Federal Insurance v. Ward , 166 F. App'x 24 ( 2006 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-2004
FEDERAL INSURANCE COMPANY, a/s/o Transworld
Connection, Limited,
Plaintiff - Appellant,
versus
THERESA ANN WARD; PAT BONDURANT,
Defendants - Appellees.
Appeal from the United States District Court for the Western
District of Virginia, at Lynchburg. Norman K. Moon, District
Judge. (CA-03-102)
Argued: October 26, 2005 Decided: January 24, 2006
Before LUTTIG, MICHAEL, and GREGORY, Circuit Judges.
Reversed and remanded by unpublished opinion. Judge Gregory wrote
the opinion, in which Judge Luttig and Judge Michael joined.
ARGUED: Daniel J. Luccaro, COZEN O’CONNOR, Philadelphia,
Pennsylvania, for Appellant. Henry Moseley Sackett, III, EDMUNDS
& WILLIAMS, P.C., Lynchburg, Virginia; John Tandy Cook, CASKIE &
FROST, Lynchburg, Virginia, for Appellees. ON BRIEF: Robert M.
Caplan, COZEN O’CONNOR, Philadelphia, Pennsylvania; Elisabeth
Ayyildiz, MORIN & BARKLEY, L.L.P., Charlottesville, Virginia, for
Appellant.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
GREGORY, Circuit Judge:
Federal Insurance Company (“Federal”) as subrogee of
Transworld Connection, Ltd. (“Transworld”), appeals the district
court’s grant of summary judgment in favor of Theresa Ann Ward and
Pat Bondurant (collectively “the Employees”), former employees of
Transworld. The resolution of this dispute turns on whether the
district court properly considered the Employees to be insured
under a policy issued to Transworld by Federal (“the Policy”) and
thus immune from suit under Virginia’s anti-subrogation rule.1 On
appeal, Federal argues that the district court erred in
interpreting the Policy under Virginia’s “course of employment”
test and in awarding summary judgment to the Employees on that
basis. Federal further contends that had the court applied the
correct tests of coverage, the award of summary judgment in favor
of the Employees would not have been appropriate. Because we agree
that the district court applied the wrong test and that the
Employees’ alleged act of negligence is not covered by the Policy,
we reverse the grant of summary judgment in favor of the Employees,
1
Virginia’s anti-subrogation rule provides that an insurance
company may not seek indemnification from its insured. Walker v.
Vanderpool, 302 S.E.2d 669, 672 (Va. 1983) (“where the plaintiff
has contracted to protect the defendant from a loss by procuring
insurance, the plaintiff (or his subrogee) may not recover for that
loss from the defendant even if the loss is caused by the
defendant’s negligence.”); see also Sherwood Trucking, Inc. v.
Carolina Cas. Ins. Co., 553 F.2d 568, 572 (4th Cir. 1977).
2
hold that they are not immune from suit, and remand for further
consideration.
I.
On September 9, 2003, Transworld’s facility located at 260
Fastener Drive in Lynchburg, Virginia, caught fire. J.A. 129. At
the time, Transworld had property and liability coverage through
the Policy issued by Federal. Id. The Policy insured Transworld’s
employees when performing two classes of covered acts: “acts
within the scope of their employment by [Transworld]” or “duties
related to the conduct of [Transworld’s] business.” Id. at 502.
Under the Policy, for which Transworld paid $14,269 annually, id.
at 337, Federal reimbursed Transworld for $352,832.34 and $240,000
in property and personal property losses, respectively. Id. at
129. Because the Policy, in limited instances, also covered
Transworld’s employees’ personal property, a portion of Federal’s
payments to Transworld was for damage to the personal effects of
Transworld’s employees. Id. at 352, 335-37. Ward, for example,
received $230 as compensation for her personal property losses.
Id. at 33, 333.
