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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

ACE PROPERTY AND CASUALTY INSURANCE COMPANY v. SPECIALTY LOGGING LLC et al

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
1:14-cv-00944 Search Pacer
Court Type: 
Federal
US District Court: 
District of South Carolina
Date Filed: 
Mar 17 2014

FACTS
The Policy
14. ACE issued Commercial Automobile Policy Number H08665102 to named
insured Specialty Logging for the policy period of March 23, 2010, through March 23, 2011
(the "Policy"). A true and correct copy of the Policy is attached hereto as Exhibit C.
15. Mr. Moors was an insured under the Policy as a result of being an employee of
the named insured, Specialty Logging, and as a result of driving, with the named insured's
permission, a vehicle scheduled under the Policy.
16. The Policy had limits of $1,000,000 per occurrence.
17. The Policy provides liability coverage for "all sums an 'insured' legally must
pay as damages because of 'bodily injury' or 'property damage' to which this insurance
applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a
covered 'auto'." Ex. C, Business Auto Coverage Form § 11(A), at 2.
18. The Policy imposed certain duties upon the Insureds in the event of an
accident, claim, suit, or loss, which operate as conditions precedent to ACE's duty to provide
coverage. In relevant part, the Policy provides:
We have no duty to provide coverage under this policy unless
there has been full compliance with the following duties:
a. In the event of "accident," claim, "suit" or "loss," you must
give our authorized representative prompt notice of the
"accident" or "loss."
b. Additionally, you and any other involved "insured" must:
(1) Assume no obligation, make no payment or incur no
expense without our consent, except at the "insured's"
own cost.
(2) Cooperate with us in the investigation or settlement of
the claim or defense against the "suit".
Id. § IV(A)(2), at 7-8.
19. In addition, the Policy contains a "no action" clause:
No one may bring legal action against us under this Coverage Form
until:
a. There has been full compliance with all the terms of this
Coverage Form; and
b. Under Liability Coverage, we agree in writing that the "insured"
has an obligation to pay or until the amount of that obligation
has been finally determined by judgment after trial. . . .
Id. § IV(A)(3), at 8.
20. The Policy also contains a clause in the Common Policy Conditions form that
prohibits the transfer of any named insured's rights and duties thereunder without ACE's
written consent:
F. Transfer Of Your Rights And Duties Under This Policy
Your rights and duties under this policy may not be transferred
without our written consent except in the case of death of an
individual named insured. . . .
Id., Common Policy Conditions, TJF.
The Accident
21. On or about September 22, 2010, Mr. Moors was driving Specialty Logging's
logging truck when he was involved in an accident in Port Wentworth, Georgia (the
"Accident"), which purportedly injured Mr. Skipper.
22. ACE first received notice of the Accident on or about September 24, 2010.
23. Mr. Skipper retained counsel in Georgia. On September 28, 2010, Mr.
Skipper's counsel requested information on the insurance coverage available to Specialty
Logging, to which ACE promptly responded on October 4, 2010, informing Mr. Skipper's
counsel that the Policy limit was $1,000,000.
24. In November 2010, ACE settled Mr. Skipper's claim for the property damage
to his vehicle, ultimately paying $18,788.79. The payment of Mr. Skipper's property
damage claim partially eroded the Policy's $1,000,000 limits, leaving only $981,211.21
remaining under the Policy.
25. Approximately three months after the Accident, Mr. Skipper began to
complain about back pain. Unknown to ACE at the time, Mr. Skipper underwent lumbar
fusion surgery in April 2011 and again in December 2011 to treat stenosis and
spondylothesis in the lumbar of his spine. As described below, an orthopedic surgeon
retained by ACE determined that the stenosis and spondylothesis were pre-existing
conditions that were not aggravated by the Accident.
Mr. Skipper's Time-Limited Pre-Suit Demand
26. ACE did not hear from Mr. Skipper or his counsel again until May 2012. On
May 15, 2012, ACE received a settlement demand from Mr. Skipper's counsel seeking
$1,000,000. Mr. Skipper's counsel imposed a time limit of 30 days for ACE to accept this
demand.
27. Along with this demand, Mr. Skipper's counsel delivered medical bills,
records, and reports as purported support for Mr. Skipper's claim. None of these materials
had been provided to ACE before May 15, 2012. Mr. Skipper's demand did not include a
medical authorization to enable ACE to verify Mr. Skipper's medical history.
28. On June 4, 2012, ACE retained the law firm of Lewis Brisbois Bisgaard &
Smith LLP as defense counsel to defend Specialty Logging and Mr. Moors even though no
lawsuit had been filed. Lewis Brisbois partner Brantley Rowlen was lead defense counsel.
That same day, Mr. Rowlen wrote Mr. Skipper's Georgia counsel to request a 60-day
extension to respond to the policy limits demand given the extensive medical records to be
reviewed and analyzed. Mr. Rowlen also requested a complete copy of Mr. Skipper's
medical records, including records regarding Mr. Skipper's pre-Accident condition.
29. Mr. Skipper's counsel refused the requested 60-day extension, agreeing only
to a 30-day extension. Instead of providing the requested medical records regarding Mr.
