects.  We conclude, therefore, that the
loss is not covered by the policy.  In so holding, we reverse the judgment of
the circuit court. [1]

STIPULATED FACTS/PROCEDURAL HISTORY

The parties entered into a “stipulation
of facts.”  A colony of honeybees nested in the walls and ceiling of Henry and
Terry Berlin’s home.  A hole was cut into the ceiling to ensure that the honeybees
were exterminated or abandoned the nests.  After the bees abandoned the nest
or were exterminated, the honey contained in the hive began to seep down through
the walls and ceiling, damaging the home.

The Berlins notified their homeowner’s
insurance carrier, South Carolina Farm Bureau, of the damage.  Farm Bureau denied
coverage, specifically pointing to a policy provision that excluded coverage
for “loss . . . caused by . . . birds, vermin, rodents, insects or domestic
animals.” 

Farm Bureau subsequently brought this
declaratory judgment action seeking a determination that the damage to the Berlins’
residence was caused by insects and therefore was not a covered loss under the
policy exclusion.  The Berlins counterclaimed for breach of contract.  Upon
consideration of the parties’ cross motions for summary judgment, the circuit
court found the language in the policy exclusion—specifically the phrase “caused
by”—was ambiguous and construed it against Farm Bureau.  The circuit court thus
found the damage from the dripping honey was not caused by insects under the
policy language and granted judgment in favor of the Berlins.

STANDARD OF REVIEW

As noted above, the motion for summary judgment
at issue in this appeal was decided by the circuit court on facts stipulated
by the parties.  After a thorough review of the record, we find no argument
raised to the circuit court that a question of material fact existed.  To the
contrary, both parties suggested that the dispute was essentially legal in nature,
and therefore ripe for final disposition at the summary judgment stage.  In
cases with stipulated facts, this court’s review is limited to “whether the
trial court properly applied the law to those facts.” Kay v. State Farm Mut.
Auto. Ins. Co., 349 S.C. 446, 448, 562 S.E.2d 676, 678 (Ct. App. 2002) (quoting
WDW Props. v. City of Sumter, 342 S.C. 6, 10, 535 S.E.2d 631, 632 (2000)). 
Were we to now entertain arguments on appeal that a question of fact precluded
summary judgment, this court would violate the longstanding rule that we only
address those issues properly raised and argued below.  See, e.g.,
Schofield v. Richland County School Dist., 316 S.C. 78, 82, 447 S.E.2d
189, 191 (1994) (holding that an issue may not be raised for the first time
on appeal, but must have been raised to the trial judge to be preserved for
appellate review).

LAW/ANALYSIS

Farm Bureau claims the circuit court erred
in granting summary judgment in favor of the Berlins.  Specifically, Farm Bureau
argues the policy language excluding coverage for damage caused by insects was
not ambiguous and that the Berlins’ losses resulting from the honey seepage
fell squarely within that coverage exclusion.  We agree.

Resolution of this coverage question hinges
on the interpretation of the policy language excluding coverage for “loss .
. . caused by . . .  insects.” [2]   Insurance policies are subject to the general
rules of contract construction. Fritz-Pontiac-Cadillac-Buick v. Goforth,
312 S.C. 315, 318, 440 S.E.2d 367, 369 (1994). When the language of an insurance
contract is free from ambiguity, the words used must be taken and understood
in their plain, ordinary and popular sense, and such construction is for the
court. Id.  An insurer’s obligation under a policy of insurance is defined
by the terms of the policy itself, and cannot be enlarged by judicial construction.
Nationwide Mut. Ins. Co. v. Commercial Bank, 325 S.C. 357, 360, 479 S.E.2d
524, 526 (Ct. App. 1996).  It is true that ambiguous or conflicting terms in
an insurance policy must be construed liberally in favor of the insured and
strictly against the insurer. Diamond State Ins. Co. v. Homestead Indus.,
Inc., 318 S.C. 231, 236, 456 S.E.2d 912, 915 (1995). Moreover, “rules of
construction require clauses of exclusion to be narrowly interpreted, and clauses
of inclusion to be broadly construed.” McPherson v. Michigan Mut. Ins. Co.,
310 S.C. 316, 319, 426 S.E.2d 770, 771 (1993).    However, these rules of construction,
inuring to the benefit of the insured, do not trump clear and unambiguous policy
terms.  Where the intention of the parties is clear, courts have no authority
to torture the meaning of policy language to extend coverage that was never
intended by the parties. Diamond State, 318 S.C. at 236, 456 S.E.2d at
915.

We are presented with the narrow question: 
Was the damage to the Berlins’ home from the honey seeping from the honeybee
hive “caused by” the honeybees?  In light of the stipulated facts, we answer
the question in the affirmative, for there is indisputably a direct and immediate
causal relationship between the honeybees and resulting damage from the honeybee
hive. 

