John D. Flowers and Dave Flowers v. Max Specialty Insurance Company and Darin I. Drane v. Max Specialty Insurance Company , 234 W. Va. 1 ( 2014 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2014 Term FILED
_______________ June 4, 2014
released at 3:00 p.m.
RORY L. PERRY II, CLERK
No. 13-0262 SUPREME COURT OF APPEALS
OF WEST VIRGINIA
_______________
JOHN D. FLOWERS, DAVE FLOWERS d/b/a VENOM, INC.,
Third-party Plaintiffs Below, Petitioner
v.
MAX SPECIALTY INSURANCE COMPANY,
A VIRGINIA CORPORATION,
Plaintiff Below, Respondent
AND
_______________
No. 13-0317
________________
DARIN I. DRANE,
Defendant Below, Petitioner
v.
MAX SPECIALTY INSURANCE COMPANY,
a VIRGINIA CORPORATION,
Plaintiff Below, Respondent
____________________________________________________________
Appeals from the Circuit Court of Cabell County
The Honorable David M. Pancake, Judge
Civil Action No. 11-C-216
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
____________________________________________________________
Submitted: February 4, 2014
Filed: June 4, 2014
Thomas H. Peyton, Esq. Duane J. Ruggier II, Esq.
Peyton Law Firm, PLLC Geoffrey Cullop, Esq.
Nitro, West Virginia Pullin, Fowler, Flanagan, Brown & Poe
Counsel for John D. Flowers, PLLC
Dave Flowers, Inc. d/b/a Venom, Inc., Charleston, West Virginia
Petitioner Counsel for Max Specialty Insurance
Company, Respondent
Scott W. Andrews, Esq.
Hoover Andrews PLLC
Barboursville, West Virginia
Counsel for Darin Drane, Petitioner
Albert C. Dunn, Esq.
Allen, Kopet & Associates, PLLC
Charleston, West Virginia
Counsel for John Young and Young
Insurance Agency, Defendants Below
The Opinion of the Court was delivered PER CURIAM.
JUSTICE KETCHUM concurs and reserves the right to file a concurring opinion.
ii
SYLLABUS BY THE COURT
1. “The interpretation of an insurance contract, including the question of whether
the contract is ambiguous, is a legal determination.” Syllabus Point 2, Riffe v. Home
Finders Associates, Inc., 205 W.Va. 216, 517 S.E.2d 313 (1999).
2. “In determining whether under a liability insurance policy an occurrence was or
was not an “accident”—or was or was not deliberate, intentional, expected, desired, or
foreseen—primary consideration, relevance, and weight should ordinarily be given to the
perspective or standpoint of the insured whose coverage under the policy is at issue.”
Syllabus, Columbia Cas. Co. v. Westfield Ins. Co., 217 W.Va. 250, 617 S.E.2d 797
(2005).
i
Per Curiam:
These consolidated appeals are before the Court upon the petitions of John
D. Flowers, Dave Flowers, Inc. d/b/a Venom, Inc. and Darin I. Drane, who both seek to
reverse the Circuit Court of Cabell County’s order granting declaratory judgment to
Respondent Max Specialty Insurance Company. Specifically, Venom appeals the circuit
court’s finding that Max Specialty’s duty to defend ends once the policy limits are
exhausted through the expenditure of attorney’s fees and litigation costs related to the
defense of the underlying tort actions. Separately, Drane appeals the circuit court’s
finding that available coverage is limited to $25,000 under the “Limited Assault and
Battery Coverage” endorsement to the policy. Upon examination of the petitions, the
responses, the submitted appendices, and the arguments of counsel, this Court concludes
that the February 8, 2013, order of the Circuit Court of Cabell County granting Max
Specialty’s Motion for Declaratory Judgment should be affirmed, in part, and reversed, in
part, and remanded for further proceedings consistent with this Opinion.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Respondent Max Specialty’s Complaint for declaratory judgment arose out
of an incident that occurred at Club Venom, a bar in Huntington which was owned and
1
operated by John D. Flowers and/or Dave Flowers, Inc. d/b/a Venom, Inc. (“Venom”).1
Max Specialty issued a commercial liability insurance policy to Flowers and/or Venom
for the policy period of August 21, 2009 through March 23, 2010.2 On or about the night
of February 21, 2010, an altercation occurred between some Club Venom patrons. During
the altercation, an unidentified man allegedly fired a gun inside Club Venom. The
altercation and subsequent shooting resulted in three Venom patrons receiving gunshot
wounds. Petitioner Darin Drane was one of the patrons of Club Venom who was injured
during the incident.3 Drane notified Venom that he intended to sue for negligence,
negligent security, and failure to warn. After being advised of this claim, Max Specialty
issued a reservation of rights to Venom and filed the instant declaratory judgment action
to determine coverage.
The limits of the applicable policy are a one million per occurrence limit, a
two million aggregate limit, and a $5,000.00 medical expense limit for any one person.
The policy includes an exclusion for claims arising from “Assault or Battery.” However,
the policy also includes an endorsement for “Limited Assault or Battery Coverage” with
a limit of $25,000 per event and $25,000 per aggregate.
1
Club Venom is located at 1123 4th Avenue in Huntington, West Virginia.
