In this action for declaratory judgment, Desa Ballard and Desa Ballard, P.A. (collectively, Ballard) appeal an order granting Admiral Insurance Companys (Admiral) motion for judgment on the pleadings, arguing the circuit court erred in considering the language of the “hammer clause”
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found in Admirals professional liability insurance policy (the Policy). Ballard further contends the record lacks the factual development necessary to properly determine whether the refusal to consent to Admirals proposed settlement was reasonable. We affirm the well-reasoned order of the circuit court.
Facts and Procedural History 2
In March 2011, Aundra Williams, Gloria Corleys daughter and attorney-in-fact (Daughter), hired Ballard to defend Corley in a lawsuit filed by attorney Adele Pope. Pope had previously represented Corley in a matter involving Corleys annual distributions from the Martin L. Corley Trust (the Trust).
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Although Pope collected approximately $18,333.33 each year from 1999 through 2010 when Corley received her annual distributions from the Trust, she filed suit to recover additional attorneys fees allegedly owed for legal services. Ballard asserted numerous defenses to Popes action against Corley, including claims that Popes fee agreement took advantage of an elderly and frail client and was void as violative of public policy.
While defending Popes claim, Ballard also represented Corley in negotiating a buy-out of her interests in the Trust. The buy-out included a lump sum payment to Corley but terminated her future annual payments of $55,000 as well as Popes ongoing yearly attorneys fees of $18,333.33.
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The Lexington County Probate Court approved the buy-out (the Trust Settlement).
Ballards complaint in the matter before us alleges the Trust Settlement “was structured so that the lump sum payment to Mrs. Corley was calculated on the basis of monthly payments provided for Mrs. Corley in Mr. Corleys Last Will and Testament for the remainder of Mrs. Corleys life based on statutory life expectancy tables.” The Trust Settlement did not include any present or future payments related to Popes prior legal representation of Corley.
In structuring the Trust Settlement, Ballard met with Daughter and Corleys certified public accountant (CPA) to discuss appropriate steps for preserving the funds for Corleys care and financial needs. Although Ballard alleges reasonable steps were taken to insulate these funds from Popes fee claim, Ballard advised the CPA that Pope might attempt to recover some portion of the Trust Settlement under a theory consistent with her claim for ongoing yearly attorneys fees.
The Trust—separately represented by its own counsel in conjunction with the Trust Settlement—argued to the probate court that the modification of the distributions to Corley was in the best interest of the Trust. Despite the express language of the Trust Settlement, which sought to nullify Corleys fee agreement with Pope, Pope moved for and obtained an order granting her one-third of the gross amount of the Trust Settlement (the Pope Judgment).
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The Pope Judgment provided attorneys fees that Pope would not have realized had Corleys interest in the Trust not been liquidated because Corley did not live as long as the statutory life expectancy tables on which the original Trust Settlement was projected.
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Ballard appealed the Pope Judgment; however, this court dismissed the appeal as untimely.
Ballard timely notified Admiral that Corley could potentially make a claim against her as a result of the untimely appeal of the Pope Judgment. On May 9, 2014, Admiral notified Ballard that it had assigned the defense of any claim to Mendes & Mount, LLP (Mendes).
While not admitting the failure to timely file the appeal caused harm to Corley, Ballard properly notified Daughter of the potential claim against Ballard. Despite advising Daughter to consult with separate counsel given the potential for a conflict, Daughter asked Ballard to continue representing Corley. During this time, Ballard kept Admiral informed of significant developments related to Popes claim and in August 2014, Admiral accepted notice of the matter as a circumstance that would fall within Ballards coverage under its 2013–14 Policy. Admiral renewed the Policy each year until 2017–18, when it declined to renew, claiming Ballard had breached the terms and conditions of the Policy by refusing to consent to Admirals request to engage in settlement discussions with Pope.
Following execution of the Trust Settlement, Ballard suggested Daughter, as attorney-in-fact, obtain counsel for the purpose of establishing a conservatorship and/or guardianship to further protect the Trust Settlement proceeds; Ballard subsequently made an appointment for Daughter with a lawyer for this purpose. Although Ballard believed Daughter met with the recommended lawyer, Daughter cancelled the meeting before it concluded and never returned. In the meantime, Pope continued her efforts to collect the Pope Judgment and amended her complaint for attorneys fees to assert additional claims against third parties.
Ballard began to suspect Daughter had mismanaged or perhaps even misappropriated some or all of the money recovered for Corley through the Trust Settlement. Thus, Ballard advised Daughter she might be a witness in further proceedings relating to Popes claim and recommended Daughter and Corley obtain separate counsel. Ballard was subsequently relieved as counsel, Corley obtained new counsel, and Daughter obtained separate counsel.
