Holding: The plaintiff-insurer has contracted to defend its insured (a general contractor) if “no other insurer defends.” Therefore, the court cannot compel the insurers of the general contractor’s subcontractors to defend the general contractor in an underlying defective construction action.
The court grants the subcontractors’ insurers’ motions to dismiss.
Plaintiff FCCI Insurance Co. seeks a declaratory judgment construing the “other insurance” provision in the policy FCCI issued to a general contractor so as to determine whether the provision would excuse FCCI from defending the general contractor to the extent the general contractor is an additional insured under its subcontractors’ insurance policies.
In Sloan Constr. Co. v. Cent. Nat’l Life Ins. Co. of Omaha, 236 S.E.2d 818 (S.C. 1977), the South Carolina Supreme Court considered a dispute between two insurers about their obligations to defend Sloan in a lawsuit arising out of an auto accident. One insurer undertook Sloan’s defense while the other refused to defend.
The court held that “where two [insurance] companies insure the identical risk and both policies provide for furnishing the insured with a defense, neither company, absent a contractual relationship, can require contribution from the other for expenses of the defense where one denies liability and refuses to defend.” Under Sloan, FCCI cannot seek this court’s enforcement of any defendant-insurer’s duty to defend the general contractor when that duty allegedly arises under an insurance contract between a defendant and one of the general contractor’s subcontractors to which FCCI is not a party.
In Auto-Owners Ins. Co. v. Travelers Cas. & Sur. Co. of Am., No. 4:12-cv-3423 (D.S.C. July 22, 2014) (Lawyers Weekly No. 002-144-14), aff’d 597 F. App’x 197 (4th Cir. 2015), Judge R. Bryan Harwell applied Sloan when considering a declaratory judgment action brought by an insurance company in similar circumstances. Auto-Owners issued a commercial general liability policy to the insured and provided a defense to the insured in the underlying lawsuit.
Travelers, which had issued a nonprofit management and organization liability policy to the insured, refused to provide a defense. Auto-Owners filed suit seeking a judicial declaration that Travelers had a duty to defend their mutual insured in the underlying lawsuit. Judge Harwell determined that Auto-Owners’ declaratory judgment claim against Travelers failed as a matter of law because Auto-Owners was not a party to the insurance contract with Travelers.
FCCI is not a party to any contract between a moving defendant and one of the subcontractors. For this reason, FCCI cannot compel any moving defendant to fulfill an alleged duty to defend the general contractor under those contracts.
FCCI insists that is not seeking a declaration requiring another carrier to defend the general contractor; instead, it seeks this court’s declaratory judgment to interpret the “other insurance” clause in its own policy. FCCI admits, however, that it seeks to determine whether the general contractor qualifies as an additional insured under one or more of its subcontractors’ policies, whether such policies include a duty to defend, and whether any coverage is primary.
FCCI claims that if its “policies are excess, then FCCI has the right to elect not to continue to defend” the general contractor. However, the plain language of the contract does not confer that right upon FCCI.
The policy provides, “If no other insurer defends, we will undertake to do so, but we will be entitled to the insured’s rights against all those insurers.” For this reason, even if this court issued the requested declaration – that the general contractor qualifies as an additional insured under one of the subcontractor’s policies – that declaration would not be sufficient for FCCI to obtain the relief it seeks because it has contracted to defend the general contractor if “no other insurer defends,” and, under Auto-Owners, the court cannot compel the moving defendants to defend the general contractor in the underlying suit.
FCCI’s declaratory judgment claim cannot afford FCCI the relief it seeks: release from its duty to defend the general contractor. In the alternative, to the extent FCCI argues in earnest that it does not seek to compel the moving defendants to defend the general contractor but seeks only this court’s interpretation of its obligations to the general contractor, then the declaratory judgment claim against the moving defendants is subject to dismissal because there is no “actual controversy” between FCCI and these defendants.
FCCI Insurance Co. v. Island Pointe, LLC (Lawyers Weekly No. 002-046-18, 10 pp.) (Richard Mark Gergel, J.) 2:17-cv-01976; Grayson Mead Shephard & William James Flynn for plaintiff; Allen Leland DuPre, Howard Michael Bowers, Mary Barnwell Ramsay, David Brown, David Grant Harris II, Joshua Shaw & Lee Dixon for defendants; D.S.C.