2
The applicable renewal policy is identified as Policy Number MAX012700003560.
3
The other victims injured in the shooting were Robert Turbeville and Kaitlin Grace
Marcum. They are not involved in the instant appeal.
2
The Assault or Battery Exclusion states as follows:
ASSAULT OR BATTERY EXCLUSION
THIS ENDORSEMENT CHANGES THE POLICY.
PLEASE READ IT THROUGHLY.
This endorsement modifies insurance provided under the
following:
COMMERCIAL GENERAL LIABILITY COVERAGE
PART COMMERCIAL UMBRELLA LIABILITY
COVERAGE PART
In consideration of the premium charged, it is understood and
agreed that this insurance does not apply to liability for
damages because of “bodily injury”, “property damage”,
“personal and advertising injury”, “medical expense”, arising
out of an “assault”, “battery”, or “physical altercation” that
occurs in, on, near, or away form an insured’s premises:
1. Whether or not caused by, at the instigation of, or with the
direct or indirect involvement of an insured, an insured’s
employees, patrons or other persons in, on, near or away from
an insured’s premises, or
2. Whether or not caused by or arising out of an insured’s
failure to properly supervise or keep an insured’s premises in
safe condition, or
3. Whether or not caused by or arising out of any insured’s
act or omission in connection with the prevention,
suppression, failure to warn of the “assault,” “battery,” or
physical altercation,” including but not limited to, negligent
hiring, training and/or supervision.
4. Whether or not caused by or arising out of negligent,
reckless, or wanton conduct by an insured, an insured’s
employees, patrons or other persons.
DEFINITIONS:
3
For purposes of this endorsement:
“Assault” means any attempt or threat to inflict injury to
another including any conduct that would reasonably place
another in apprehension of such injury.
“Battery” means the intentional or reckless physical contact
with or any use of force against a person without his or her
consent that entails some injury or offensive touching
whether or not the actual injury inflicted is intended or
expected. The use of force includes but is not limited to the
use of a weapon.
“Physical altercation” means a dispute between individuals
in which one or more persons sustain bodily injury arising out
of the dispute.
All other term, conditions, definitions and exclusions apply.
The Limited Assault and Battery Coverage form provides as follows:
LIMITED ASSAULT OR BATTERY COVERAGE
THIS ENDORSEMENT CHANGES THE POLICY.
PLEASE READ IT THROUGHLY.
This endorsement modifies insurance provided under the
following:
COMMERCIAL GENERAL LIABILITY COVERAGE
FORM COMMERCIAL PROFESSIONAL LIABILITY
COVERAGE FORM LIQUOR LIABILITY
COVERAGE FORM Schedule
LIMITS OF INSURANCE PREMIUM
$ 25,000.00 Per Event $ 300.00
$ 25,000.00 Aggregate
4
For the above premium, the MXG108 – Assault or Battery
Exclusion is inapplicable; the Limit of Insurance shown in the
above schedule applies.
1. COVERAGE – LIMITED ASSAULT COVERAGE
We will pay those sums that the insured becomes legally
obligated to pay as damages because of “bodily injury” or
medical expense, arising out of an “event,” of “assault,”
“battery,” or “physical altercations” that occurs in, on, near,
or away from an insured’s premises:
a) Whether or not caused by, at the instigation of, or with the
direct or indirect involvement of an insured, an insured’s
employees, patrons or other persons in, on, near or away from
an insured’s premises, or
b) Whether or not caused by or arising out of an insured’s
failure to properly supervise or keep an insured’s premises in
safe condition, or
c) Whether or not caused by or arising out of any insured’s
act or omission in connection with the prevention,
suppression, failure to warn of the “assault,” “battery,” or
physical altercation,” including but not limited to, negligent
hiring, training and/or supervision.
d) Whether or not caused by or arising out of negligent,
reckless, or wanton conduct by an insured, an insured’s
employees, patrons or other persons.
LIMITS OF INSURANCE
The most we pay under the COMMERCIAL GENERAL
LIABILITY COVERAGE PART, the COMMERCIAL
PROFESSIONAL LIABILITY COVERAGE PART, and the
LIQUOR LIABILITY COVERAGE PART for damages and
for SUPPLEMENTARY PAYMENTS for any “assault,”
“battery,” or “physical altercation” is the “per event” limit
shown in the Schedule above.
5
The amount shown under the Schedule above as the aggregate
is the most we will pay for damages and for
SUPPLEMENTARY PAYMENTS under the
COMMERCIAL GENERAL LIABILITY COVERAGE
PART, the COMMERCIAL PROFESSIONAL LIABILITY
COVERAGE PART, and the LIQUOR LIABILITY
COVERAGE PART under paragraph 1 in any one policy
period irrespective of the number of claimants or injuries.
The Limits of Insurance above shall not be in addition to any
other Limits in the policy.
Any supplementary payments we make arising out of an
“event” of “assault and battery” or “physical altercation” that
occurs in, on, near or away from an insured’s premises, will
reduce the Limits of Insurance shown above.
No other obligation or liability to pay sums or perform acts or
services is covered.
DEFINITIONS:
(For purposes of this endorsement)
“Assault” means any attempt or threat to inflict injury to
another including any conduct that would reasonably place
another in apprehension of such injury.
