Desa Ballard v. Admiral Insurance Co.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Desa Ballard and Desa Ballard P.A., d/b/a Ballard &
Watson, Appellants,

v.

Admiral Insurance Company and Adele J. Pope,
individually and as Special Administrator of the Estate of
Gloria Corley, Respondents.

Appellate Case No. 2019-000367

Appeal From Lexington County
Walton J. McLeod, IV, Circuit Court Judge

Opinion No. 5994
Heard March 15, 2022 – Filed June 28, 2023

AFFIRMED

Eric Steven Bland, of Bland Richter, LLP, of Lexington;
and Scott Michael Mongillo and Ronald L. Richter, Jr.,
both of Bland Richter, LLP, of Charleston, all for
Appellants.

Adele Jeffords Pope, of Law Office of Adele J. Pope, PC,
of Newberry, for Respondent Adele J. Pope.

Wesley Brian Sawyer, of Murphy & Grantland, PA, of
Columbia, for Respondent Estate of Gloria Corley.
Adam Tremaine Silvernail, of Law Ofc. of Adam T.
Silvernail, of Columbia, for Respondent Admiral
Insurance Company.

MCDONALD, J.: In this action for declaratory judgment, Desa Ballard and Desa
Ballard, P.A. (collectively, Ballard) appeal an order granting Admiral Insurance
Company's (Admiral) motion for judgment on the pleadings, arguing the circuit
court erred in considering the language of the "hammer clause" 1 found in Admiral's
professional liability insurance policy (the Policy). Ballard further contends the
record lacks the factual development necessary to properly determine whether the
refusal to consent to Admiral's proposed settlement was reasonable. We affirm the
well-reasoned order of the circuit court.

Facts and Procedural History 2

In March 2011, Aundra Williams, Gloria Corley's daughter and attorney-in-fact
(Daughter), hired Ballard to defend Corley in a lawsuit filed by attorney Adele
Pope. Pope had previously represented Corley in a matter involving Corley's
annual distributions from the Martin L. Corley Trust (the Trust). 3 Although Pope
collected approximately $18,333.33 each year from 1999 through 2010 when
Corley received her annual distributions from the Trust, she filed suit to recover
additional attorney's fees allegedly owed for legal services. Ballard asserted
numerous defenses to Pope's action against Corley, including claims that Pope's fee
agreement took advantage of an elderly and frail client and was void as violative of
public policy.

While defending Pope's claim, Ballard also represented Corley in negotiating a
buy-out of her interests in the Trust. The buy-out included a lump sum payment to

1
A hammer clause "puts pressure on the insured's right to refuse consent to settle
and thereby increases an insurer's ability to effectuate a settlement." Rawan v.
Cont'l Cas. Co., 136 N.E.3d 327, 330 (Mass. 2019).
2
We recite the facts here as alleged in Ballard's complaint but recognize Admiral,
Pope, and the Estate of Gloria Corley (the Estate) dispute many of these
statements.
3
Corley's late husband established the Trust for her benefit.
Corley but terminated her future annual payments of $55,000 as well as Pope's
ongoing yearly attorney's fees of $18,333.33. 4 The Lexington County Probate
Court approved the buy-out (the Trust Settlement).

Ballard's complaint in the matter before us alleges the Trust Settlement "was
structured so that the lump sum payment to Mrs. Corley was calculated on the
basis of monthly payments provided for Mrs. Corley in Mr. Corley's Last Will and
Testament for the remainder of Mrs. Corley's life based on statutory life
expectancy tables." The Trust Settlement did not include any present or future
payments related to Pope's prior legal representation of Corley.

In structuring the Trust Settlement, Ballard met with Daughter and Corley's
certified public accountant (CPA) to discuss appropriate steps for preserving the
funds for Corley's care and financial needs. Although Ballard alleges reasonable
steps were taken to insulate these funds from Pope's fee claim, Ballard advised the
CPA that Pope might attempt to recover some portion of the Trust Settlement
under a theory consistent with her claim for ongoing yearly attorney's fees.

