Update: Crossman Communities of North Carolina v. Harleysville Mutual Insurance Company

By Stephen P. Groves, Sr.

Crossmann Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Company,

___ S.C. ___, ___ S.E.2d ___ (2011) (2011 WL 93716, filed January 7, 2011)

On January 11, 2011, I posted an entry to this blog addressing the South Carolina Supreme Court’s decision in the above-referenced case. As it turned out, my entry was only the tip of the iceberg. This case has created a firestorm of controversy in South Carolina and has been the subject of discussion around this country. Furthermore, the decision spurred action in the South Carolina Legislature with the introduction of various bills seeking, in essence to overturn Crossmann Communities and make sure that insurance companies doing business in South Carolina provide liability insurance coverage to contractors and subcontractors for unintentional defective construction and/or faulty workmanship.

The opinion, of course, elicited a Petition for Rehearing, as well as, numerous amicus briefs in opposition to and in support of the petition. The amici included the (a) Ledgestone Court Residents of York County; (2) Coastal Carolina University Student Housing Association, (3) American Subcontractors Association of the Carolinas, (5) Mechanical Contractors Association of South Carolina, (6) Riverwalk at Arrowhead Country Club Property Owners Association, (7) Medical University of South Carolina, (8) Home Builders Association of South Carolina, (9) National Association of Nome Builders, (10) Community Associations Institute, (11) South Carolina Chapter of the Community Associations Institute, (12) Associated General Contractors of America, Inc., (13) Carolinas AGC, Inc., (14) Cincinnati Insurance Company, (15) Charleston County School District, (16) School District of Greenville County, (17) Associated Builders and Contractors of the Carolinas, Inc., and (18) Leading Builders of America. In the spirit of full disclosure, I filed an amicus brief on behalf of the Property Casualty Insurers Association of America.

Apparently, based at least in part on the uproar, including the legislative action, on March 9, 2011, the Supreme Court granted the Petition for Rehearing and scheduled re-argument of the case for Monday, May 23, 2011. In addition to the unusual Monday scheduling, the Supreme Court has specifically granted all of the amici oral argument time. This should prove to be an interesting day.

Women's (Legal) History Month, Part One: Chief Justice Toal makes history (again!)

By Kirsten E. Small

Just as I was casting about for my first post about the history of female lawyers in this country, the South Carolina Bar's weekly e-newsletter arrived in my box with the news that South Carolina Supreme Court Chief Justice Jean Hoefer Toal has been named the first recipient of the Sandra Day O'Connor Award for the Advancement of Civics Education. The award, given by the National Center for State Courts recognizes Chief Justice Toal for her leadership in the SC Supreme Court's "long history of supporting civics education." The press release is here.

The civics programs sponsored by the Court are described here.

Of course, this is not the first time Chief Justice Toal has made history. She was the South Carolina Supreme Court's first female justice and currently serves as the first female Chief Justice. As her official bio notes, when she was admitted to the bar in 1968, fewer than one percent of the state's lawyers were women.

Fourth Circuit rejects South Carolina's definition of "direct contempt"

By Kirsten E. Small

Last Friday, the Fourth Circuit affirmed a grant of habeas relief in favor of Donald Brandt. A South Carolina court summarily convicted Brandt of "direct" criminal contempt and sentenced him to six months' imprisonment, based on Brandt's use of a forged letter in a deposition. Brandt appealed his conviction, arguing that "direct" contempt applies only to conduct occurring in the presence of a judge. The South Carolina Supreme Court agreed with this proposition but held that the "presence" of the judge encompasses "all elements of the judicial system," including a deposition.

Not so much, says the Fourth Circuit. Y'all can do what you want as a matter of due process under the state Constitution, but the federal Constitution* allows a conviction for direct criminal contempt only when the judge actually sees the contemptuous conduct. Because that was not the case with Brandt (the contempt was proved to the court, in part, with expert testimony that the document was forged), direct criminal contempt was improper.

You might wonder if this decision is a hallmark of a more "liberal" Fourth Circuit, which one lawyer once referred to as a "black hole" of habeas jurisprudence. I don't think so. For one thing, the authoring judge (Agee) is a Bush appointee. For another, the decision was really a no-brainer. The law on what constitutes direct contempt is abundantly clear, and the South Carolina Supreme Court clearly applied the wrong definition.

*Any grammar gurus out there: what's the capitalization rule for the word "constitution" when combined with the modifiers "state" or "federal?" I know that constitution should be capitalized when referring to "the Constitution" (as in, the federal one), but beyond that, I'm lost. (Incidentally, Blogger's spell check seems to think that "constitution" should always be capitalized. Hmm.)

Water, Water Everywhere, but not a Drop to Drink

By Stephen P. Groves, Sr.