On August 6, 2015, Ballard notified Admiral of a potential new claim, and Admiral engaged Monitor Liability Managers (Monitor) and Mendes to review it.
Corley died on March 31, 2016, and the probate court appointed Pope, a judgment creditor, as special administrator of Corleys estate. Ballard alleges Pope obtained Daughters consent to serve as special administrator by agreeing the Estate would not attempt to recover any of the funds Daughter mismanaged or misappropriated. Daughter also agreed to assist Pope in pursuing a civil suit against Ballard.
After her appointment as special administrator, Pope asserted Ballard committed legal malpractice by advising Corley to enter into the disadvantageous Trust Settlement. As specified in Corleys estate planning documents, any excess funds recovered in the legal malpractice action that are not paid to Pope will be paid to Daughter as Corleys beneficiary.
In accordance with her rights under the Policy, Ballard notified Admiral of her preference not to extend any settlement offers or enter any settlement in the legal malpractice claim Pope brought in her capacity as special administrator of the Estate. However, Mendess agents notified Ballard that Admiral wished to engage in pre-suit mediation with Pope in an effort to settle. Ballard repeated that no settlement discussions or mediation were to be initiated by Admiral or any attorney retained to represent Ballard and asserted that doing so would violate Ballards rights under the Policy. Admiral then notified Ballard that if it could reach a settlement figure and Ballard refused to agree, Admiral would withdraw its defense coverage under the Policy. Ballard “reiterated that no settlement discussions should occur in any context.”
In February 2017, Pope filed a legal malpractice claim against Ballard on behalf of the Estate.
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Admiral again advised Ballard of its plan to initiate settlement discussions. If the negotiations succeeded, Admiral intended to settle the matter and terminate Ballards coverage. Ballard objected to Admirals plan to offer in excess of $100,000 to settle, noting such a settlement would convey the impression that the claims were meritorious, reflect negatively on her reputation and standing in the legal community, and harm the firms future insurability with other professional liability carriers. Ballard further asserted a settlement offer would constitute a breach of Admirals obligations under the Policy.
Three months after Pope filed the Estates legal malpractice claim, Monitor notified Ballard that the Policy, as it then existed, would not be renewed due to Ballards “failure to comply with policy terms and conditions.” Upon Ballards inquiry as to how she failed to comply, Monitor advised Ballard by email that “[t]he basis for the non-renewal [was] the insureds refusal to consent to settle.” Ballard challenges this—arguing the Policy does not contain terms requiring her to “consent to settle” upon the carriers request. To the contrary, Ballard asserts the Policy provides a bargained-for contractual right to refuse to settle and Admirals purported basis for non-renewal was merely anticipatory because the parties had not yet agreed on a settlement figure. Ballard claims the non-renewal was “invidious, retaliatory and against public policy and constituted a denial of first party insurance coverage.”
Ballard subsequently retained counsel and brought this action for declaratory, injunctive, and related relief against Admiral regarding the parties’ respective rights and obligations under the Policy. Admiral answered and counterclaimed, seeking declaratory relief to enforce the Policy as written. Admiral further sought declarations that: (1) Admiral had the right to participate in settlement negotiations in the underlying legal malpractice action; (2) Ballard owed a duty to cooperate in the defense and settlement of the claim and could not prevent Admiral from participating in settlement negotiations; and (3) the Policys hammer clause would be enforced as written.
Admiral moved for judgment on the pleadings, and the circuit court held a hearing to address several matters.
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Through counsel, Ballard asserted the Policy gave her the right to prevent settlement negotiations if it appeared Pope would benefit from the settlement.
The circuit court granted Admirals motion for judgment on the pleadings and dismissed Ballards accompanying bad faith claim without prejudice, finding the Policy section titled “Defense, Cooperation and Settlement” controlling. Section VI of the Policy provides in pertinent part:
B. The Insurer shall have the sole right and the duty to defend any covered Claim, and has the sole right to select defense counsel․
C. Each Insured shall cooperate with the Insurer in the defense and settlement of any Claim ․ Upon the request of the Insurer, the Insured shall ․ attend hearings, depositions and trials, assist in effecting settlement, securing and giving evidence, obtaining the attendance of witnesses ․ and meeting with such representatives for the purposes of investigation or defense, all without charge to the Insurer.
Reading these provisions, the circuit court determined that by the plain terms of the Policy, Admiral had the right to control the defense of the case, which included the right to participate in settlement negotiations.
