Danny Marks, Jr. v. Scottsdale Insurance Company

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1823
DANNY RAY MARKS, JR.,
Plaintiff - Appellant,
and
TIMOTHY B. JOHNSON,
Plaintiff,
v.
SCOTTSDALE INSURANCE COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. David J. Novak, Magistrate
Judge. (3:14-cv-00025-DJN)
Argued: May 13, 2015 Decided: June 29, 2015
Before GREGORY and HARRIS, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by published opinion. Judge Harris wrote the opinion,
in which Judge Gregory and Senior Judge Hamilton joined.
ARGUED: John Janney Rasmussen, INSURANCE RECOVERY LAW GROUP,
PLC, Richmond, Virginia, for Appellant. John Becker Mumford,
Jr., HANCOCK, DANIEL, JOHNSON & NAGLE, P.C., Glen Allen,
Virginia, for Appellee. ON BRIEF: Eileen R. Geller, HANCOCK,
DANIEL, JOHNSON & NAGLE, P.C., Glen Allen, Virginia, for
Appellee.
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PAMELA HARRIS, Circuit Judge:
Plaintiff Timothy B. Johnson (“Johnson”) is a member of the
Northumberland Hunt Club (the “Hunt Club” or the “Club”). While
hunting on Club-leased land, he unintentionally shot and injured
Plaintiff-Appellant Danny Ray Marks, Jr. (“Marks”), who was
driving nearby on a public road. Marks sued both Johnson and
the Hunt Club in Virginia court, alleging that each had been
negligent in connection with his accidental shooting.
Defendant-Appellee Scottsdale Insurance Company (“Scottsdale”),
which insures the Club under a general liability policy, denied
coverage to Johnson, contending that the policy does not cover
Club members for their personal recreational activities but only
for liability arising from some official action of the Hunt Club
or actions undertaken on behalf of the Club. The magistrate
judge agreed with Scottsdale, and awarded it summary judgment.
For the reasons that follow, we affirm.
I.
A.
Scottsdale has issued a commercial general liability policy
to the Hunt Club (“the Policy”), under which it agrees to
indemnify for “those sums that the insured becomes legally
obligated to pay as damages because of ‘bodily injury’ or
‘property damage’ to which this insurance applies,” and to
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defend against any suit seeking such damages. J.A. 143. The
Hunt Club is the sole named insured on the Policy. But the
Policy also includes an endorsement (“the Endorsement”)
modifying its coverage:
ADDITIONAL INSURED—CLUB MEMBERS . . .
WHO IS AN INSURED (Section II) is amended to include
as an insured any of your members, but only with
respect to their liability for your activities or
activities they perform on your behalf.
J.A. 160. The Policy defines “you” and “your” as “the Named
Insured shown in the Declarations,” J.A. 28, which is the Hunt
Club, J.A. 136, so that the Endorsement effectively extends
Policy coverage to Club members “only with respect to [member]
liability for [the Club’s] activities or activities [members]
perform on [the Club’s] behalf.” The question in this case is
whether Johnson, a Club member, is an “insured” under the
Endorsement for purposes of Marks’s suit.
B.
On January 3, 2013, Johnson was participating in a deer
hunt with other members of the Hunt Club and their guests, on
land leased by the Hunt Club and adjacent to Route 642 in
Richmond County, Virginia. Johnson shot at a deer, and pellets
from the shot traveled toward the highway and struck and injured
Marks.
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On December 16, 2013, Marks filed suit in Virginia court
(the “Marks Suit”), seeking compensatory and punitive damages.
As against Johnson, Marks alleged both negligence and gross
negligence. According to the complaint, Johnson, who had
extensive firearm training and was familiar with the location,
took a position approximately 75 yards from the highway even
though he knew or should have known that his gun could shoot
further than 75 yards. When Johnson shot in the direction of
the highway, Marks alleged, one of the pellets from Johnson’s
gun struck Marks in the head. Marks also brought a separate
negligence claim against the Hunt Club, alleging that the Club
leased the land where the shooting occurred, knew that its
officers and members regularly hunted there, but failed to
promulgate rules or regulations to protect the nearby public.
The complaint did not seek to hold Johnson or any other Club
member vicariously liable for the alleged negligence of the
Club.