Skipper's pre-Accident condition, Mr. Skipper's counsel simply provided an affidavit from
Mr. Skipper that stated he did not suffer from any back pain before the Accident.
30. On June 8, 2012, ACE advised Specialty Logging that Mr. Skipper might seek
damages in excess of its policy limits and that Specialty Logging was free to retain separate
defense counsel to protect its interests if it so desired.
31. ACE retained an orthopedic surgeon to review the limited medical records
provided by Mr. Skipper's counsel with his $1,000,000 demand. The orthopedic surgeon
concluded that, based upon the records available, Mr. Skipper's alleged back injuries were
due to pre-existing conditions and were not related to or aggravated by the Accident. On
July 16, 2012, ACE rejected Mr. Skipper's demand but nonetheless made an offer of
settlement on the Insureds' behalf.
32. When ACE made its offer of settlement on the deadline set by Mr. Skipper, no
lawsuit had been filed, no discovery had been taken, and ACE had not had a meaningful
opportunity to evaluate any evidence other than the information that Mr. Skipper's counsel
provided.
33. Mr. Skipper never responded to ACE's settlement offer.
The Underlying Lawsuits and
the Skippers' Ever-Increasing Settlement Demands
34. Instead of responding to ACE's settlement offer, Mr. Skipper retained new
counsel in South Carolina, H. Woodrow Gooding and Mark Tinsley of Gooding and
Gooding, P.A., and filed a lawsuit against the Insureds on August 17, 2012 in the Court of
Common Pleas of Allendale County, South Carolina, under Civil Action Number 2012-CP-
03-00172.
35. Mr. Skipper's Lawsuit asserted causes of action arising out of the Accident
against Mr. Moors for negligence and reckless conduct and against Specialty Logging for
imputed liability and negligent hiring, training, and supervision.
36. Before Mr. Skipper's Lawsuit was filed, there was no indication that Mr.
Skipper would file suit in Allendale County, South Carolina. Rather, there was every
indication that he would file suit in Georgia, given that the Accident occurred in Georgia,
Mr. Skipper resided in Georgia, and had retained Georgia counsel.
37. Neither the Insureds nor ACE received a complete list of Mr. Skipper's
medical providers until after Mr. Skipper's Lawsuit was filed and his medical records were
obtained through discovery.
38. After Mr. Skipper retained Gooding and Gooding and filed his lawsuit, there
was no opportunity for Specialty Logging, Mr. Moors, and/or ACE to settle Mr. Skipper's
claims within the Policy's limits.
39. Mr. Bowers, as Specialty Logging's corporate representative, gave a
deposition in Mr. Skipper's Lawsuit on January 18, 2013. During his deposition, Mr.
Bowers stated on the record that Specialty Logging assumed full responsibility for causing
the Accident. Mr. Bowers made this statement even though Specialty Logging and Mr.
Moors had viable defenses to causation and damages.
40. On February 14, 2013, Mr. Skipper filed an offer of judgment in the
Underlying Lawsuit for $2,500,000. This offer exceeded the Policy's limits.
41. In or around late Spring/early Summer 2013, the Insureds retained Mr.
Randolph Murdaugh IV of Hampton, South Carolina as their personal counsel.
42. On April 30, 2013, Specialty Logging requested that ACE tender the
remaining Policy limits to settle Mr. Skipper's claims. ACE promptly did so.
43. On May 28, 2013, Mr. Skipper's counsel made another settlement demand in
excess of the Policy's limits. The value that Mr. Skipper's counsel attached to Mr. Skipper's
claim was based largely on the fact that juries in Allendale County tend to award damages far
in excess of the plaintiff's actual damages. Mr. Skipper's counsel threatened bad faith
litigation against ACE in the event an excess verdict was entered against the Insureds even
though the Skippers had no standing to assert bad faith claims.
44. On July 18, 2013, in a letter from Mr. Murdaugh, the Insureds demanded that
ACE settle Mr. Skipper's claim even if that meant paying in excess of the Policy's remaining
limits. Mr. Murdaugh's letter also mentioned the possibility of a bad faith claim against
ACE if ACE refused.
45. On or about September 19, 2013, Veronica Skipper filed a lawsuit in the Court
of Common Pleas in Allendale County, South Carolina, under Civil Action Number 2013-
CP-03-00168, against Specialty Logging and Mr. Moors. Mrs. Skipper asserted causes of
action for imputed liability and negligent hiring, training, and supervision against Specialty
Logging and sought damages for alleged loss of consortium, all arising out of the Accident.
46. ACE has at all times attempted to negotiate with the Skippers and the
Specialty Logging Parties in an attempt to settle the Skippers' claims.
The Settlement Agreement
47. Weeks before the anticipated trial date in Mr. Skipper's Lawsuit, on January 9,
2014, the Skippers, the Insureds, and Mr. Bowers entered into a Settlement Agreement,
Agreement to Stay Execution of Judgment, and Springing Covenant Not to Execute (the
"Settlement Agreement"). A true and correct copy of the Settlement Agreement is attached
hereto as Exhibit B.
