American States Insurance v. Barbara Surbaugh , 231 W. Va. 288 ( 2013 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2013 Term FILED
February 6, 2013
_____________
released at 3:00 p.m.
RORY L. PERRY II, CLERK
No. 11-1186 SUPREME COURT OF APPEALS
OF WEST VIRGINIA
_____________
AMERICAN STATES INSURANCE COMPANY,
Defendant Below, Petitioner
V.
BARBARA SURBAUGH, ADMINISTRATOR
OF THE ESTATE OF GERALD KIRCHNER,
Plaintiff Below, Respondent
____________________________________________________________________
Appeal from the Circuit Court of Greenbrier County
Honorable J.C. Pomponio, Jr., Judge
Civil Action No. 97-C-241
REVERSED AND REMANDED
____________________________________________________________________
Submitted: January 15, 2013
Filed: February 6, 2013
Avrum Levicoff Barry L. Bruce
Julie A. Brennan Barry L. Bruce and Associates, L.C.
Levicoff, Silko & Deemer, P.C. Lewisburg, West Virginia
Pittsburgh, Pennsylvania Attorney for Respondent
Attorneys for Petitioner
JUSTICE DAVIS delivered the Opinion of the Court.
CHIEF JUSTICE BENJAMIN and JUSTICE KETCHUM concur and reserve the right
to file concurring opinions.
SYLLABUS BY THE COURT
1. “Determination of the proper coverage of an insurance contract when
the facts are not in dispute is a question of law.” Syllabus point 1, Tennant v. Smallwood,
211 W. Va. 703, 568 S.E.2d 10 (2002).
2. “An insurer wishing to avoid liability on a policy purporting to give
general or comprehensive coverage must make exclusionary clauses conspicuous, plain, and
clear, placing them in such a fashion as to make obvious their relationship to other policy
terms, and must bring such provisions to the attention of the insured.” Syllabus point 10,
National Mutual Insurance Co. v. McMahon & Sons, Inc., 177 W. Va. 734, 356 S.E.2d 488(1987), overruled on other grounds by, Potesta v. United States Fidelity & Guaranty Co.,
202 W. Va. 308, 504 S.E.2d 135 (1998).
3. As a general rule, the issue of whether an insurer has brought a policy
exclusion to the attention of an insured is to be resolved by the trial court.
4. “A party to a contract has a duty to read the instrument.” Syllabus point
5, Soliva v. Shand, Morahan & Co., Inc., 176 W. Va. 430, 345 S.E.2d 33 (1986), overruled
i
on other grounds by National Mutual Insurance Co. v. McMahon & Sons, Inc., 177 W. Va.
734, 356 S.E.2d 488 (1987).
ii
Davis, Justice:
American States Insurance Company (“American States”), defendant below,
appeals from an adverse jury verdict in an insurance coverage declaratory judgment action
brought by Barbara Surbaugh (“Ms. Surbaugh”),1 plaintiff below. Before this Court,
American States contends that the circuit court erred in submitting the insurance coverage
issue to a jury as a matter of law and erred in denying its motion for summary judgment.2
After a careful review of the briefs and record on appeal, and listening to the arguments of
the parties, we reverse and remand.
I.
FACTUAL AND PROCEDURAL HISTORY
This case began on or about June 6, 1997, when Gerald Kirchner was
accidentally shot and killed by Robbie Bragg. At the time of the shooting, Mr. Kirchner and
Mr. Bragg were both employees of Grimmett Enterprises, a sporting goods store located in
Rainelle, West Virginia. Grimmett Enterprises was owned by David Grimmett (“Mr.
Grimmett”). Mr. Kirchner was shot accidentally while Mr. Bragg was showing a customer
how to load a handgun that was for sale in the store.
1
Ms. Surbaugh filed the action as Administrator of the estate of Gerald
Kirchner.
2
American States’ brief actually sets out six assignments of error. However,
we have reduced the issues down to two dispositive matters. In addition, Ms. Surbaugh
assigned three issues as cross-assignments of error.
1
On or about December 19, 1997, the mother of Mr. Kirchner, Ms. Surbaugh,
filed a wrongful death action against Mr. Bragg and a workers’ compensation deliberate
intent cause of action against Grimmett Enterprises. In 2002, Mr. Bragg and Grimmett
Enterprises entered into a settlement with Ms. Surbaugh. Under the terms of the settlement,
Mr. Bragg and Grimmett Enterprises agreed to a judgment against them for $1.5 million.
Ms. Surbaugh agreed to not execute the judgment against the defendants in exchange for the
defendants assigning all claims they might have against their respective insurers for refusing
to provide a defense and coverage.
In 2005, Ms. Surbaugh filed an amended complaint to assert a declaratory
judgment action against Grimmett Enterprises’ insurer, American States.3 The amended
complaint sought a determination of whether the insurance policy issued by American States
to Grimmett Enterprises provided coverage for the claim against Grimmett Enterprises.4 By
order entered April 19, 2010, the circuit court bifurcated the declaratory judgment action
from the underlying wrongful death/deliberate intent action. Subsequently, on or about July
3
A prior amended complaint was filed against Mr. Bragg’s homeowners
insurer. That action was settled.
