Stephen Berkhouse v. Great American Assurance Co.

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Stephen Berkhouse, as Conservator and Guardian of FILED
Billy Berkhouse, a protected person, November 22, 2013
RORY L. PERRY II, CLERK
Plaintiff Below, Petitioner SUPREME COURT OF APPEALS
OF WEST VIRGINIA
vs) No. 13-0264 (Kanawha County 09-C-542)
Great American Assurance Company, a corporation doing
business in West Virginia,
Defendant Below, Respondent
MEMORANDUM DECISION
Petitioner Stephen Berkhouse, by counsel Robert B. Warner and Lynnette Simon
Marshall, appeals the Circuit Court of Kanawha County’s August 14, 2012, “Declaratory
Judgment Order” and February 6, 2013, “Order Denying Plaintiff’s Motion to Alter or Amend
Declaratory Judgment Order.” Mr. Berkhouse argues that the circuit court erred in upholding the
validity and applicability of a liquor liability exclusion in an umbrella insurance policy.
Respondent Great American Assurance Company, by counsel Jill Crantson Rice, Tyler N.
Williams, and Debra Tedeschi Varner, responds in support of the circuit court’s orders.
This Court has considered the parties= briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
presented, the Court finds no substantial question of law and no prejudicial error. For these
reasons, a memorandum decision affirming is appropriate under Rule 21 of the Rules of
Appellate Procedure.
I. Factual and Procedural Background
On the night of June 6, 2008, the Charleston Lodge of the Loyal Order of Moose served
multiple alcoholic drinks to Melissa Newman. Ms. Newman was then driven to Impulse
Nightclub. Newman, who was intoxicated, left Impulse Nightclub and began driving her vehicle.
She lost control of the vehicle, drove onto a sidewalk, and ran over pedestrian Billy Berkhouse,
who suffered severe and permanent injuries as a result.
Stephen Berkhouse (“Mr. Berkhouse”), as conservator and guardian of Billy Berkhouse,
a protected person, filed suit against Newman, the Loyal Order of Moose, and Impulse
Nightclub. With regard to the Loyal Order of Moose, Mr. Berkhouse argued that it was negligent
for not refraining from serving alcohol to the intoxicated Ms. Newman and for failing to
adequately train and supervise its employees. On April 14, 2011, the circuit court approved a
settlement between Mr. Berkhouse and the Loyal Order of Moose in the amount of $3,000,000.
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This settlement was paid by various insurance policies covering the Loyal Order of Moose: the
limits of a self-insured retention, the limits of a commercial general liability policy, and the
liquor liability limits of an excess liability policy.
Prior to this settlement, Mr. Berkhouse had filed an amended complaint seeking a third-
party declaratory judgment ruling as to whether there was coverage for the Charleston Moose
Lodge under another policy—an umbrella policy issued by Great American Assurance
Company. This umbrella policy was purchased by Moose International and provided $5,000,000
in coverage to Moose International and to individual lodges, including the Charleston Moose
Lodge. However, while the umbrella policy provided liquor liability coverage to Moose
International, it excluded liquor liability coverage for the lodges. This exclusion provided,
GENERAL ENDORSEMENT
LIQUOR LIABILITY EXCLUSION
As respects: Moose Lodges, Chapters, Moose Legions, Regional, State and/or
Provincial Associations
The following exclusion is added to Section IV—EXCLUSIONS:
Any liability of any “Insured” by reason of:
(1) causing or contributing to the intoxication of any person; or
(2) the furnishing of alcoholic beverages to a person under the legal
drinking age or under the influence of alcohol; or
(3) any statute, ordinance, or regulation relating to the sale, gift,
distribution or use of alcoholic beverages.
This endorsement does not change any other provision of the policy.
Mr. Berkhouse released Moose International as part of the settlement, but he continued to
litigate the declaratory judgment action against the Charleston Moose Lodge to ascertain whether
the umbrella policy’s liquor liability exclusion was valid and applicable. In its August 14, 2012,
declaratory judgment order, the circuit court ruled that the exclusion is plain and unambiguous; it
validly excludes liquor liability coverage; and it is sufficiently broad to also exclude coverage for
Mr. Berkhouse’s negligent training and supervision claims.
Accordingly, pursuant to Rule 56 of the West Virginia Rules of Civil Procedure, the
circuit court granted summary judgment in favor of Great American Assurance on the
declaratory judgment count. Subsequently, Mr. Berkhouse filed a motion pursuant to Rule 59(e)
of the West Virginia Rules of Civil Procedure to alter or amend the summary judgment order.
