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Owners Insurance Co. v. Clayton5/23/2005
Opinion
Heard April 20, 2005
AFFIRMED
This is an appeal from a circuit court order granting respondent Lands Inn and respondent Clayton summary judgment on an insurance policy coverage question, and holding Lands Inn was entitled to indemnification by appellant (Owners) for a $1.25 million judgment in Clayton's tort suit. Owners asserts the circuit court erred in finding that coverage was not precluded by the policy's employment-related practices (ERP) exclusion, and that several other statements in the order are incorrect. We hold that the ERP exclusion does not apply, and that the inaccuracies in the order have not prejudiced Owners. We therefore affirm.
FACTS
The underlying tort judgment was obtained by Clayton, a former manager of Lands Inn, a motel. Lands Inn fired Clayton for allegedly stealing and embezzling funds. After she was fired, two individuals who called the motel and asked to speak to Clayton were told by a Lands Inn employee that she had been terminated because she had stolen money or misappropriated funds. After a criminal charge against Clayton was nol prossed, she filed a civil suit against Lands Inn. The case was submitted to the jury on three causes of action: malicious prosecution, slander, and negligence. The jury returned a general verdict of $1.25 million, of which $500,000 was for compensatory damages and $750,000 for punitive damages.
Owners provided Commercial General Liability (CGL) coverage to Lands Inn. It defended the Clayton suit under a full reservation of rights, but prior to that trial commenced this declaratory judgment suit. Owners now appeals a circuit court order granting Lands Inn summary judgment on the coverage issue and holding Lands Inn entitled to indemnification for the $1.25 million Clayton verdict.
ISSUES
On appeal, Owners raises these issues:
1) Did the trial judge err in finding the policy language ambiguous?
2) Did the trial court err in holding the ERP exclusion did not apply?
3) Did the trial court err in holding that Owners must indemnify Lands Inn for $1.25 million when the policy limit is $1 million?
4) Did the trial court's order and judgment form contain other inaccuracies?
A. Ambiguous Policy
The trial court found the CGL policy "potentially" ambiguous since it purported first to cover malicious prosecution and slander, but then to exclude slander in the ERP exclusion. Relying on S.C. State Budget & Control Bd. v. Prince, 304 S.C. 241, 403 S.E.2d 643 (1991), the circuit court concluded that such an inclusion/exclusion situation creates an ambiguity. Owners argues that, logically, exclusions can only apply to otherwise covered items, for if the item is not covered it is by definition excluded. We agree with Owners that the trial court misread Prince.
The policy provides this coverage:
COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies.
COVERAGE B. PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" to which this coverage part applies.
The Definitions section of the policy then provides:
3. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any one time.
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