4
Even though an agreed judgment was entered against Grimmett Enterprises,
the circuit court held that the judgment was not binding on American States. See Syl. pt. 7,
in part, Horkulic v. Galloway, 222 W. Va. 450, 665 S.E.2d 284 (2008) (“A consent or
confessed judgment against an insured party is not binding on that party’s insurer in
subsequent litigation against the insurer where the insurer was not a party to the proceeding
in which the consent or confessed judgment was entered, unless the insurer expressly agreed
to be bound by the judgment”).
2
20, 2010, Ms. Surbaugh filed a motion for summary judgment on the declaratory judgment
claim.5 American States filed a cross motion for summary judgment. Ms. Surbaugh argued
that an employee exclusion in the policy was ambiguous, was not conspicuous, and had not
been brought to the attention of Mr. Grimmett.6 American States argued that the policy was
unambiguous and conspicuous. The record reflects that the circuit court entered an order on
September 24, 2010, denying, in part, Ms. Surbaugh’s motion.7 The order made two
dispositive rulings. First, the circuit court held as a matter of law that the exclusionary
language contained in the policy was not ambiguous. Second, the court ruled that the issue
of whether the exclusion was disclosed to Mr. Grimmett was to be resolved by a jury.
Ms. Surbaugh filed a renewed motion for summary judgment on May 4, 2011.
In response, American States filed a renewed cross motion for summary judgment. American
States argued that it was entitled to summary judgment because of the court’s earlier ruling
5
American States previously had filed a motion for summary judgment on the
declaratory judgment claim before that claim and the wrongful death/deliberate intent actions
were bifurcated. The trial court denied the motion by order entered June 14, 2007.
6
The policy did not provide coverage for a bodily injury to “[a]n employee of
the insured arising out of and in the course of employment by the insured.” Greater details
about the policy and its purchase are brought out in the “Discussion” section of this opinion.
See Section II, infra.
7
The record does not contain an order specifically addressing American States’
cross motion for summary judgment.
3
that the exclusion was unambiguous. By order entered June 17, 2011, the circuit court denied
both summary judgment motions.
On June 23, 2011, a jury trial was held to determine coverage under the policy.
The only witness called during the trial was Mr. Grimmett. At the conclusion of the
evidence, the case was submitted to the jury with a special verdict form that had only one
question: “Was the exclusionary language at issue in this case brought to the attention of the
insured, Grimmett Enterprises, Inc.”8 On June 24, 2011, the jury returned a verdict
answering the question in the negative. The circuit court thereafter, on June 30, 2011,
entered a final order concluding that, based upon the jury’s answer to the special verdict
question, the employee policy exclusion was unenforceable. This appeal followed.
II.
STANDARD OF REVIEW
This is an appeal from a jury verdict in a declaratory judgment action. In
addition to appealing the jury verdict, American States also has assigned error to the trial
court’s denial of its motions for summary judgment. With respect to a jury verdict in a
declaratory judgment proceeding, we have held,
8
See W. Va. R. Civ. Pro. 49(a) (special verdicts).
4
[t]his Court reviews a circuit court’s entry of a
declaratory judgment de novo, because the principal purpose of
a declaratory judgment action is to resolve legal questions. . . .
Any determinations of fact made by the circuit court or jury in
reaching its ultimate judgment are reviewed under a clearly
erroneous standard.
Joslin v. Mitchell, 213 W. Va. 771, 775, 584 S.E.2d 913, 917 (2003).
This Court’s standard of review concerning summary judgment is well-settled.
Upon appeal, “[a] circuit court’s entry of summary judgment is reviewed de novo.” Syl. pt.
1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994). In conducting our de novo
review, we are mindful that “[a] motion for summary judgment should be granted only when
it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is
not desirable to clarify the application of the law.” Syl. pt. 3, Aetna Cas. & Sur. Co. v.
Federal Ins. Co. of New York, 148 W. Va. 160, 133 S.E.2d 770 (1963). In other words,
“[t]he circuit court’s function at the summary judgment stage is not to weigh the evidence
and determine the truth of the matter, but is to determine whether there is a genuine issue for
trial.” Syl. pt. 3, Painter, 192 W. Va. 189, 451 S.E.2d 755.
With these standards of review in mind, we address the dispositive issues
presented.
5
III.
DISCUSSION
In this case, we are presented with two dispositive issues. First, we must
determine whether the trial court was correct in finding, as a matter of law, that a jury had
to decide if an insurance policy’s exclusionary language was adequately brought to the
attention of Mr. Grimmett. Second, we must decide whether the trial court erred in denying
summary judgment in favor of American States. We will address both issues separately.
A. Ordinarily the Trial Court Should Decide Whether a Policy’s
Exclusionary Language Was Brought to the Attention of an Insured
The trial court determined that it was for the jury to decide whether the
exclusionary language at issue in this case was brought to the attention of Mr. Grimmett.
American States argued below, and in this appeal, that this issue was for the trial court and
not a jury.9 We agree with American States.
We previously have held that “when a declaratory judgment proceeding
involves the determination of an issue of fact, that issue may be tried and determined by a
judge or jury in the same manner as issues of fact are tried and determined in other civil
actions.” Erie Ins. Prop. & Cas. Co. v. Stage Show Pizza, 210 W. Va. 63, 66, 553 S.E.2d
9As an alternative argument, American States also wrongly contended below,
and in this appeal, that our cases did not require proof of disclosure.