“Battery” means the intentional or reckless physical contact
with or any use of force against a person without his or her
consent that entails some injury or offensive touching
whether or not the actual injury inflicted is intended or
expected. The use of force includes but is not limited to the
use of a weapon.
“Physical altercation” means a dispute between individuals
in which one or more persons sustain bodily injury arising out
of the dispute.
“Event” may be comprised of one or more incidents of
assault and battery taking place in one twenty-four (24) hour
period.
6
No other obligation or liability to pay sums or perform acts or
services is covered.
All other policy terms, exclusions and conditions remain the
same.
On or about May 5, 2011, Max Specialty filed its Amended Complaint for
Declaratory Judgment against John D. Flowers, Dave Flowers, Inc., d/b/a Venom, Inc.,
Robert Daniel Turbeville, Darin Idris Drane, and Kaitlin Grace Marcum. Max Specialty
asked the circuit court to enter a declaratory judgment determining the applicability of the
provisions of the subject insurance policy, determining specifically Max Specialty’s
rights, liabilities, obligations, and duties concerning insurance coverage. In doing so,
Max Specialty sought a declaration that the subject insurance policy provides only up to
$25,000.00 in insurance coverage and no coverage for punitive damages pursuant to the
policy’s “Limited Assault or Battery” endorsement.
Max Specialty filed a Motion for Summary Judgment on July 26, 2011.
Responses and replies were filed with the circuit court. On February 8, 2013, the circuit
court entered its Order, holding that the applicable policy of insurance limited coverage
under the given facts to $25,000.00. The circuit court also held that payments of
attorney’s fees and litigation costs (supplementary payments) made by Max Specialty
reduce the limits of remaining coverage pursuant to the unambiguous language of the
“Limited Assault or Battery Endorsement.” Further, the circuit court held that Max
Specialty’s duty to defend Venom ended once the $25,000.00 limits of insurance
7
coverage were exhausted whether through payment of attorney’s fees and litigation costs,
or settlement of the claims.
Following entry of the circuit court’s order, Petitioner Flowers/Venom filed
its petition for appeal alleging that the circuit court erred in finding that Max Specialty’s
duty to defend Venom ended once the $25,000.00 limits of insurance coverage were
exhausted whether through payment of attorney’s fees and litigation costs, or settlement
of the claims. Petitioner Drane filed his petition for appeal asserting that the circuit court
erred in finding that the applicable policy of insurance limited coverage to $25,000.00
under the given facts rather than the one million commercial general liability (“CGL”)
limits. Petitioners’ appeals have been consolidated for purposes of review.
II.
STANDARD OF REVIEW
The West Virginia Supreme Court “reviews a circuit court’s entry of a
declaratory judgment de novo, since the principal purpose of a declaratory judgment
action is to resolve legal questions.” Farmers & Mechs. Mut. Ins. Co. v. Cook, 210 W.
Va. 394, 398, 557 S.E.2d 801, 805 (2001) (citing Syl. Pt. 3, Cox v. Amick, 195 W. Va.
608, 466 S.E.2d 459 (1995)). “Determination of the proper coverage of an insurance
contract when the facts are not in dispute is a question of law.” Farmers & Mechs. Mut.
Ins. Co. v. Cook, 210 W. Va. at 399, 557 S.E.2d at 806 (quoting Murray v. State Farm
8
Fire & Cas. Co., 203 W. Va. 477, 509 S.E.2d 1, 6 (1998)). Therefore, “the interpretation
of an insurance contract, including the question of whether the contract is ambiguous, is a
legal determination that, like a lower court’s grant of summary judgment, shall be
reviewed de novo on appeal.” Id. at 399, 557 S.E.2d at 806 (quoting Syl. Pt. 2, Riffe v.
Home Finders Associates. Inc., 205 W. Va. 216, 517 S.E.2d 313 (1999)).
III.
ANALYSIS
A. Venom’s Appeal – No. 13-0262
In Venom’s appeal, the issue is whether the trial court erred in granting
Max Specialty’s motion for summary judgment when it found that the commercial
general liability policy at issue permits it to terminate its duty to defend at such time as
the liability policy limit of $25,000 is exhausted through the expenditure of attorney’s
fees and costs.4
Venom argues that even assuming arguendo that the “Assault or Battery
Exclusion” and the “Limited Assault or Battery Coverage Endorsement” apply, Max
4
Venom does not appeal the circuit court’s holding that the $25,000 coverage is reduced
by supplementary payments made by Max Specialty relative to the litigation of the
subject claims, including costs and attorney’s fees. Venom’s assignment of error only
alleges that the circuit court erred when it found that the commercial general liability
policy at issue permits Max Specialty to terminate its duty to defend at such time as the
liability policy limit of $25,000 is exhausted through the expenditure of attorney’s fees
and litigation costs related to the defense of the underlying tort actions.
9
Specialty nonetheless has a duty to defend Venom beyond the $25,000 coverage limit.
Venom asserts that the purported monetary limitation on Max Specialty’s duty to defend
is not set forth in clear and unambiguous language in the policy.
Venom asserts that the Max Specialty policy requires the reading of
different sections of the policy in an attempt to determine the insurer’s duty to defend.