The court found no basis to grant Rule 59(e) relief and denied the motion on February 6, 2013.
II. Standard of Review
Mr. Berkhouse appeals the circuit court’s summary judgment order and the order denying
his Rule 59(e) motion. Our standard of review of both orders is de novo. Syl. Pt. 1, Painter v.
Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994) (“A circuit court's entry of summary judgment is
reviewed de novo.”); Syl. Pt. 1, Wickland v. American Travellers Life Ins. Co., 204 W.Va. 430,
513 S.E.2d 657 (1998) (“The standard of review applicable to an appeal from a motion to alter or
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amend a judgment, made pursuant to W. Va. R. Civ. P. 59(e), is the same standard that would
apply to the underlying judgment upon which the motion is based and from which the appeal to
this Court is filed.”); Syl. Pt. 3, Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995) (“A circuit
court's entry of a declaratory judgment is reviewed de novo.”).
III. Discussion
We held in National Mutual Insurance Company v. McMahon & Sons, Inc. that “[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 policy terms, and must bring such
provisions to the attention of the insured.” Syl. Pt. 10, Id., 177 W.Va. 734, 356 S.E.2d 488
(1987), overruled on other grounds by Potesta v. U.S. Fidelity & Guar. Co., 202 W.Va. 308, 504
S.E.2d 135 (1998). Moreover, in general, the issue of whether an insurer has brought a policy
exclusion to the insured’s attention is an issue to be resolved by the court, not a jury. Syl. Pt. 3,
American States Insurance Co. v. Surbaugh, 231 W.Va. 288, 745 S.E.2d 179 (2013).
Mr. Berkhouse contends that the Charleston Moose Lodge is a named insured under the
policy, thus under National Mutual Insurance Company, Great American Assurance was
required to bring the liquor liability exclusion to the Charleston Moose Lodge’s attention. Mr.
Berkhouse argues that Great American Assurance failed in this obligation. He asserts that the
policy was bound and effective by May 1, 2008, but the written policy document was not
compiled and delivered to Moose International’s representative until June 26, 2008, at the
earliest—nineteen days after Ms. Newman injured Billy Berkhouse. He further asserts that Great
American Assurance failed to produce evidence in response to discovery requests as to when the
Charleston Moose Lodge was informed of the exclusion. Accordingly, Mr. Berkhouse argues
that the liquor liability exclusion should be declared invalid as it applies to his claim.
When considering Mr. Berkhouse’s arguments, it is important to note that this is a third-
party declaratory judgment action, not a first-party action. Mr. Berkhouse is arguing about rights
belonging to the Charleston Moose Lodge, which did not pursue a claim for declaratory relief.
However, even assuming that Mr. Berkhouse can assert error regarding communications about a
policy to which he is not a party, a review of the record convinces us that Mr. Berkhouse has
failed to support his assertions. There was no evidence presented to the circuit court regarding
the Charleston Moose Lodge’s knowledge of the exclusion. Great American Assurance
explained that the first named insured, Moose International, negotiated for the umbrella policy
on behalf of itself and the state and regional lodges and specifically requested that the liquor
liability exclusion be included. Moose International asked for the exclusion in order to lower the
policy premiums. Moreover, the binder clearly stated that a liquor liability exclusion applied to
Moose chapters.1 Finally, the policy in effect when Billy Berkhouse was injured was a renewal
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The binder stated, “Terms & Conditions: Excludes . . . Liquor Liability (GAI 601 06 97)
For the following entities: Moose Lodges, Chapters, Moose Legions, and Regional, State and/or
Provincial Associations.”
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policy containing the identical liquor liability exclusion as the prior year’s policy.2
Next, Mr. Berkhouse argues that the liquor liability exclusion does not apply to his claims
that the Charleston Moose Lodge negligently failed to train and supervise its employees. To
address this argument, we must examine the language of exclusion. “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), abrogated on other grounds by National Mut. Ins.
Co. 177 W.Va. at 741 n. 6, 356 S.E.2d at 495 n. 6. Further, “[w]here 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. of Am., 153 W.Va. 813, 172 S.E.2d 714 (1970). See also Syl. Pt. 2, Shamblin
v. Nationwide Mut. Ins. Co., 175 W.Va. 337, 332 S.E.2d 639 (1985) (“Where provisions in an
insurance policy are plain and unambiguous and where such provisions are not contrary to a
statute, regulation, or public policy, the provisions will be applied and not construed.”).
