Beachwalk Homeowners Ass'n v. General Star Indemnity Co.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BEACHWALK HOMEOWNERS 
ASSOCIATION,
Plaintiff-Appellant,
v.
GENERAL STAR INDEMNITY COMPANY,
Defendant-Appellee,  No. 02-2193
and
GENERAL STAR MANAGEMENT
COMPANY,
Defendant.

BEACHWALK HOMEOWNERS 
ASSOCIATION,
Plaintiff-Appellee,
v.
GENERAL STAR INDEMNITY COMPANY,
Defendant-Appellant,  No. 02-2294
and
GENERAL STAR MANAGEMENT
COMPANY,
Defendant.

Appeals from the United States District Court
for the District of South Carolina, at Beaufort.
Patrick Michael Duffy, District Judge.
(CA-01-3130-9-23)
Argued: June 3, 2003
Decided: September 3, 2003
2 BEACHWALK HOMEOWNERS ASSOC. v. GENERAL STAR INDEMNITY
Before WIDENER, NIEMEYER, and LUTTIG, Circuit Judges.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Michael S. Seekings, MULLEN, WYLIE & SEEKINGS,
L.L.C., Charleston, South Carolina, for Appellant. C. Michael John-
son, FELLOWS, JOHNSON & LA BRIOLA, L.L.P., Atlanta, Geor-
gia, for Appellee. ON BRIEF: Laurie E. Dugoniths, FELLOWS,
JOHNSON & LA BRIOLA, L.L.P., Atlanta, Georgia; William C.
Cleveland, Mark A. Crawford, BUIST, MOORE, SMYTHE &
MCGEE, P.A., Charleston, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Plaintiff Beachwalk Homeowners Association appeals from the
judgment of the district court granting summary judgment to defen-
dants General Star Indemnity Company and General Star Manage-
ment Company1 on the ground that the type of property damage
claimed by the plaintiff was excluded under its insurance policy. In
its complaint, the plaintiff asserted claims for breach of contract and
bad faith refusal to settle, as well as a demand for declaratory judg-
ment in favor of coverage. The district court granted summary judg-
ment as to all claims in favor of the defendants. On appeal, the
1
General Star Management Company is not a party to this appeal.
BEACHWALK HOMEOWNERS ASSOC. v. GENERAL STAR INDEMNITY 3
plaintiff asserts that the district court erred in granting summary judg-
ment because the damaged building for which the claim was filed was
in a state of imminent collapse as the result of defective methods of
construction, which is alleged to be a covered risk under the terms of
the policy. The defendants filed a cross-appeal asserting that the dis-
trict court erred in not granting summary judgment on the additional
grounds raised in their motion. For the following reasons, we affirm
the judgment of the district court. Expressing no opinion on the same,
we dismiss the cross-appeal as moot.
On June 27, 1997, the defendants issued a Commercial Insurance
Policy, No. IAG-351172, to the plaintiff, which provided coverage for
a variety of risks for the 16 buildings that comprise Beachwalk Villas
condominium development which is more than 25 years old. Around
November or December of 1998, an employee of the plaintiff’s prop-
erty management company, Allied Management, was notified of
structural problems with Building Ten, which is comprised of condo-
minium units 163-169. The structural problems included cracking of
the walls and ceilings, sloping of the floors and countertops, and mis-
alignment of the doors.
Allied Management consulted various architects and engineers to
determine the cause of the damage to the building. They discovered
that a portion of the building was built over a construction debris pit,
which was causing settlement of the foundation of four to six inches
at a corner of the building. The district judge correctly found the
cause of the loss as follows:
It was determined then, and is uncontested, that the damages
to Building Ten were caused by long-term settlement, which
in turn was caused by Building Ten having been built over
a construction debris pit.
The plaintiff then installed helical piers below the building. The
piers were designed to retard the continuing settlement and to stop the
building from collapsing as a result of underlying decay. The plaintiff
also repaired the damage done to the interior of the building. The total
cost that the plaintiff spent on these repairs was $89,789.
In December of 1999, the plaintiff submitted a claim with its insur-
ance agent, Coastal Plains Insurance Company. The plaintiff for-
4 BEACHWALK HOMEOWNERS ASSOC. v. GENERAL STAR INDEMNITY
warded all of the invoices for repairs to Building Ten to Coastal
Plains which then forwarded notice of the claim to its broker, who
forwarded it to the defendants in June of 2000.
On July 26, 2000, the defendants notified the plaintiff in a letter
that they were denying the claim on the following grounds:
[N]o coverage is afforded for the damages claimed, as foun-
dations are not considered covered property under the Build-
ing and Personal Property Coverage form. In addition, the
policy also specifically excludes damages which are the
result of earth movement, decay or deterioration, settlement
or faulty or inadequate construction or siting.
The plaintiff then filed this action in the South Carolina Court of
Common Pleas, which was removed to the district court on the basis
of diversity of citizenship, seeking its damages under the insurance
policy.
Following discovery, the district court granted the defendant’s
motion for summary judgment. We affirm.