First, the “Limited Assault or Battery Coverage” endorsement states that “[a]ny
supplementary payments we make arising out of an ‘event’ of ‘assault or battery’ or
‘physical altercation’ that occurs in, on, near or away from an insured’s premises, will
reduce the Limits of Insurance shown above.” Venom maintains that the endorsement
does not define “supplementary payments” but instead references the main CGL policy.
Venom contends that the CGL policy contains a section describing
supplementary payments, but this section does not expressly include attorney’s fees or
litigation costs incurred as a result of the duty to defend. It states that Max Specialty will
pay “All expenses we incur” but does not define expenses to include the attorney’s fees
paid for the defense. Moreover, it states that supplementary payments “will not reduce
the limits of insurance.”
Venom contends that the only policy language that references the duty to
defend is set forth in Section 1 of the policy. Section 1.a states that Max Specialty has a
duty to defend the insured against any suit seeking bodily injury damages. Section 1.a(2)
10
states that Max Specialty’s “right and duty to defend ends when we have used up the
applicable limits of insurance in the payments of judgments or settlements under
Coverages A or B or medical expenses under Coverage C.” Venom contends that
because there have been no settlements or judgments in this case, this provision is
inapplicable.
To the contrary, Max Specialty avers that coverage for the injured patrons’
claims is not established by the CGL part of the policy. Max Specialty maintains that the
CGL policy clearly and expressly excludes such coverage in the “Assault or Battery
Exclusion.” The exclusion expressly provides that it applies to the CGL coverage part.
Accordingly, Max Specialty contends that it is only under the “Limited Assault or Battery
Coverage” endorsement that any coverage for the underlying claim is established.
Max Specialty argues that the “Limited Assault or Battery Coverage”
endorsement plainly and unambiguously states that supplementary payments made by
Max Specialty reduce the $25,000 policy limit:
The most we pay under the Commercial General Liability Coverage Part . .
. and for SUPPLEMENTARY PAYMENTS for any “assault”, “battery”, or
“physical altercation” is the “per event” limit shown in the Schedule above.
The amount shown under the Schedule above as the aggregate is the most
we will pay for damages and for SUPPLEMENTARY PAYMENTS under
the COMMERCIAL GENERAL LIABILITY COVERAGE PART . . .
irrespective of the number of claimants or injuries.
11
. . . . Any supplementary payments we make arising out of an “event” of
“assault and battery” or “physical altercation” that occurs in, near or away
from an insured’s premises, will reduce the Limits of Insurance shown
above. . . .
(emphasis added).
Max Specialty asserts that requiring it to expend more than $25,000, even
for defense costs, would contradict the express policy language. It contends that although
“supplementary payments” is not defined in the endorsement, it is plainly and
unambiguously defined in the policy. The first supplementary payment which is listed in
the policy is “a. All expenses we incur . . . .” Therefore, Max Specialty contends that the
expenses which it incurs in providing a defense to any suit against its insured are
considered “supplementary payments” pursuant to the plain and unambiguous policy
language. Max Specialty maintains that the attorney’s fees it pays to defend an insured
from covered claims is an expense incurred by the insurer. It asserts that when the
endorsement is read along with the definition of “supplementary payments” contained in
the CGL coverage part there is no ambiguity.
After thorough review of the parties’ arguments and the record before us,
we conclude that the circuit court’s order must be reversed on this issue. In the case sub
judice, the purported monetary limitation on Max Specialty’s duty to defend is not set out
in clear, direct, and unambiguous language. Coverage for the event is established by the
Commercial General Liability Coverage Form which provides as follows:
SECTION I – COVERAGES
12
COVERAGE A BODILY INJURY AND PROPERTY
DAMAGE LIABILITY
1. Insuring Agreement
a. 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. We will have the right and duty to defend the
insured against any “suit” seeking those damages.
(Emphasis added.) However, we will have no duty to defend
the insured against any “suit” seeking damages for “bodily
injury” or “property damage” to which this insurance does not
apply. We may, at our discretion, investigate any
“occurrence” and settle any claim or “suit” that may result.
But:
(1) The amount we will pay for damages is
limited as described in Section III – Limits Of Insurance; and
(2) Our right and duty to defend ends when
we have used up the applicable limit of insurance in the
payment of judgments or settlements under Coverages A
or B or medical expenses under Coverage C. (Emphasis
added.)
No other obligation or liability to pay sums or
perform acts or services is covered unless explicitly provided
for under Supplementary Payments Coverages A and B.
* * * * *
SUPPLEMENTARY PAYMENTS – COVERAGES A AND
B
1. We will pay, with respect to any claim we
investigate or settle, or any “suit” against an insured we
defend:
a. All expenses we incur.
b. Up to $250 for cost of bail bonds required
because of accidents or traffic law violations arising out of
13
the use of any vehicle to which the Bodily Injury Liability
Coverage applies. We do not have to furnish these bonds.
c. The cost of bonds to release attachments, but
only for bond amounts within the applicable limit of
insurance. We do not have to furnish these bonds.
d. All reasonable expenses incurred by the
insured at our request to assist us in the investigation or
defense of the claim or “suit,” including actual loss of
earnings up to $250 a day because of time off from work.
e. All court costs taxed against the insured in
the “suit”. However, these payments do not include attorneys’
fees or attorneys’ expenses taxed against the insured.
f. Prejudgment interest awarded against the
insured on that part of the judgment we pay. If we make an
offer to pay the applicable limit on insurance, we will not pay
any prejudgment interest based on that period of time after
the offer.
g. All interest on the full amount of any
judgment that accrues after entry of the judgment and before
we have paid, offered to pay, or deposited in court the part of
the judgment that is within the applicable limit of insurance.
