State Farm Fire v. Thomas

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
STATE FARM FIRE AND CASUALTY
COMPANY,
Plaintiff-Appellee,
v.
LORRIE A. THOMAS, Administratrix
of the Estates of William D.
Thompson, deceased,
No. 99-1276
Defendant-Appellant,
and
EDWARD LEE MCCALL; PHYLLIS
MCCALL, Individually and d/b/a
Western Greenbrier Disposal
Service,
Defendants.
Appeal from the United States District Court
for the Southern District of West Virginia, at Beckley.
David A. Faber, District Judge.
(CA-98-149-5)
Argued: May 3, 2000
Decided: June 13, 2000
Before WIDENER and MOTZ, Circuit Judges, and
Frank W. BULLOCK, Jr., United States District Judge
for the Middle District of North Carolina,
sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Anthony J. Majestro, MASTERS & TAYLOR, L.C.,
Charleston, West Virginia, for Appellant. Carl L. Fletcher, SHAFFER
& SHAFFER, Charleston, West Virginia, for Appellee. ON BRIEF:
Charles M. Love, IV, MASTERS & TAYLOR, L.C., Charleston,
West Virginia, for Appellant. Charles S. Piccirillo, SHAFFER &
SHAFFER, Charleston, West Virginia, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
State Farm Fire and Casualty Company (State Farm) brought this
federal declaratory judgment action to determine its coverage obliga-
tions arising out of a fatal automobile accident. State Farm sought a
declaration that it was not bound to defend or indemnify the policy-
holders in a pending West Virginia wrongful death suit. The district
court issued the requested declaration in favor of State Farm, and we
affirm.
I.
On November 14, 1996, William Thompson died in a single-
vehicle accident in Charmo, West Virginia. The accident was attribut-
able to brake failure and occurred while Thompson was driving a gar-
bage truck for his employer, Western Greenbrier Disposal Service, an
unincorporated business owned by Phyllis McCall and her husband,
Edward Lee McCall (the McCalls). Mr. McCall is now deceased.
On August 13, 1997, Lorrie A. Thomas, the administratrix of
Thompson's estate, initiated a wrongful death action against Western
Greenbrier Disposal Service, Mrs. McCall, and the estate of Mr.
2
McCall in the Circuit Court of Greenbrier County, West Virginia.
Thomas, seeking to come within an exception to the West Virginia
worker's compensation scheme, alleged that the McCalls acted with
deliberate intent to cause Thompson's injuries and negligently failed
to maintain the garbage truck in a reasonably safe condition.
On February 20, 1998, State Farm filed this declaratory judgment
action in the United States District Court for the Southern District of
West Virginia based on diversity jurisdiction, seeking a declaration of
the rights of the parties with regard to coverage under the McCalls'
automobile insurance policy. Thomas, as administratrix, moved for
dismissal of the federal action, urging the court to refrain from exer-
cising jurisdiction and issuing a declaration in this case in view of the
parallel state court proceedings. The district court denied Thomas's
motion to dismiss.
Thereafter, the district court denied State Farm's motion for sum-
mary judgment, ruling that a material issue of fact existed in the case
as to whether the McCalls and Thompson were "fellow employees,"
which would bar coverage for the McCalls for Thompson's accident
under the policy. The parties then agreed to proceed with a trial on
the documentary record. Following the trial, the district court ruled in
favor of State Farm. The court determined that the McCalls were
Thompson's employer, not a "fellow employee," and that Thomp-
son's injuries therefore were not covered under the State Farm policy.
On appeal, Thomas challenges both the district court's exercise of
jurisdiction and its ultimate ruling in State Farm's favor on the policy
coverage issue. For the following reasons, we affirm.
II.
The district court's rulings of law are subject to de novo review.
United States v. Bostic, 168 F.3d 718, 721 (4th Cir. 1999). Findings
of fact by the district court are reviewed for clear error. Ost-West-
Handel Bruno Bischoff GMBH v. Project Asia Line, Inc., 160 F.3d
170, 173 (4th Cir. 1998). The district court's decision to proceed with
a declaratory judgment action is reviewed for abuse of discretion.
United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493 (4th Cir. 1998).
3
III.