Summary judgment is appropriate when the "pleadings depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any mate-
rial fact and that the moving party is entitled to judgment as a matter
of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting
Fed. R. Civ. P. 56(c)). There is no genuine issue for trial if the record
taken as a whole could not lead a rational trier of fact to find for the
non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986).
The issue we are reviewing involves the interpretation of an insur-
ance contract, which is subject to the law of South Carolina. Under
South Carolina law, insurance policies are subject to general rules of
contract construction. See Fritz-Pontiac-Cadillac-Buick v. Goforth,
440 S.E.2d 367, 369 (S.C. 1994). "The [c]ourt must give policy lan-
guage its plain, ordinary, and popular meaning." Century Indem. Co.
v. Golden Hills Builders, Inc., 561 S.E.2d 355, 358 (S.C. 2002).
BEACHWALK HOMEOWNERS ASSOC. v. GENERAL STAR INDEMNITY 5
The plaintiff claims as a covered cause of loss that described in the
policy as: "D. ADDITIONAL COVERAGE - COLLAPSE." Part D.1
of the policy provides:
We will pay for direct physical loss or damage to Covered
Property, caused by collapse of a building or any part of a
building insured under this Coverage Form, if the collapse
is caused by one or more of the following: (a) The "speci-
fied cause of loss" or breakage of building glass . . . (b) Hid-
den decay; (c) Hidden insect or vermin damage; (d) Weight
of people or personal property; (e) Weight of rain that col-
lects on a roof; (f) Use of defective material or methods in
construction . . . if the collapse occurs during the course of
the construction . . . . However, if the collapse occurs after
construction . . . is complete and is caused in part by a cause
of loss listed [above], we will pay for the loss or damage
even if the use of defective material or methods, in construc-
tion . . . contributes to the collapse.
The COLLAPSE coverage, Part D.4, also provides that:
[c]ollapse does not include settling, cracking, shrinkage,
bulging or expansion.
And a policy EXCLUSION to the covered causes of loss is Part
B.2.d.(4) which is that:
We will not pay for loss or damage caused by or resulting
from any of the following: . . . d.1(4) settling, cracking,
shrinking or expansion . . . [unless the loss results from] a
"specified cause of loss"
which is defined in the policy separately but is not applicable here.2
2
A "specified cause of loss" under Part F of the policy is fire; light-
ning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or
civil commotions; vandalism; leakage from fire extinguishing equip-
ment; sinkhole collapse; volcanic action; falling objects; weight of snow,
ice or sleet; water damage. And sinkhole collapse means the sudden sink-
ing or collapse of land into underground empty spaces created by the
action of water on limestone or dolomite.
6 BEACHWALK HOMEOWNERS ASSOC. v. GENERAL STAR INDEMNITY
The parties are not in agreement as to the meaning of the word col-
lapse as used in the policy. The plaintiff takes the view that imminent
collapse is sufficient, and the insurance company takes the view that
the collapse must have happened. We need not, and do not, decide
that question. For the purposes of this opinion, we will assume that
imminent, or near, or ultimate, collapse, as appears in this record, is
sufficient.
The building construction was completed years ago, so one of the
itemized causes of loss in Part D.1.a-e must be a contributing cause
if use of a defective method of construction contributed to a collapse.
The only one of those itemized causes which might be applicable is
b., hidden decay. The argument goes that any decay in the materials
in the trash pit may have contributed to the cause of the loss. The dis-
trict court, however, construed decay to refer to decay that exists in
the covered property, not in the land beneath the covered property. It
reasoned that the policy defines covered property in Part A. COVER-
AGE, which includes the buildings, and provides that the term does
not include "land including land on which the property is located."
Part A.2.h. We are of opinion the district court was correct.3
Thus, the specific provision in Part D.4, that "collapse does not
include settling" and the similar exclusion in Part B.2.d.(4), that the
policy would not "pay for loss or damage caused by . . . settling,"
govern here. The meaning of the language is clear. The loss having
been caused by long-term settlement, recovery under the policy is
precluded.
Our application of an exclusion in an insurance policy is consistent
with South Carolina law. See Falkosky v. Allstate Insurance Com-
pany, 429 S.E.2d 194 (S.C. Ct. App. 1993); Laidlaw Environmental
3
"Covered Property," as defined in the policy, includes coverage for
"Building, meaning the building or structure described in the Declara-
tions . . . ." Condominium Ass’n Coverage Form, ¶ A(1)(a). The policy
specifies, however, that property not covered is: (1) "Foundations of
buildings, structures . . . if their foundations are below . . . the lowest
basement floor; or . . . the surface of the ground . . ."; and (2) "Land
(including land on which the property is located) . . . ." ¶¶ A(2)(g) & (h).
BEACHWALK HOMEOWNERS ASSOC. v. GENERAL STAR INDEMNITY 7
Services (TOC) Inc. v. Aetna Cas. & Sur. Co. of Ill., 524 S.E.2d 847,
849-50 (S.C. Ct. App. 1999).
The judgment of the district court is accordingly
AFFIRMED.