Court Opinion

ID: 2648508
Source: CourtListenerOpinion
Date Created: 2014-01-08 19:53:24.457426+00
Date Added: 2024-06-11T12:56:24.619737
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 12-2452

FIRST FINANCIAL INSURANCE COMPANY,

                 Plaintiff - Appellant,

           v.

TONYA BRUMBAUGH, as Personal Representative for the Estate
of Wanda Elaine Malmede Holland,

                 Defendant – Appellee,

           and

CHAD WAYNE KESSING, SR.; EDWARD STEVE ENGLISH; GARY DENAUX;
GAREY G. GOREY; WHOLESALE TRANSMISSIONS AND AUTO REPAIR; GHA
LLC,

                 Defendants.

Appeal from the United States District Court for the District of
South Carolina, at Charleston.     Richard M. Gergel, District
Judge. (2:11-cv-00554-RMG)

Argued:   September 18, 2013                 Decided:   January 8, 2014

Before SHEDD, DUNCAN, and KEENAN, Circuit Judges.

Vacated and remanded by unpublished opinion. Judge Keenan wrote
the majority opinion, in which Judge Duncan joined. Judge Shedd
wrote a dissenting opinion.
ARGUED: Mark S. Barrow, SWEENY, WINGATE & BARROW, PA, Columbia,
South Carolina, for Appellant.     William Mullins McLeod, Jr.,
MCLEOD LAW GROUP, Charleston, South Carolina, for Appellee. ON
BRIEF: William R. Calhoun, Jr., Aaron J. Hayes, SWEENY, WINGATE
& BARROW, PA, Columbia, South Carolina, for Appellant. Julie L.
Moore, MCLEOD LAW GROUP, LLC, Charleston, South Carolina, for
Appellee.

Unpublished opinions are not binding precedent in this circuit.

                                2
BARBARA MILANO KEENAN, Circuit Judge:

       In    this   appeal,        we   consider      whether      the   district        court

properly applied principles of equitable estoppel under South

Carolina      law   in    requiring        that     an   insurance       carrier       provide

coverage to a third party not otherwise entitled to coverage

under the terms of the policy at issue.                         Upon our review, we

conclude that the district court abused its discretion in using

the    doctrine      of     estoppel       to       create   coverage          under     these

circumstances.            We      therefore         vacate   the     district          court’s

judgment.

                                             I.

       Appellant First Financial Insurance Co. (First Financial)

issued a liability insurance policy to Gary Denaux, formerly the

sole       proprietor       of     Wholesale        Transmission,         an     automotive

transmission business located in Moncks Corner, South Carolina.

The policy issued to Denaux (the policy or the Denaux policy)

listed      the     named        insured    as      “Gary    Denaux       DBA     Wholesale

Transmission.”        The term “insured” was defined in the policy to

include the named insured as well as his employees. 1

       1
       An endorsement to the policy added the owners of the
“garage premises” as additional insureds.

                                                3
     In the section of the policy declarations entitled “form of

business,”      the     policy       listed           “individual,”      rather        than

alternative         options     including         “partnership”         and      “limited

liability company.”           Under the policy, First Financial agreed to

“pay all sums an ‘insured’ legally must pay as damages because

of ‘bodily injury’ or ‘property damage’ . . . caused by an

‘accident’ and resulting from ‘garage operations.’”

     By its terms, the policy was effective from May 23, 2007

through   May   23,     2008.       Under       the    heading     “Transfer     of     Your

Rights and Duties Under this Policy,” the policy provided:

     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.

(Emphasis added).

     Midway     through       the   term    of        the    policy,    Denaux        ceased

operating     his    business.       A   former         coworker,      Edward    English,

opened    a   new     automotive     transmission            business    in     the    same

location,     also    named     Wholesale       Transmission.           English       and   a

friend, Garey Gorey, operated the new business through a newly

formed    limited      liability     company.               Upon   receiving      a    bill

addressed to Denaux at the business’ address, English paid the

last installment of the Denaux policy premium in February 2008.

     Denaux did not attempt to cancel the policy or to transfer

his coverage under the policy to English.                      In April 2008, as the

policy was nearing its termination date, First Financial sent by

                                            4
facsimile a blank insurance application to Lee Ann Wise, the

independent    insurance      agent   who    had    obtained   the    policy   for

Denaux and who also was acting as English’s agent.                   Wise thought

that the application was for a renewal of the Denaux policy,

which was to expire on May 23, 2008.

       On May 2, 2008, Wise sent a completed application for a

policy in English’s name to an underwriter for First Financial.

Her facsimile transmission included a cover sheet, which stated:

       Gary Denaux is no longer the owner of this company. I
       made the changes on the app[lication]. I am not sure
       if you will need to re-quote it w[ith] the new owner
       [and] drivers.     Please call me if you have any
       questions.