A.
Thomas first contends that the district court abused its discretion
in refusing to abstain in the federal declaratory judgment action in
favor of the West Virginia suit. The federal declaratory judgment stat-
ute, 28 U.S.C. § 2201(a), is permissive in nature and thereby autho-
rizes district courts to decline jurisdiction when appropriate. Kapiloff,
155 F.3d at 493. Where parallel state proceedings exist, the factors to
be considered in ruling in a motion to abstain are:
(1) whether the state has a strong interest in having the
issues decided in its courts; (2) whether the state courts
could resolve the issues more efficiently than the federal
courts; (3) whether the presence of "overlapping issues of
fact or law" might create unnecessary "entanglement"
between the state and federal courts; and (4) whether the
federal action is mere "procedural fencing," in the sense that
the action is merely the product of forum-shopping.
Id. at 493-94 (citing Nautilus Ins. Co. v. Winchester Homes, Inc., 15
F.3d 371, 377 (4th Cir. 1994)).
When considered in the instant case, these factors indicate that
there was no abuse of discretion. Initially, the issues of law presented
are not genuinely novel because they involve standard principles of
contract interpretation. Second, it was at least as efficient, if not more
so, to proceed in the federal forum because State Farm was not a party
to the state action. Third, although the issue to be resolved in the fed-
eral case (i.e., the insurance coverage) is ancillary to the issue in the
state court (i.e., the underlying tort suit), the issues do not present
excessive entanglement problems. Finally, the district court did not
clearly err in finding that State Farm did not bring this declaratory
judgment action with the intent to circumvent the state court. Accord-
ingly, the district court did not abuse its discretion in denying Defen-
dant Thomas's motion to dismiss.
B.
Thomas next challenges the district court's interpretation and appli-
cation of the automobile insurance policy held by the McCalls.
4
Thomas disputes the district court's interpretation of one of the poli-
cy's various coverage exclusion provisions. The provision in question
reads:
THERE IS NO COVERAGE:
2. FOR ANY BODILY INJURY TO:
a. A FELLOW EMPLOYEE WHILE ON THE JOB AND
ARISING FROM THE MAINTENANCE OR USE OF A
VEHICLE BY ANOTHER EMPLOYEE IN THE
EMPLOYER'S BUSINESS. You and your spouse are cov-
ered for such injury to a fellow employee.
b. ANY EMPLOYEE OF AN INSURED ARISING OUT
OF HIS OR HER EMPLOYMENT. This does not apply to
a household employee who is not covered or required to be
covered under any worker's compensation insurance.
(J.A. at 532)
The first sentence of Exclusion 2.a. clearly provides that there is no
coverage where the person who caused the accident (the "tortfeasor")
and the injured person (the "victim") are"fellow employees." The
second sentence of Exclusion 2.a. provides an exception to the first
sentence. In interpreting the above language, the district court deter-
mined that Exclusion 2.a. authorized coverage (i.e., there was an
exception to the exclusion) only if the victim and the policyholder
were "fellow employees." The court further concluded that the
McCalls were Thompson's employers, not "fellow employees."
Thomas contends that, contrary to the district court's interpretation,
the second sentence of Exclusion 2.a. covers the policyholder for any
accident in which the tortfeasor and the victim were"fellow employ-
ees." In other words, Thomas contends that the McCalls were insured
under this policy so long as Bob Redford, the Western Greenbrier
employee who allegedly failed to repair the brakes, and Thompson
were "fellow employees."
5
A closer examination of Thomas's suggested interpretation of
Exclusion 2.a. reveals its fallacy. Thomas's reading of the second sen-
tence of the fellow-employee exclusion not only makes the relation-
ship between the victim and the policyholder irrelevant, but also
directly contradicts the clear meaning of the preceding sentence and
creates inconsistencies between Exclusion 2.a. and Exclusion 2.b. See
Columbia Gas Transmission Corp. v. E.I. DuPont de Nemours & Co.,
217 S.E.2d 919, 926-27 (W. Va. 1975) (in interpreting a contract, a
court should give effect to every clause). Furthermore, although no
West Virginia court has addressed Exclusion 2.a., the district court's
interpretation and application of the fellow-employee exclusion has
been endorsed by courts in other jurisdictions faced with similar cov-
erage disputes involving identical State Farm automobile insurance poli-
cies.1 See State Farm Mut. Auto. Ins. Co. v. Dyer, 19 F.3d 514, 521-
22 (10th Cir. 1994) (the fellow-employee exclusion precludes cover-
age under an employer's policy for an accident caused by one
employee resulting in injury to another employee); State Farm Mut.
