United Financial Casualty Co. v. Greg Ball ( 2022 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-1452
UNITED FINANCIAL CASUALTY COMPANY,
Plaintiff - Appellee,
v.
GREG ALLEN BALL,
Defendant - Appellant
and
MILTON HARDWARE, LLC; BUILDERS DISCOUNT, LLC; RODNEY PERRY;
Defendants.
Appeal from the United States District Court for the Southern District of West Virginia, at
Huntington. Robert C. Chambers, District Judge. (3:17-cv-02002)
Argued: December 7, 2021 Decided: February 23, 2022
Before WILKINSON, NIEMEYER, and AGEE, Circuit Judges.
Question certified to the Supreme Court of Appeals of West Virginia by published order.
Judge Niemeyer directed entry of the order with the concurrences of Judge Wilkinson and
Judge Agee.
ARGUED: Stephen Brooks Farmer, FARMER, CLINE & CAMPBELL, PLLC,
Charleston, West Virginia, for Appellant. Susan Renee Snowden, JACKSON KELLY
PLLC, Martinsburg, West Virginia, for Appellee. ON BRIEF: Jennifer D. Roush,
FARMER, CLINE & CAMPBELL, PLLC, Charleston, West Virginia, for Appellant.
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NIEMEYER, Circuit Judge:
ORDER OF CERTIFICATION
The United States Court of Appeals for the Fourth Circuit, exercising the privilege
afforded by the State of West Virginia through the Uniform Certification of Questions of
Law Act, W. Va. Code §§ 51-1A-1 to 51-1A-13, requests that the Supreme Court of
Appeals of West Virginia exercise its discretion to accept the following question:
When an exclusion in an automobile liability insurance policy violates West
Virginia Code § 33-6-31(a) because it would deny coverage to a permissive
user of an insured automobile, must the insurance company provide the
permissive user with the full liability coverage available under the policy or
the minimum liability coverage required by the Motor Vehicle Safety
Responsibility Law, W. Va. Code § 17D-1-1 et seq.?
We acknowledge that the Supreme Court of Appeals may reformulate this question. See
W. Va. Code §§ 51-1A-4, 51-1A-6(a)(3). In our view, there is no controlling appellate
decision, constitutional provision, or West Virginia statute that definitively answers this
question, and the answer will be determinative of an issue in a case currently pending
before our court. Accordingly, we conclude that the question is appropriate for
certification. See id. § 51-1A-3.
I
The facts relevant to the certified question are undisputed. On October 25, 2016,
employees of Milton Hardware, LLC, were performing construction work at the home of
Rodney Perry in Milton, West Virginia. At one point during the work, Milton Hardware’s
owner authorized Perry to move one of Milton Hardware’s trucks, which was blocking the
driveway. As Perry was moving the truck in reverse, however, he accidentally struck Greg
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Ball, a Milton Hardware employee, temporarily pinning him between the truck Perry was
driving and another Milton Hardware truck. As a result, Ball sustained serious injuries that
required hospitalization.
At the time of the accident, Milton Hardware had a commercial automobile liability
insurance policy issued by United Financial Casualty Company, which provided $1 million
in liability coverage to Milton Hardware and to any person using Milton Hardware’s
vehicles with its permission. Based on this provision, Ball demanded that United Financial
indemnify him for the injuries that he claimed were caused by Perry’s negligence. United
Financial denied coverage and commenced an action in federal court against the named
insureds, Milton Hardware and Builders Discount, LLC, as well as Perry and Ball, seeking
a declaratory judgment that it had no obligation to cover Perry’s liability to Ball. It asserted
that coverage for Perry’s liability to Ball was barred by two exclusions in the policy — a
“Worker’s Compensation” exclusion and an “Employee Indemnification and Employer’s
Liability” exclusion. Ball filed a crossclaim against Perry, seeking damages for his
negligence, and a counterclaim against United Financial for a declaratory judgment that,
among other things, the Worker’s Compensation exclusion did not apply and that the
Employee Indemnification and Employer’s Liability exclusion violated West Virginia
Code § 33-6-31(a). Ball also sought money damages from United Financial, alleging
breach of contract, breach of the covenants of good faith and fair dealing, unfair trade
practices, and common law bad faith.