These payments will not reduce the limits of
insurance. (Emphasis added).
The Limited Assault and Battery Coverage
Form further provides:
LIMITS OF INSURANCE
The most we pay under the COMMERCIAL
GENERAL LIABILITY COVERAGE PART, the
COMMERCIAL PROFESSIONAL LIABILITY
COVERAGE PART, and the LIQUOR LIABILITY
COVERAGE PART for damages and for
SUPPLEMENTARY PAYMENTS for any “assault,”
14
“battery,” or “physical altercation” is the “per event” limit
shown in the Schedule above.
The amount shown under the Schedule above as
the aggregate is the most we will pay for damages and for
SUPPLEMENTARY PAYMENTS under the
COMMERCIAL GENERAL LIABILITY COVERAGE
PART, the COMMERCIAL PROFESSIONAL LIABILITY
COVERAGE PART, and the LIQUOR LIABILITY
COVERAGE PART under paragraph 1 in any one policy
period irrespective of the number of claimants or injuries.
The Limits of Insurance above shall not be in
addition to any other Limits in the policy.
Any supplementary payments we make arising
out of an “event” of “assault and battery” or “physical
altercation” that occurs in, on, near or away from an insured’s
premises, will reduce the Limits of Insurance shown above.
No other obligation or liability to pay sums or
perform acts or services is covered.
The Max Specialty policy requires reading of different sections of the
policy in an attempt to determine the limitations on the duty to defend. First, the Limits of
Insurance section of the Limited Assault and Battery Coverage endorsement does not
define “Supplementary Payments”, but, instead, simply refers to a separate portion of the
CGL policy which addresses supplementary payments. This section does not address
defense costs and attorney fees directly, but does state that supplementary payments “will
not reduce the limits of insurance.” The Supplementary Payments portion of the policy
does not expressly reference attorney fees incurred as a result of Max Specialty’s duty to
defend and does not contain any language regarding the termination of its duty to defend.
The Supplementary Payments language does state that Max Specialty will pay “All
15
expenses we incur”, but it does not define expenses to include the attorney fees paid to an
attorney pursuant to its duty to defend a suit as established in SECTION I -
COVERAGES.
The only policy language which references the duty to defend is set forth in
Section I, Coverage A. The policy clearly states that Max Specialty has a duty to defend
Flowers against any suit seeking bodily injury damages. In regard to the termination of
the duty to defend, the only policy language specifically addressing this issue states,
“[o]ur right and duty to defend ends when we have used up the applicable limit of
insurance in the payment of judgments or settlements[.]” It is uncontested that Max
Specialty has not paid the policy limits toward settlements or judgments. There has not
been a trial by jury, nor have the alleged tort victims accepted a settlement in exchange
for a release of Flowers from further liability.
The language of the Limited Assault or Battery Coverage is also instructive
to the extent it provides that the policy language of the General Liability Coverage Form
remains applicable and is simply modified by the endorsement. The endorsement plainly
states that coverage is provided under the COMMERCIAL GENERAL LIABILITY
COVERAGE PART. (Emphasis in original.) The Limited Assault or Battery Coverage
endorsement is not a policy standing alone. Rather, this endorsement nullifies the alleged
Assault or Battery Exclusion and provides a lower policy limit for damages resulting
from an “assault” or “battery.”
16
The CGL coverage part does not contain any provision that reduces policy
limits by attorney fees and costs incurred for the defense of the subject tort actions.
Further, the endorsement, even when read in pari materia with the Supplementary
Payments provision, does not clearly, directly or unambiguously state that the policy
limits are reduced by attorney fees and costs incurred for the defense of the subject tort
actions. There is only one clause in the entire policy, including endorsements, which has
any bearing on Max Specialty’s right to terminate its duty to defend Flowers. The two
alternate conditions by which it may terminate its duty to defend, payment of a judgment
or settlement, have not occurred.
Venom cites to an unpublished opinion from the United States District
Court, Southern District of West Virginia, Liberty Insurance Underwriters, Inc. v.
Camden Clark Memorial Hosp. Corp., (S.D.W.Va. 12-8-2009), which analyzed an
insurer’s duty defend in a case where the insurer argued that the policy limits were
diminished by attorney fees and that the duty to defend ended when the limits of the
policy were reached. In that opinion, the District Court cited to prior holdings of this
Court, stating,
[t]he language of the insurance policy delineates an insurer’s
duty to defend. See, e.g., Tackett v. Am. Motorists Ins. Co.,
584 S.E.2d 158, 162 (W. Va. 2003); Horace Mann Ins. Co. v.
Leeber, 376 S.E.2d 581, 584 (W. Va. 1988). Crucially, “any
ambiguity in the language of an insurance policy is to be
construed liberally in favor of the insured, as the policy was
prepared exclusively by the insurer.” Horace Mann, 376
17
S.E.2d at 584; see also Aetna Cas. & Sur. Co. v. Pitrolo, 342
S.E.2d 156, 160 (W. Va. 1986) (“[A]ny question concerning
an insurer’s duty to defend under an insurance policy must be
construed liberally in favor of an insured where there is any
question about an insurer’s obligations.”).