The Trust—separately represented by its own counsel in conjunction with the Trust
Settlement—argued to the probate court that the modification of the distributions
to Corley was in the best interest of the Trust. Despite the express language of the
Trust Settlement, which sought to nullify Corley's fee agreement with Pope, Pope
moved for and obtained an order granting her one-third of the gross amount of the
Trust Settlement (the Pope Judgment). 5 The Pope Judgment provided attorney's
fees that Pope would not have realized had Corley's interest in the Trust not been
liquidated because Corley did not live as long as the statutory life expectancy
tables on which the original Trust Settlement was projected. 6 Ballard appealed the
Pope Judgment; however, this court dismissed the appeal as untimely.

Ballard timely notified Admiral that Corley could potentially make a claim against
her as a result of the untimely appeal of the Pope Judgment. On May 9, 2014,

4
Pope was not a party to the Trust buy-out proceeding.
5
One of Ballard's filings in a prior matter notes that in August 2013, Pope was
awarded "$248,673.87, plus daily interest and costs of collection."
6
Corley died approximately four years after the execution of the Trust Settlement.
Admiral notified Ballard that it had assigned the defense of any claim to Mendes &
Mount, LLP (Mendes).

While not admitting the failure to timely file the appeal caused harm to Corley,
Ballard properly notified Daughter of the potential claim against Ballard. Despite
advising Daughter to consult with separate counsel given the potential for a
conflict, Daughter asked Ballard to continue representing Corley. During this
time, Ballard kept Admiral informed of significant developments related to Pope's
claim and in August 2014, Admiral accepted notice of the matter as a circumstance
that would fall within Ballard's coverage under its 2013–14 Policy. Admiral
renewed the Policy each year until 2017–18, when it declined to renew, claiming
Ballard had breached the terms and conditions of the Policy by refusing to consent
to Admiral's request to engage in settlement discussions with Pope.

Following execution of the Trust Settlement, Ballard suggested Daughter, as
attorney-in-fact, obtain counsel for the purpose of establishing a conservatorship
and/or guardianship to further protect the Trust Settlement proceeds; Ballard
subsequently made an appointment for Daughter with a lawyer for this purpose.
Although Ballard believed Daughter met with the recommended lawyer, Daughter
cancelled the meeting before it concluded and never returned. In the meantime,
Pope continued her efforts to collect the Pope Judgment and amended her
complaint for attorney's fees to assert additional claims against third parties.

Ballard began to suspect Daughter had mismanaged or perhaps even
misappropriated some or all of the money recovered for Corley through the Trust
Settlement. Thus, Ballard advised Daughter she might be a witness in further
proceedings relating to Pope's claim and recommended Daughter and Corley
obtain separate counsel. Ballard was subsequently relieved as counsel, Corley
obtained new counsel, and Daughter obtained separate counsel.

On August 6, 2015, Ballard notified Admiral of a potential new claim, and
Admiral engaged Monitor Liability Managers (Monitor) and Mendes to review it.

Corley died on March 31, 2016, and the probate court appointed Pope, a judgment
creditor, as special administrator of Corley's estate. Ballard alleges Pope obtained
Daughter's consent to serve as special administrator by agreeing the Estate would
not attempt to recover any of the funds Daughter mismanaged or misappropriated.
Daughter also agreed to assist Pope in pursuing a civil suit against Ballard.
After her appointment as special administrator, Pope asserted Ballard committed
legal malpractice by advising Corley to enter into the disadvantageous Trust
Settlement. As specified in Corley's estate planning documents, any excess funds
recovered in the legal malpractice action that are not paid to Pope will be paid to
Daughter as Corley's beneficiary.

In accordance with her rights under the Policy, Ballard notified Admiral of her
preference not to extend any settlement offers or enter any settlement in the legal
malpractice claim Pope brought in her capacity as special administrator of the
Estate. However, Mendes's agents notified Ballard that Admiral wished to engage
in pre-suit mediation with Pope in an effort to settle. Ballard repeated that no
settlement discussions or mediation were to be initiated by Admiral or any attorney
retained to represent Ballard and asserted that doing so would violate Ballard's
rights under the Policy. Admiral then notified Ballard that if it could reach a
settlement figure and Ballard refused to agree, Admiral would withdraw its defense
coverage under the Policy. Ballard "reiterated that no settlement discussions
should occur in any context."