The Berlins argue that the phrase “caused by” in
an insurance policy inclusion clause warrants a broad and expansive interpretation
and, conversely, a narrower interpretation in the context of a policy exclusion. 
We agree, but that distinction does not, we believe, justify our rejection of
the policy exclusion here.  See King v. North River Ins. Co.,
278 S.C. 411, 413, 297 S.E.2d 637, 638 (1982) (construing a clause of inclusion
broadly, noting that “it is generally sufficient to prove the event insured
against was the efficient cause of the loss, even though not the sole
cause”);  Stevenson v. Connecticut General Life Ins. Co., 265 S.C. 348,
349-50, 218 S.E.2d 427, 430 (1975) (construing a clause of inclusion broadly,
holding that policy language insuring against losses resulting from an accidental
bodily injury “directly and independently of all other causes” should be interpreted
as meaning those losses “proximately caused by the accidental bodily injury,
even though some other cause may have contributed to a minor degree”); Lesley
v. American Sec. Ins. Co., 261 S.C. 178, 182-83, 199 S.E.2d 82, 84-85 (1973)
(interpreting a policy inclusion clause insuring losses “directly and immediately
resulting from . . . fire and lightning” as meaning losses proximately caused
by fire and lightning—specifically opining that “the terms ‘proximate and immediate’
are virtually synonymous”);  7 Lee R. Russ & Thomas F. Segalla, Couch
on Insurance § 101:40, at 101-127 to 101-129 (3d ed. 1999) (“the rule of
causation applied in the context of insurance coverage is ‘proximate cause’”)  
(footnotes omitted).   This rule of liberal construction in favor of the insured,
to be sure, requires a different interpretation and application of the same
causal-relationship phrase when it is part of a clause of exclusion.  Where
we part ways with the Berlins’ analysis is their conclusion that this rule of
construction, standing alone, mandates a rejection of the policy exclusion before
us and a finding of coverage.  We adhere to the view that the phrase “caused
by” in an exclusion clause retains some meaning and efficacy, albeit a narrow
and restricted meaning.

The case of McPherson v. Michigan Mutual Insurance
Co. provides some guidance.  In McPherson, our supreme court granted
certiorari to review a decision of this court.  We had held that the City of
Charleston’s general liability insurance policy excluded coverage for McPherson’s
injuries resulting from a collision with a Charleston police vehicle.  McPherson
v. Michigan Mut. Ins. Co., 306 S.C. 456, 412 S.E.2d 445 (Ct. App. 1991),
aff’d as modified, 310 S.C. 316, 426 S.E.2d 770 (1993). 
The supreme court affirmed in result, but found fault with this court’s construction
of the relevant policy exclusion.  Recognizing that the phrase in the exclusionary
clause—“arising out of”—is subject to many interpretations, the supreme court
noted that this court erred when it “relied primarily on cases construing clauses
of inclusion to interpret the phrase ‘arising out of’ in the exclusion provision
of Charleston’s general liability policy.” McPherson, 310 S.C. at 319,
426 S.E.2d at 771.  The supreme court adopted a construction of the phrase in
the exclusion provision “most favorable to the insured.” Id. at 319-20,
426 S.E.2d at 771.  The court held “that for the purpose of construing an exclusionary
clause in a general liability policy, ‘arising out of’ should be narrowly construed
as ‘caused by.’ However, we find that even under a narrow construction
of the exclusion, the injuries . . . are not covered under the policy.”  Id.
at 320, 426 S.E.2d at 771-72 (emphasis added).  We similarly conclude that even
under a narrow construction, the damage to the Berlins’ home was “caused by”
the honeybees.

The stipulated facts lead to the inescapable
conclusion that the cause of the damage to the Berlins’ home was the activity
of the honeybees themselves.  Were we required to resort to an attenuated proximate
cause analysis to link the damage to the Berlins’ home to the honeybees, the
rule in McPherson would compel a different result.  Here, however, the
nexus between the honeybees, honey, and damage is immediate and direct.  It
belies common sense and experience to suggest that, merely because the homeowners
took measures to eliminate an insect infestation, the causal connection to the
insects themselves is broken such that the natural, consequential effects of
the insect activity are no longer subject to a standard policy exclusion for
damage “caused by” insects.

CONCLUSION

We find the damage to the Berlins’ home was caused
by the honeybees and that Farm Bureau properly relied on the applicable exclusion
in denying coverage.  The judgment of the circuit court is

REVERSED.

HUFF, KITTREDGE, and BEATTY, JJ., concur.

    
[1] In fairness to the able circuit judge, our holding is grounded on authority
that was not presented to him.

    
[2] The parties stipulated that “[a] honeybee is an ‘insect’ under the policy.”