Court Opinion

ID: 1001014
Source: CourtListenerOpinion
Date Created: 2013-07-04 17:49:10.165081+00
Date Added: 2024-06-11T13:18:27.265416
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

SOUTHEASTERN FERTILITY CENTER,
Plaintiff-Appellant,

v.
                                                                   No. 99-1736
THE AETNA CASUALTY AND SURETY
COMPANY,*
Defendant-Appellee.

Appeal from the United States District Court
for the District of South Carolina, at Charleston.
Patrick Michael Duffy, District Judge.
(CA-97-1602-2)

Argued: January 25, 2000

Decided: February 28, 2000

Before NIEMEYER, Circuit Judge, HAMILTON, Senior Circuit
Judge, and J. Frederick MOTZ, Chief United States District Judge
for the District of Maryland, sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Donald Bruce Clark, Arnold Samuel Goodstein, ROSEN,
GOODSTEIN & HAGOOD, L.L.C., Charleston, South Carolina, for
_________________________________________________________________
*Although Aetna is now known as the Travelers Casualty and Surety
Company, we will still refer to the appellee in this case as Aetna.
Appellant. Mark Hedderman Wall, OGLETREE, DEAKINS, NASH,
SMOAK & STEWART, Charleston, South Carolina, for Appellee.
ON BRIEF: Linda B. Foster, Andrew R. Diamond, WEISSMAN,
NOWACK, CURRY & WILCO, P.C., Atlanta, Georgia, for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

In this action for coverage under successive general commercial
liability insurance policies, Southeastern Fertility Center, P.A. (South-
eastern) challenges the district court's grant of summary judgment in
favor of Aetna Casualty & Surety Co. (Aetna) on Southeastern's
claims alleging breach of contract and breach of the duty of good faith
and fair dealing with respect to Aetna's obligations under the policies
to provide indemnification and a defense to litigation. Southeastern
also challenges the district court's failure to certify two particular
questions to the South Carolina Supreme Court. We affirm on the rea-
soning of the district court.

I

The facts in this case are undisputed. In October 1984, Richard
Jablonski (Jablonski) was diagnosed with Hodgkin's Disease. Con-
cerned that treatment for the disease would render him sterile, Jablon-
ski sought treatment from Dr. Grant Patton (Dr. Patton) for the
purpose of storing some of his sperm. In late 1984 and early 1985,
Jablonski made several deposits of his sperm for frozen storage with
Southeastern, a professional association owned by Dr. Patton.

Southeastern stored Jablonski's sperm for over four years. During
this time, Jablonski ceased paying storage fees to Southeastern, and
Southeastern lost all contact with Jablonski. At some point, Jablonski

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paid $288 to a collection agency to satisfy his account with Southeast-
ern, but the record is unclear whether the collection agency ever trans-
ferred the payment to Southeastern. Operating under the belief that
Jablonski had not paid his storage fees for a significant period of time,
in October 1989, Southeastern thawed Jablonski's stored sperm and
discarded it.

Nearly two years later, in August 1991, Jablonski's wife, Patricia
Jablonski, contacted Southeastern in an attempt to retrieve her hus-
band's stored sperm. By this time, Jablonski's treatment for Hodg-
kin's Disease had left him sterile. Upon contacting Southeastern,
Patricia Jablonski learned that her husband's stored sperm had been
destroyed.

The Jablonskis subsequently filed a civil action in South Carolina
state court against Southeastern, among others, to recover damages
for the destruction of Jablonski's stored sperm. Once in 1992, once
in 1994, and once in 1995, Southeastern requested that Aetna defend
it against the state court action pursuant to several general commercial
liability policies. On all three occasions, Aetna refused Southeastern's
request.

The South Carolina Medical Malpractice Joint Underwriting
Authority, which provided Southeastern an upper limit of $100,000
in coverage, defended Southeastern in the state action. Southeastern
eventually settled the case in October 1996 by executing a confession
of judgment in favor of Jablonski for $1.1 million, with the stipulation
that Jablonski could not enforce the confession of judgment against
the assets of Southeastern or its agents. Additionally, under the terms
of the settlement, Jablonski possessed the right to collect under any
applicable insurance policies held by Southeastern. The Joint Under-
writers Association paid its limit of $100,000 to the Jablonskis, leav-
ing $1 million of the judgment unsatisfied.

The present coverage action by Southeastern followed. The case
was originally filed in South Carolina state court on April 25, 1997,
but was removed to the United States District Court for the District
of South Carolina on May 30, 1997, based upon diversity jurisdiction.
See 28 U.S.C. § 1332. Southeastern's coverage action asserts two
claims under South Carolina law--a breach of contract claim, seeking

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compensatory damages, and a breach of the duty of good faith and
fair dealing claim, seeking compensatory and punitive damages.

Three of the four insurance policies at issue below are at issue in
this appeal. All three are general commercial liability policies. The
first was issued by Aetna to Dr. Patton and his wife for the coverage
period of October 31, 1988 to October 31, 1989. The second was
issued by Aetna to Dr. Patton and his wife for the coverage period of
October 31, 1989 to October 31, 1990. The third was issued by Aetna
to Southeastern for the coverage period of October 31, 1990 to Octo-
ber 31, 1991.

The following policy language at issue in this appeal is identical in
all three policies (the Three Policies).

