Tebele v. Lloyd's: Sprinkler Denial Holds, Agent Pays Only $15,000

Abraham Tebele signed the final application for 1901 North Kings Highway on January 14, 2019. It stated the Myrtle Beach building was 100% sprinklered. The system had not been connected to a water supply, and it still was not on February 25, 2019, when the building burned.¹

The South Carolina Court of Appeals affirmed on the appeal and the cross-appeal on August 26, 2026, in Opinion No. 6162, Appellate Case No. 2024-000705.³ The Myrtle Beach location carried $2.85 million of limits across building, contents and loss of rent, the total the court charged as the contract ceiling.¹ The Rule 221, SCACR rehearing window is still open and remittitur has not issued.³

Precedential today, not final.

A spreadsheet column instead of a symbol

The declarations listed "SRU-024 071 0 - Protective Safeguards - Fire Endorsement" under "Forms Applicable to Common Forms."¹ Its box carries a left column for Symbol(s), offering AS for automatic sprinkler system, and a right column for Location(s) Applicable, which beside AS read "as indicated on the Schedule of Values on file with the Company."¹ No AS symbol appears anywhere on that Schedule. What it carried instead was a spreadsheet column headed "sprinklered," and the cell for 1901 North Kings Highway read "100%."¹ James Twaddell, the public adjuster Tebele hired to deal with the insurers, testified the notation indicated only that the property was sprinklered, never that sprinklers were a condition of coverage.¹ The court held the endorsement unambiguous as a matter of law, because nothing in it limits the requirement to locations tagged AS. Five properties were marked 100% sprinklered. Those five had to maintain sprinklers.

Westfield Insurance Co. v. Enterprise 522, LLC, 34 F. Supp. 3d 737 (E.D. Mich. 2014) did not carry the argument, because there the endorsement appeared only by form number under optional coverage and the insurer knew the building was unsprinklered.¹ Breton, LLC v. Graphic Arts Mutual Insurance Co., 446 F. App'x 598 (4th Cir. 2011), unpublished and 2-1, found "maintain" ambiguous where a tenant closed a valve on an installed system.¹ Tebele's sprinklers were never operable, so there was nothing to maintain.

The directed-verdict motion rested exclusively on ambiguity, so non-delivery of the policy went unpreserved, and the Valued Policy Statute, S.C. Code § 38-75-20, surfaced for the first time on appeal.¹ Abraham Tebele did not see a copy of the policy until after the fire.¹

What happens to the agent file next

On January 11, 2019, Crescent Coast office manager Sandra Nenna emailed AmWINS that Melissa Garcia of tenant La Casona said the sprinklers had never been connected to water, and agent Sutherland was copied.¹ Agent Egan sent the final application that day. Three days later, Abraham signed it.

How the fire started never mattered. An NFPA 921-compliant origin report would not have moved a single finding, because a condition-based denial gets decided in the underwriting file.

So the money moved to Crescent Coast. The jury found the agency 40% negligent and Tebele 60% responsible, producing no award at all on negligence.¹ The signature dated January 14 carried that 60%.

On breach of fiduciary duty the jury awarded $15,000, affirmed.¹ Pitts v. Jackson National Life Ins. Co., 352 S.C. 319, 574 S.E.2d 502 (Ct. App. 2002), holds no fiduciary duty attaches at the application stage.⁴ The court got around Pitts by adopting, as an accurate observation about the state of the law, the formulation from Smith v. Universal Property & Casualty Ins. Co., 2017 WL 3599590 (D.S.C. Aug. 22, 2017), an unpublished federal district decision it noted is not controlling: a fiduciary relationship may arise where the transaction "was not truly at arm's length or other factors demonstrate that the parties' relationship goes beyond the mere sale of insurance."¹ Sutherland had known Tebele for years through the restaurant business.

Read the damages half narrowly. The opinion never holds that fiduciary-duty claims are exempt from comparative negligence. The verdict form treated the counts separately, so the $15,000 survived the 60% finding, and the court then used that fault finding on damages, reasoning that a policy-amount award on the fiduciary count after a zero on negligence would be inconsistent.¹ It endorsed Crescent Coast's theory that $15,000 approximated disgorgement of the roughly $17,000 commission the agency earned.¹ Twaddell's consultant had estimated 2019 replacement cost near $4.5 million.¹

Pull the Schedule of Values before arguing the endorsement, then find out who typed the sprinkler notation and what that person knew that week. When the answer is the agent, the E&O file is real, capped by whatever the insured signed and by a commission figure that may be all a fiduciary count is worth. Price both on day one, because that arithmetic is what public adjusters get paid to run.

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