Regarding the hammer clause, the circuit court found the Policy language unambiguous and enforceable according to its plain terms. This clause, found in section VI, paragraph D, provides:
The Insurer shall not settle any Claim without the Named Insureds consent. If, however, the Named Insured shall refuse to consent to any settlement recommended by the Insurer, which is acceptable to the claimant, and shall elect to contest the Claim, or continue any legal, administrative or arbitration proceedings in connection with such Claim, then the Insurers liability for the Claim shall not exceed the amount for which the Claim could have been settled, including Claims Expense incurred up to the date of such refusal. Such amounts are subject to the provisions of section V. In the event that the Named Insured refuses to consent to any settlement as set forth in section VI. D., the Insurers right and duty to defend such Claim shall end upon the date of such refusal.[9]
Although Ballard argued the clause could not be enforced unless the named insured unreasonably refuses a settlement proposal recommended by the insurer and acceptable to the claimant, the circuit court declined to insert the word “unreasonably” into the Policy.
Ballard has appealed the circuit courts findings that:
a. Admiral has the right to negotiate a potential settlement as part of its defense of the Underlying Malpractice Action;
b. Admiral has a right to participate in settlement negotiations at mediation in the Underlying Malpractice Action;
c. Plaintiffs owe a duty to cooperate in the defense and settlement of the case and do not have a right to prevent Admiral from participating in settlement negotiations with [the Estate];
d. If Admiral recommends a settlement to the Named Insured which is acceptable to [the Estate], and the Named Insured rejects the settlement and chooses to contest the Underlying Malpractice Action, then Admirals liability for the Claim shall not exceed the amount for which the Claim could have been settled, including Claim Expenses incurred up to the date of such refusal; and
e. If Admiral recommends a settlement to the Named Insured which is acceptable to [the Estate], and the Named Insured rejects the settlement and chooses to contest the Underlying Malpractice Action, then Admirals right and duty to defend the Underlying Malpractice Action shall end upon the date of such rejection.
Standard of Review
The circuit court incorporated the provisions of the Policy into its consideration of Admirals motion for judgment on the pleadings. For that reason, and also because Admiral attached a copy of the Policy to its motion for judgment on the pleadings, Ballard asserts the proper standard of review is that for a motion for summary judgment; however, Admiral asserts the Policy was part of the pleadings, both through its attachment of the Policy to its answer and counterclaim and due to Ballards specific references to the Policy throughout her complaint. Thus, Admiral argues and we agree that (1) the circuit court properly considered the Policy when it evaluated Admirals motion for judgment on the pleadings; and (2) the proper standard of review is that for a motion for judgment on the pleadings.
“Any party may move for a judgment on the pleadings under Rule 12(c), SCRCP. When considering such motion, the court must regard all properly pleaded factual allegations as admitted.” Falk v. Sadler, 341 S.C. 281, 286, 533 S.E.2d 350, 353 (Ct. App. 2000). In analyzing a Rule 12(c) motion, the court must liberally construe the complaint “so that substantial justice is done between the parties.” Id. at 287, 533 S.E.2d at 353. Under Rule 12(c),
If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the Court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
In any event, “[w]hether reviewing a grant of summary judgment or a judgment on the pleadings, we apply the same legal standards as the trial court.” Ziegler v. Dorchester Cnty., 426 S.C. 615, 619, 828 S.E.2d 218, 220 (2019). “We review questions of law de novo.” Id.
Law and Analysis
I. Policy Language
Ballard argues the circuit courts consideration of the hammer clause was premature because “this lawsuit does not seek to prevent a settlement from occurring. Instead, it seeks to prevent Admiral [from] ‘pursu[ing] a settlement’ or ‘seek[ing] to settle’ the claim so as to put Ballard in a position of having to invoke the ‘consent’ provision of the policy.” We disagree.
“Insurance policies are subject to the general rules of contract construction.” Auto Owners Ins. Co. v. Benjamin, 415 S.C. 137, 143, 781 S.E.2d 137, 141 (Ct. App. 2015) (quoting Whitlock v. Stewart Title Guar. Co., 399 S.C. 610, 614, 732 S.E.2d 626, 628 (2012)). “The cardinal rule of contract interpretation is to ascertain and give legal effect to the parties’ intentions as determined by the contract language.” Id. (quoting Whitlock, 399 S.C. at 614, 732 S.E.2d at 628). “Courts must enforce, not write, contracts of insurance, and their language must be given its plain, ordinary and popular meaning.” Id. (quoting Whitlock, 399 S.C. at 614, 732 S.E.2d at 628).