In February 2017, Pope filed a legal malpractice claim against Ballard on behalf of
the Estate. 7 Admiral again advised Ballard of its plan to initiate settlement
discussions. If the negotiations succeeded, Admiral intended to settle the matter
and terminate Ballard's coverage. Ballard objected to Admiral's plan to offer in
excess of $100,000 to settle, noting such a settlement would convey the impression
that the claims were meritorious, reflect negatively on her reputation and standing
in the legal community, and harm the firm's future insurability with other
professional liability carriers. Ballard further asserted a settlement offer would
constitute a breach of Admiral's obligations under the Policy.

Three months after Pope filed the Estate's legal malpractice claim, Monitor notified
Ballard that the Policy, as it then existed, would not be renewed due to Ballard's
"failure to comply with policy terms and conditions." Upon Ballard's inquiry as to
how she failed to comply, Monitor advised Ballard by email that "[t]he basis for

7
The Estate alleged Ballard was negligent in: (1) failing to recognize termination
of the trust was not in Corley's best interests; (2) failing to have a guardian ad litem
appointed for Corley; (3) representing both Corley and Daughter despite the
inherent conflict of interest; (4) failing to recognize Pope's fee agreement entitled
Pope to a percentage of the lump sum buyout payment; and (5) undertaking a
frivolous defense of the Pope Judgment and then failing to timely appeal.
the non-renewal [was] the insured's refusal to consent to settle." Ballard
challenges this—arguing the Policy does not contain terms requiring her to
"consent to settle" upon the carrier's request. To the contrary, Ballard asserts the
Policy provides a bargained-for contractual right to refuse to settle and Admiral's
purported basis for non-renewal was merely anticipatory because the parties had
not yet agreed on a settlement figure. Ballard claims the non-renewal was
"invidious, retaliatory and against public policy and constituted a denial of first
party insurance coverage."

Ballard subsequently retained counsel and brought this action for declaratory,
injunctive, and related relief against Admiral regarding the parties' respective rights
and obligations under the Policy. Admiral answered and counterclaimed, seeking
declaratory relief to enforce the Policy as written. Admiral further sought
declarations that: (1) Admiral had the right to participate in settlement negotiations
in the underlying legal malpractice action; (2) Ballard owed a duty to cooperate in
the defense and settlement of the claim and could not prevent Admiral from
participating in settlement negotiations; and (3) the Policy's hammer clause would
be enforced as written.

Admiral moved for judgment on the pleadings, and the circuit court held a hearing
to address several matters. 8 Through counsel, Ballard asserted the Policy gave her
the right to prevent settlement negotiations if it appeared Pope would benefit from
the settlement.

The circuit court granted Admiral's motion for judgment on the pleadings and
dismissed Ballard's accompanying bad faith claim without prejudice, finding the
Policy section titled "Defense, Cooperation and Settlement" controlling. Section
VI of the Policy provides in pertinent part:

B. The Insurer shall have the sole right and the duty to
defend any covered Claim, and has the sole right to
select defense counsel. . . .

C. Each Insured shall cooperate with the Insurer in the
defense and settlement of any Claim . . . . Upon the
request of the Insurer, the Insured shall . . . attend

8
Pope and the Estate filed motions to dismiss or, in the alternative, to strike. The
circuit court granted these motions to dismiss, and Ballard did not appeal the
dismissals.
hearings, depositions and trials, assist in effecting
settlement, securing and giving evidence, obtaining the
attendance of witnesses . . . and meeting with such
representatives for the purposes of investigation or
defense, all without charge to the Insurer.

Reading these provisions, the circuit court determined that by the plain terms of the
Policy, Admiral had the right to control the defense of the case, which included the
right to participate in settlement negotiations.