Auto. Ins. Co. v. Bainbridge, 941 S.W.2d 546, 548-49 (Mo. Ct. App.
1997) (Exclusion 2.a. denies coverage where the policyholder was the
victim's employer); see also State Farm Mut. Auto. Ins. Co. v.
Burgin, 752 F. Supp. 877, 881 (W.D. Ark. 1990); State Farm Mut.
Auto. Ins. Co. v. Hollingsworth, 668 F. Supp. 1476, 1479-80 (D.
Wyo. 1987).
Thomas further claims that the disputed policy language is ambigu-
ous and capable of multiple interpretations and therefore should be
read in favor of coverage. Under West Virginia law, ambiguous terms
in insurance contracts will be strictly construed against the insurer.
See Murray v. State Farm Fire and Cas. Co., 509 S.E.2d 1, 6-7 (W.
_________________________________________________________________
1 This court has not dealt previously with this exact policy language.
However, in a case applying Maryland law, we have interpreted a simi-
larly worded "fellow employee" clause to exclude coverage under an
employer's (or some other named insured's) policy where the tortfeasor
and the victim were "fellow employees." See Bevans v. Liberty Mut. Ins.
Co., 356 F.2d 577, 580-82 (4th Cir. 1966) (holding that passenger in
insured truck who suffered injuries in collision due to negligence of fel-
low employee driver while truck was on loan to their employer was
barred from recovering from owner's automobile liability insurer
because of "fellow employee" limitation).
6
Va. 1998). Although Exclusion 2.a. is not a model of clarity, there is
no ambiguity problem for purposes of this case because Exclusion
2.a. is not reasonably susceptible to the construction chosen by
Thomas. See, e.g., Nisbet v. Watson, 251 S.E.2d 774, 779-80 (W. Va.
1979). Thomas's interpretation of Exclusion 2.a. as first withholding,
in sentence one, and then conferring, in sentence two, insurance cov-
erage where the tortfeasor and the victim are "fellow employees" is
implausible. See Fraternal Order of Police Lodge No. 69 v. City of
Fairmont, 468 S.E.2d 712, 718 (W. Va. 1994) ("an accepted canon
of construction forbids the balkanization of contracts for interpretive
purposes"). Furthermore, despite Thomas's assertion to the contrary,
the McCalls could not reasonably have expected their policy to cover
all accidents in which one employee injures another. See Riffe v.
Home Finders Assocs., Inc., 517 S.E.2d 313, 318 (W. Va. 1999) (to
be honored, the policyholder's expectations regarding the terms of the
insurance contract must be objectively reasonable).
Finally, Thomas argues that the McCalls and Thompson should be
regarded as "fellow employees."2 Whether Western Greenbrier is
characterized as a partnership or as a sole proprietorship, the McCalls
were its owners, and they therefore were not "fellow employees" of
Thompson. See Rader v. American Ass'n of Christian Schs., 506
S.E.2d 794, 797-98 (W. Va. 1998) (holding that under the West Vir-
ginia Worker's Compensation Act the partners of a partnership, like
the owners of a sole proprietorship, are not its employees). As to
Thompson, the McCalls "occup[ied] the status of co-employers." Id.
at 797. Accordingly, the policy issued by State Farm did not cover
Thompson while he was working for the McCalls.
IV.
For the foregoing reasons, the district court's decision to assert
jurisdiction over the declaratory judgment action and to find that the
_________________________________________________________________
2 Thomas raised this argument for the first time in her reply brief. Nev-
ertheless, we will exercise our discretion to consider this claim. We will
also accept the surreply brief that State Farm provisionally submitted in
connection with its motion to strike Thomas's reply brief.
7
automobile insurance policy at issue did not provide coverage is
AFFIRMED.
8