The District Court held that the purported monetary limitation on Liberty’s
duty to defend was not set out in clear, direct, unambiguous language. Limitations on an
insurer’s duty to defend must be so expressed. See Liberty Ins. Underwriters, Inc. v.
Camden Clark Mem. Hosp. Corp., (S.D.W. Va. 12-8-2009) (citing Chicago Title Ins. Co.
v. Kent School Corp., 361 F. Supp. 2d 4, 10 (D. Conn. 2005)).
“The interpretation of an insurance contract, including the question of
whether the contract is ambiguous, is a legal determination.” Syl. Pt. 2, Riffe v. Home
Finders Associates, Inc., 205 W.Va. 216, 517 S.E.2d 313 (1999). See also Payne v.
Weston, 195 W.Va 502, 506-507, 466 S.E.2d 161, 165-166 (1995). Similarly, a
“determination of the proper coverage of an insurance contract when the facts are not in
dispute is a question of law.” Murray v. State Farm Fire & Cas. Co., 203 W.Va. 477,
482, 509 S.E.2d 1, 6 (1998). With regard to a court’s interpretation of an insurance
contract’s policy language, we held that,
[i]n West Virginia, insurance policies are controlled by the
rules of construction that are applicable to contracts generally.
We recognize the well-settled principle of law that this Court
will apply, and not interpret, the plain and ordinary meaning
of an insurance contract in the absence of ambiguity or some
other compelling reason. Our primary concern is to give
effect to the plain meaning of the policy and in doing so we
construe all parts of the document together; We will not
18
rewrite the terms of a policy; instead, we will enforce it as
written.
Pavne v. Weston, 195 W.Va. 502, 507, 466 S.E.2d 161, 166 (1995).
It is well-settled law in West Virginia that ambiguous terms in insurance
contracts are to be strictly construed against the insurance company and in favor of the
insured. See Mylan Laboratories, Inc. v. Am. Motorists Ins. Co., 226 W.Va. 307, 309, 700
S.E.2d 518, 520 (2010). Insurance policy language is ambiguous when it is reasonably
susceptible of different meanings.
In the case at hand, the Max Specialty policy does not state that the
endorsement overrides the supplementary payments provision of the policy. Further, the
Max Specialty endorsement does not address the termination of its duty to defend. The
Limited Assault and Battery endorsement specifically states that the payments covered by
the endorsement are “under the COMMERCIAL GENERAL LIABILITY COVERAGE
PART[.]” Therefore, the insured is required to refer back to both the CGL coverage and
the supplementary payments parts of the policy. The provisions in these parts regarding
the duty to defend are contradictory to the endorsement. These contradictory and
confusing provisions create significant ambiguity within the entire policy. This ambiguity
must be liberally construed in favor of Venom. If Max Specialty wished to restrict its
duty to defend, the endorsement should have expressly said so. See, e.g., Nat’l Union v.
Lake Acad., 548 F.3d 8 (1st Cir. 2008).
19
Accordingly, we conclude that the circuit court erred in finding that the
CGL policy at issue permits Max Specialty to terminate its duty to defend at such time as
the liability policy limit of $25,000 is exhausted through the expenditure of attorney’s
fees and costs related to the defense of the underlying tort actions.
B. Drane’s Appeal – No. 13-0317
In this appeal, Mr. Drane, a third-party claimant, appeals the circuit court’s
finding that available coverage is limited to $25,000 under the “Limited Assault and
Battery Coverage” endorsement to the CGL policy, rather than the $1 million limit that is
otherwise available under the CGL coverage part.
Drane alleges that the shooting victims sued Venom for negligence—not
for an intentional act. The unknown shooter is not a party to this suit and there is no
evidence suggesting that the shooter was an employee of Venom. There are no
allegations that Venom intended for the shooter to fire his gun, or that it intended for any
of its customers to be shot. Drane asserts that analyzing the incident and coverage from
Venom’s perspective, this qualifies as a covered “bodily injury” and “occurrence” under
the bodily injury coverage in the CGL coverage part. Drane contends that this is a bodily
injury caused by an occurrence in the covered territory and during the policy period.
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Coverage is conferred by the Policy’s Commercial General Liability
Coverage Form, SECTION 1 - COVERAGES, COVERAGE A, BODILY INJURY AND
PROPERTY DAMAGE LIABILITY, which provides in pertinent part:
1. Insuring Agreement
a. 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....
b. This insurance applies to “bodily injury” and “property
damage” only if:
(1) The “bodily injury” or “property damage” is caused by an
“occurrence” that takes place in the “coverage territory;”
(2) The “bodily injury” or “property damage” occurs during
the policy period; and
(3) Prior to the policy period, no insured listed under
Paragraph 1 of Section II - Who is an Insured and no
“employee” authorized by you to give or receive notice of an
“occurrence” or claim, knew that the “bodily injury” or
“property damage” had occurred, in whole or in part....