On June 6, 2008, First Financial issued a new policy to “Steve

Edward English DBA Wholesale Transmission” (the English policy),

retroactively effective as of May 23, 2008, the same day that

the Denaux policy expired.

    Eleven days before the expiration of the Denaux policy, but

before the English policy went into effect, one of English’s

employees, Chad Kessing, was involved in a vehicle collision

that    resulted   in   the   death   of    Wanda   Holland    (the    accident).

Tonya    Brumbaugh,     the    personal      representative      of     Holland’s

estate, filed a wrongful death action in a South Carolina state

court against Kessing, Wholesale Transmission, Denaux, English’s

limited liability company, and English.                First Financial later

brought the present action in federal district court against

                                       5
Kessing,     English,       Denaux,   Gorey,     Wholesale      Transmission,

English’s limited liability company, and Brumbaugh, seeking a

declaration that the Denaux policy did not provide coverage in

the underlying liability lawsuit.

      The district court entered default judgment against all of

the   defendants    except    Brumbaugh. 2     The   defaulting     defendants

therefore admitted the following:

      Mr. Denaux, the named insured under First Financial’s
      policy, cannot be liable—directly or vicariously—for
      the injuries to or death of Ms. Holland. He had sold
      the business and left it entirely approximately four
      months before Kessing’s accident.

      Kessing was not an insured under Denaux’s policy at
      the time of the accident.     He did not fit into the
      policy’s “Who is an Insured” provision because he was
      not an employee of Denaux when the accident occurred;
      he was employed by Steve English in a different
      business than that owned by Gary Denaux.    Mr. Denaux
      had no “power or right to control and direct” Mr.
      Kessing at the time of the accident.

      Mr. Denaux could not, and did not, transfer his rights
      and duties under the policy to Steve English; [Garey]
      Gorey; GHA, LLC; or Wholesale Transmission and Auto
      Repair.   Denaux did not seek, and did not obtain,
      First Financial’s written consent to transfer any
      rights under [the policy] to any other party.

See DIRECTV, Inc. v. Rawlins, 523 F.3d 318, 322 n.2 (4th Cir.

2008) (citing Ryan v. Homecomings Fin. Network, 253 F.3d 778,

780   (4th   Cir.    2001))     (explaining      that,   when   a   defendant

defaults,    he    admits    the   plaintiff’s    factual    allegations   as

      2
       Brumbaugh also defaulted but successfully moved to set
aside default.

                                       6
true).     The district court thereafter entered a default judgment

order holding that the Denaux policy did not provide coverage

for any of the defaulted defendants.

      After     entering      the    default       judgment        order,      and     after

considering     the     cross-motions        for      summary     judgment        filed        by

First    Financial     and    Brumbaugh,        the     district    court      held       as    a

matter of law that the Denaux policy did not provide coverage

for the accident, because First Financial had not consented in

writing to the transfer of Denaux’s rights under the policy to

English and his employees.                 Following this determination, the

district      court    held    a    bench    trial       to   resolve       the      court’s

additional question whether First Financial “should be equitably

estopped from denying coverage, notwithstanding the fact that

coverage    does      not    technically        exist    under     the   terms       of    the

Policy.”

      At the conclusion of the bench trial, the district court

reiterated that the Denaux policy did not cover the accident,

but     nevertheless        held    that    First        Financial       was    equitably

estopped from denying coverage because, by its conduct, First

Financial      had     reasonably      induced          English    to     believe         that

Denaux’s rights under the policy had been transferred.                                First

Financial     timely    appealed      from      the     district    court’s       judgment

imposing equitable estoppel in this case.

                                            7
                                      II.

     We review the district court’s decision to apply equitable

estoppel for abuse of discretion.             Am. Bankers Ins. Grp. v.

Long, 453 F.3d 623, 629 (4th Cir. 2006).              Under the facts of

this case, we note at the outset that English never was a named

insured under the Denaux policy, and was not otherwise a party

to an insurance contract with First Financial at any time before

the accident. 3    See Auto-Owners Ins. Co. v. Rhodes, No. 27316,

2013 S.C. LEXIS 248, at *21-22 (S.C. Sept. 25, 2013) (citations

omitted)     (citing   cases   for    the   proposition      that,   when   an

insurance policy is issued for a sole proprietorship, the policy

is considered to be issued to the proprietor personally).

     Under     South   Carolina      law,   the   doctrine    of     equitable

estoppel applies when the party to be estopped (1) engages in

“conduct which amounts to a false representation, or conduct

which is calculated to convey the impression that the facts are

otherwise than, and inconsistent with, those which the party

subsequently attempts to assert; (2) [has] the intention that

such conduct shall be acted upon by the other party; and (3)

     3
       We observe that Brumbaugh was the only party who attempted
to establish coverage through equitable estoppel, given the
default of all her co-defendants.         Because we hold that
equitable estoppel cannot be employed to create coverage under
the Denaux policy for the accident, we do not consider the
effect of English’s default on Brumbaugh’s ability to assert
equitable estoppel derivatively through English.