On cross-motions for summary judgment, the district court granted United
Financial’s motion. The court concluded that because Ball “sustained his injuries while he
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was working within the course of his employment with Milton Hardware,” his injuries fell
within the scope of the Worker’s Compensation exclusion and “that, as a result, he [was]
barred from liability coverage under the policy.” The court also rejected Ball’s argument
that West Virginia Code § 33-6-31(a) required United Financial to extend liability coverage
to Perry as a permissive user of an insured automobile, reasoning that the exception in § 33-
6-31(h) applied to eliminate this requirement. See W. Va. Code § 33-6-31(h) (providing
that subsection (a) does “not apply to any policy of insurance to the extent that it covers
the liability of an employer to his or her employees under any workers’ compensation
law”). The court dismissed all of Ball’s counterclaims against United Financial, including
his state law claims for damages, and it declined to exercise supplemental jurisdiction over
Ball’s state law tort claim against Perry.
On Ball’s appeal, we vacated the district court’s judgment and remanded for further
proceedings. United Financial Casualty Co. v. Ball, 941 F.3d 710 (4th Cir. 2019). We
held first that “because Ball’s negligence claim against Perry was a claim against a third
party, rather than a claim against his employer for workers’ compensation, the [policy’s]
Worker’s Compensation exclusion did not apply.” Id. at 712. We also “conclude[d] that
the policy’s broader exclusion for Employee Indemnification and Employer’s Liability,
which on its face would apply to exclude coverage for Perry’s liability to Ball, was
inoperable because its limitation of coverage contravened West Virginia Code § 33-6-31.”
Id. Specifically, United Financial had argued that Ҥ 33-6-31(a) [did] not apply because of
the workers’ compensation exception in subsection (h),” but we explained that because
“Ball’s claim against Perry [was] not a workers’ compensation claim, but rather a third-
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party common law tort claim, the exception in § 33-6-31(h) [did] not apply, and § 33-6-
31(a) continue[d] to override the restrictions of the Employee Indemnification and
Employer’s Liability exclusion.” Id. at 716. As we summarized,
At bottom, we conclude that while the language of the Employee
Indemnification and Employer’s Liability exclusion, considered alone, is
sufficiently broad to deny Perry coverage for his liability to Ball, such a
limitation of coverage for a permissive user of an insured vehicle contravenes
West Virginia Code § 33-6-31(a) and thus renders the exclusion
unenforceable. See Universal Underwriters Ins. Co. v. Taylor, 185 W. Va.
606, 408 S.E.2d 358, 363 (1991) (recognizing “that any provision in an
insurance policy which attempts to contravene W. Va. Code, 33-6-31(a) is of
no effect” (cleaned up)); see also Burr [v. Nationwide Mut. Ins. Co.], 359
S.E.2d [626, 631 (W. Va. 1987)]. Accordingly, we hold that the Employee
Indemnification and Employee’s Liability exclusion cannot operate to deny
Perry coverage under United Financial’s policy for his liability to Ball.
Id. at 717. Thus “conclud[ing] that United Financial may not deny liability coverage to
Perry by reason of either the Worker’s Compensation exclusion or the Employee
Indemnification and Employer’s Liability exclusion,” we remanded “for further
proceedings as to any unresolved issues raised by the parties.” Id.On remand to the district court, the parties disagreed on what level of coverage
United Financial was required to provide in view of our holding that the Employee
Indemnification and Employer’s Liability exclusion was unenforceable. And this dispute
brought into play West Virginia Code § 17D-4-2(b) (requiring minimum liability coverage
of $25,000 for bodily injury to a person injured in a motor vehicle accident), as well as our
prior holding under West Virginia Code § 33-6-31(a). United Financial argued that while
the exclusion was unenforceable up to the $25,000 minimum liability coverage required
by § 17D-4-2(b), it remained enforceable as to any amount above that statutory minimum.