On January 13, 2014, Marks filed a second complaint in
Virginia court, this time against Scottsdale, seeking a
declaration under Virginia law that Scottsdale has a duty under
the Policy to defend and indemnify Johnson in the Marks Suit.
In that complaint, Marks alleged that the Endorsement, which
insures Club members “with respect to their liability for [the
Club’s] activities,” covered Johnson’s shooting of Marks,
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because Johnson is a Club member and hunting is one of “[the
Club’s] activities.”
Scottsdale removed this case to federal court based on
diversity jurisdiction, and filed a counterclaim seeking a
declaration that Scottsdale owes no duty to defend or indemnify
Johnson in the Marks Suit. 1 Scottsdale argued that the
Endorsement does not cover Hunt Club members for their personal
activities in connection with the Club, such as Johnson’s
hunting on the day of the shooting. Instead, according to
Scottsdale, it covers members only to the extent they are
vicariously liable for the Club’s own activities or take action
on behalf of the Club. Johnson joined the district court
litigation, and though he subsequently filed for bankruptcy
protection, the bankruptcy court allowed this action to proceed.
The parties consented to have a magistrate judge adjudicate
the case and filed cross-motions for summary judgment. Adopting
Scottsdale’s reading of the Policy, the magistrate judge held
that Scottsdale has no duty to defend or indemnify Johnson in
the Marks Suit, and accordingly granted summary judgment to
1
Scottsdale’s counterclaim was limited to Marks’s claims
against Johnson; it did not contest its obligation under the
Policy to defend the Hunt Club itself against Marks’s claims.
At oral argument, Scottsdale confirmed that it is defending the
Hunt Club in the Marks Suit.
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Scottsdale while denying the summary judgment motions of Marks
and Johnson. This timely appeal followed.
II.
We review a grant of summary judgment de novo. CACI Int’l,
Inc. v. St. Paul Fire and Marine Ins. Co., 566 F.3d 150, 155
(4th Cir. 2009). Because jurisdiction is based on diversity, we
apply the choice-of-law rules of the forum state - here,
Virginia. Id. at 154. In insurance cases, Virginia law looks
to the law of the state where the insurance contract is written
and delivered. Id. The parties agree that the Policy was
written and delivered in Virginia and therefore that Virginia
law governs.
A.
In construing the Policy provision at issue, we are
directed by Virginia law to apply ordinary contract-
interpretation principles, deducing the parties’ intent from the
words of the Policy itself. See Va. Farm Bureau Mut. Ins. Co.
v. Williams, 677 S.E.2d 299, 302 (Va. 2009). We are to give the
text its “ordinary and customary meaning,” Salzi v. Va. Farm
Bureau Mut. Ins. Co., 556 S.E.2d 758, 760 (Va. 2002) (quoting
Graphic Arts Mut. Ins. v. C.W. Warthen Co., Inc., 397 S.E.2d
876, 877 (Va. 1990)), and may not insert by construction a term
that is not expressly in the contract, Lansdowne Dev. Co.,
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L.L.C. v. Xerox Realty Corp., 514 S.E.2d 157, 161 (Va. 1999).
Virginia does apply one rule of construction specific to
insurance contracts and relevant here: If policy language is
ambiguous, then it is to be construed against the insurer.
Williams, 677 S.E.2d at 302. But – and equally relevant here –
a term will not be deemed ambiguous unless it is “capable of
more than one reasonable meaning” even after it has been
examined in context. Res. Bankshares Corp. v. St. Paul Mercury
Ins. Co., 407 F.3d 631, 636 (4th Cir. 2005).
The Endorsement in question, again, insures “any of [the
Club’s] members, but only with respect to [member] liability for
[the Club’s] activities or activities [members] perform on [the
Club’s] behalf.” Marks concedes on appeal that the second
clause – covering member activities performed on the Club’s
behalf – does not reach Johnson’s hunting expedition, but argues
that the first clause – member liability for Club activities –
unambiguously does, because hunting is one of the Club’s
activities. Alternatively, Marks argues that the first clause
is at least ambiguous on the point, and therefore must be
construed in his favor.