6
257, 260 (2001). Our declaratory judgment act provides that, “‘[w]hen a proceeding under
this article involves the determination of an issue of fact, such issue may be tried and
determined in the same manner as issues of fact are tried and determined in other civil
actions in the court in which the proceeding is pending.’ W. Va. Code § 55-13-9 (1941).”
Syl. pt 15, Mountain Lodge Ass’n v. Crum & Forster Indem. Co., 210 W. Va. 536, 558
S.E.2d 336 (2001). Moreover, in Syllabus point 16 of Mountain Lodge we held that
West Virginia Code § 55-13-9 and Rules 38, 39 and 57
of the West Virginia Rules of Civil Procedure, read and
considered together, operate to guarantee that any issue triable
by a jury as a matter of right in other civil actions cognizable by
the circuit courts shall, upon timely demand in a declaratory
judgment proceeding, be tried to a jury. As to other issues, Rule
39 of the Rules of Civil Procedure expressly authorizes trial by
the court, with or without an advisory jury.
Id.
It is clear from the above authorities that issues of fact, that are normally tried
by a jury, may be submitted to a jury in a declaratory judgment action. However, in the
context of a declaratory judgment action to determine insurance coverage, generally the
issues presented are for the trial court to decide. This Court has held that “[d]etermination
of the proper coverage of an insurance contract when the facts are not in dispute is a question
of law.” Syl. pt. 1, Tennant v. Smallwood, 211 W. Va. 703, 568 S.E.2d 10 (2002). See also
Syl. pt. 2, in part, Riffe v. Home Finders Assocs., Inc., 205 W. Va. 216, 517 S.E.2d 313(1999) (“The interpretation of an insurance contract, including the question of whether the
contract is ambiguous, is a legal determination[.].”). In Payne v. Weston, 195 W. Va. 502,
7
466 S.E.2d 161 (1995). Justice Cleckley addressed the parameters for invoking a jury trial
on an insurance coverage issue:
In West Virginia, insurance policies are controlled by the
rules of construction that are applicable to contracts
generally. . . .
Only if the court makes the determination that the
contract cannot be given a certain and definite legal meaning,
and is therefore ambiguous, can a question of fact be submitted
to the jury as to the meaning of the contract. It is only when the
document has been found to be ambiguous that the
determination of intent through extrinsic evidence become [sic]
a question of fact. Where a provision of an insurance policy is
ambiguous, it is construed against the drafter, especially when
dealing with exceptions and words of limitation.
However, a court should read policy provisions to avoid
ambiguities and not torture the language to create them. If a
court properly determines that the contract is unambiguous on
the dispositive issue, it may then properly interpret the contract
as a matter of law and grant summary judgment because no
interpretive facts are in genuine issue.
Payne, 195 W. Va. at 507, 466 S.E.2d at 166 (citations and internal quotations omitted). See
also State ex rel. Piper v. Sanders, 228 W. Va. 792, 794, 724 S.E.2d 763, 765 (2012) (“The
circuit court conducted a jury trial on the declaratory judgment action . . . , in which the jury
found that the State Farm umbrella policy provides liability coverage[.]”); Mountain Lodge
Ass’n v. Crum & Forster Indem. Co., 210 W. Va. 536, 558 S.E.2d 336 (2001) (holding that
genuine issue of material fact as to whether owner, acting as its own general contractor,
retained the right to exercise control of its construction manager precluded summary
judgment for insurer); West Virginia Ins. Co. v. Lambert, 193 W. Va. 681, 682, 458 S.E.2d
8774, 775 (1995) (“The jury also determined insurance coverage was available because Mr.
Lambert’s actions did not fall under the ‘business pursuits’ exclusion of his policy.”);
Marson Coal Co., Inc. v. Insurance Co. of State of Pennsylvania, 158 W. Va. 146, 148, 210
S.E.2d 747, 749 (1974) (“The insurance company denied coverage under the policy and the
plaintiff, thereafter, instituted a declaratory judgment action. The case was tried to the court
without a jury, and upon the trial court’s findings of fact and conclusions of law, coverage
under the policy was denied.”); Spencer v. Travelers Ins. Co., 148 W. Va. 111, 114, 133
S.E.2d 735, 738 (1963) (“All of the evidence relative to the conversations between the
[parties] relative to the coverage in the insurance policy was objected to by the defendant as
a violation of the parol evidence rule, but was admitted by the trial court for the consideration
of the jury.”); Syl. pt. 1, Runner v. Calvert Fire Ins. Co., 138 W. Va. 369, 76 S.E.2d 244(1953) (“Where, under the facts and circumstances of a particular case, the court cannot, as
a matter of law, hold that the specific provisions of an insurance contract have been
breached, the question is one for jury determination.”).
In the instant case, the trial court determined that, based upon the per curiam
opinion in Luikart v. Valley Brook Concrete & Supply, Inc., 216 W. Va. 748, 613 S.E.2d 896(2005), a jury was required to determine whether the exclusionary language at issue in the
case was brought to the attention of Mr. Grimmett. Simply put, Luikart does not support the
trial court’s ruling as to the necessity of a jury trial.