“Where the contracts language is clear and unambiguous, the language alone determines the contracts force and effect.” Id. (quoting Whitlock, 399 S.C. at 615, 732 S.E.2d at 628). “Whether the language of a contract is ambiguous is a question of law for the court.” Id. at 143–44, 781 S.E.2d at 141. “An insurance contract is read as a whole document so that ‘one may not, by pointing out a single sentence or clause, create an ambiguity.’ ” Id. at 144, 781 S.E.2d at 141 (quoting Beaufort Cnty. Sch. Dist. v. United Natl Ins. Co., 392 S.C. 506, 516, 709 S.E.2d 85, 90 (Ct. App. 2011)). “However, this court must construe ‘[a]mbiguous or conflicting terms in an insurance policy ․ liberally in favor of the insured and strictly against the insurer.’ ” Id. (quoting Whitlock, 399 S.C. at 615, 732 S.E.2d at 628).
Here, section VI, paragraph B of the Policy gives Admiral the “sole right and the duty to defend any covered Claim․” Moreover, the clear and unambiguous language of the Policy states Admiral, as the insurer, has the right to control the defense of the case. Likewise, Section VI, paragraph C, provides each “Insured shall cooperate with the Insurer in the defense and settlement of any Claim․”
Section VI, paragraph D, does initially seem to prohibit Admiral from settling any claim without Ballards consent:
The Insurer shall not settle any Claim without the Named Insureds consent.
Yet, paragraph D goes on to state:
If, however, the Named Insured shall refuse to consent to any settlement recommended by the Insurer, which is acceptable to the claimant, and shall elect to contest the Claim, or continue any legal, administrative or arbitration proceedings in connection with such Claim, then the Insurers liability for the Claim shall not exceed the amount for which the Claim could have been settled, including Claims Expense incurred up to the date of such refusal․ In the event that the Named Insured refuses to consent to any settlement as set forth in section VI. D., the Insurers right and duty to defend such Claim shall end upon the date of such refusal.
Thus, if Admiral recommends a settlement to Ballard that is acceptable to the Estate, Ballard has the right to reject it and continue defending the case. However, such a rejection ends Admirals duty to defend and caps its liability at the proposed settlement amount. Although the consent clause, found in the same paragraph as the hammer clause, gives Ballard the option to reject a settlement proposed by Admiral, we find nothing in the Policy gives Ballard the ability to prevent Admiral from participating in settlement negotiations. Otherwise, there would be no way to determine an amount “for which the Claim could have been settled” for purposes of this provision in the Policy.
Ballard further argues Admiral failed to allege Ballard refused to cooperate in “the handling” of the claim. However, this is exactly what Admiral alleged—Ballards repeated refusal to allow Admiral to initiate settlement or mediation discussions constituted a failure “to cooperate with the Insurer in the defense and settlement of any Claim.” Ballard further contends Admiral has neither offered nor accepted a settlement. But, in her pleadings, Ballard stated Admiral informed her of its intent to offer the Estate in excess of $100,000. Admiral attempted to initiate settlement discussions both before and after Pope filed suit in 2017; nevertheless, Ballard stated again and again that neither Admiral nor any attorney retained to represent Ballard was to initiate settlement or mediation discussions.
We find the circuit court correctly analyzed the clear and unambiguous language of the Policy in finding Ballard could not prevent Admiral from negotiating with the Estate to settle the Pope claim. The Policy requires Ballard to cooperate with Admiral in the defense and settlement of Popes action; Ballard is free to choose not to consent to a settlement, but such refusal triggers the consequences of the hammer clause.
II. “Reasonableness”
Ballard next argues the record reflects no facts upon which the circuit court could properly determine whether her refusal to permit settlement was reasonable. In so arguing, Ballard attempts to insert a “reasonableness” term into the Policys consent to settle clause. Acceptance of this argument would essentially require us to rewrite the Policy, which South Carolina law forbids. See, e.g., Benjamin, 415 S.C. at 143, 781 S.E.2d at 141 (“Courts must enforce, not write, contracts of insurance, and their language must be given its plain, ordinary and popular meaning.”) (quoting Whitlock, 399 S.C. at 614, 732 S.E.2d at 628).
Ballard cites Clauson v. New England Insurance Co., 254 F.3d 331 (1st Cir. 2001) for the proposition that a hammer clause cannot be enforced unless the insured “unreasonably” rejects a proposed settlement. However, contrary to Ballards claim, the Clauson court merely applied the language of the consent to settle clause in the policy at issue—which included language addressing “unreasonably withheld” consent. See id. at 336–35 (“The Company shall have the right to make any investigation it deems necessary and with the written consent of the insured, said consent not to be unreasonably withheld, any settlement of any claim covered by the terms of this policy.”). This case is easily distinguishable because Ballards Admiral Policy contains no such language.