Federal maintains that the fire resulted from the Employees’
negligent disposal of smoking materials. At approximately 6:00
p.m. on the evening of the fire, after everyone except for the
Employees and two waiting children had left the building, Ward shut
3
down her computer and lit a cigarette as she prepared to leave
work.2 Id. at 200, 570-74. After Bondurant completed her work and
shut down her computer, she entered Ward’s office, observed Ward
smoking, and lit her own cigarette. Id. at 192-93, 204, 570-74.
Just before leaving Ward’s office, Ward and Bondurant flicked ashes
from the ends of their cigarettes into a trash can filled with
paper. Id. at 193, 206-10, 574. Bondurant claims that she then
peered into the trash can and observed that nothing was smoldering
or smoking before allowing Ward to place the trash can back under
the desk. Id. at 193. Thereafter, Ward and Bondurant left Ward’s
office, Ward set the burglar alarm, and she, Bondurant, and the
children exited the building. Id. at 196-97, 570-74.
Transworld did not have any written rules regarding smoking
prior to the fire, but there was an informal policy that employees
were not to smoke in the building during business hours as a
courtesy to non-smokers. J.A. 223-24, 229. The president and
owner of Transworld, Joe Tubbs, was aware that employees smoked
inside the facility after hours, and allowed the practice so long
as no one objected. Id. at 226-27.
Tubbs has made contradictory statements as to whether the
Employees were acting for the benefit of the company while smoking
2
Ward testified that she could not remember the exact order of
her activities, i.e., whether she shut down the computer before or
after lighting her cigarette. J.A. 203. The precise order of
Ward’s activities, however, is immaterial to our discussion.
4
on the night of the fire. He testified that he considered Ward to
be “on company time,” “doing her job” until she left the building
because she was expected to set the building alarm. J.A. 321-22.
In a letter mailed to Federal upon learning that Federal was
pursuing legal action against the Employees, Tubbs stated that both
Ward and Bondurant were acting within “the scope of their
employment” on the night of the fire as they were “working overtime
on company business.” Id. at 334. At the same time, however,
Tubbs acknowledged that the Employees did not need to smoke to
perform their job-related duties, id. at 228, and that smoking was
not listed in their job descriptions, id. at 229. During his
deposition, he also admitted that on the night of the fire, he left
the building before the Employees and could not state from personal
knowledge “whether or not Ms. Ward and Ms. Bondurant were finished
working before they began smoking . . . .” Id. at 252-53.
On December 9, 2003, Federal filed suit against the Employees,
seeking indemnification for the costs of the fire damage. J.A. 7-
11. The Employees responded by filing individual motions for
summary judgment based on their assertion that they were insured
under the Policy and hence immune from suit under Virginia’s anti-
subrogation rule. Id. at 12-13, 34-35. After reviewing the
parties’ briefs and hearing oral argument, the district court
entered summary judgment in the Employees’ favor. Id. at 135.
5
The district court held that Virginia’s anti-subrogation rule
barred Federal from bringing suit against the Employees. J.A. 134.
According to the court, the Employees were covered under the
liability section of the Policy, which provided that “employees .
. . are insured, but only [1] for acts within the scope of their
employment by [Transworld] or [2] while performing duties related
to the conduct of [Transworld’s] business.” Id. at 502. The
district court found that the Policy’s phrase “while performing
duties related to the conduct of [Transworld’s] business” was
synonymous with the definition of “course of employment.” Id. at
133. Accordingly, the court referenced Virginia’s definition of
“course of employment,” as elucidated in the workers’ compensation
context,3 in determining whether the Employees were insured under
the Policy. Id. The district court concluded that the Employees
were acting within the “course of their employment” at the time
they discarded their ashes, and accordingly, held that the
Employees were insured under the Policy, immune from suit under
Virginia’s anti-subrogation rule, and thus entitled to summary
judgment. Id. at 133-34.
Federal timely appealed. Id. at 136-37.
3
Under Virginia law, an act is within the “course of
employment,” where it occurs during the period of employment, at a
place where the employee is reasonably expected to be, and while
the employee is reasonably fulfilling the duties of his employment
or an act reasonably incidental thereto, such as going to and from
work. J.A. 132-33 (citing Conner v. Bragg, 123 S.E.2d 393, 396
(Va. 1962); Brown v. Reed, 165 S.E.2d 394, 397 (Va. 1969)).