Regarding the hammer clause, the circuit court found the Policy language
unambiguous and enforceable according to its plain terms. This clause, found in
section VI, paragraph D, provides:

The Insurer shall not settle any Claim without the
Named Insured's consent. If, however, the Named
Insured shall refuse to consent to any settlement
recommended by the Insurer, which is acceptable to the
claimant, and shall elect to contest the Claim, or continue
any legal, administrative or arbitration proceedings in
connection with such Claim, then the Insurer's liability
for the Claim shall not exceed the amount for which the
Claim could have been settled, including Claims
Expense incurred up to the date of such refusal. Such
amounts are subject to the provisions of section V. In the
event that the Named Insured refuses to consent to any
settlement as set forth in section VI. D., the Insurer's
right and duty to defend such Claim shall end upon the
date of such refusal.[9]

Although Ballard argued the clause could not be enforced unless the named
insured unreasonably refuses a settlement proposal recommended by the insurer

9
Policy section III, paragraph B defines "Claims Expense" as "reasonable and
necessary fees, costs and expenses . . . resulting solely from the investigation,
adjustment, defense and appeal of a covered or potentially covered Claim against
the Insureds." However, the definition specifically excludes "salaries, wages,
overhead or benefit expenses associated with any Insured, or any amount covered
by the duty to defend obligation of any other insurer." Section V addresses the
Policy's limits of liability and deductible.
and acceptable to the claimant, the circuit court declined to insert the word
"unreasonably" into the Policy.

Ballard has appealed the circuit court's findings that:

a. Admiral has the right to negotiate a potential
settlement as part of its defense of the Underlying
Malpractice Action;

b. Admiral has a right to participate in settlement
negotiations at mediation in the Underlying Malpractice
Action;

c. Plaintiffs owe a duty to cooperate in the defense and
settlement of the case and do not have a right to prevent
Admiral from participating in settlement negotiations
with [the Estate];

d. If Admiral recommends a settlement to the Named
Insured which is acceptable to [the Estate], and the
Named Insured rejects the settlement and chooses to
contest the Underlying Malpractice Action, then
Admiral's liability for the Claim shall not exceed the
amount for which the Claim could have been settled,
including Claim Expenses incurred up to the date of such
refusal; and

e. If Admiral recommends a settlement to the Named
Insured which is acceptable to [the Estate], and the
Named Insured rejects the settlement and chooses to
contest the Underlying Malpractice Action, then
Admiral's right and duty to defend the Underlying
Malpractice Action shall end upon the date of such
rejection.

Standard of Review

The circuit court incorporated the provisions of the Policy into its consideration of
Admiral's motion for judgment on the pleadings. For that reason, and also because
Admiral attached a copy of the Policy to its motion for judgment on the pleadings,
Ballard asserts the proper standard of review is that for a motion for summary
judgment; however, Admiral asserts the Policy was part of the pleadings, both
through its attachment of the Policy to its answer and counterclaim and due to
Ballard's specific references to the Policy throughout her complaint. Thus,
Admiral argues and we agree that (1) the circuit court properly considered the
Policy when it evaluated Admiral's motion for judgment on the pleadings; and (2)
the proper standard of review is that for a motion for judgment on the pleadings.

"Any party may move for a judgment on the pleadings under Rule 12(c), SCRCP.
When considering such motion, the court must regard all properly pleaded factual
allegations as admitted." Falk v. Sadler, 341 S.C. 281, 286, 533 S.E.2d 350, 353
(Ct. App. 2000). In analyzing a Rule 12(c) motion, the court must liberally
construe the complaint "so that substantial justice is done between the parties." Id.
at 287, 533 S.E.2d at 353. Under Rule 12(c),

If, on a motion for judgment on the pleadings, matters
outside the pleadings are presented to and not excluded
by the Court, the motion shall be treated as one for
summary judgment and disposed of as provided in Rule
56, and all parties shall be given reasonable opportunity
to present all material made pertinent to such a motion by
Rule 56.

In any event, "[w]hether reviewing a grant of summary judgment or a judgment on
the pleadings, we apply the same legal standards as the trial court." Ziegler v.
Dorchester Cnty., 426 S.C. 615, 619, 828 S.E.2d 218, 220 (2019). "We review
questions of law de novo." Id.

Law and Analysis

I. Policy Language

Ballard argues the circuit court's consideration of the hammer clause was
premature because "this lawsuit does not seek to prevent a settlement from
occurring. Instead, it seeks to prevent Admiral [from] 'pursu[ing] a settlement' or
'seek[ing] to settle' the claim so as to put Ballard in a position of having to invoke
the 'consent' provision of the policy." We disagree.