9
The plaintiff in Luikart was the father and administrator of the estate of Paul
Travis Luikart, who was killed during the course of his employment. The plaintiff sued the
employer for wrongful death under the workers’ compensation statute. While the action was
pending, the employer’s insurer denied coverage and filed a declaratory judgment action to
obtain a judicial ruling on the issue. After the two actions were consolidated, the employer
entered into a settlement and an agreed judgment against it for $3 million. The plaintiff
agreed to not execute the judgment against the employer in exchange for the employer
assigning all claims it might have against its insurer for refusing to provide a defense and
coverage. Eventually, the insurer moved for summary judgment on the declaratory judgment
claim. The trial court granted summary judgment in favor of the insurer. The plaintiff
appealed.
One of the issues presented in Luikart involved the application of language
found in Syllabus point 10 of National Mutual Insurance Co. v. McMahon & Sons, Inc., 177
W. Va. 734, 356 S.E.2d 488 (1987), overruled on other grounds by Potesta v. United States
Fidelity & Guaranty Co., 202 W. Va. 308, 504 S.E.2d 135 (1998). In McMahon, we held:
An insurer wishing to avoid liability on a policy
purporting to give general or comprehensive coverage must
make exclusionary clauses conspicuous, plain, and clear, placing
them in such a fashion as to make obvious their relationship to
other policy terms, and must bring such provisions to the
attention of the insured.
Syl. pt. 10, McMahon, 177 W. Va. 734, 356 S.E.2d 488 (emphasis added.)
10
After we determined in Luikart that the language of the insurance contract was
unambiguous and conspicuous, we addressed the plaintiff’s contention that the exclusionary
language was not brought to the attention of the employer. In addressing this issue, we
examined the deposition testimony of the employer’s president, who testified that he read
some of the policy but not everything. In addition to reviewing the president’s deposition,
we reviewed the policy:
Moreover, the policy’s coverage section clearly stated
that it was subject to various exclusions. The portion of the
insurance policy titled “Commercial General Liability Coverage
Form,” which contains the relevant exclusionary language,
cautions in its first sentence that “[v]arious provisions in this
policy restrict coverage. Read the entire policy carefully to
determine rights, duties and what is and is not covered.”
Luikart, 216 W. Va. at 754, 613 S.E.2d at 902. In view of this evidence, we held that the
insurer “sufficiently disclosed the exclusions to Valley Brook.” Luikart, 216 W. Va. at 754,
613 S.E.2d at 902.
It is clear to this Court that Luikart’s application of Syllabus point 10 of
McMahon, that an insurer bring exclusionary language to the attention of an insured, did not
remotely suggest that this was a mandatory jury question. In fact, we wish to make clear, and
so hold, that, as a general rule, the issue of whether an insurer has brought a policy exclusion
to the attention of an insured is to be resolved by the trial court.
11
Our holding is consistent with the procedural way in which a federal district
court in Canal Insurance Co. v. Sherman, 430 F. Supp. 2d 478 (E.D. Pa. 2006), addressed
the issue. Sherman was a diversity jurisdiction case that applied West Virginia insurance law
to a policy coverage issue. One of the issues addressed by Sherman was the parties’ cross
motions for summary judgment on the issue of whether the insurer brought policy exclusions
to the attention of the insured. After rejecting the insurer’s evidence that the exclusions were
brought to the attention of the insured, the court held that the insurer’s “motion for summary
judgment that the exclusions bar coverage will be denied.” Sherman, 430 F. Supp. 2d at 488.
In turning to the insured’s cross motion for summary judgment, the court held that the
insured
has shown there is no genuine issue of material fact that the
policy was not explained to him and Canal has failed to raise
such an issue. Under West Virginia law, failure to explain the
exclusion to the insured prevents the application of that
exclusion. Therefore, Sherman is entitled to judgment as a
matter of law.
Sherman, 430 F. Supp. 2d at 489. Although we may not agree with the district court’s
substantive resolution of the disclosure issue in Sherman, we find that the district court
correctly concluded that the resolution of the issue was for the court and not a jury.
Consequently, and in conjunction with the discussion that follows, we find that
the trial court committed error in having a jury decide whether the insurance policy’s
exclusionary language adequately was brought to the attention of Mr. Grimmett.
12
B. Summary Judgment
The parties filed several summary judgment motions in this case. In our review
of the issue on appeal, we will rely on the record submitted for all of the summary judgment
motions, as well as the arguments set out in this appeal.
With respect to general principles involved with examining provisions of an
insurance policy, this Court has indicated that “[w]hen an insurance company seeks to avoid
its duty to defend, or its duty to provide coverage, through the operation of a policy
exclusion, the insurance company bears the burden of proving the facts necessary to trigger
the operation of that exclusion.” State Auto. Mut. Ins. Co. v. Alpha Eng’g Servs., Inc., 208
W. Va. 713, 716, 542 S.E.2d 876, 879 (2000) (citation omitted). “Language in an insurance
policy should be given its plain, ordinary meaning.” Syl. pt 1, Soliva v. Shand, Morahan &
Co., Inc., 176 W. Va. 430, 345 S.E.2d 33 (1986), overruled on other grounds by National
Mut. Ins. Co. v. McMahon & Sons, 177 W. Va. 734, 356 S.E.2d 488 (1987). “Where the
provisions of an insurance policy contract are clear and unambiguous they are not subject to
judicial construction or interpretation, but full effect will be given to the plain meaning
intended.” Syl., Keffer v. Prudential Ins. Co., 153 W. Va. 813, 172 S.E.2d 714 (1970). As
we previously indicated,
“[a]n insurer wishing to avoid liability on a policy purporting to
give general or comprehensive coverage must make
exclusionary clauses conspicuous, plain, and clear, placing them
in such a fashion as to make obvious their relationship to other
13
policy terms, and must bring such provisions to the attention of
the insured. Syl. pt. 10, McMahon, 177 W. Va. 734, 356 S.E.2d
488. The dispositive summary judgment issues that were before
the trial court involved a determination of whether the policy
exclusion for employee injuries was (1) unambiguous, (2)
conspicuous, and (3) disclosed to the insured. We will examine
each issue separately.