In M & M Corporation of South Carolina v. Auto-Owners Insurance Company, ___ S.C. ___, ___ S.E.2d ___ (2010) (Sup. Ct. Op. No. 26883, filed 11 October 2010), a divided South Carolina Supreme Court (3-2), answered several certified questions from the United States District Court for the District of South Carolina. The Supreme Court determined Auto-Owners was required to provide property damage insurance coverage to its insured hotel for damages caused by overflowing water.
Auto-Owners issued M&M Corporation a commercial all-risk insurance policy for its hotel property located in Blythewood, South Carolina. In August 2006, the South Carolina Department of Transportation (“SCDOT”) initiated a road improvement project near the hotel which involved, in part, installation of a new underground stormwater drainage system. Before the system could be completed the Blythewood area sustained a significant rain event during which more than four inches of rain fell in a single day. As noted by the Supreme Court:

The incomplete stormwater drainage system comprised 1,600 feet of pipes and collected water from an area of approximately 15.9 acres, terminating at an exposed, above-ground [30]-inch pipe [50’] from the edge of the hotel property line and [150’] from [the] hotel building. The total volume of water discharged from the pipe on the day at issue was over 830,000 gallons at a rate of 6.3 feet per second.

Unfortunately, the discharged water filled the hotel’s parking lot to a level sufficient to allow water to enter into the interior of the hotel building and, in turn, cause significant property damage. M&M Corporation sued Auto-Owners for the damages. Auto-Owners denied and defended the claim on the basis of the insurance policy’s “flood” and “surface water” exclusions. After the parties filed their respective cross-summary judgment motions, the District Court certified three questions to the Supreme Court.

1. Under an all-risk Commercial Property Policy of insurance, does "surface water" encompass rainwater collected and channeled in a stormwater collection system?

The Supreme Court noted that since the insurance policy did not define either the term “surface water” or “flood water” then it was free to use the “plain, ordinary, and popular meaning[s]” of those terms. Moreover, the Supreme Court noted insurance policies are construed in favor of coverage with all exclusions, such as those asserted by Auto-Owners, interpreted against the insurer.

Looking to a definition of “surface water” reached in 1901, the Supreme Court concluded that “[o]nce surface water is deliberately contained, concentrated, and cast onto an adjoining landowner's property, it is no longer naturally flowing, diffuse water. Water spewing in an unnatural concentration from a stormwater drainage system lacks the identifiable characteristics of surface water . . . .” . The Supreme Court therefore answered the first certified question with a rather emphatic “No”.

2. If the answer to Question I is no, can such non-surface water reacquire its classification as surface water upon exit from the stormwater collection system and, if so, under what circumstances?

Following, in essence, the same 100+ year old definition, the Supreme Court also answered the second certified question with a similar rather emphatic “No”. The Court stated once the rampaging waters had lost their “surface water” characteristics when expelled from the pipe, the unnatural flow cannot be transformed back into “surface water”.

3. Under an all-risk Commercial Property Policy of insurance, does "flood water" encompass water discharged from a stormwater collection system in concentrated form, pooled, and that thereafter enters a building?

Finally, interpreting Auto-Owners’ “flood water” exclusion, the Supreme Court noted South Carolina had not yet defined the term. Looking to an Idaho case, the Supreme Court impliedly approved a definition reading “ ‘[f] waters are waters which escape, because of their height, from the confinement of a stream and overflow adjoining territory; implicit in the definition is the element of abnormality.’ ” See Milbert v. Carl Carbon, Inc., 406 P.2d 113, 117 (Idaho 1965). Since the waters in this case did not “breach” the containment of a stream or other natural land formation, but was intentionally channeled, then the waters cannot be defined as “flood waters”.

Chief Justice Toal authored the opinion and was joined by Justices Beatty and Kittredge. Justices Pleicones authored a dissenting opinion joined in by Justice Hearn.

1. See Lawton v. South Bound Railroad Co., 61 S.C. 548, 39 S.E. 752 (1901). The Supreme Court defined “surface water” as:

waters of a casual and vagrant character, which ooze through the soil or diffuse or squander themselves over the surface, following no definite course. They are waters which, though customarily and naturally flowing in a known direction and course, have nevertheless no banks or channels in the soil, and include waters which are diffused over the surface of the ground, and which are derived from rains and melting snows . . . .

Lawton v. South Bound Railroad Co., 61 S.C. 548, 552, 39 S.E. 752, 753.

SC Supreme Court holds that what a jury might do is irrelevant to summary judgment analysis.

by Kirsten E. Small

Earlier this month, the South Carolina held that the Court of Appeals improperly applied a jury-focused standard in reviewing a grant of summary judgment by the circuit court. Hoard v. Roper Hospital, Inc. (S.C. May 3, 2010).