"Insurance policies are subject to the general rules of contract construction." Auto
Owners Ins. Co. v. Benjamin, 415 S.C. 137, 143, 781 S.E.2d 137, 141 (Ct. App.
2015) (quoting Whitlock v. Stewart Title Guar. Co., 399 S.C. 610, 614, 732 S.E.2d
626, 628 (2012)). "The cardinal rule of contract interpretation is to ascertain and
give legal effect to the parties' intentions as determined by the contract language."
Id. (quoting Whitlock, 399 S.C. at 614, 732 S.E.2d at 628). "Courts must enforce,
not write, contracts of insurance, and their language must be given its plain,
ordinary and popular meaning." Id. (quoting Whitlock, 399 S.C. at 614, 732 S.E.2d
at 628).

"Where the contract's language is clear and unambiguous, the language alone
determines the contract's force and effect." Id. (quoting Whitlock, 399 S.C. at 615,
732 S.E.2d at 628). "Whether the language of a contract is ambiguous is a
question of law for the court." Id. at 143–44, 781 S.E.2d at 141. "An insurance
contract is read as a whole document so that 'one may not, by pointing out a single
sentence or clause, create an ambiguity.'" Id. at 144, 781 S.E.2d at 141 (quoting
Beaufort Cnty. Sch. Dist. v. United Nat'l Ins. Co., 392 S.C. 506, 516, 709 S.E.2d
85, 90 (Ct. App. 2011)). "However, this court must construe '[a]mbiguous or
conflicting terms in an insurance policy . . . liberally in favor of the insured and
strictly against the insurer.'" Id. (quoting Whitlock, 399 S.C. at 615, 732 S.E.2d at
628).

Here, section VI, paragraph B of the Policy gives Admiral the "sole right and the
duty to defend any covered Claim. . . ." Moreover, the clear and unambiguous
language of the Policy states Admiral, as the insurer, has the right to control the
defense of the case. Likewise, Section VI, paragraph C, provides each "Insured
shall cooperate with the Insurer in the defense and settlement of any Claim. . . ."

Section VI, paragraph D, does initially seem to prohibit Admiral from settling any
claim without Ballard's consent:

The Insurer shall not settle any Claim without the
Named Insured's consent.

Yet, paragraph D goes on to state:

If, however, the Named Insured shall refuse to consent
to any settlement recommended by the Insurer, which is
acceptable to the claimant, and shall elect to contest the
Claim, or continue any legal, administrative or
arbitration proceedings in connection with such Claim,
then the Insurer's liability for the Claim shall not exceed
the amount for which the Claim could have been settled,
including Claims Expense incurred up to the date of
such refusal. . . . In the event that the Named Insured
refuses to consent to any settlement as set forth in section
VI. D., the Insurer's right and duty to defend such
Claim shall end upon the date of such refusal.

Thus, if Admiral recommends a settlement to Ballard that is acceptable to the
Estate, Ballard has the right to reject it and continue defending the case. However,
such a rejection ends Admiral's duty to defend and caps its liability at the proposed
settlement amount. Although the consent clause, found in the same paragraph as
the hammer clause, gives Ballard the option to reject a settlement proposed by
Admiral, we find nothing in the Policy gives Ballard the ability to prevent Admiral
from participating in settlement negotiations. Otherwise, there would be no way to
determine an amount "for which the Claim could have been settled" for purposes
of this provision in the Policy.

Ballard further argues Admiral failed to allege Ballard refused to cooperate in "the
handling" of the claim. However, this is exactly what Admiral alleged—Ballard's
repeated refusal to allow Admiral to initiate settlement or mediation discussions
constituted a failure "to cooperate with the Insurer in the defense and settlement of
any Claim." Ballard further contends Admiral has neither offered nor accepted a
settlement. But, in her pleadings, Ballard stated Admiral informed her of its intent
to offer the Estate in excess of $100,000. Admiral attempted to initiate settlement
discussions both before and after Pope filed suit in 2017; nevertheless, Ballard
stated again and again that neither Admiral nor any attorney retained to represent
Ballard was to initiate settlement or mediation discussions.

We find the circuit court correctly analyzed the clear and unambiguous language of
the Policy in finding Ballard could not prevent Admiral from negotiating with the
Estate to settle the Pope claim. The Policy requires Ballard to cooperate with
Admiral in the defense and settlement of Pope's action; Ballard is free to choose
not to consent to a settlement, but such refusal triggers the consequences of the
hammer clause.