1. The exclusion was unambiguous. The policy involved in this case is a
standard commercial liability policy. The policy contained an exclusion purporting to deny
coverage to an employee injured during the course of his or her employment. The circuit
court found that the exclusion was not ambiguous. This Court has explained that
“[w]henever the language of an insurance policy provision is reasonably susceptible of two
different meanings or is of such doubtful meaning that reasonable minds might be uncertain
or disagree as to its meaning, it is ambiguous.” Syl. pt. 1, Prete v. Merchants Prop. Ins. Co.,
159 W. Va. 508, 223 S.E.2d 441 (1976). However, “[t]he mere fact that parties do not agree
to the construction of a contract does not render it ambiguous. The question as to whether
a contract is ambiguous is a question of law to be determined by the court.” Syl. pt. 1,
Berkeley Cnty. Pub. Serv. Dist. v. Vitro Corp. of America, 152 W. Va. 252, 162 S.E.2d 189(1968). In the instant case the language of the policy exclusion was set out as follows:
B. EXCLUSIONS
1. Applicable to Business Liability Coverage –
This Insurance does not apply to:
14
....
e. “Bodily injury” to:
(1) An employee of the insured arising out of and in the
course of employment by the insured; or
(2) The spouse, child, parent, brother or sister of that
employee as a consequence of (1) above.
This exclusion applies:
(a) Whether the insured may be liable as an employer or
in any other capacity; and
(b) To any obligation to share damages with or repay
someone else who must pay damages because of the injury.
In Ms. Surbaugh’s motion for summary judgment on July 20, 2010, she argued
that this exclusion was ambiguous. Ms. Surbaugh contended that the exclusion could be read
to mean that the employer had to cause the injury. To support this assertion, Ms. Surbaugh
submitted an affidavit by Mr. Grimmett, in which he stated that when he read the exclusion
after the accident, he thought that it meant that he, as the employer, had to cause the injury.
Ms. Surbaugh also presented deposition testimony of a linguistics expert, who opined that
the exclusion was ambiguous.
The circuit court rejected Ms. Surbaugh’s argument that the exclusion was
ambiguous. The circuit court’s order addressed the issue as follows:
15
This Court rules as a matter of law that the policy language is
not ambiguous. In fact, the exact same language was used in
insurance policies in question[s] in at least two West Virginia
cases: Spencer v. Travelers Ins. Co., 148 W. Va. 111, 115, 133
S.E.2d 735, 738 (1963) and Smith v. Animal Urgent Care, Inc.,
208 W. Va. 664, 666, 542 S.E.2d 827, 829 (2000). The
language in the current case and the two cases just cited are
exactly similar and state that excluded from coverage is bodily
injury to “[a]n employee of the insured arising out of and in the
course of employment by the insured.” Because the language in
the current case and in Spencer and Smith are exactly the same,
and the West Virginia Supreme Court of Appeals never
indicated that the language in either Spencer or Smith was at all
ambiguous, this Court rules that as a matter of law the language
in the current case is similarly not ambiguous.
We agree with the circuit court that the language of the exclusion in this case
is not new to this Court. See Luikart, 216 W. Va. at 751, 613 S.E.2d at 899 (similar
exclusion); Trent v. Cook, 198 W. Va. 601, 608 n.13, 482 S.E.2d 218, 225 n.13 (1996),
overruled on other grounds by Gibson v. Northfield Ins. Co., 219 W. Va. 40, 631 S.E.2d 598(2005) (similar exclusion). Moreover, this same policy language has been found to be
unambiguous by other courts. See Aetna Cas. & Sur. Co. v. Beautiful Signs, Inc., 496 N.E.2d
1229, 1230 (Ill. App. Ct. 1986) (“The exclusion in question states that coverage will not
apply ‘to bodily injury to any employee of the insured arising out of and in the course of his
employment by the insured. . .’. . The exclusion in question was designed to preclude
coverage in those areas normally covered by Worker’s Compensation insurance.”); Franklin
v. J. A. Jones Constr. Co., 391 So. 2d 1321, 1323 (La. Ct. App. 1980) (“[W]e hold that the
16
terms of the policy are clear and unambiguous.”); United States Fid, &Guar. Co. v. Rosso,
521 A.2d 301, 304 (Me. 1987) (“We find the language of the exclusion clause in Rosso’s
insurance policy to be unambiguous. It clearly applies to ‘any employee of the insured
arising out of and in the course of employment by the insured.’ Therefore, we construe this
language according to its plain meaning.”); State v. Schenectady Hardware & Elec. Co., Inc.,
636 N.Y.S.2d 861, 863 (N.Y. App. Div. 1996) (“The exclusionary language in the CGL
policy is clear and unambiguous and renders the coverage inapplicable to ‘bodily injury to
any employee of the insured arising out of and in the course of his employment by the
insured[.]’”); Fieldcrest Cannon, Inc. v. Fireman’s Fund Ins. Co., 477 S.E.2d 59, 67
(N.C. App. 1996) (“This coverage was explicitly stated to be inapplicable ‘to bodily injury
to any employee of the insured arising out of and in the course of employment by the
insured. . . .’”). Consequently we conclude that the language of the exclusion is not
ambiguous as a matter of law. Under the policy, an injury to an employee arising out of and
in the course of employment is excluded from coverage.