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Ball and Perry, by contrast, argued that the exclusion was entirely unenforceable under
§ 33-6-31(a) and that therefore United Financial was required to provide Perry with
coverage of up to the full $1 million afforded by the policy.
The district court entered summary judgment upholding United Financial’s position
in a memorandum opinion and order dated March 31, 2020. J.A. 484–92. It observed that,
in a series of cases, the “Supreme Court of Appeals of West Virginia has held that policy
exclusions that violate the state’s minimum coverage requirements set in the omnibus
clause and [the] Safety Responsibility Law (W. Va. Code § 17D-1-1 et seq.) are void” but
“has permitted these voided exclusions to apply above the minimum coverage
requirements.” J.A. 487 (citing, inter alia, Jones v. Motorists Mut. Ins. Co., 356 S.E.2d
634 (W. Va. 1987)). The court found that Gibson v. Northfield Insurance Co., 631 S.E.2d
598 (W. Va. 2005), and another case relied upon by Ball were distinguishable, and
accordingly it held that the policy’s Employee Indemnification and Employer’s Liability
exclusion was “unenforceable up to the minimum insurance coverage [of $25,000] required
by state law but operative as to any amount above the state’s mandatory minimum limits.”
J.A. 492. The court certified its ruling as a final judgment under Federal Rule of Civil
Procedure 54(b), and Ball filed an appeal to our court. Ball’s crossclaim against Perry and
certain of his counterclaims against United Financial remain pending in the district court
but have been stayed pending appeal.
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II
The sole issue presented by the second appeal now before us is a narrow one
regarding the level of liability coverage that United Financial must provide with respect to
Perry’s liability to Ball.
Milton Hardware’s policy with United Financial provided for $1 million of liability
coverage to Milton Hardware and to any person using Milton Hardware’s vehicles with its
permission. Concededly, at the time of the accident, Perry was a permissive user of Milton
Hardware’s vehicle. But the policy also contained an Employee Indemnification and
Employer’s Liability exclusion, which provided that liability coverage did not extend to
“[b]odily injury to . . . [a]n employee of any insured arising out of or within the course of:
(i) [t]hat employee’s employment by any insured; or (ii) [p]erforming duties related to the
conduct of any insured’s business.” It provided further that “[t]his exclusion applies . . .
[w]hether the insured may be liable as an employer or in any other capacity.”
Given that Ball was an employee of the named insured and was injured in the course
of his employment, this exclusion would, on its face, bar any coverage to Perry for his
liability to Ball. But West Virginia Code § 33-6-31(a) provides that, subject to limited
exceptions, automobile liability insurance policies must contain “a provision insuring the
named insured and any other person . . . using the motor vehicle with the consent, expressed
or implied, of the named insured.” W. Va. Code § 33-6-31(a).
In the last appeal, we rejected United Financial’s argument that § 33-6-31(a) was
inapplicable because of the workers’ compensation exception in § 33-6-31(h). United
Financial Casualty Co., 941 F.3d at 715–17. Accordingly, we held that despite the broad
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language of the Employee Indemnification and Employer’s Liability exclusion, United
Financial could not, consistent with West Virginia law, deny liability coverage to Perry, a
permissive user of its insured’s vehicle. Id. at 717. We did not resolve, however, the level
of coverage that United Financial was required to provide to Perry. That issue was not
raised by the parties and argued to us. But on remand, the issue was raised and is now
presented to us in the second appeal.
United Financial contends that it is obligated to provide only the $25,000 minimum
amount of coverage required by the Motor Vehicle Safety Responsibility Law, W. Va.
Code § 17D-4-2(b) (requiring “proof of ability to respond in damages for liability . . .
arising out of the . . . use of a motor vehicle . . . in the amount of $25,000 because of bodily
injury to or death of one person in any one accident”). And Ball contends that United
Financial is obligated to provide Perry with coverage in an amount of up to $1 million, as
provided in the policy.