We disagree. Instead, we agree with the magistrate judge
and the other federal courts that have considered identical
policy provisions: The clause covering Club members “with
respect to [member] liability for [the Club’s] activities”
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unambiguously restricts coverage to situations involving a
member’s alleged vicarious liability for the activities of the
Club as an entity. J.A. 384–87; see Everett Cash Mut. Ins. Co.
v. Ins. Corp. of Hanover, Civ. A. No. 1:07-CV-0641, 2008 WL
4453113, at *5–6 (M.D. Penn. Sept. 30, 2008) (identical
endorsement to hunt club insurance policy does not cover
member’s accidental shooting during recreational hunt); Lenox v.
Scottsdale Ins. Co., No. Civ. 04-2282(SRC), 2005 WL 1076065, at
*3–5 (D.N.J. May 5, 2005) (identical endorsement to beach club
insurance policy does not cover member’s accidental injury of
guest on club property). 2
First, even standing on its own, the phrase “[member]
liability for [the Club’s] activities” is quite clear. “Member
liability for the Club’s activities” is the language of
vicarious liability, and it is most plainly read to apply “when
a member is held vicariously liable for some activity undertaken
2 In a third case, Mt. Hawley Ins. Co. v. Nat’l Cas. Co.,
Civ. A. No. 13–cv–01652–CMA–KLM, 2015 WL 428768, at *4–5 (D.
Colo. Jan. 30, 2015), this one involving a national go-karting
association, the court addressed a policy endorsement
substantively identical to the second clause here, covering
members when they are “acting on [the club’s] behalf.”
Following Lenox and Everett Cash, as well as the magistrate
judge in this case, the court held that the term “on behalf of”
does not encompass the voluntary, recreational activities of
members, but instead extends only to actions undertaken by
members at the request or for the benefit of the club. See id.Again, on appeal, Marks concedes that the Endorsement’s second
clause is not applicable in this case.
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by the Club as a corporate entity.” Lenox, 2005 WL 1076065, at
*4; see also Everett Cash, 2008 WL 4453113, at *5 (“club
activities” refers to “those actions taken by the Club in its
capacity as a non-profit corporate entity”); J.A. 387 (same).
In his brief, Marks argues that the Policy covers his suit
against Johnson because the shooting occurred “during” a Hunt
Club activity, Appellant’s Br. at 12, or “arose from” a Hunt
Club activity, id. at 17. But that is not what the Policy says,
and we cannot add words that are not there. See Lansdowne, 514
S.E.2d at 161. Members are covered with respect to their
liability for the Club’s own corporate activities, not with
respect to anything they may do during or in connection with
Club activities.
That reading is confirmed when we look at the Endorsement
as a whole. The limiting terms with which the Endorsement
begins – the Policy is modified to cover Club members, “but only
with respect to [member] liability for [the Club’s] activities
or activities [members] perform on [the Club’s] behalf” – “make
clear that the Policy is not intended to cover every member
pursuit at the Club.” Lenox, 2005 WL 1076065, at *4. And that
point is reinforced by the joint operation of the Endorsement’s
two clauses. The first, as we have explained, is most naturally
read to invoke actions by the Club as an entity – entering into
contracts, suing and being sued, buying and selling property –
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for which a member might be held vicariously liable. The
individual activities of Club members, by contrast, are covered
by the second clause – “activities [members] perform on [the
Club’s] behalf” – but only when they are undertaken at the
request or for the benefit of the Club, a condition that Marks
concedes is not satisfied here. On Marks’s reading, however,
that restriction is entirely superfluous, because all member
activities in connection with the Club are covered already, by
the first clause. We decline to adopt a construction of the
Endorsement that renders so much of it redundant. Cf. id.(party taking same position as Marks “essentially asks the Court
to interpret this provision in such a way that the limiting
language is irrelevant”).