6
II.
We review the district court’s grant of summary judgment de
novo, viewing all factual inferences in the light most favorable to
the nonmovant. Cont’l Airlines, Inc. v. United Airlines, Inc., 277
F.3d 499, 508 (4th Cir. 2002). Summary judgment is only
appropriate where “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law.” Fed. R. Civ. P. 56(c). Once the party moving
for summary judgment has shown that there are no genuine issues of
material fact, the nonmoving party has a burden to “set forth
specific facts showing that there is a genuine issue for trial.”
Fed. R. Civ. P. 56(e). If a nonmoving party, in opposing summary
judgment, does not provide evidence on which a jury can rely to
rule in the nonmoving party’s favor, summary judgment is
appropriate. Barwick v. Celotex Corp., 736 F.2d 946, 958-59 (4th
Cir. 1984).
This case involves a question of contract interpretation,
which is also subject to de novo review. Seabulk Offshore Ltd. v.
Am. Home Assurance Co., 377 F.3d 408, 418 (4th Cir. 2004). We are
not constrained by the district court’s interpretation of the
Policy, because “[t]he interpretation of a written contract is a
question of law that turns upon a reading of the document itself,
7
and a district court is in no better position than an appellate
court to decide such an issue.” Id.Where, as here, our subject-matter jurisdiction is premised on
diversity of citizenship, we must apply the substantive law of the
forum state. See Hitachi Credit America Corp. v. Signet Bank, 166
F.3d 614, 623-624 (4th Cir. 1999). Under the law of the forum
state, here Virginia, “the law of the place where an insurance
contract was written and delivered governs questions of insurance
coverage.” See Buchanan v. Doe, 431 S.E.2d 289, 291 (Va. 1993)
(citing Lackey v. Virginia Sur. Co., 167 S.E.2d 131, 133 (Va.
1969)). Because the insurance contract at issue was delivered in
Virginia, see J.A. 454, the parties correctly agree that their
dispute should be resolved in accordance with Virginia law. With
these principles in mind, we proceed to determine whether the
Employees were insured under the Policy and thus immune from suit.
III.
A.
Federal argues that the district court erred in applying the
concept of “course of employment,” as elucidated in the workers’
compensation context, to the facts of this case. In particular,
Federal asserts that the court erred at the outset in equating the
phrase “while performing duties related to the conduct of
[Transworld’s] business,” with the phrase “course of employment.”
8
We agree. In reading the contract as a whole, as we must, see
Transit Casualty Co. v. Hartman’s, Inc., 239 S.E.2d 894, 896 (Va.
1978), it is apparent that “course of employment” and “while
performing duties related to the conduct of [Transworld’s]
business” are not synonymous.
The Policy expressly distinguishes these two phrases. In
setting forth exclusions from coverage, the Policy provides that no
employee is insured for bodily injuries occurring “while in the
course of his or her employment or while performing duties related
to the conduct of [Transworld’s] business.” J.A. 502 (emphasis
added). As the two phrases are set off by the word “or,” we are
persuaded that they are intended to express distinct concepts.
Moreover, the Policy’s incorporation of the phrase “course of
employment” indicates that the Policy’s drafters employed that term
where they sought to invoke that concept. Consequently, the
suggestion that they would employ a wordier phrase to express the
“course of employment” concept elsewhere in the Policy defies
logic. Accordingly, the district court erred in equating “course
of employment” with “while performing duties related to the conduct
of [Transworld’s] business,” and in applying the definition of
“course of employment” elucidated in the workers’ compensation
context to the facts of this case.
9
B.
We thus examine whether the court’s grant of summary judgment
was appropriate when the correct tests of coverage are considered.
Because we find, as explained below, that the Employees’ alleged
act of negligence does not fall under either of the two classes of
acts covered in the Policy, we hold that they were not insured
under the liability section of the Policy.