                                       8
[has]    actual       or   constructive             knowledge       of   the   real    facts.”

Strickland      v.     Strickland,         650          S.E.2d   465,    470   (S.C.    2007).

Estoppel can be established through a party’s silence when that

party owes the other a duty to speak but “refrains from doing so

and thereby leads the other to believe in the existence of an

erroneous state of facts.”                 S. Dev. Land & Golf Co. v. S.C. Pub.

Serv. Auth., 426 S.E.2d 748, 751 (S.C. 1993) (citation omitted).

The    party    asserting      estoppel             must    demonstrate        “(1)   lack     of

knowledge, and the means of knowledge, of the truth as to the

facts in question; (2) reliance upon the conduct of the party

estopped; and (3) a prejudicial change of position in reliance

on the conduct of the party being estopped.”                                Strickland, 650

S.E.2d at 470.

       Although       estoppel      is     a    flexible         doctrine      that   requires

consideration of the relative equities between the parties, see

Pitts v. N.Y. Life Ins. Co., 148 S.E.2d 369, 371-72 (S.C. 1966),

the doctrine’s reach is not unlimited.                             In Pitts, the Supreme

Court    of    South       Carolina      discussed          the     general    principle       of

insurance law that conditions or restrictions on coverage may

not be extended by waiver or estoppel.                              Id. at 371 (citations

omitted).       According to this principle, estoppel “cannot be used

to    extend    the    coverage       of       an       insurance    policy     or    create    a

primary       liability,      but   may        only       affect     the   rights     reserved

therein.”       Id.

                                                    9
      The South Carolina court held that this general principle

is not binding when circumstances warrant application of the

doctrine.         Pitts,    148     S.E.2d      at    371.       Addressing    such     a

circumstance, the court carved out a narrow exception in which,

after the insured’s coverage has terminated, the insurer retains

premium payments made by the insured over a period of time.                           In

Pitts’ case such payments extended for a period of 16 years.

Id. at 370-71.

      Holding      that     the     insurance        carrier    was     estopped     from

denying coverage, the court in Pitts explained that

      [w]here the insurer over a long period of time after
      the date prescribed by it for the termination of a
      particular coverage has continued to demand, accept
      and retain the premium fixed by it for that coverage,
      it may be reasonably inferred that the insured, who in
      the normal course of things relies upon the insurer’s
      billing, has been misled by such conduct to believe
      that the insurer has continued to accept the coverage.

Id. at 372.

      The court in Jost v. Equitable Life Assurance Society of

the   United      States,     248     S.E.2d     778     (S.C.    1978),     similarly

concluded    that,    because        the   insurer      knew     that    coverage     had

expired    but    nevertheless       collected        premium    payments     from    the

insured,    the    carrier’s      actions       could    only    indicate     that    the

carrier either intended to provide additional coverage, intended

to provide the insured with nothing, despite the payments, or

had collected the payments by mistake, which explanation the

                                           10
carrier had not asserted.           Id. at 779.         Therefore, relying on

Pitts, the court in Jost held that the insurer was estopped from

denying coverage.      248 S.E.2d at 780.

     In the present case, Brumbaugh asserts that English and his

employees are entitled to the benefits of coverage under the

Denaux policy, even though English was not a named insured under

the policy.     Relying on Pitts and Jost, she contends that First

Financial misled English into believing that the Denaux policy

provided him with coverage, by failing to return the premium on

Denaux’s policy after learning that Denaux had ceased operating

his business.        In our view, Brumbaugh’s requested result would

impermissibly “create a primary liability” by estoppel, because

the special circumstances warranting application of the doctrine

in Pitts and Jost are absent here.

     In both those cases, the doctrine of equitable estoppel was

applied    because    the   insurance       carrier     had   misled    its   named

insured,    with   whom     the   carrier    had   an    existing      contractual

relationship, to think that coverage continued to exist.                      Here,