Marks’s contrary argument rests almost exclusively on
dictionary definitions of “activity,” under which, he contends,
“hunting” comfortably fits. We do not doubt that “hunting”
constitutes an “activity” within the freestanding meaning of
that word, and even an “activity” to which the Hunt Club is
committed. And if the Policy broadly extended coverage to Club
members for, say, “all member activities on Club property,” or
“all member activities within the scope of the Club’s purpose,”
we would have a different case. See id. The problem for Marks
is not the word “activity,” but the words right around it in the
Policy actually before us, extending coverage to Club members
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“but only with respect to [member] liability for [the Club’s]
activities.” That is the language, taken as a whole, that
precludes Marks’s interpretation, unambiguously covering Club
members only with respect to their vicarious liability for the
activities of the Club as an entity. See Gates, Hudson, &
Assocs. v. Fed. Ins. Co., 141 F.3d 500, 502 (4th Cir. 1997)
(contract term is deemed unambiguous if its meaning is clear in
context).
B.
Having determined the Policy’s scope of coverage, the rest
of our task is straightforward. In deciding whether Scottsdale
has a duty to defend Johnson in the Marks Suit, under Virginia’s
“eight corners rule” we look only to Marks’s underlying
complaint, and determine whether its allegations against Johnson
come within the scope of the Policy’s coverage. AES Corp. v.
Steadfast Ins. Co., 725 S.E.2d 532, 535 (Va. 2012); see also
CACI, 566 F.3d at 155–56; Fuisz v. Selective Ins. Co. of Am., 61
F.3d 238, 242 (4th Cir. 1995). If the complaint alleges any
facts that, if proved, would render Scottsdale liable under the
Policy for a judgment against Johnson, then Scottsdale must
defend Johnson in the Marks Suit. See CACI, 566 F.3d at 155.
But if it is clear based on the complaint that Scottsdale would
not be liable under the Policy for any judgment based on the
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allegations against Johnson, then Scottsdale has no such duty to
defend. See id.The complaint in the Marks Suit does not allege any facts
that, if proved, would render Scottsdale liable as to Johnson
under the Policy as we have construed it. Marks alleges only
that Johnson, a member of the Club, was on land leased by the
Club and regularly used by Club members when he negligently
fired his gun. As Marks concedes, that is not enough to bring
his claim under the Endorsement’s second clause, for member
activities “on [the Club’s] behalf.” Nor does the complaint
seek to hold Johnson vicariously liable “for [the Club’s]
activities” so as to trigger coverage under the first clause.
The complaint does raise a separate claim against the Club as an
entity, charging it with negligence in failing to protect the
safety of the nearby public – but what it does not do is seek to
hold Johnson vicariously liable “for [the Club’s] activities” in
this regard. Instead, its allegations against Johnson rest only
on “the recreational pursuits indulged in by Club members,” see
Everett Cash, 2008 WL 4453113, at *5, which, as we have
explained, fall outside the scope of the Endorsement. 3
3
The facts alleged in the complaint give us no occasion to
consider whether coverage under the first clause of the
Endorsement might extend to situations in which a Club member
has participated in a group activity organized or sponsored by
the Club itself – say, an annual picnic, or official Club
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Because it is clear from the Marks Suit complaint that
Scottsdale would not be liable for any judgment against Johnson,
Scottsdale has no duty to defend Johnson. It follows that
Scottsdale also has no duty to indemnify Johnson in the Marks
Suit. See Penn-America Ins. Co. v. Coffey, 368 F.3d 409, 413
(4th Cir. 2004) (duty to defend is broader than duty to
indemnify); AES Corp., 725 S.E.2d at 535–36 (same).
Accordingly, we hold that the magistrate judge properly granted
summary judgment to Scottsdale and denied summary judgment to
Marks and Johnson. 4
III.
For the foregoing reasons, we affirm the judgment of the
magistrate judge.
AFFIRMED
breakfast. That question was reserved expressly by the
magistrate judge, as well as by the court in Lenox, 2005 WL
1076065, at *5; see also Everett Cash, 2008 WL 4453113, at *5
(recreational hunting “outside the context of a club event” is
not covered club activity), and we need not decide it today.
4
In analyzing Scottsdale’s duty to defend, the magistrate
judge referred not only to the allegations of the Marks Suit
complaint but also to undisputed facts adduced during discovery.
To the extent the magistrate judge relied on materials outside
the complaint, it appears to have erred under Virginia law. But
the result is the same when we confine our analysis to the
underlying complaint, and so the magistrate judge’s conclusion
is in any event correct. See United States v. Smith, 395 F.3d
516, 519 (4th Cir. 2005) (appellate court may affirm on any
ground apparent in the record).
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