2. The exclusion was conspicuous. The circuit court determined that the
exclusion was conspicuous, plain, and clear.10 We already have pointed out that an insurance
10
American States refers this Court to two summary judgment orders as
indicating the trial court found the exclusion was conspicuous. No language in those orders
makes such a ruling. However, it is clear from the trial transcript that the trial court made
a pretrial ruling that the exclusion was conspicuous.
17
policy “must make exclusionary clauses conspicuous, plain, and clear[.]” West Virginia
Employers’ Mut. Ins. Co. v. Summit Point Raceway Assocs., Inc., 228 W. Va. 360, 373, 719
S.E.2d 830, 843 (2011) (internal quotations and citations omitted). Furthermore, this Court
has emphasized that “any type of exclusion . . . must be stated with such clarity and
specificity so as to place an insured on notice as to its existence in the subject policy of
insurance.” Bender v. Glendenning, 219 W. Va. 174, 181, 632 S.E.2d 330, 337 (2006) (per
curiam).
Ms. Surbaugh contended below that the exclusion was not conspicuous because
the policy did not contain a table of contents.11 We find no merit to this argument. In no
decision of this Court have we ever held that insurance policies must have a table of contents
for exclusions to be found to be conspicuous. While it is true that a few of the insurance
policy cases presented to this Court have had a table of contents, we have not made this an
absolute requirement. See Luikart, 216 W. Va. at 753, 613 S.E.2d at 901 (policy had table
of contents); Farm Family Mut. Ins. Co. v. Bobo, 199 W. Va. 598, 603, 486 S.E.2d 582, 587
(1997) (same). Obviously, a table of contents would be helpful in understanding any
insurance policy, but such helpfulness has not been mandated by this Court, nor has Ms.
Surbaugh pointed to any statute or regulation requiring the same.
11
It was also argued that “the exclusionary language was not plain and clear in
describing what it was excluding.” We have already rejected this argument in determining
that the exclusion was not ambiguous.
18
The exclusion in the policy is found in the “Businessowners Liability Coverage
Form.” The relevant exclusion in this case is found on page two of this policy Form. The
policy sets out the exclusion section in bold, capital letters that use a larger font size than the
substantive material. The employee exclusion is the fifth exclusion on the page. As we
observed in Luikart, “[i]n the present case, the exclusionary language was set apart from the
other language by an emboldened subheading entitled ‘Exclusions.’ Therefore, the only
conclusion that can be reached by the use of the boldface language is that it was, indeed,
conspicuous.” Luikart, 216 W. Va. at 753, 613 S.E.2d at 901. In sum, we find the exclusion
in this case was conspicuous.
3. The exclusion was disclosed to the insured. American States argued
below that, once the policy was found to be unambiguous and conspicuous, the analysis
ended, and the exclusion had to be enforced. Alternatively, American States argued that if
there was an additional requirement of showing that the exclusion was disclosed to the
insured, the evidence supported that such disclosure had been made. The circuit court found
that the issue of disclosure was an element set out in McMahon and applied to this case, that
material issues of fact existed as to whether the exclusion had been disclosed to Mr.
Grimmett.
19
We already have made clear that, under Syllabus point 10 of McMahon, an
insurer seeking to invoke exclusions “must bring such provisions to the attention of the
insured.” Webster Cnty. Solid Waste Auth. v. Brackenrich & Assocs., Inc., 217 W. Va. 304,
312, 617 S.E.2d 851, 859 (2005) (internal quotations and citations omitted). Although the
issue of disclosure is part of the analysis in determining whether to enforce an exclusion, it
is an element that is rarely invoked. In the vast majority of cases brought to this Court
involving enforcement of exclusions under Syllabus point 10 of McMahon, the issue of
disclosure was not raised by the insured. See West Virginia Emp’rs’ Mut. Ins. Co. v. Summit
Point Raceway Assocs., Inc., 228 W. Va. 360, 719 S.E.2d 830 (2011) (resolving issues under
Syllabus point 10 of McMahon but no direct issue raised concerning disclosure of
exclusion); Bender v. Glendenning, 219 W. Va. 174, 632 S.E.2d 330 (2006) (per curiam)
(same); Webster Cnty. Solid Waste Auth. v. Brackenrich & Assocs., Inc., 217 W. Va. 304, 617
S.E.2d 851 (2005) (same); Satterfield v. Erie Ins. Prop. & Cas., 217 W. Va. 474, 618 S.E.2d
483 (2005) (same); Wehner v. Weinstein, 216 W. Va. 309, 607 S.E.2d 415 (2004) (same);
Russell v. Bush & Burchett, Inc., 210 W. Va. 699, 559 S.E.2d 36 (2001) (same); Marcum
Trucking Co., Inc. v. United States Fid. & Guar. Co., 190 W. Va. 267, 438 S.E.2d 59 (1993)
(same). But see New Hampshire Ins. Co. v. RRK, Inc., ___ W. Va. ___, ___ S.E.2d ___, No.