in contrast, English was not a named insured under the Denaux

policy, and First Financial had no duty to inform English or his

agent, Wise, that English lacked coverage under the existing

                                       11
Denaux policy. 4   Further, at the time of the accident, the Denaux

policy was still in effect for Denaux and his covered former

employees, and English had not yet obtained his own policy. 5   For

these reasons, we conclude that Brumbaugh’s reliance on Pitts

and Jost is misplaced.     She cannot escape the general principle

of insurance law, as applied by the South Carolina courts, which

ordinarily does not allow use of the doctrine of estoppel to

create insurance coverage when an insurer has not misled its

insured to think that the risk in question was covered.         See

     4
       Under South Carolina law, “as a general rule, an insurance
agent has no duty to advise an insured at the point of
application, absent an express or implied undertaking to do so.”
Houck v. State Farm Fire & Cas. Ins. Co., 620 S.E.2d 326, 329
(S.C. 2005).     A duty can be created by implication if the
insurer received compensation beyond the payment of the premium,
the insured clearly requested the advice of the insurer, or
“there is a course of dealing over an extended period of time
which would put an objectively reasonable insurance agent on
notice that his advice is being sought and relied on.”        Id.
(citation omitted).    None of these exceptions to the general
rule apply here.
     5
       In concluding that First Financial had misled English into
believing that he was covered under the Denaux policy, the
district court relied partially on the fact that First Financial
failed to cancel the policy after receiving notice on May 2,
2008 that Denaux had ceased operating Wholesale Transmission.
     Under the terms of the policy, however, First Financial
could unilaterally cancel the policy only under limited
circumstances.    Aside from cancellation for non-payment of
premiums, a circumstance not applicable in this case, First
Financial could cancel the policy only after providing Denaux
with 30 days’ notice.    Accordingly, had First Financial sought
to cancel the policy after receiving Wise’s facsimile on May 2,
2008, the required 30-day notice period would have eclipsed both
the date of the accident and the date on which the policy would
have expired by its own terms.

                                 12
Pitts, 148 S.E.2d at 371; Standard Fire Ins. Co. v. Great Am.

Ins. Co., 392 S.E.2d 460, 462 (S.C. 1990).

     We     also     observe         that    imposition           of   primary     liability

coverage in the present case would not promote the equitable

considerations        underlying           the    doctrine        of    estoppel.        Such

imposition would require that an insurance carrier, here, First

Financial, provide coverage for a party and associated risks

that:    (1)   were       not   contemplated           when   the      carrier   originally

entered into the insurance contract with its insured; and (2)

for which no premium was paid.

     Moreover,        Brumbaugh        cannot         prove   a    required      element    of

equitable estoppel, namely, that English did not know or have

the opportunity to know the truth about the transferability of

rights under the Denaux policy.                       Although English and Wise may

have had an honest misunderstanding about the state of English’s

coverage,      the    face      of   the    policy       makes     plain    that    Denaux’s

rights    could      not   be    transferred           absent     written    consent     from

First Financial.

     Wise, as the insurance agent of both Denaux and English,

had access to the Denaux policy and, therefore, had the ability

to correct her mistaken assumption that the policy automatically

covered English’s new business.                       Nevertheless, she did not seek

clarification        or     a    response         from     First       Financial    on     the

facsimile cover page, nor did she indicate to First Financial

                                                 13
that she thought that the rights under the Denaux policy had

been transferred to English.         English therefore cannot show the

“lack of knowledge, and the means of knowledge, of the truth as

to the facts in question” necessary to apply equitable estoppel.

Strickland, 650 S.E.2d at 470; see also S. Dev. Land & Golf Co.,

426 S.E.2d at 751 (“One with knowledge of the truth or the means

by which with reasonable diligence he could acquire knowledge

cannot claim to have been [misled].”). 6

                                     III.

     In   sum,    we   hold   that    the   district    court     abused   its

discretion   in    holding    that    First   Financial     was     equitably

estopped from denying coverage for the accident.                Accordingly,

we vacate the district court’s judgment and remand for further

proceedings consistent with this opinion.

                                                       VACATED AND REMANDED

     6
        Because we conclude that Brumbaugh’s assertion of
equitable estoppel fails as an improper imposition of coverage,
and because Wise and English had the means to discover the
transferability requirements of the Denaux policy, we do not
address whether the other elements of equitable estoppel are
satisfied.

                                      14
SHEDD, Circuit Judge, dissenting:

     I believe the majority has made several critical mistakes

in its analysis. It has required the accident victim to prove an

additional    element    not   mandated    by    the   law    of    equitable

estoppel, and it has failed to focus on the crucial information

known only by the insurance company, which is the basis for this

estoppel. This knowledge is not, as the majority believes, the

transfer    provision   written   into    the   insurance     contract,   but

instead the fact that the company did not intend to waive that

provision. The result of this flawed analysis means that the

insurance    company    will   succeed    in    avoiding     even   potential

liability for the fatal        accident caused by its insured, 1 and

which victim the insurance company tried to silence in court.

Under the circumstances, I respectfully dissent.

     First Financial Insurance Co. (“First Financial”), issued

an insurance policy to Gary Denaux, doing business as Wholesale

Transmission (“WT”), covering the period of May 23, 2007, to May

23, 2008. WT is an auto-repair shop started by Gary Denaux,

which Edward English later joined as a partner. The two ran the

company together from late 2006 to late 2007. Around the end of

2007 or beginning of 2008, Denaux left the business. WT was then

     1
       As pointed out by the court below, despite equitable
estoppel, First Financial can still assert it has no financial
responsibility for the accident. See J.A. 313.