1.
We begin by examining whether the act of flicking ashes into
a wastebasket qualifies as an “act[] within the scope of [the
Employees’] employment by [Transworld].” J.A. 502. Because we
conclude that such an act is necessarily outside the scope of the
Employees’ employment, we are compelled to hold that they were not
performing an act covered under this test when they flicked ashes
into a paper-filled trash can.4
Under the “scope of employment” test set forth in Virginia, we
think it plain that the act of flicking ashes into a wastebasket
4
Federal argues that smoking is necessarily for an employee’s
“external, independent, and personal motive,” and thus outside the
scope of employment. Appellant’s Br. at 18. Because the inquiry
relevant here is not whether smoking is within the scope of the
Employees’ employment, but rather whether flicking ashes into a
paper-filled can is within the scope of employment, we refrain from
deciding whether smoking itself would meet this standard. Thus, we
decline to opine as to whether smoking is necessarily outside the
scope of an employee’s employment in Virginia, an issue that
Virginia has yet to decide. Likewise, we do not consider what
other states have said regarding whether smoking is within the
scope of employment.
10
cannot be said to be within the scope of the Employees’ employment.
According to the Virginia Supreme Court, an act is within the scope
of employment if:
(1) it was expressly or impliedly directed by the
employer, or is naturally incident to the business, and
(2) it was performed, although mistakenly or ill-
advisedly, with the intent to further the employer’s
interest, or from some impulse or emotion that was the
natural consequence of an attempt to do the employer’s
business, “and did not arise wholly from some external,
independent, and personal motive on the part of the
[employee] to do the act upon his account.”
Kensington Assocs. v. West, 362 S.E.2d 900, 901 (Va. 1987)
(citations omitted). In discarding the ashes as they did, Ward and
Bondurant both engaged in an act independent of any other job-
related function that may have preceded, superceded, or even
occurred simultaneously with the act of disposing of the ashes.
That distinct act, which must be the focus of our inquiry, was not
within the scope of employment. Although Transworld permitted
smoking in its buildings, the negligent disposal of smoking
materials was not directed by Transworld or naturally incident to
Transworld’s manufacturing business. In fact, at the exterior of
its premises, Transworld provided its employees with urns
specifically designed for the disposal of smoking materials. J.A.
224-25. Nor was the Employees’ act of flicking ashes into a trash
can performed with the intent to further the employer’s interest or
from an impulse to carry out the employer’s business. The
negligent conduct did not promote any business-related interest.
11
Rather, it compromised the employer’s interest in maintaining a
safe working environment. The Employees’ conduct “ar[o]se wholly
from some external, independent, and personal motive . . . .”
Kensington Assocs., 362 S.E.2d at 901. We are thus compelled to
conclude as a matter of law that the Employees were not engaged in
an act in the scope of their employment when they flicked ashes
into a paper-filled trash can on the night of the fire.
Accordingly, they were not insured under the first test of
coverage.
2.
We now turn to the second test of coverage under the liability
section of the Policy, i.e., whether the Employees were “performing
duties related to the conduct of [Transworld’s] business” when they
discarded their ashes. J.A. 502.
Under the plain language of the contract, the question before
us is simply whether in discarding ashes into a paper-filled
container, the Employees were “performing duties related to the
conduct of [Transworld’s] business.” J.A. 502. On the night of
the fire, Ward and Bondurant admittedly performed some duties
related to the conduct of Transworld’s business of manufacturing
custom cable molded assemblies. Id. at 214. For instance, that
evening, Ward, a purchasing manager, carried out her normal
purchasing duties and set the burglar alarm. Id. at 31.
Bondurant, a quality control manager and inside sales
12
representative, was also engaged in a job-related duty, namely the
completion of a report for a client. Id. at 326. However, neither
Ward, nor Bondurant can properly characterize the act of concern--
discarding ashes in a wastebasket containing paper--as done in the
performance of a work-related duty. Indeed, because the act of
smoking was not within the Employees’ job description or needed to
perform a job-related duty, see J.A. 228-29, the subsidiary act of
flicking ashes also cannot be characterized as the exercise of a
duty. Thus, the even more circumscribed act of disposing ashes
into a paper-filled wastebasket is certainly not the performance of
a duty. Accordingly, we conclude that by this test, Ward and
Bondurant were not performing a covered act when they discarded
ashes into the wastebasket.