48. Pursuant to the Settlement Agreement, the Insureds and Mr. Bowers agreed to
execute a Confession of Judgment in which they admitted liability for the injuries and losses
sustained by the Skippers and agreed that the value of those injuries and losses was $4.5
million. Ex. B § 3.1 (Settlement Agreement). A true and correct copy of the Confession of
Judgment is attached hereto as Exhibit A.
49. The Confession of Judgment was not filed with the court in Allendale County.
Instead, it is being held in "trust" by the Skippers' counsel, and will continue to be held in
trust so long as the Insureds and Mr. Bowers abide by their obligations under the Settlement
Agreement. See Ex. B. § 3.1 (Settlement Agreement) ("Thereafter, counsel for Plaintiffs
shall hold the Judgment only to be filed and enrolled on the Judgment Roll with the
Allendale County Clerk of Court under the circumstances as outlined in this settlement
agreement."); id. §5.5 (providing that if the Insureds and Mr. Bowers "fail, refuse or are
unable to fully participate, prosecute the claims or cooperate with Plaintiffs' counsel in the
prosecution of the claims," then upon notice, "Plaintiffs shall have the right to immediately
begin execution on the Judgment."); see also Ex. A \2 (Confession of Judgment) ("Plaintiffs'
counsel will hold this Confession of Judgment in trust until such time as the Defendants fail
to meet the terms or conditions precedent to the filing of the Confession of Judgment.").
50. The Settlement Agreement further provides that the Skippers will delay filing
the Confession of Judgment and stay its execution "until all claims that may be brought by or
on behalf of [the Skippers] and [the Insureds and Mr. Bowers] . . . are resolved by settlement
or verdict or otherwise resolved or abandoned." Ex. B § 4.2 (Settlement Agreement). But
the very next section states that "upon the earlier of a settlement of [the Skippers'] claims
against [the Insureds and Mr. Bowers] or final judgment in all claims by or on behalf of [the
Skippers] and [the Insureds and Mr. Bowers] to recover as damages, . . . [the Skippers] will
mark the Judgment as satisfied and agree never to enforce, execute or levy upon [the
Insureds' and Mr. Bowers'] personal assets for the Judgment" Id. §4.3.
51. The Settlement Agreement also purported to assign the Skippers an interest in
the Insureds' and Mr. Bowers' claims against ACE for its alleged mishandling of the claim
and against Lewis Brisbois for alleged legal malpractice, among other alleged claims (the
"Assignment"). Id. §§ 5.1-5.2.2 The Insureds and Mr. Bowers agreed to cooperate with the
Skippers in the prosecution of the claims against ACE. Id. § 5.5.
52. Pursuant to the Assignment, the Insureds and Mr. Bowers could receive
anywhere from five to fifteen percent of the proceeds from a settlement of the claims against
ACE—even if the settlement is for less than $4.5 million, the amount of the confessed
judgment. Id. § 5.3.
53. Because the Insureds did not expect to pay the confessed judgment out of their
own resources, their interests were no longer adverse to the Skippers' interests. In fact, their
interests were aligned against ACE insofar as the Insureds could receive a portion of any
settlement of the assigned claims.
54. Neither the Skippers nor the Insureds informed Lewis Brisbois or ACE that
they planned to enter into the Settlement Agreement and Assignment or execute the
Confession of Judgment. The Insureds never sought or obtained ACE's consent to the
Settlement Agreement, the Assignment, or the Confession of Judgment.
55. On or about January 15, 2014, the Insureds, Mr. Bowers, and the Skippers (as
purported assignees) filed the Claim Handling Lawsuit against ACE. The Claim Handling
Lawsuit was originally filed in the Court of Common Pleas of Allendale County, South
Carolina and has since been removed to this Court and assigned to the Honorable J. Michelle
Childs under Civil Action Number l:14-cv-00444-JMC. Plaintiffs have indicated that they
plan to file a motion to remand the Claim Handling Lawsuit to state court.
56. In the Claim Handling Lawsuit, ACE has filed a motion to dismiss, arguing
that the Settlement Agreement, Assignment, and Confession of Judgment are invalid. ACE
anticipates that the Skippers will attempt to reinstate the Underlying Lawsuits against the
Insureds, as contemplated by the Settlement Agreement. See Ex. B § 3.2 (Settlement
Agreement). ACE brings this action so that this Court may determine ACE's duties in
connection with the Underlying Lawsuits. ACE brings this action separately from the Claim
Handling Lawsuit so that the claims asserted herein may continue to be adjudicated in this
Court in the event the Claim Handling Lawsuit is dismissed or remanded.
57. The Insureds breached the Policy by (1) accepting full responsibility for the
Accident even though there were viable defenses to both causation and damages, (2)
executing a Confession of Judgment for $4.5 million despite viable defenses, (3) agreeing to
cooperate with the Skippers in the prosecution of the Claim Handling Lawsuit, (4) agreeing
to the Assignment, and (5) suing ACE to recover the amount of the purported judgment even
though ACE had not agreed in writing that Insureds had an obligation to pay and the amount
of that obligation had not been finally determined by judgment after trial. These material
breaches substantially prejudiced ACE.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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