                                    15
run by English and Gary Gorey, after Gorey bought out Denaux’s

interest.      WT    operated     in   the   same   location,    and   the   First

Financial policy remained in place. In February of 2008, English

paid the final insurance premium for the 2007–2008 policy with a

check signed in his name.

      In April of 2008, Lee Ann Wise, an insurance agent for WT

and English, received a blank application from First Financial

for insurance for WT, which she understood to be an application

for the renewal of the then-existing policy. On the application,

Wise asked for the renewal to be effective on May 23, 2008, the

date the original coverage period was to terminate, which would

ensure no lapse of coverage. As with the original application,

the   renewal       application    listed     the   name   of   the   business   as

Wholesale Transmission, the same address for WT, the applicant’s

business as a “transmission repair shop,” and the same amount of

coverage. On May 2, 2008, Wise faxed the completed application

to First Financial, with a cover letter that stated,

      Pat- 2

      Gary     Denaux is no longer the owner of this company. I
      made     the changes on the app, I am not sure if you will
      need     to re-quote it w/ the new owner & drivers. Please
      call     me if you have any questions. Thank you, Lee Ann.

      2
       Pat Dandridge was an employee of Johnson & Johnson, which
is an agent of First Financial. J.A. 320.

                                         16
J.A. 114 (emphasis added). First Financial never contacted Wise

regarding    the     information         in    her       cover     letter      or    in     the

application, nor did it inform her the current policy would not

cover   WT   if    Denaux    was    no    longer        the    owner.    Further,         First

Financial    did    not     refund       any       of   the    premium      to      WT    after

discovering Denaux was no longer involved with WT. On May 12,

2008, Ms. Wanda Holland was killed in a car accident with one of

WT’s    employees.     Ms.     Holland,            through     her      daughter,         Tonya

Brumbaugh, sued WT (and others) in state court because of the

accident.

       The case before us represents First Financial’s attempts to

avoid liability coverage for the auto accident. First Financial

brought a declaratory judgment action in district court against

Brumbaugh (and others) seeking a determination that it was not

required to provide coverage for the accident that caused Ms.

Holland’s    death.         After    suing         Brumbaugh      in    the      declaratory

judgment     action,      First     Financial           then     claimed      she    had    no

standing to even assert First Financial’s coverage.

       The district court first denied First Financial’s attack on

Brumbaugh’s standing. Then, after a bench trial, the district

court estopped First Financial from denying coverage based on

First Financial’s position that it had not given written consent

under the policy for coverage to be transferred to WT operating

without Denaux.

                                              17
       In arguing that we should not even hear from Brumbaugh,

First Financial incorrectly relies on South Carolina case law

that explains when a party may bring a direct cause of action

against an insurer. Brief of Appellant at 11–12. Here, Brumbaugh

did    not    bring      a   direct        action     against    First        Financial,     but

rather, was brought into court by First Financial. Brumbaugh

clearly      has      standing      to     defend     herself    in   this      action      under

South     Carolina           law.        Cases      limiting       direct       actions       are

inapplicable. See, e.g., Major v. Nat'l Indem. Co., 229 S.E.2d

849     (S.C.      1976)         (distinguishing         between      case     law     allowing

joinder of insurance companies by third parties versus a direct

suit    solely        against      an    insurance     company      by    a    third      party).

South    Carolina        courts         allow    third    parties        to   seek     contract

reformation        of    insurance         contracts      to    which     they      are    not   a

party. George v. Empire Fire & Marine Ins. Co., 519 S.E.2d 107,

110 (S.C. Ct. App. 1999) rev'd on other grounds, 545 S.E.2d 500

(S.C. 2001), (“Ordinarily, a party requesting reformation must

have been a party to the written document or in privity with a

party.       However,        a     third-party        beneficiary        to    an    insurance

contract        may     bring       such    an      action.”    (citations           omitted)).

Accordingly, Brumbaugh has standing to defend herself in this

                                                 18
declaratory action, regardless of whether she has a direct cause

of action against the insurer under South Carolina law. 3

      Next, First Financial argues that insurance coverage may

not be extended by equitable estoppel. See Brief of Appellant at

22.   First   Financial   is   incorrect;   South   Carolina   does   allow

insurance coverage to be extended by estoppel. See Standard Fire

Co. v. Marine Contracting & Towing Co., 392 S.E.2d 460, 462

(S.C. 1990); Pitts v. New York Life Ins. Co., 148 S.E.2d 369,

      3
        First   Financial’s   argument  on  standing  not   only
contravenes South Carolina law but is contrary to the insurance
principles recognized both in this Circuit and others. For
example, as we previously stated in Penn Am. Ins. Co. v. Valade,
28 F. App’x 253 (4th Cir. 2002),

