Young Brothers v. Royal Insurance ( 1997 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
YOUNG BROTHERS PROPERTIES,
INCORPORATED; YOUNG BROTHERS,
INCORPORATED; YOUNG BROTHERS
INCORPORATED OF FLORENCE, d/b/a
Days Inn East,
No. 96-1004
Plaintiffs-Appellants,
v.
ROYAL INSURANCE COMPANY OF
AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the District of South Carolina, at Florence.
Cameron McGowan Currie, District Judge.
(CA-95-511-4-22)
Argued: October 29, 1996
Decided: February 21, 1997
Before RUSSELL and ERVIN, Circuit Judges, and
PHILLIPS, Senior Circuit Judge.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Charles Craig Young, WILLCOX, MCLEOD, BUYCK
& WILLIAMS, Florence, South Carolina, for Appellants. Finley B.
Clarke, CLARKE, JOHNSON, PETERSON & MCLEAN, P.A., Flor-
ence, South Carolina, for Appellee. ON BRIEF: William Reynolds
Williams, WILLCOX, MCLEOD, BUYCK & WILLIAMS, Florence,
South Carolina, for Appellants.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Young Brothers Properties, Inc. ("Young") appeals the district
court's order granting summary judgment to Royal Insurance Com-
pany of America ("Royal") on its claims against Royal for breach of
contract and bad faith refusal to defend and pay benefits under the
contract--a general liability insurance policy. Young contends the
district court erroneously granted Royal summary judgment because
it misconstrued the facts in favor of Royal and disregarded existing
questions of material fact. Finding no error in the district court's
order, we affirm on the reasoning of the district court.
I.
Young initiated its breach of contract and bad faith failure to
defend and pay benefits claims against Royal in the Court of Com-
mon Pleas for Florence County, South Carolina. Citing diversity of
citizenship pursuant to 28 U.S.C. § 1332, Royal removed the contro-
versy to the United States District Court for the District of South Car-
olina. 28 U.S.C. § 1441. This case, however, arose from an antecedent
state court negligence action, the facts of which bear on the case at
hand.
On March 19, 1990, George Roche ("Roche") sustained injuries
when he slipped and fell on motel property owned by Young.
Although Roche's injuries required medical attention and Young
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knew about the accident the day it happened, Young failed to immedi-
ately notify its commercial general liability insurer--Royal--as
required by the terms of the contract. Instead, Young notified Royal
of the accident three months later in June, after Roche had obtained
an attorney and sent a letter to Young stating his potential claim
against Young.
On August 31, 1990, Roche filed an action against Young in the
Court of Common Pleas for Florence County, South Carolina. On
September 4, 1990, Roche served process on Young by restricted reg-
istered mail addressed to Ed L. Young (the registered agent for ser-
vice of process). Instead of Ed L. Young receiving the process, James
Neil Young, a vice-president of the corporation, signed for and subse-
quently misplaced the letter of service. Consequently, Young
remained unaware of the lawsuit against it until February 12, 1992,
when it received notification that a default judgment had been entered
against it in the amount of $ 45,000. Upon learning of the judgment,
Young immediately notified Royal. Said notification, therefore, was
the first time Royal learned that a suit had been brought against
Young.
Royal refused to tender a defense and/or provide coverage for
Young, on the grounds that Young failed to comply with the condi-
tion precedent outlined in its insurance contract that specifically
required Young to timely notify Royal whenever it sought coverage.
Eventually Young and Royal signed a non-waiver agreement, which
stipulated that Royal would retain counsel to assist Young's counsel
in its appeal from the default judgment.
On appeal, the South Carolina Court of Appeals reversed and
vacated the judgment against Young for improper service of process
and deficient notice. When Roche appealed to the Supreme Court of
South Carolina, however, the Court reinstated the default judgment
against Young, finding that Roche had shown compliance with the
service of process provisions stated in Rule 4(d)(8), SCRCP, and that
Young had failed to show that James Neil Young was unauthorized
to accept service on behalf of the corporation. The Supreme Court did
however remand the matter for a hearing on damages.
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II.
In district court, Young sought actual and punitive damages for
breach of contract and bad faith refusal to defend and indemnify.
Young argued it did not receive notice of the suit until the day the
default judgement was entered against it because the summons had
been erroneously delivered to James N. Young, an officer of the cor-
poration who lacked the authority to accept service of process. Royal
countered that because Young lost the summons and complaint and
consequently failed to send proper notification to Royal as required
under its policy, Royal was not obligated to provide a defense.
Upon Royal's motion for summary judgment, the district court
found that Royal did not breach the contract by not defending Young
in Roche's state court action against Young. And it further found that
Young was precluded from pursuing its bad faith refusal claim.
With respect to the breach of contract action, the district court
found that no material issue of fact existed as to Young's failure to
fulfill the condition precedent of timely notice to Royal. Young
received proper service pursuant to Rule 4(d)(8), SCRCP, but failed
to immediately notify Royal. The district court also found as a matter
of law that notice of suit given to an insurer approximately one and
a half years after actual receipt of the papers, and after the suit had
been reduced to a default judgment, failed to constitute timely notice
within the policy terms.
With respect to the bad faith refusal to defend and indemnify, the
district court, citing Walters v. Canal Ins. Co. , 363 S.E.2d 120 (S.C.
App. 1987), found that under South Carolina law a bad faith suit will
not lie against an insurer unless the insured has met all conditions pre-
cedent under the policy.
Young appeals the district court's order of summary judgment. It
asserts the district court misconstrued the facts in favor of Royal, and
disregarded existing questions of material fact concerning its receipt
of process in the state court action and its notification of the state suit
to Royal.
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After carefully reviewing the record, reading the briefs, hearing
oral argument, and giving full consideration to the parties' conten-
tions, we affirm the judgment below of the district court.
AFFIRMED
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