Danny Marks, Jr. v. Scottsdale Insurance Company


PUBLISHED AUTHORED OPINION filed. Originating case number: 3:14-cv-00025-DJN. [999610728]. [14-1823]

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Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 1 of 14 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, Appeal: 14-1823 Doc: 25 DANIEL, JOHNSON Appellee. Filed: 06/29/2015 & NAGLE, Pg: 2 of 14 P.C., 2 Glen Allen, Virginia, for Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 3 of 14 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, driving nearby on a public road. Jr. (“Marks”), who was 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 “those Policy”), indemnify for sums that obligated to pay as damages ‘property damage’ to which under the because this 3 which insured of it becomes ‘bodily insurance agrees legally injury’ applies,” to and or to Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 4 of 14 defend against any suit seeking such damages. J.A. 143. Hunt Club is the sole named insured on the Policy. Policy also includes an endorsement (“the The But 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.” whether Johnson, a Club The question in this case is 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 Richmond County, Virginia. Club and adjacent to Route 642 in Johnson shot at a deer, and pellets from the shot traveled toward the highway and struck and injured Marks. 4 Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 5 of 14 On December 16, 2013, Marks filed suit in Virginia court (the “Marks Suit”), seeking compensatory and punitive damages. As against Johnson, negligence. Marks According alleged to the both negligence complaint, and Johnson, gross 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 officers land and where members the shooting regularly occurred, hunted there, knew but that its 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 Virginia January court, 13, 2014, this Marks time filed against a second Scottsdale, complaint in 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 5 shooting of Marks, Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 6 of 14 because Johnson is a Club member and hunting is one of “[the Club’s] activities.” Scottsdale this case to jurisdiction, diversity removed and filed a federal court on seeking counterclaim based a declaration that Scottsdale owes no duty to defend or indemnify Johnson in the Suit. 1 Marks Scottsdale argued that the Endorsement does not cover Hunt Club members for their personal activities in hunting the day it covers on Scottsdale, connection of with the the Club, shooting. members only such as Instead, to the Johnson’s according extent they to are vicariously liable for the Club’s own activities or take action on behalf litigation, of the and Club. though Johnson he joined subsequently the filed district for court 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 1 granted summary judgment to 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. 6 Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 7 of 14 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). apply the Virginia. Because jurisdiction is based on diversity, we choice-of-law Id. at 154. rules of the forum state - here, 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 directed construing by the Virginia Policy law provision to at apply issue, ordinary we are 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, 7 Lansdowne Dev. Co., Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 8 of 14 L.L.C. v. Xerox Realty Corp., 514 S.E.2d 157, 161 (Va. 1999). Virginia does apply one rule of construction insurance contracts and relevant here: ambiguous, then it is to be to If policy language is construed Williams, 677 S.E.2d at 302. specific against the insurer. But – and equally relevant here – a term will not be deemed ambiguous unless it is “capable of more than one reasonable examined in context. meaning” even after it has been 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] clause behalf.” – Marks covering concedes member on activities appeal that performed the second the Club’s on behalf – does not reach Johnson’s hunting expedition, but argues that the first clause – member liability for Club activities – unambiguously activities. is at least does, because hunting is one of the Club’s Alternatively, Marks argues that the first clause ambiguous on the point, and therefore must be construed in his favor. We disagree. and the policy respect other Instead, we agree with the magistrate judge federal provisions: to [member] courts The that clause liability covering for 8 have [the considered Club identical members Club’s] “with activities” Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 unambiguously restricts Pg: 9 of 14 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 endorsement *5–6 to (M.D. hunt club Penn. Sept. insurance 30, policy 2008) (identical 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 liability for [the Club’s] activities” is quite clear. liability for the Club’s activities” is the “[member] “Member 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. 9 Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 10 of 14 by the Club as a corporate entity.” *4; see also Everett Cash, 2008 Lenox, 2005 WL 1076065, at 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. S.E.2d at liability 161. for Members the are covered with Club’s own corporate See Lansdowne, 514 respect activities, to not their 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 – 10 Appeal: 14-1823 for Doc: 25 which a Filed: 06/29/2015 member might be Pg: 11 of 14 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. that restriction is entirely On Marks’s reading, however, superfluous, because all member activities in connection with the Club are covered already, by the first clause. Endorsement that We decline to adopt a construction of the 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 constitutes an fits. “activity” We do within the not doubt that freestanding “hunting” 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 11 Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 12 of 14 “but only with respect to [member] liability for [the Club’s] activities.” precludes That Marks’s is the language, interpretation, taken as a unambiguously whole, that 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, defend Johnson in the Marks Suit. then Scottsdale must 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 12 Appeal: 14-1823 Doc: 25 Filed: 06/29/2015 Pg: 13 of 14 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 fired his gun. his claim used by Club members to under hold he negligently As Marks concedes, that is not enough to bring the Endorsement’s second activities “on [the Club’s] behalf.” seek when Johnson vicariously clause, for member Nor does the complaint 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 13 Appeal: 14-1823 Doc: 25 Because Filed: 06/29/2015 it is clear from Pg: 14 of 14 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. indemnify); 2004) AES (duty Corp., to defend 725 is S.E.2d broader at than 535–36 duty to (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). 14

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