227 N.C. App. 238
N.C. Ct. App.2013Background
- Builders Mutual Insurance Company appeals from judgments on the pleadings favoring Erie and TP Duffy Builder, Inc. and from denial of a motion to alter, amend, or vacate.
- TPD Builder and Duffy were insured by Erie for 2006–2009 and by Builders Mutual for 2009–2010; Hardisons sued TPD Builder and others for damages from a slope collapse on December 7, 2009.
- Erie agreed to defend TPD Builder and Duffy under a reservation of rights but ultimately refused to defend; Erie then sought declaratory relief regarding duties under the policies.
- Erie settled the Hardison Action for $170,000 on behalf of TPD Builder and Duffy; plaintiffs sought reimbursement of defense costs and settlement sums via declaratory judgment.
- The trial court granted judgment on the pleadings in favor of plaintiffs for the settlement amount but denied or did not fully grant recovery of defense costs; court later denied defendant’s motion to alter, amend, or vacate.
- On appeal, the court held the refusal to defend was unjustified, triggering a duty to indemnify the settlement amount, but defense costs were not adequately pled and could not be awarded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court correctly treated outside materials under Rule 12(c) | Policy terms/issues referenced in complaint; briefs admissible. | Outside materials converted 12(c) to 56; improper without notice. | No conversion; proper consideration of policy and briefs |
| Whether defendant had a duty to defend in the Hardison Action under the policy | Pleadings show covered property damage by a single occurrence within policy period. | Coverage not triggered; damages not within policy. | Duty to defend triggered; defendant unjustifiably refused |
| Whether the settlement amount is recoverable due to unjustified defense refusal | If insurer breaches defense duty, it must pay settlement costs. | Settlement costs not properly pled or proven. | Settlement amount recoverable; defense costs require proper pleading |
| Whether defense costs, as pled, can be awarded | Defense costs were incurred and should be reimbursed. | No pleaded facts or amount for defense costs. | Defense costs not awarded; not properly pled |
Key Cases Cited
- Gaston County Dyeing Machine Co. v. Northfield Ins. Co., 351 N.C. 293 (N.C. 1992) (injury-in-fact timing triggers policy coverage under proper facts)
- Hutchinson v. Nationwide Mut. Fire Ins. Co., 163 N.C. App. 601 (N.C. Ct. App. 2004) (defect timing vs. injury timing; coverage depends on occurrence date)
- Coley v. N.C. Nat'l Bank, 41 N.C. App. 121 (N.C. Ct. App. 1979) (contract terms referenced do not convert Rule 12 motion to 56 when subject is the contract)
- Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52 (N.C. Ct. App. 2001) (contract terms may be considered without converting Rule 12(c) motion)
- Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688 (N.C. 1986) (duty to defend determined by pleadings; resolve doubts in insured's favor)
- Duke University v. St. Paul Fire and Marine Ins. Co., 96 N.C. App. 635 (N.C. Ct. App. 1990) (duty to defend is broad and independent of duty to pay)
- Mitchell (Builders Mut. Ins. Co. v. ... ), 210 N.C. App. 657 (N.C. Ct. App. 2011) (duty to defend based on underlying action allegations; insurer may be liable for defense costs)
- Privette v. Univ. of N.C., 96 N.C. App. 124 (N.C. Ct. App. 1989) (briefs/not considered outside pleadings for Rule 12 motion)
- Harleysville Mut. Ins. Co. v. Berkley Ins. Co. of the Carolinas, 169 N.C. App. 556 (N.C. Ct. App. 2005) (property damage over time; different fact patterns than present case)
- Nelson v. Hartford Underwriters Ins. Co., 177 N.C. App. 595 (N.C. Ct. App. 2006) (continued property damage from pre-coverage construction; timing matters)