          We will pay those sums that the insured becomes legally
          obligated to pay as damages because of "bodily injury" or
          "property damage" to which this insurance applies. . . . The
          bodily injury or property damage must be caused by an "oc-
          currence."

(J.A. 156).

          This insurance does not apply to: . . . "Property damage" to:
          . . . (4) Personal property in your care, custody or control
          ....

(J.A. 158).

          "Bodily injury" means bodily injury, sickness or disease sus-
          tained by a person, including death resulting from any of
          these at any time.

(J.A. 164).

          "Property Damage" means:

          a. Physical injury to tangible property, including all result-
          ing loss of use of that property; or

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          b. Loss of use of tangible property that is not physically
          injured.

(J.A. 166).

On March 31, 1998, the parties filed cross motions for summary
judgment, including supporting memoranda. After conducting a hear-
ing on the cross motions and considering the parties' supporting
memoranda, on February 22, 1999, the district court issued an order
granting summary judgment in favor of Aetna on the breach of con-
tract claim and denying summary judgment in favor of Southeastern
on the breach of contract claim. In its order, the district court thor-
oughly explained that it ruled in favor of Aetna on the breach of con-
tract claim involving the Three Policies on the basis that Jablonski's
stored sperm constituted his personal property, and therefore, its
destruction in 1989 was plainly excluded from coverage under the
exclusion for coverage of damage to the personal property of others
in the care, custody, and control of the insured. Under the district
court's reasoning, the exclusion was applicable regardless of which of
the Three Policies was in effect at the time Southeastern destroyed
Jablonski's stored sperm.

With respect to Southeastern's cause of action for breach of the
duty of good faith and fair dealing, the district court granted summary
judgment in favor of Aetna and denied summary judgment in favor
of Southeastern to the extent Southeastern's claim alleged bad faith
refusal to pay benefits, bad faith refusal to defend, and entitlement to
punitive damages. However, relying on the South Carolina Supreme
Court's decision in Tadlock Painting Co. v. Maryland Casualty Co.,
473 S.E.2d 52 (S.C. 1996), the district court held that Southeastern
could proceed to trial on its breach of the duty of good faith and fair
dealing claim to the extent Southeastern claimed that Aetna acted in
bad faith in the handling or processing of its claim despite the fact
that Aetna had not breached any express contractual term of the Three
Policies or the fourth policy not at issue in this appeal. The district
court refused to grant summary judgment in favor of Southeastern on
this remaining portion of its breach of the duty of good faith and fair
dealing claim.

On March 4, 1999, Southeastern filed a motion pursuant to Federal
Rule of Civil Procedure 59(e) to alter or amend the judgment and/or

                    5
to certify to the South Carolina Supreme Court the question of when
the loss occurred for purposes of triggering coverage under the Three
Policies. On March 5, 1999, Southeastern supplemented its Rule 59(e)
motion with an additional argument and requested that the district
court certify to the South Carolina Supreme Court the question of the
applicability of the exclusion for damage to personal property in the
care, custody, and control of the insured. The district court denied the
motion, as supplemented, in toto on April 7, 1999 on the basis that
its prior analysis of Southeastern's claims upon which it granted sum-
mary judgment in favor of Aetna was sound.

On May 3, 1999, Southeastern filed a motion, pursuant to Federal
Rule of Civil Procedure 54(b), asking the district court to certify its
February 22, 1999 and April 7, 1999 orders for immediate appellate
review and to stay the trial of the surviving portion of its breach of
the duty of good faith and fair dealing claim. The district court
granted Southeastern's Rule 54(b) motion and entered final judgment
with respect to the claims upon which it granted summary judgment
in favor of Aetna.

Southeastern noted a timely appeal. On appeal, Southeastern
argues: (1) the district court erred in holding the personal property
exclusion precluded coverage under the Three Policies; (2) Jablonski
suffered bodily injury within the meaning of the Three Policies when
Southeastern destroyed his stored sperm; (3) that because bodily
injury is involved with lingering mental anguish, the district court
erred in holding that the damage only occurred in 1989 when the
stored sperm was actually destroyed; and (4) the district court erred
in failing to certify the questions outlined in Southeastern's Rule
59(e) motion to the South Carolina Supreme Court.

II

We review a district court's grant of summary judgment de novo,
viewing the evidence in the light most favorable to the non-moving
party. See Figgie Int'l, Inc. v. Destileria Serralles, Inc., 190 F.3d 252,
255 (4th Cir. 1999). We review a district court's failure to certify a
question to a state's highest court for abuse of discretion. See Lehman
Bros. v. Schein, 416 U.S. 386, 391 (1974). Upon review of the briefs
and the record, and after consideration of oral arguments, we con-

                     6
clude that the district court correctly granted summary judgment in
favor of Aetna on Southeastern's claims involving the Three Policies
and did not abuse its discretion in failing to certify the questions out-
lined in Southeastern's Rule 59(e) motion to the South Carolina
Supreme Court. Accordingly, we affirm the judgment in favor of
Aetna on the reasoning of the district court. See Southeastern Fertility
Ctr., P.A. v. Aetna Cas. & Sur. Co., Civ. A. No. DKC 2:97-1602-23
(D.S.C. Feb. 22, 1999 & Apr. 7, 1999).

AFFIRMED

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