We would reach the same conclusion even if we read the phrase
“while performing duties related to the conduct of [Transworld’s]
business” to suggest that any act an employee can accomplish as she
performs job-related duties is necessarily covered. We think this
is a strained reading of the contract given the illogical results
it would engender. Under this temporal interpretation, a virtually
limitless number of activities would be covered merely because they
coincide with a job-related duty. By this rule, neither Federal,
nor Transworld could ever anticipate the breadth of acts subject to
coverage. Nonetheless, even under this strained interpretation,
the Employees are still not insured, because they do not insinuate
13
that they were engaged in any simultaneous job-related duty at the
precise moment when they flicked ashes in the trash can. All
alleged job-related activities took place either before or after
they flicked ashes into the can.
In sum, we hold as a matter of law that under the language of
the liability section of the Policy, the Employees were not insured
when they flicked ashes into a trash can containing paper. That
act was neither within the scope of their employment, nor in
performance of a job-related duty.5
C.
At this time, we consider the Employees’ alternative arguments
in favor of affirmance.6 Because we find these arguments
5
We may conclude as a matter of law that the Employees are not
insured under the two tests set forth in the liability section of
the Policy, because there are no genuine issues of material fact
left for resolution by the district court. Indeed, in moving for
summary judgment, the Employees conceded that there are no facts in
dispute, and that we may resolve the question of whether they are
insured under the Policy on the record as it existed before the
district court. J.A. 16, 40.
6
Federal argues that this Court should not entertain the
Employees’ remaining arguments because they were not raised by
Federal on appeal or addressed by the district court. According to
Federal, to preserve their arguments, the Employees should have
cross appealed under Federal Rule of Appellate Procedure 28(h).
Federal, however, misunderstands this Court’s ability to review
arguments not addressed by a district court or briefed by an
appellant. Although a court of appeals may not consider an
argument not raised by an appellant as grounds for reversal, it may
consider any evidence in the record as grounds for affirmance.
See, e.g., El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479
(1999) (“Absent a cross-appeal, an appellee may ‘urge in support of
14
unavailing, we reverse the district court’s grant of summary
judgment and hold that the Employees are not insured under the
insurance policy.
1.
The Employees argue that they are insured under the Policy
because their personal property on Transworld’s premises is covered
under particular circumstances. We are not persuaded, however,
because the Employees’ argument is contrary to the plain language
of the Policy and not supported by authority in Virginia.
The personal property section of the Policy provides that
“[Federal] will pay for direct physical loss or damage to personal
property of employees caused by or resulting from a peril not
otherwise excluded.” J.A. 352. Indeed, Federal indirectly
compensated Ward for personal property losses totaling $230 by
paying that amount to Transworld, who in turn made payment to Ward.
The Employees derive their argument, in large part, from the
Louisiana Court of Appeals’ decision in State Farm Fire & Casualty
a decree any matter appearing in the record, although his argument
may involve an attack upon the reasoning of the lower court,’ but
may not ‘attack the decree with a view either to enlarging his own
rights thereunder or of lessening the rights of his adversary.’”)
(quoting United States v. Am. Ry. Express Co., 265 U.S. 425, 435
(1924)); accord Oklahoma v. United States Civil Serv. Com., 330
U.S. 127, 135 n.3 (1947); Le Tulle v. Scofield, 308 U.S. 415, 421-
22 (1940); Langnes v. Green, 282 U.S. 531, 538-539 (1931); Landram
v. Jordan, 203 U.S. 56, 62 (1906); United States v. Blackfeather,
155 U.S. 180, 186 (1894); Mount Pleasant v. Beckwith, 100 U.S. 514,
527 (1880); The Stephen Morgan, 94 U.S. 599, 599 (1877); JH v.