      [T]he third party’s interest in defining the scope of
      insurance coverage is independent of the interest of
      the insured. When an insurer initiates a declaratory
      judgment action against both an injured third party
      and its insured, the injured third party acquires
      standing, independent of that of the insured, to
      defend itself in the declaratory judgment proceeding.
      Fed. Kemper Ins. Co. v. Rauscher, 807 F.2d 345, 353
      (3d Cir. 1986) (stating that injured third party
      “ha[s] standing to defend the declaratory judgment
      action despite the absence of . . . the actual
      insured”); Hawkeye-Sec. Ins. Co. v. Schulte, 302 F.2d
      174, 177 (7th Cir. 1962) (“It would be anomalous to
      hold here that an actual controversy exists between
      [an injured third party] and [an insurer] and yet deny
      [the injured third party] the right to participate in
      the controversy.”). In this regard, it would be
      anomalous not to permit the injured third party an
      opportunity to present its case against the insurer,
      which initially brought the declaratory judgment
      action, after the insured defaulted.

Id. at 256–57 (emphasis added).

                                    19
372   (S.C.   1966)   (“[E]stoppel   is   an   equitable   doctrine,

essentially flexible, and therefore to be applied or denied as

the equities between the parties may preponderate.”).

      The question here is whether the district court erred in

finding that the circumstances present in this case met South

Carolina’s estoppel requirements. We review the district court

decision under the abuse of discretion standard. The district

court abused its discretion only if it made an error of law or

clearly erred in its factual findings. Am. Bankers Ins. Grp.,

Inc. v. Long, 453 F.3d 623, 629 (4th Cir. 2006).

      We review factual findings by the district court under
      the clearly erroneous standard set forth in Federal
      Rule of Civil Procedure 52(a). Monroe v. Angelone, 323
      F.3d 286, 299 (4th Cir. 2003); Fields v. Attorney Gen.
      of Md., 956 F.2d 1290, 1297 n.18 (4th Cir. 1992). Our
      scope of review is narrow; we do not exercise de novo
      review of factual findings or substitute our version
      of the facts for that found by the district court.
      Jiminez v. Mary Washington College, 57 F.3d 369, 378
      (4th Cir. 1995). Instead, “[i]f the district court's
      account of the evidence is plausible in light of the
      record viewed in its entirety, the court of appeals
      may not reverse it even though convinced that had it
      been sitting as the trier of fact, it would have
      weighed the evidence differently.” Anderson v. City of
      Bessemer City, 470 U.S. 564, 573-74, 105 S. Ct. 1504,
      84 L.Ed.2d 518 (1985). Thus, facts found by the
      district court are conclusive on appeal “unless they
      are plainly wrong.” Jiminez, 57 F.3d at 378-79.

Walton v. Johnson, 440 F.3d 160, 173 (4th Cir. 2006). For the

reasons discussed below, the district court made no error of

law; and as the factfinder, that court clearly could find the

                                20
elements   of    equitable   estoppel      had    been     met     based    on   the

circumstances in this case.

      Although the majority correctly rejects First Financial’s

erroneous view that South Carolina does not allow the extension

of   insurance   coverage    under   equitable         estoppel,    it     otherwise

misreads    South     Carolina       law.        The      majority         conflates

circumstances    which   allow   for      the    application        of   equitable

estoppel in specific cases with the requirements of the general

rule. Stated another way, the cases the majority relies on do

not add an additional requirement to equitable estoppel in South

Carolina. Properly applying the law of equitable estoppel, we

must affirm the district court.

      As relevant here, the elements for equitable estoppel in

South Carolina are:

      As to the estopped party, . . . (1) . . . conduct
      calculated to convey the impression that the facts are
      otherwise than, and inconsistent with, the party's
      subsequent assertions; (2) intention or expectation
      that such conduct be acted upon by the other party;
      and (3) actual or constructive knowledge of the real
      facts. As to the party claiming estoppel, the
      essential elements are: (1) lack of knowledge or the
      means   of   acquiring,  with   reasonable  diligence,
      knowledge of the true facts; (2) reasonable reliance
      on the other party's conduct; and (3) a prejudicial
      change in position. . . . Estoppel by silence arises
      when the estopped party owes a duty to speak to the
      other party but refrains from doing so, thereby
      leading the other party to believe in an erroneous
      state of facts.

                                     21
Provident Life & Acc. Ins. Co. v. Driver, 451 S.E.2d 924, 928

(S.C.   Ct.   App.   1994)   (citation    omitted).   Further,    a   duty   to

speak may arise

     where one party expressly reposes a trust and
     confidence in the other with reference to the
     particular transaction in question, or else from the
     circumstances of the case, the nature of their
     dealings, or their position towards each other, such a
     trust and confidence in the particular case is
     necessarily implied[.]

Hedgepath v. Am. Tel. & Tel. Co., 559 S.E.2d 327, 339 (S.C. Ct.

