Background
A. Tebele & Sons owned multiple commercial properties in Myrtle Beach and worked with Crescent Coast Insurance to obtain roughly $22 million in property coverage. Its application represented that a North Kings Highway building was fully sprinklered, although the sprinkler installation had not yet been connected to the city’s water supply. The resulting policy included a protective-safeguards endorsement conditioning fire coverage on maintaining designated sprinkler systems in complete working order. A fire destroyed the building about six weeks after the policy began, and the insurers denied the claim because the promised safeguard was not operational.
Tebele sued the insurers and Crescent Coast. After a multi-day trial, the jury found for the insurers on coverage. It assigned Crescent Coast forty percent of the fault and Tebele sixty percent on negligence, producing no negligence recovery under South Carolina’s modified comparative-negligence rule. The jury separately found that Crescent Coast breached a fiduciary duty and awarded Tebele $15,000. Both Tebele and Crescent Coast challenged the resulting rulings on appeal.
Tebele advanced several routes around the coverage verdict. It argued that the policy documents did not clearly identify which locations were subject to the sprinkler condition, that “maintained” was susceptible to more than one meaning, and that language concerning additions under construction covered the unfinished installation. It also challenged the consequences of not receiving the complete policy until after the fire. Crescent Coast, for its part, argued that South Carolina law foreclosed a fiduciary duty by an insurance agent as a matter of law. Those arguments required the appellate court to separate ordinary contract construction from the evidence supporting the tort verdicts.
The Court’s Holding
The Court of Appeals affirmed across the board. The policy was not ambiguous merely because the endorsement used no special symbol next to the insured location or left the word “maintained” undefined. Read as a whole, the documents identified properties represented as fully sprinklered, and requiring a sprinkler system to be maintained in complete working order could not reasonably cover a system that had never been connected or made operational. Language covering additions under construction did not transform the unfinished sprinkler work into coverage for the destroyed building.
The court also rejected arguments based on delayed policy delivery and upheld the trial rulings concerning the verdict and damages. On Crescent Coast’s cross-appeal, the court declined to establish a categorical rule that an insurance agent can never owe an insured a fiduciary duty. The ordinary agent-insured relationship does not itself create that duty, but evidence of a longer relationship, repeated solicitation, and circumstances going beyond an arm’s-length sale allowed the jury to decide the issue. The modest fiduciary-duty award was supported without disturbing the separate comparative-negligence verdict.
Key Takeaways
- An insured’s application representation can identify the locations subject to a protective-safeguards condition even without a separate endorsement symbol.
- A requirement to maintain a sprinkler system in complete working order does not cover a system that was never connected and operational.
- South Carolina does not impose a fiduciary duty in every insurance-agent relationship, but additional trust and relationship facts can permit such a finding.
Why It Matters
The published opinion gives South Carolina coverage lawyers a useful roadmap for reading protective-safeguards endorsements together with applications, schedules of values, and declarations. Property owners should verify operational safeguards before signing an application and again when coverage attaches; a plan to complete installation is not the same as compliance with a condition stated in the policy.
For brokers and professional-liability counsel, the decision is equally important because it keeps fiduciary duty fact-dependent. Firms should document whether they are merely placing requested coverage or undertaking broader advisory responsibilities. Insureds alleging a special relationship will need evidence beyond the ordinary sale of insurance, while agents seeking judgment as a matter of law should address the parties’ prior dealings and the scope of any assurances. Documentation matters.