11-1099 Nov. 2012) (per curiam) (raising disclosure issue); Luikart v. Valley Brook Concrete
& Supply, Inc., 216 W. Va. 748, 613 S.E.2d 896 (2005) (same). The reason for the rarity of
this issue is probably because it is an element that is difficult to sustain. The arguments made
20
by Ms. Surbaugh illustrate the difficulty in establishing disclosure as a genuine issue in
dispute.
The evidence shows that, at some point in 1995, Mr. Grimmett opened a
sporting goods store. The owner of the building where the store was going to be located
informed Mr. Grimmett that he would have to obtain insurance. Mr. Grimmett contacted a
New York agent of American States and made arrangements by phone to purchase a policy.
Mr. Grimmett received the first policy in October 1995. The policy subsequently was
renewed for the period October 1996 to October 1997. The shooting accident occurred
during the second year of the policy.
Ms. Surbaugh raised the issue of failure to disclose by arguing below that Mr.
Grimmett was never verbally told about the exclusions, that the initial application for
insurance did not contain any exclusions, and that the initial quote for coverage did not
disclose any exclusions. In light of this evidence, Ms. Surbaugh contends American States
failed to bring the exclusions to the attention of Mr. Grimmett.
American States argues that the cover letter of the first policy informed Mr.
Grimmett of the following:
Please read your policy carefully. In the event of a loss
your insurance coverage will be controlled by the terms,
21
conditions and exclusions of your policy. After your review,
please call us should you find you require further explanation
regarding any part of your policy or if you wish to make any
changes or corrections.
In addition, American States points out that at the top of the policy the following appears:
Various provisions in this policy restrict coverage. Read
the entire policy carefully to determine rights, duties and what
is and is not covered.
Finally, American States notes that Mr. Grimmett admitted to reading the cover letter, but
not the policy. In the affidavit submitted by Mr. Grimmett, as an exhibit along with Ms.
Surbaugh’s first motion for summary judgment on the policy, he stated the following:
10. After the accident on June 6, 1997, I reviewed my
insurance policy and for the first time read the exclusions on
employee bodily injury, Section 2.e. After reading the
exclusion, I read it to mean that bodily injury to an employee
was not covered if I injured the employee. I believed that I had
coverage for this accident because I did not cause the injury to
the employee.
Ms. Surbaugh contends that the fact that Mr. Grimmett did not read the policy
until after the accident is not dispositive. Ms. Surbaugh argues that our decision in Mitchell
v. Broadnax, 208 W. Va. 36, 49, 537 S.E.2d 882, 895 (2000), superseded by statute as
recognized by Findley v. State Farm Mutual Automobile Insurance Co., 213 W. Va. 80, 576
S.E.2d 807 (2002), outlines the requirements for bringing an exclusion to the attention of a
policyholder. This Court noted in footnote 24 of Mitchell the following:
22
Methods by which insurers may effectively communicate
an exclusion to an insured to secure his/her awareness thereof
may include, but are not necessarily limited to, reference to the
exclusion and corresponding premium adjustment on the
policy’s declarations page or procurement of the insured’s
signature on a separate waiver signifying that he/she has read
and understood the coverage limitation.
Mitchell, 208 W. Va. at 49 n.24, 537 S.E.2d at 895 n.24. The dicta in footnote 24 of Mitchell
by its express terms did not provide exhaustive examples of how an insurer may bring policy
exclusions to the attention of an insured.12 Moreover, the true intent of the limited examples
provided in the footnote can be found in the body of the opinion. After resolving the
dispositive policy issues in Mitchell, the opinion continued in dicta as follows:
Before concluding our discussion herein, we would like
to take this opportunity to speak on a matter that has troubled us
during our decision of this case. . . .
....
. . . [T]he Legislature has vested the Commissioner with
sufficient authority to reject policy provisions which do not
clearly and accurately inform the insured as to the coverage
provided by such policy.
Despite the Commissioner’s regulatory powers, we are
mindful, from the policy language at issue in this case, that two
marginally viable practices continue to accompany the
incorporation of insurance policy exclusions. First, we observe
12
We have pointed out that “language in a footnote generally should be
considered obiter dicta which, by definition, is language unnecessary to the decision in the
case and therefore not precedential.” State ex rel. Medical Assurance of West Virginia, Inc.
v. Recht, 213 W. Va. 457, 471, 583 S.E.2d 80, 94 (2003) (internal quotations and citation
omitted).
23
that the “owned but not insured” exclusion in this case, though
it was clearly designated as a limitation of the available UM
coverage, most likely would not have been apparent to the
majority of insurance consumers given its less-than-prominent
placement in the appropriate policy endorsement. . . . Therefore,
we urge the Commissioner to review proffered policies of
insurance to ensure that coverage exclusions are not so incognito
as to be deceptive or misleading as to the true scope of coverage
available to the insured.