App. 2001). In the insurance context specifically,

     [a] duty may be imposed . . . if the agent . . .
     undertakes to advise the insured. . . . [A] duty can
     be impliedly created. In determining whether an
     implied duty has been created, courts consider several
     factors, including whether: (1) the agent received
     consideration beyond a mere payment of the premium,
     (2) the insured made a clear request for advice, or
     (3) there is a course of dealing over an extended
     period of time which would put an objectively
     reasonable insurance agent on notice that his advice
     is being sought and relied on.

Houck v. State Farm Fire & Cas. Ins. Co., 620 S.E.2d 326, 329

(S.C. 2005) (citations and internal quotation marks omitted).

     At trial, the evidence necessary to establish each element

of equitable estoppel was presented to the district court as the

factfinder.

     First,     there   was    “conduct     calculated    to     convey      the

impression that the facts are otherwise than, and inconsistent

with, the party's subsequent assertions.” Provident Life & Acc.

Ins. Co., 451 S.E.2d at 928. First Financial’s conduct conveyed

                                    22
the impression that English was covered because by not saying

anything to Wise or English, First Financial signified it was

waiving the no transfer provision in the original policy.

     Second, there was an “intention or expectation that such

conduct be acted upon by the other party.” Id. First Financial

should   have   expected   that   by   not    saying   anything    at   all   in

response to Wise’s fax, English would believe he had continuing

coverage. Further, the existence of continuing coverage could be

gleaned from the fact that the new policy was to begin the exact

minute the old coverage period expired. The factfinder could

certainly find that English would thereby understand that he was

continually covered and would decide to forego obtaining other

insurance. See Moore v. Palmetto State Life Ins. Co., 73 S.E.2d

688, 693 (S.C. 1952).

     Third,     First   Financial       had    “actual    or      constructive

knowledge of the real facts.” Provident Life & Acc. Ins. Co.,

451 S.E.2d at 928. First Financial knew or should have known

that English was seeking continuing coverage and that it did not

intend to waive the no transfer provision in the contract to

allow for that coverage. On this point, the majority mistakenly

believes the critical fact is the no transfer provision of the

insurance contract, but it is not. The “real” fact is that First

Financial did not waive that provision.

                                       23
      Fourth, the party asserting estoppel must show a “lack of

knowledge or the means of acquiring, with reasonable diligence,

knowledge of the true facts.” Id. Here, the majority focuses on

the wrong “facts.” The majority asserts that Brumbaugh cannot

establish this element because “the face of the policy makes

plain   that     Denaux’s     rights      could       not   be    transferred      absent

written consent from First Financial.” But again, the majority

fails to realize that the critical issue is not whether English

could   have     found      the   no    transfer      provision         in    reading    the

contract, but rather, that First Financial had no intention of

waiving it.

      Without      question,      First    Financial        had    the       authority   to

waive     the    provision        requiring     its     written         consent    for    a

transfer. Insurance companies can waive any provision meant to

protect them and can even waive provisions that define how a

proper waiver is to occur. Gandy v. Orient Ins. Co.,                              29 S.E.

655, 656 (S.C. 1898) (“An insurance contract, like any other

contract, may be altered by the contracting parties, and the

insurer     may,    of   course,       waive    any    provision        for    forfeiture

therein. It may also waive the provision relating to the manner

or   form   of     waiver    by   its   agents,       since      this    clause    has    no

greater sanctity than any other part of the instrument.”). Thus,

First Financial clearly could waive the requirement that its

consent to transfer had to be in writing. Accepting, as the

                                           24
majority does, that Wise knew of the transfer provision, she is

also charged with having knowledge of the law on waiver, and

based on her course of dealing with First Financial, she thought

First     Financial      was    waiving      the        provision.      Neither     Wise       nor

English had any way to discover that First Financial did not

intend to waive that provision because First Financial did not

respond in a manner to put English on notice that there was a

problem or issue pursuant to Wise’s fax.

     Fifth, there was “reasonable reliance on the other party's

conduct.” Provident Life & Acc. Ins. Co., 451 S.E.2d at 928.

English, through his agent, Wise, believed that by its silence,

First     Financial      was   consenting          to    a   transfer     of      the    policy.

Thus,     Wise     thought      First        Financial’s           silence     meant      First

Financial was providing English with continuing coverage. There

is   no    doubt      this      reliance       was       clearly      reasonable;         First

Financial’s representative admitted as much at trial. J.A. 180.

     Sixth,      there        was    “a    prejudicial          change       in    position.”

Provident     Life       &    Acc.    Ins.    Co.,        451   S.E.2d       at    928.    Wise

testified that if First Financial had notified her that there

was any problem whatsoever with continuing coverage for English,

she would have immediately obtained other insurance for English

to   prevent       any       lapse    in     coverage.          Thus,     English        had    a

prejudicial      change        in    position       when      he    did   not      get    other

insurance for that time period.