The liquor liability exclusion expressly excludes coverage for lodges for “[a]ny liability
of any ‘Insured’ by reason of: (1) causing or contributing to the intoxication of any person; or (2)
the furnishing of alcoholic beverages to a person . . . under the influence of alcohol[.]” We find
nothing ambiguous in this language. There is also no dispute that the Charleston Moose Lodge is
a “lodge” under the meaning of this exclusion. Finally, all of the claims that Mr. Berkhouse
asserts against the Charleston Moose Lodge are subject to this exclusion, including his claim of
negligent training and supervision of employees. The alleged deficiency in the employees’
training and supervision specifically pertains to their furnishing of alcohol to persons under the
influence of alcohol. Thus, pursuant to the plain and unambiguous policy exclusion, there is no
coverage under the umbrella policy for Mr. Berkhouse’s claims.
Next, Mr. Berkhouse argues that the doctrine of reasonable expectations applies to
require coverage under the umbrella policy. We find no merit to this argument. First, we have no
record evidence as to what the Charleston Moose Lodge’s expectations were. Second, in West
Virginia the doctrine of reasonable expectations is limited to those instances in which the policy
language is ambiguous. National Mut. Ins. Co., 177 W.Va. at 742, 356 S.E.2d at 496, citing
Soliva, 176 W.Va. at 433, 345 S.E.2d at 36. The doctrine is essentially a rule of construction, and
unambiguous contracts do not require construction by the courts. National Mut. Ins. Co., 177
W.Va. at 742 n. 7, 356 S.E.2d at 496 n. 7. The liquor liability exclusion in this case is plain and
unambiguous, thus the reasonable expectations doctrine need not be applied.
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While the case was pending on appeal to this Court, Mr. Berkhouse moved to
supplement the record with an affidavit on the issue of the insurer’s alleged lack of
communications with the Charleston Moose Lodge about the exclusion. However, that affidavit
was not part of the circuit court’s record. Indeed, the language of the affidavit shows that it was
created for purposes of this appeal. We denied the motion to supplement the record. “Although
our review of the record from a summary judgment proceeding is de novo, this Court for obvious
reasons, will not consider evidence or arguments that were not presented to the circuit court for
its consideration in ruling on the motion. To be clear, our review is limited to the record as it
stood before the circuit court at the time of its ruling.” Powderidge Unit Owners Ass’n v.
Highland Properties, Ltd., 196 W.Va. 692, 700, 474 S.E.2d 872, 880 (1996).
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Mr. Berkhouse also argues that Great American Assurance’s denial of this claim should
be deemed ineffective because the denial letter was sent to Moose International, instead of to the
Charleston Moose Lodge. First, there is no evidence that the Charleston Lodge was unaware of
the denial. Second, although the parties’ briefs do not directly explain the relationship between
Moose International and the Charleston Moose Lodge, they are obviously related entities: Moose
International obtained this umbrella policy on behalf of the Charleston Moose Lodge, and Moose
International was released from liability as part of the settlement in this case. Under these facts,
we find no basis to deem the denial letter ineffective.
Finally, Mr. Berkhouse argues that the circuit court erred in applying West Virginia law
without analyzing whether the law of some other state applies to this case. He explains that the
umbrella policy was issued to Moose International, which is located in Illinois, through a broker
in Illinois. The policy was countersigned by a Great American Assurance official in Ohio. When
denying the Rule 59(e) motion, the court found that there is no conflict of law issue in this case,
and we agree. The case turns on the unambiguous contractual policy language. In addition, prior
to the summary judgment order, Mr. Berkhouse’s counsel argued to the circuit court that West
Virginia law does apply. Accordingly, even if there was error, it was waived. See, State v.
Whittaker, 221 W.Va. 117, 131, 650 S.E.2d 216, 230 (2007) (“Ordinarily, a party must raise his
or her objection contemporaneously with the trial court's ruling to which it relates or be forever
barred from asserting that that ruling was in error.”).
For the foregoing reasons, we conclude that there are no outstanding genuine issues of
material fact and that summary judgment for Great American Assurance is proper. Accordingly,
we affirm.
Affirmed.
ISSUED: November 22, 2013
CONCURRED IN BY:
Chief Justice Brent D. Benjamin
Justice Margaret L. Workman
Justice Menis E. Ketchum
Justice Allen H. Loughry II
DISSENTING:
Justice Robin Jean Davis
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