The Commercial General Liability Coverage Form provides the following
pertinent definitions in SECTION V - DEFINITIONS:
3. “Bodily injury” means bodily injury, sickness or disease
sustained by a person, including death resulting from any of
these at any time.
13. “Occurrence” means an accident, including continuous or
repeated exposure to substantially the same general harmful
conditions.
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In its Complaint, Max Specialty discussed the Policy’s ASSAULT AND
BATTERY EXCLUSION, and the LIMITED ASSAULT OR BATTERY COVERAGE
available under the Policy. The Exclusion contains the following definitions:
“Assault” means any attempt of threat to inflict injury to
another including any conduct that would reasonably place
another apprehension of such injury.
“Battery” means the intentional or reckless physical contact
with or any use of force against a person without his or her
consent that entails some injury or offensive touching
whether or not the actual injury inflicted is intended or
expected. The use of force includes but is not limited to the
use of a weapon.
“Physical altercation” means a dispute between individuals in
which one or more persons sustain bodily injury arising out of
the dispute.
All other terms, conditions, definitions and exclusions apply.
The Limited Assault or Battery Coverage Endorsement contains the
following definitions, which vary slightly from the Exclusion:
“Assault” means any attempt of threat to inflict injury to
another including any conduct that would reasonably place
another apprehension of such injury.
“Battery” means the intentional or reckless physical contact
with or any use of force against a person without his or her
consent that entails some injury or offensive touching
whether or not the actual injury inflicted is intended or
expected. The use of force includes but is not limited to the
use of a weapon.
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“Physical altercation” means a dispute between individuals in
which one or more persons sustain bodily injury arising out of
the dispute.
“Event” may be comprised of one or more incidents of assault
and battery taking place in one twenty-four (24) hour period.
All other policy terms, exclusions and conditions remain the
same.
Finally, the Policy’s Declarations Page provides a limit for each occurrence
of Commercial General Liability of $1,000,000.00. The Endorsement for the Limited
Assault or Battery Coverage is limited to $25,000.00.
Drane argues that the circuit court’s major error was failing to analyze
coverage from the standpoint of Venom, the insured policyholder. With regard to
intentional acts exclusions, this Court has held that “a policyholder may be denied
coverage only if the policyholder (1) committed an intentional act, and (2) expected or
intended the specific resulting damage.” Farmers and Mechanics Mut. Ins. Co. v. Cook,
210 W.Va. 394, 400, 557 S.E.2d 801, 807 (quoting SER Davidson v. Hoke, 207 W.Va.
332, 339, 532 S.E.2d 50, 57 (2000)). Drane maintains that the same rationale should
apply to an endorsement which purports to provide limited coverage for an intentional
tort such as assault and/or battery. This Court held in Columbia Cas. Co. v. Westfield Ins.
Co., 217 W.Va. 250, 617 S.E.2d 797 (2005), that a county jail inmate’s suicide
constituted an accident and a covered “occurrence” under a general liability policy from
the standpoint of the insured county commission. Although the inmate intended suicide,
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the county commission had no desire, plan, expectation, or intent for the death to occur.
This Court said,
In determining whether under a liability insurance policy an occurrence was
or was not an “accident”—or was or was not deliberate, intentional,
expected, desired, or foreseen—primary consideration, relevance, and
weight should ordinarily be given to the perspective or standpoint of the
insured whose coverage under the policy is at issue.
Syl., Columbia Cas. Co.
Drane contends that to the extent the “Assault or Battery Exclusion” or the
“Limited Assault or Battery Coverage” endorsement say otherwise, they are ambiguous.
He asserts that the term “occurrence” is not found anywhere in the exclusion or
endorsement, and thus, these documents do not exclude or limit coverage for an
“occurrence.” Drane argues that under the policy definitions, an “occurrence” is
essentially an accident. However, assault and battery are intentional torts. Drane
maintains that where a specific, defined term such as “occurrence” is not used in an
exclusion or purported limitation of coverage, one can only conclude that the exclusion or
limitation does not defeat an “occurrence.”
Instead of using the term “occurrence,” the “Limited Assault or Battery
Coverage” endorsement uses the term “event.” “Event” has a different definition than
“occurrence” and refers only to assault and battery. Moreover, the endorsement also
clearly states that “[a]ll other policy terms, exclusions and conditions remain the same.”
The “Assault or Battery Exclusion” mentions neither “occurrence” or “event.” Drane
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contends that the drafter’s failure to be more specific about the terms and conditions of its
policy renders the policy ambiguous and subject to multiple interpretations; ambiguous
terms are construed in favor of the insured. Drane maintains that the incident constitutes
an “occurrence” under the policy, and therefore the $1 million limit of the CGL policy
applies.
Respondent Young & Young Insurance Company (“Young”) joins Drane’s
argument and asserts that the circuit court made two errors: (1) it made an improper
finding of fact that the incident at issue was an intentional act of battery; and (2) it
erroneously determined that the CGL policy and the “Limited Assault and Battery
Coverage” endorsement are clear and unambiguous as to coverage for actions that are not
intentional by the insured.