By contrast, courts interpreting polices that—like Ballards—lack the phrase “unreasonably withheld” in the context of a consent to settle clause have applied the policy language regardless of whether the insured “unreasonably” withheld consent. For example, in Security National Insurance Co. v. City of Montebello, Montebello argued “it acted reasonably in refusing a settlement offer conditioned on [an] employees continuing employment.” 680 F. Appx 525, 527 (9th Cir. 2017). Rejecting Montebellos “reasonableness” argument, the Ninth Circuit noted the clause at issue did “not limit the insurers right to invoke the clause to instances where the insured was unreasonable in rejecting an offer. To hold otherwise would impermissibly rewrite the hammer clause to the policyholders benefit.” Id.
Likewise, in Cowan v. Codelia, 50 F. Appx 36, 38 (2d Cir. 2002), the Second Circuit explained, “[T]he district court conducted an evidentiary hearing regarding the parties’ settlement discussions and found that Codelias ‘phantom objections’ and ‘illusory’ complaints about the settlement were the equivalent of a rejection.” Thus, the court rejected the insureds argument “that its right to choose its own counsel supplanted the effect of the consent-to-settle clause, particularly where Chicago Insurance pursued a settlement in good faith.”
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Id.
We find the circuit court correctly applied the reasoning of City of Montebello in rejecting Ballards argument seeking to rewrite the clear and unambiguous language of the Policy. The Policys hammer clause sets out the consequences of an insureds rejection of a recommended settlement such as that proposed by Admiral here. Because the clause does not include a “reasonableness” modifier, development of the factual record in this case was unnecessary; the circuit court properly considered the Policy language as written.
Conclusion
For the foregoing reasons, the circuit courts order granting Admirals motion for judgment on the pleadings is
AFFIRMED.
FOOTNOTES
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. A hammer clause “puts pressure on the insureds right to refuse consent to settle and thereby increases an insurers ability to effectuate a settlement.” Rawan v. Contl Cas. Co., 483 Mass. 654, 136 N.E.3d 327, 330 (2019).
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. Corleys late husband established the Trust for her benefit.
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. Pope was not a party to the Trust buy-out proceeding.
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. One of Ballards filings in a prior matter notes that in August 2013, Pope was awarded “$248,673.87, plus daily interest and costs of collection.”
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. Corley died approximately four years after the execution of the Trust Settlement.
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. The Estate alleged Ballard was negligent in: (1) failing to recognize termination of the trust was not in Corleys best interests; (2) failing to have a guardian ad litem appointed for Corley; (3) representing both Corley and Daughter despite the inherent conflict of interest; (4) failing to recognize Popes fee agreement entitled Pope to a percentage of the lump sum buyout payment; and (5) undertaking a frivolous defense of the Pope Judgment and then failing to timely appeal.
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. Pope and the Estate filed motions to dismiss or, in the alternative, to strike. The circuit court granted these motions to dismiss, and Ballard did not appeal the dismissals.
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. Policy section III, paragraph B defines “Claims Expense” as “reasonable and necessary fees, costs and expenses ․ resulting solely from the investigation, adjustment, defense and appeal of a covered or potentially covered Claim against the Insureds.” However, the definition specifically excludes “salaries, wages, overhead or benefit expenses associated with any Insured, or any amount covered by the duty to defend obligation of any other insurer.” Section V addresses the Policys limits of liability and deductible.
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. Ballard argues there is no need for an “unreasonably withheld” qualifier for the Policys consent consideration because the requirement of good faith and fair dealing on the part of the insurer supplants the need for such Policy language. We disagree. While Ballard correctly argues courts must balance a malpractice carriers interest in efficiently resolving claims against its insureds right to protect her reputation and challenge claims reasonably believed to be of little or no merit, this is not such a bad faith action. Because the circumstances alleged in Ballards Complaint do not implicate such balancing concerns, we focus—as we must—on the plain language of the Policy. Cf. Sentry Select Ins. Co. v. Maybank L. Firm, LLC, 426 S.C. 154, 157–58, 826 S.E.2d 270, 271–72 (2019) (noting an “insurers right to settle must be exercised in good faith, and that duty of good faith requires the insurer to act reasonably in protecting the insured from liability in excess of the policy limits”).
MCDONALD, J.:
THOMAS and HEWITT, JJ., concur.