Mitchell, 208 W. Va. at 48-49, 537 S.E.2d at 894-95. In the final analysis, the dicta of
footnote 24 in Mitchell was merely pointing out examples of how “deceptive or misleading”
exclusions could be brought to the attention of policyholders.
In the instant proceeding, there is nothing “deceptive or misleading” in the
plain and unambiguous exclusions in the policy. Consequently, there is no basis to suggest
that American States had to do more than demonstrate that it communicated in writing to Mr.
Grimmett that he should read the policy and its exclusions and contact American States if he
had concerns.13 Had Mr. Grimmett read the policy, as he was told to do in a letter and on the
policy itself, he would have learned of the exclusions and could have contacted American
13
We would note that our recent decision in New Hampshire Ins. Co. v. RRK,
Inc., ___ W. Va. ___, ___ S.E.2d ___, No. 11-1099 Nov. 9. 2012) is distinguishable from the
facts of the instant case. In RRK the insured was sent a 17-page fax of the policy coverage
forms. The coverage form included exclusions, but did not include the exclusion at issue in
the case. The insured read the coverage forms. However, the insured did not read the actual
policy when it was sent, allegedly because he believed it was consistent with the policy
coverage forms. The instant case does not involve a conflict between a draft of the policy
coverage forms and the policy itself.
24
States with any questions he had regarding said exclusions. In other words, American States
fulfilled its obligation to bring the exclusion to the attention of Mr. Grimmett, but Mr.
Grimmett failed to carry out his duty to read the policy. The law of this State is clear in
holding that “[a] party to a contract has a duty to read the instrument.” Syl. pt. 5, Soliva v.
Shand, Morahan & Co., Inc., 176 W. Va. 430, 345 S.E.2d 33 (1986), overruled on other
grounds by National Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W. Va. 734, 356 S.E.2d
488 (1987).14 As pointed out by a California appellate court:
Failing to read a policy . . . is not sufficient reason to hold
a clear and conspicuous policy provision unenforceable. To
hold otherwise would turn both contract and insurance law on its
head. Insurers are not required to sit beside a policy holder and
force them to read (and ask if they understand) every provision
in an insurance policy.
Mission Viejo Emergency Med. Assocs. v. Beta Healthcare Grp., 128 Cal. Rptr. 3d 330, 338
(2011). See also Blankenship v. City of Charleston, 223 W. Va. 822, 827, 679 S.E.2d 654,
659 (2009) (“[A]n equally important provision of the general policy is the cautionary
introductory statement that ‘[v]arious provisions in this policy restrict coverage [and one has
to] [r]ead the entire policy carefully to determine rights, duties and what is not covered.’”);
14
Although dicta appears in footnote 6 of McMahon that might suggest an
insured does not have a duty to read a policy, the opinion does not stand for such an
abhorrent proposition. As indicated in Luikart, the dicta in McMahon merely relaxed the
duty to read in the limited context of an ambiguous contract and the application of the
doctrine of reasonable expectations. See Luikart, 216 W. Va. at 755, 613 S.E.2d at 903(“The application of the doctrine of reasonable expectations has resulted in a relaxation of
our earlier-stated rule that a party to a contract has a duty to read the instrument.”).
25
Luikart, 216 W. Va. at 754, 613 S.E.2d at 902 (“The portion of the insurance policy titled
‘Commercial General Liability Coverage Form,’ which contains the relevant exclusionary
language, cautions in its first sentence that ‘[v]arious provisions in this policy restrict
coverage. Read the entire policy carefully to determine rights, duties and what is and is not
covered.’ Accordingly, we conclude that Motorists sufficiently disclosed the exclusions to
Valley Brook.”); Moore v. United Benefit Life Ins. Co., 145 W. Va. 549, 564, 115 S.E.2d
311, 319 (1960) (“[T]he insured cannot escape the effect of the conditions of a policy on the
ground of ignorance, due to failure to read his policy, it being his duty to examine it[.]”).15
In sum, American States established at the summary judgment stage that no
material issue of fact was in dispute as to the exclusion being unambiguous, conspicuous, and
disclosed to Mr. Grimmett. Consequently, the circuit court should have entered summary
judgment in favor of American States and declared the exclusion enforceable.
15
We summarily reject Ms. Surbaugh’s three cross-assignments of error. Ms.
Surbaugh contends that the exclusions should not be enforced because the policy was not
signed by a West Virginia resident agent for American States, as was once required by
W. Va. Code § 33-12-11 (the requirement was repealed in 2004). See W. Va. Code § 33-12­
11 (2004) (Repl. Vol. 2011). The circuit court rejected this argument, and so do we.
Assuming that we would find the former version of W. Va. Code § 33-12-11 constitutionally
valid, the appropriate remedy would be to invalidate the policy and not, as Ms. Surbaugh
contends, invalidate only the exclusions. Ms. Surbaugh’s other cross-assignments of error,
whether the policy was for $1 million or $2 million and the trial court’s refusal to give a
reasonable expectation of coverage instruction, are rendered moot by our decision.
26
IV.
CONCLUSION
In view of the foregoing, the circuit court’s order of June 30, 2011, which
entered judgment in favor of Ms. Surbaugh based upon a jury verdict, is reversed. This case
is remanded with instructions that the circuit court enter summary judgment in favor of
American States in the bifurcated declaratory judgment part of the action.
Reversed and Remanded.
27