II. "Reasonableness"

Ballard next argues the record reflects no facts upon which the circuit court could
properly determine whether her refusal to permit settlement was reasonable. In so
arguing, Ballard attempts to insert a "reasonableness" term into the Policy's
consent to settle clause. Acceptance of this argument would essentially require us
to rewrite the Policy, which South Carolina law forbids. See, e.g., Benjamin, 415
S.C. at 143, 781 S.E.2d at 141 ("Courts must enforce, not write, contracts of
insurance, and their language must be given its plain, ordinary and popular
meaning.") (quoting Whitlock, 399 S.C. at 614, 732 S.E.2d at 628)).

Ballard cites Clauson v. New England Insurance Co., 254 F.3d 331 (1st Cir. 2001)
for the proposition that a hammer clause cannot be enforced unless the insured
"unreasonably" rejects a proposed settlement. However, contrary to Ballard's
claim, the Clauson court merely applied the language of the consent to settle clause
in the policy at issue—which included language addressing "unreasonably
withheld" consent. See id. at 336–35 ("The Company shall have the right to make
any investigation it deems necessary and with the written consent of the insured,
said consent not to be unreasonably withheld, any settlement of any claim covered
by the terms of this policy."). This case is easily distinguishable because Ballard's
Admiral Policy contains no such language.

By contrast, courts interpreting polices that—like Ballard's—lack the phrase
"unreasonably withheld" in the context of a consent to settle clause have applied
the policy language regardless of whether the insured "unreasonably" withheld
consent. For example, in Security National Insurance Co. v. City of Montebello,
Montebello argued "it acted reasonably in refusing a settlement offer conditioned
on [an] employee's continuing employment." 680 F. App'x 525, 527 (9th Cir.
2017). Rejecting Montebello's "reasonableness" argument, the Ninth Circuit noted
the clause at issue did "not limit the insurer's right to invoke the clause to instances
where the insured was unreasonable in rejecting an offer. To hold otherwise would
impermissibly rewrite the hammer clause to the policyholder's benefit." Id.

Likewise, in Cowan v. Codelia, 50 F. App'x 36, 38 (2d Cir. 2002), the Second
Circuit explained, "[T]he district court conducted an evidentiary hearing regarding
the parties' settlement discussions and found that Codelia's 'phantom objections'
and 'illusory' complaints about the settlement were the equivalent of a rejection."
Thus, the court rejected the insured's argument "that its right to choose its own
counsel supplanted the effect of the consent-to-settle clause, particularly where
Chicago Insurance pursued a settlement in good faith." 10 Id.

10
Ballard argues there is no need for an "unreasonably withheld" qualifier for the
Policy's consent consideration because the requirement of good faith and fair
dealing on the part of the insurer supplants the need for such Policy language. We
disagree. While Ballard correctly argues courts must balance a malpractice
We find the circuit court correctly applied the reasoning of City of Montebello in
rejecting Ballard's argument seeking to rewrite the clear and unambiguous
language of the Policy. The Policy's hammer clause sets out the consequences of
an insured's rejection of a recommended settlement such as that proposed by
Admiral here. Because the clause does not include a "reasonableness" modifier,
development of the factual record in this case was unnecessary; the circuit court
properly considered the Policy language as written.

Conclusion

For the foregoing reasons, the circuit court's order granting Admiral's motion for
judgment on the pleadings is

AFFIRMED.

THOMAS and HEWITT, JJ., concur.

carrier's interest in efficiently resolving claims against its insured's right to protect
her reputation and challenge claims reasonably believed to be of little or no merit,
this is not such a bad faith action. Because the circumstances alleged in Ballard's
Complaint do not implicate such balancing concerns, we focus—as we must—on
the plain language of the Policy. Cf. Sentry Select Ins. Co. v. Maybank L. Firm,
LLC, 426 S.C. 154, 157–58, 826 S.E.2d 270, 271–72 (2019) (noting an "insurer's
right to settle must be exercised in good faith, and that duty of good faith requires
the insurer to act reasonably in protecting the insured from liability in excess of the
policy limits").