Henrico County Sch. Bd., 326 F.3d 560 (4th Cir. 2003); Rhodes v.
Comm’r, 111 F.2d 53, 56 (4th Cir. 1940).
15
Co. v Sentry Indemnity Co., 316 So. 2d 185 (La. Ct. App. 1975).7
The Employees’s argument, however misses the point, because as a
federal court sitting in diversity, we are obliged to discern and
apply the law of Virginia, not Louisiana. See Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 78 (1938); see also United States v. Little,
52 F.3d 495, 498 (4th Cir. 1995). Yet, the Employees fail to cite
any Virginia case stating categorically that if an employee’s
possessions are covered under certain provisions of a policy, they
are rendered an insured under the entirety of that policy.
The Employees ask this Court to apply a strained reading of
the Policy, which we may not do. Pilot Life Ins. Co. v.
Crosswhite, 145 S.E.2d 143, 146 (Va. 1965) (“It is the function of
the court to construe the language of the contract as written, and
the court cannot make a new contract for the parties different from
that plainly intended and thus create a liability not assumed by
the insurer.”). The Policy lists only one named insured,
Transworld. See, e.g., J.A. 337, 464. Premiums were paid by that
7
In State Farm Fire & Casualty Co., the Louisiana Court of
Appeals held that under Louisiana’s anti-subrogation rule, an
insurance company could not seek indemnification from a pastor (an
employee of the covered church) because although the pastor was not
a named insured, the insurance policy extended coverage to
“[p]ersonal property [or] personal effects while located on the
described premises, belonging to the insured, officers, partners or
employees thereof.” 316 So. 2d at 188. The court affirmed summary
judgment in the pastor’s favor, holding that the fact that the
pastor’s possessions were covered under the policy, rendered him a
co-insured, and thus immunized him from a subrogation action by the
insurance company. Id. at 188-89.
16
named insured, and Federal issued payments to that named insured.
The plain language of the provision imparting protection to the
personal property of employees specifically distinguishes employees
from the insured. See J.A. 347, 352 (using the terms “you” and
“your” to refer to the named insured and “employees” to refer to a
separate, uninsured class). Also, nothing in the record
establishes that the parties in entering the insurance contract
intended to convey upon all employees the status of additional or
co-insureds. The Employees do not indicate that they were the
intended beneficiaries of the contract. See Walker v. Vanderpool,
302 S.E.2d 669 (Va. 1983) (In interpreting contracts, courts should
enforce the intention of the parties). When asked whether he
considered employees to be insured under the company’s policy,
Tubbs did not so indicate. See J.A. 315.
Moreover, the fact that Transworld’s employees’ possessions
were only protected if under the “care, custody, and control” of
Transworld suggests that Transworld sought insurance for the
personal effects of employees only to protect itself from liability
to its employees. J.A. 443 (emphasis added) (defining personal
property of employees as “personal property owned or leased by your
employee and in your care, custody or control”). Because
Transworld effectively “assumed responsibility” for the personal
property of employees that remained on the Transworld premises,
Transworld had an independent interest in protecting that property.
17
We find further support for our conclusion in Virginia Heart
Institute, Ltd. v. Northside Electric Co., No A-908, 1982 WL 215281(Va. Cir. Ct. Oct. 29, 1982) (unpublished), a Virginia Circuit
Court opinion, which specifically rejects the categorical approach
that the Employees advocate.8 In that case, the court addressed
whether a provision in an insurance policy that extended some
coverage to a subcontractor hired to make improvements on an
existing building rendered that subcontractor a coinsured under the
entire policy. Va. Heart Inst., 1982 WL 215281, *10-15. A
building owner brought suit against a subcontractor when a fire,
worsened by the subcontractor’s negligence, destroyed his building.
Id. at *1. The relevant portion of the insurance policy provided
that “the Owner shall purchase and maintain property insurance upon
the entire Work at the site to the full insurable value thereof.