We recognize that West Virginia has two overlapping but distinct statutory
provisions addressing the omnibus clauses that are “automatically engrafted onto all
[automobile liability] policies issued in [the] State.” State Farm Mut. Auto. Ins. Co. v.
Universal Underwriters Ins. Co., 383 S.E.2d 791, 793 (W. Va. 1989); see also Black’s Law
Dictionary 1261 (10th ed. 2014) (defining an “omnibus clause” as “[a] provision in an
automobile-insurance policy that extends coverage to all drivers operating the insured
vehicle with the owner’s permission”). First, as part of the Motor Vehicle Safety
Responsibility Law, West Virginia Code § 17D-4-12(b)(2) provides that a motor vehicle
liability policy must:
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insure the person named therein and any other person, as insured, using any
such vehicle or vehicles with the express or implied permission of such
named insured, against loss from the liability imposed by law for damages
arising out of the ownership, operation, maintenance or use of such vehicle
or vehicles . . . subject to limits exclusive of interest and costs, with respect
to each such vehicle, in the amounts required in section two of this article.
W. Va. Code § 17D-4-12(b)(2) (emphasis added). Section 2 of Chapter 17D, Article 4, in
turn, specifies the minimum amount of liability coverage that must be provided pursuant
to this statutory requirement — $25,000, as relevant here. Id. § 17D-4-2(b). Second, the
insurance chapter of the West Virginia Code also contains an omnibus clause requirement,
codified at § 33-6-31(a). See State Farm Mut. Auto. Ins. Co., 383 S.E.2d at 793. It directs:
No policy or contract of bodily injury liability insurance, or of property
damage liability insurance, covering liability arising from the ownership,
maintenance or use of any motor vehicle, may be issued or delivered in this
state to the owner of such vehicle . . . unless it contains a provision insuring
the named insured and any other person, except a bailee for hire and any
persons specifically excluded by any restrictive endorsement attached to the
policy, responsible for the use of or using the motor vehicle with the consent,
expressed or implied, of the named insured or his or her spouse against
liability for death or bodily injury sustained or loss or damage occasioned
within the coverage of the policy or contract as a result of negligence in the
operation or use of such vehicle by the named insured or by such person . . . .
W. Va. Code § 33-6-31(a) (emphasis added).
West Virginia law appears fairly settled that when an insurance policy fails to extend
the scope of liability coverage required by § 17D-4-12(b)(2), then the remedy is to require
the insurance company to provide such coverage but — in the words of that provision —
“subject to limits . . . in the amounts required in” § 17D-4-2. See, e.g., Jones, 356 S.E.2d
at 636; Dotts v. Taressa J.A., 390 S.E.2d 568, 573–74 (W. Va. 1990). The dispositive
question here is whether that same rule applies to an automobile liability policy that fails
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to extend the scope of liability coverage required by § 33-6-31(a) or whether, in those
circumstances, the policy’s own liability limits become applicable. While the court’s
reasoning in Gibson might suggest the latter, 631 S.E.2d at 603 n.8, 604–06, 609, there
does not appear to be any controlling authority definitively resolving this question. And
finding “no controlling appellate decision, constitutional provision or [West Virginia]
statute” that definitively answers that question, W. Va. Code § 51-1A-3, we conclude that
the question warrants certification to the Supreme Court of Appeals of West Virginia given
the potential impact a ruling on this issue may have in other cases.
III
Accordingly, under the privilege made available by the West Virginia Uniform
Certification of Questions of Law Act, it is hereby ORDERED: (1) that the question stated
above be, and the same hereby is, certified to the Supreme Court of Appeals of West
Virginia; (2) that the Clerk of this Court forward to the Supreme Court of Appeals of West
Virginia, under the official seal of this Court, a copy of this order and, to the extent
requested by the Supreme Court of Appeals of West Virginia, the original or a copy of the
record in this Court; and (3) that any request for all or part of the record be fulfilled by the
Clerk of this Court simply upon notification from the Clerk of the Supreme Court of
Appeals.
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