                                              25
      The two additional elements for estoppel by silence are (1)

the duty to speak and (2) a failure to speak that misleads the

injured    party.     Id.    They   are   both    present         here.    The   majority

believes that “First Financial had no duty to inform English or

his agent, Wise, that English lacked coverage” because English

did not have an “existing contractual relationship” with First

Financial.     The    majority      apparently        finds   that       requirement    in

Jost v. Equitable Life Assurance Soc’y of the U.S., 248 S.E.2d

778 (S.C. 1978) and            Pitts, 148 S.E.2d 369. There, the South

Carolina Supreme Court estopped insurance companies from denying

coverage      because       they    continued         to    accept       premiums     from

individuals after their insurance policies had terminated. In

these cases, the court applied estoppel in a factual situation

where there was an existing contractual relationship, but the

court did not make such an existing relationship a requirement

for equitable estoppel. See S. Dev. Land & Golf Co., Ltd. v.

S.C. Pub. Serv. Auth., 426 S.E.2d 748, 750 (S.C. 1993) (listing

the   elements       of     equitable     estoppel,         but    not    including    an

existing relationship as a requirement); Provident Life & Acc.

Ins. Co., 451 S.E.2d at 928 (same).

      There    is     no     requirement        for    an     existing      contractual

relationship, or any type of prior relationship, for there to be

a duty to speak in South Carolina. See, e.g., Moore, 73 S.E.2d

at 693 (estopping an insurance company from denying coverage of

                                           26
an   individual          who    had     not    yet    formed      a     contract      with    the

company,      and    treating          the    company’s      failure      to    speak    as    an

implied acceptance). In fact, in South Carolina, as little as a

first-time         phone       conversation          between      the     parties       can   be

sufficient to create a duty to speak. See S. Dev. Land & Golf

Co.,       Ltd.,   426     S.E.2d       at    750–51.       For   example,       in   Southern

Development         Land    and      Golf     Co.,    an    individual         interested      in

purchasing property for development called the power company to

inquire about exposed power lines located on the property and

advised      the    company       of    his    need    to    avoid      any    exposed    power

lines. Id. The power company told the caller the current lines

could be buried, but failed to tell him of its finalized plans

to replace those current lines with exposed high voltage lines.

Id. Because the power company knew the man needed to avoid all

such exposed lines and also knew it had plans to build new

exposed      lines    on       the     property,      this     superior        knowledge      was

enough to create a duty to speak, even though there was no prior

relationship between the parties before this phone call. Id.

       The court found a duty to speak under the circumstances of

this case. 4 That finding is justified in several ways. First,

there was an implied trust and confidence based on both the

       4
       “Plaintiff could have informed [English] that it did not
consent to a transfer of rights under the Policy and that
additional coverage must be purchased for the period up until
May 23, 2008.” J.A. 326, n.9.

                                                27
circumstances           of    the    case    and     the    nature      of    the    course     of

dealings between Wise, as English’s agent, and First Financial.

See Hedgepath, 559 S.E.2d at 339.

       Second, under South Carolina law, there may be a duty to

speak       in    the        insurance      context        if     there      is     an   implied

undertaking         to   advise       an    applicant.          Here,     Wise’s     fax   could

certainly be construed as a request for advice. Further, the

testimony indicated “there [was] a course of dealing [between

Wise and First Financial] over an extended period of time which

would put an objectively reasonable insurance agent on notice

that his advice [was] being sought and relied on.” Houck, 620

S.E.2d at 329. The course of dealing between First Financial and

Wise    was      such    that       whenever    there       was    any     problem       with   an

individual’s         coverage        or     application,          First      Financial     would

advise her of it. Here, based on their prior course of dealing,

Wise was asking whether anything further needed to be done to

ensure that English had continuing coverage. Under these facts,

a duty to speak would arise under South Carolina law.

       As     for    the       second       additional      element          of   estoppel      by

silence, First Financial’s failure to speak did have the effect

of misleading English. First Financial’s failure to speak had

the effect of causing both Wise and English to believe English

had continuing coverage. Wise testified that based on her course

of dealing with First Financial, the fact First Financial did

                                                28
not contact her after she sent the fax signified there was no

problem   with   English’s   continuing   coverage.   Therefore,   this

element of estoppel by silence is met.

     In conclusion, I do not believe the majority has correctly

applied the law of equitable estoppel to the circumstances of

this case. It has added a requirement that the parties have a

pre-existing relationship and it has focused on the contract

language rather than the insurance company’s failure to disclose

it was not waiving that contract provision. The district court

correctly followed South Carolina law, and the majority has not

made any real argument that the district court factfinding was

clearly erroneous. I believe reversing the district court is an

error and such a reversal certainly creates a harsh result for

the innocent victim. For these reasons, I respectfully dissent.

                                  29