8
Although unpublished state cases are not binding on this
Circuit, they can be instructive in resolving a question of state
law. C.F. Trust, Inc. v. First Flight Ltd. P’ship, 306 F.3d 126,
136 (4th Cir. 2002) (finding that no authority prevents a federal
court from relying upon an unpublished state decision to assist in
resolving a question of state law); see also King v. Order of
United Commercial Travelers, 333 U.S. 153, 160-61 (1948) (holding
that unpublished decisions are not binding, but noting that a court
“properly attributed some weight” to an unpublished decision).
Likewise, we may follow the authority of a trial court unless we
are persuaded that the state supreme court would reach a different
conclusion under the same circumstances. See, e.g., Cain v. Sec.
of Health, Educ. & Welfare, 377 F.2d 55, 58 (4th Cir. 1967)
(“Where, as here, the Supreme Court has not had occasion to declare
the law, the Secretary may follow the opinion of a nisi prius
court; but if he believes its decision to be in conflict with what
the Supreme Court ‘would find’ were the point presented to it, he
may disregard that lower court’s decision.”).
18
This insurance shall include the interest of the Owner, the
Contractor, Subcontractors, and Sub-subcontractors . . . .” Id. at
*3. Under the contract, “Work” was defined to include “all labor
necessary to produce the construction required by the Contract
Documents, and all materials and equipment incorporated in such
construction.” Id. at *12. The court found that the
subcontractor’s insurable interest in the property only extended to
the improvements made by the subcontractor and not to the
preexisting structure. Id. Thus, the court concluded that even if
the subcontractor was an insured party, its interest was limited to
its insurable interest and hence “it [was] liable for damages
beyond the amount of its insured interest.” Id.
In sum, we find that the Employees were not insured, because
the Policy identifies Transworld as the only insured, extends
protection to Transworld’s employees’ personal property only in an
effort to protect Transworld, the Employees have cited no authority
in Virginia for the categorical approach they would have us
embrace, and because we are persuaded by the reasoning of Virginia
Heart Institute. We thus conclude that even if the Employees do
have an insurable interest in the Policy, that interest, by the
terms of the Policy, extends only to their personal property, which
plainly does not include Transworld’s building. J.A. 443
(buildings are excluded from the definition of “personal property
of employees”). Accordingly, any limited coverage that was
19
afforded to the Employees does not serve to shield them from suit
for destruction of the entire Transworld building.9
2.
Finally, the Employees argue that they are insured because a
corporation can only act through its employees. Hence, according
to the Employees, to cover the corporation but exclude all
employees from coverage would in effect not cover the corporation.
The Employees effectively suggest that whenever an employer
purchases insurance, all acts of the employees are necessarily
covered. However, the policy at issue here, specifically limits
coverage to employees when they are engaged in acts within the
scope of employment or are “performing duties related to the
conduct of [Transworld’s] business.” Because the rule the
Employees advocate would require us to ignore the plain language of
the Policy, and would do injury to the ability of parties to
control the manner in which they contract for insurance, we find
their argument to be without merit. See Quesenberry v. Nichols,
159 S.E.2d 636, 640 (Va. 1968) (courts ought not apply a “strained
or unjustified construction of [an insurance] policy . . ., which
9
For the same reasons, we are not persuaded by the Employees’
contention that Federal has waived its ability to claim that Ward
is not an insured by virtue of its payment to Ward on account of
Ward’s property damage. The Employees maintain this argument
applies with equal force to Bondurant because Federal concedes that
had Bondurant also lost personal property during the fire, she too
would have been compensated under the Policy. J.A. 155. The
Employees’ argument fails because, as stated above, the fact that
their personal property was protected does not render them insured.
20
disregards the plain meaning and intent of the parties . . . .”
(internal quotation marks and citations omitted)).
IV.
For the reasons stated above, we reverse the district court’s
grant of summary judgment, hold that the Employees were not insured
under the Policy and thus not immune from suit, and remand for
further proceedings consistent with this opinion.
REVERSED AND REMANDED
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