Young first asserts that the circuit court erred in concluding as a matter of
law in summary judgment that an intentional battery had occurred. Young contends that
this finding was based solely on the fact that three people in a bar suffered gunshot
wounds, but there is nothing in the record as to who committed the shootings, why the
shots were fired, how the shots were fired, or who the targets were. The three victims
were not together in the bar, and the bar was crowded. Young maintains that the gun’s
discharge could have been accidental. Young argues that there is no factual basis in the
record for a court to conclude whether it was intentional or accidental. Young avers that
whether Venom failed to keep the premises safe is a matter of negligence, not intentional
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conduct, and the exclusion and endorsement pertain to intentional conduct. Young asserts
that the circuit court did not consider the negligence claims and what provisions of the
policy those claims would trigger.
Conversely, Max Specialty argues that Drane attempts to muddy the waters
by presenting arguments based upon the policy’s “intentional acts exclusion” but that
exclusion is not at issue in this matter. It asserts that the circuit court was asked to
interpret the policy’s “Limited Assault or Battery Coverage” endorsement, which is
different from the “intentional acts exclusion.” By its own terms, the endorsement
contemplates limited coverage. As such, Max Specialty contends that Drane’s arguments
are completely misplaced and irrelevant.
Max Specialty asserts that the plain and unambiguous language in the
“Assault or Battery Exclusion” defeats Drane’s argument that this was a covered
occurrence because any liability for assault, battery, or physical altercation is expressly
excluded. It provides,
In consideration of the premium charged, it is understood and
agreed that this insurance does not apply to liability for
damages because of “bodily injury” . . . [or] “medical
expense”, arising out of an “assault”, “battery”, or “physical
altercation” that occurs in, or, near, or away from an insured’s
premises.
The exclusion goes on to explain that it applies whether the damages sound in
negligence, intentional tort, or some combination thereof.
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Max Specialty contends that Venom paid an extra three hundred dollar
premium for the limited assault or battery coverage. In the endorsement, “battery” is
defined as “the intentional or reckless physical contact with or any use or force against a
person without his or her consent that entails some injury or offensive touching whether
or not the actual injury inflected is intended or expected. The use of force includes [but]
is not limited to the use of a weapon.” Max Specialty argues that Drane’s gunshot wound
clearly falls under this definition. The endorsement states that the insurer will only pay
$25,000 in insurance coverage for damages “that the insured becomes legally obligated
to pay as damages because of bodily injury; or medical expense, arising out of an
event of . . . battery[.]” (emphasis added). The limited $25,000 coverage applies
whether or not “caused by or arising out of an insured’s failure to properly supervise
or keep an insured’s premises in a safe condition[.]” (emphasis added). Thus, Max
Specialty asserts that the only coverage available for Drane’s (and the other customers’)
claims is $25,000 from the “Limited Assault or Battery Coverage” endorsement.
Max Specialty further contends that Columbia Casualty and the other cases
cited by Drane are inapplicable. In this case, an analysis of the policy is being performed
from the perspective of Venom, Inc. No analysis is being performed from the standpoint
of the shooter.
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In response to Young’s arguments, Max Specialty argues that Young
misstates the circuit court’s findings. It maintains that the court did not hold that the
shootings were the result of an intentional act of battery upon the three patrons. Rather,
the court found that the patrons “who are now involved in this case suffered bodily
injuries and/or medical expenses arising out of an event of battery or physical altercation
that occurred in the insured’s premises. Therefore, the Limited Assault or Battery
Coverage applies to the undisputed facts of the case.” Max Specialty argues that this
holding mirrors the plain policy language, and whether the shooting was intentional has
never been a determinative issue in this declaratory judgment action. We agree with Max
Specialty’s argument.
The definition of “battery” in the “Limited Assault or Battery Coverage”
endorsement does not include the word “intentional.” However, the endorsement does
pertain to “reckless” conduct. It also states that, in the alternative, a “battery” could be
“any use of force against a person without his or her consent that entails some injury or
offensive touching whether or not the actual injury inflicted is intended or expected.” The
definition states that the aforementioned “use of force includes, but is not limited to the
use of a weapon.” Moreover, whether or not the shooting was intentional, the injuries
alleged by the patrons arise from a battery and/or physical altercation pursuant to the
definitions of those words in the “Limited Assault or Battery Coverage” endorsement.
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Similarly, the question of whether or not negligence is alleged by the
patrons is of no consequence to the final analysis of this insurance coverage. The
damages that the patrons allege fall within the definitions of battery or physical
altercation in the endorsement. Accordingly, Max Specialty was not required to prove
that the shooting was intentional or not, and the circuit court correctly applied the
contractual policy language. The circuit court’s ruling that the Limited Assault or Battery
Endorsement applies to the facts of this case and that coverage for the alleged injuries
and damages is limited to $25,000 is affirmed.
IV.
CONCLUSION
For the foregoing reasons, we affirm, in part, and reverse, in part, the
Circuit Court of Cabell County’s February 8, 2013, order granting Max Specialty’s
Motion for Declaratory Judgment, and remand this matter for further proceedings
consistent with this Opinion.
Affirmed, in part, Reversed, in part, and Remanded.
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