Neonatologist Marshall Goldstein directed the placement of an umbilical vein catheter (UVC) as part of his treatment of newborn Jamia Hoard for respiratory distress. One risk of a UVC is that it will be improperly placed, piercing the right atrium. Radiologist Robert Smith reviewed an x-ray and noted in his report that the catheter had pierced Jamia's atrium. Aware of this information, Dr. Goldstein decided not to reposition the catheter. As a result of the improper placement of the UVC, Jamia suffered a cardiac arrest that resulted in significant brain damage.

All defendants except Dr. Smith settled. The circuit court granted summary judgment to Dr. Smith, concluding that even if Dr. Smith was negligent, Dr. Goldstein's decision not to adjust the UVC was an intervening and independent proximate cause of the injury. This conclusion was based in large part upon Dr. Goldstein's deposition testimony regarding his decision not to adjust the UVC, which was uncontradicted by any other record evidence.

The Court of Appeals reversed on the basis of the established rule that a jury is not required to accept even uncontroverted testimony. The Supreme Court reversed the Court of Appeals, noting that while a jury may reject uncontroverted testimony at trial, this rule does not apply on summary judgment, where the burden rests on the plaintiff to "affirmatively demonstrat[e] the presence of a genuine issue of material fact." It was therefore irrelevant, and counter to the very purpose of summary judgment, to consider how a jury might view the evidence.

South Carolina Court of Appeals holds that violating mandatory seatbelt law is not evidence of negligence.

By Manton Grier, Jr.

In Sims v. Gregory, Opinion No. 4649 (Ct. App. Jan. 28, 2010), the Court of Appeals held that violating a mandatory seatbelt statute was not evidence of negligence. In that case, a minor child was injured when the car her father was driving was hit by a third party. The child’s mother sued the father. Although the father was not responsible for the wreck, the mother argued that the father was responsible for some of the damages because he failed to ensure that his daughter was secured by a shoulder harness in addition to a lap belt.

The case was decided strictly on the basis of statutory interpretation. Although Section 56-5-6520 requires a driver to secure with proper seatbelts all passengers under 18, Section 56-5-6540(C) states that a “violation of this article is not negligence per se or contributory negligence, and is not admissible as evidence in a civil action.” The court further held that the duty to apply a seatbelt to a minor is only a statutory, and not common-law, duty. Thus, the clear meaning of Section 56-5-6540(C) precludes private right of actions under the mandatory seatbelt law.

U.S. Supreme Court allows Duke Energy and Catawba River Water Supply Project to intervene in South Carolina v. North Carolina

by Manton Grier, Jr.

This past Wednesday, the United States Supreme Court granted motions to intervene filed by Duke Energy and Catawba River Water Supply in South Carolina v. North Carolina, No. 138, an original action filed by South Carolina seeking an equitable apportionment of the Catawba River waters. The opinion was written by Justice Alito for a five-justice majority; the Chief Justice concurred in the judgment in part and dissented in part.

In intra-state disputes brought in the original jurisdiction of the Supreme Court, the Court demands a “compelling interest” before allowing a non-state party to intervene in what is otherwise a sovereign dispute between two states. The Court held, however, that “any equitable apportionment of the river will need to take into account the amount of water that Duke Energy needs to sustain its operations and provide electricity to the region, thus giving Duke Energy a strong interest in the outcome of this litigation.” As to Catawba River Water Supply Project, the Court held that it had unique interests because half of its customers are North Carolina residents and half South Carolina residents. The Project also relies on authority granted by both states to draw water from the Catawba River. The Court rejected the motion to intervene of the City of Charlotte, North Carolina, reasoning that its interest was not sufficiently unique that it could not be effectively represented by North Carolina.

The Chief Justice concurred in the denial of Charlotte's motion to intervene but dissented from the grant of intervention to Duke Energy and the CRWSP on the basis that the Court has never before granted intervention to a non-sovereign entity in an original action for equitable enforcement of water rights.

On the Bench: Kaye Hearn, South Carolina Supreme Court

"On the Bench" is a periodic feature of On the Docket in which we profile an appellate judge from the Carolinas or the Fourth Circuit.

by Kirsten Small


Kaye Hearn was sworn in today as a Justice of the Supreme Court of South Carolina, replacing retiring Justice John Waller. She comes to the Supreme Court bench with a wealth of judicial experience, having served on the South Carolina Court of Appeals, ten of those years as the court's Chief Judge. Prior to that, she was a family court judge for the 15th Judicial Circuit (Georgetown and Horry Counties). Justice Hearn is the second woman on the five-member Supreme Court. She joins Chief Justice Jean Toal and Associate Justices Costa Pleicones, Donald Beattie, and John Kittredge.

Judge Hearn graduated cum laude from Bethany College in 1972 and earned her J.D., cum laude, from the University of South Carolina School of Law in 1977. In 1998, she earned an L.L.M. degree from the University of Virginia.

My first appearance at the South Carolina Court of Appeals was before a panel that included Judge Hearn. I found her to be well prepared, insightful, and fair. I am sure she will be an asset to the Court.