Bruce Levine v. Employers Ins. Co. of Wausau
PUBLISHED AUTHORED OPINION filed. Originating case number: 1:16-cv-00355-GBL-TCB. . [17-1342, 17-1432]
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UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BRUCE LEVINE, Administrator of the Estate of Carlos Bolanos Castillo,
Plaintiff – Appellant,
MARCO A. GABARETTE,
EMPLOYERS INSURANCE COMPANY OF WAUSAU,
Defendant – Appellee,
JESSICA LYNN COBLE; PURNELL FURNITURE SERVICES, INC.; PENSKE
TRUCK LEASING COMPANY, INCORPORATED,
-----------------------------VIRGINIA TRIAL LAWYERS ASSOCIATION,
Amicus Supporting Appellant,
VIRGINIA ASSOCIATION OF DEFENSE ATTORNEYS,
Amicus Supporting Appellee.
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MARCO A. GABARETTE,
Plaintiff – Appellant,
BRUCE LEVINE, Administrator of the Estate of Carlos Bolanos Castillo,
EMPLOYERS INSURANCE COMPANY OF WAUSAU,
Defendant – Appellee,
JESSICA LYNN COBLE; PURNELL FURNITURE SERVICES, INC.; PENSKE
TRUCK LEASING COMPANY, INCORPORATED,
-----------------------------VIRGINIA TRIAL LAWYERS ASSOCIATION,
Amicus Supporting Appellant,
VIRGINIA ASSOCIATION OF DEFENSE ATTORNEYS,
Amicus Supporting Appellee.
Appeals from the United States District Court for the Eastern District of Virginia, at
Alexandria. Gerald Bruce Lee, District Judge. (1:16-cv-00355-GBL-TCB)
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Argued: January 23, 2018
Decided: April 12, 2018
Before WILKINSON, AGEE, and WYNN, Circuit Judges.
Affirmed by published opinion. Judge Agee wrote the majority opinion, in which Judge
Wilkinson joined. Judge Wynn wrote a dissenting opinion.
ARGUED: Eugene C. Miller, WEINER, SPIVEY & MILLER, PLC; Kevin Michael
Leach, TURBITT, O’HERRON & LEACH, PLLC, Burke, Virginia, for Appellants.
Edwin Ford Stephens, CHRISTIAN & BARTON, LLP, Richmond, Virginia, for
Appellee. Dominick Michael Mullori, Jr., Woodbridge, Virginia, for Amicus Virginia
Trial Lawyers Association. ON BRIEF: Alexander S. de Witt, FREEBORN & PETERS
LLP, Richmond, Virginia, for Amicus Virginia Association of Defense Attorneys.
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AGEE, Circuit Judge:
Carlos Bolanos Castillo was killed and Marco A. Gabarette was injured in a motor
vehicle accident during the course of their employment. Castillo’s estate and Gabarette
filed declaratory judgment actions seeking coverage under the uninsured/underinsured
motorists endorsement of a third party’s insurance policy for payment of the wrongful
death and personal injury damages from the accident. The district court held that the
policy did not extend coverage to Castillo’s estate or Gabarette and granted summary
judgment to the insurer. They now appeal. Because the plain language of the policy
supports the district court’s determination, we affirm the judgment of the district court.
Purnell Furniture Services, Inc. (“Purnell”), a Virginia company, hired Castillo
and Gabarette (collectively, the “Plaintiffs”) as independent contractors to deliver
furniture in northern Virginia. 1 Purnell regularly hired such independent contractors to
deliver its furniture in the contractors’ vehicles. For this particular delivery, the originally
scheduled contractors were unable to fulfill the order, and Purnell inquired whether the
Plaintiffs could do the job. Due to Purnell’s last-minute request, the Plaintiffs did not
have a sufficient vehicle available, so Purnell permitted them to use a truck for that
delivery that Purnell had rented from Penske.
For convenience, we include Castillo’s estate within the “Plaintiffs” definition and only
distinguish between Castillo and his estate where indicated.
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Gabarette drove the truck with Castillo as passenger. En route to their destination,
they pulled over on the side of the interstate so Castillo could check on the security of the
furniture load. Another driver then struck the rented Penske truck, killing Castillo and
injuring Gabarette. 2
At the time of the accident, Purnell had a motor vehicle insurance policy (the
“Policy”) issued by Employers Insurance Co. of Wausau (“Wausau”), which includes an
uninsured/underinsured motorists (“UIM”) 3 endorsement as required by the applicable
state law of Virginia. See Va. Code Ann. § 38.2-2206(A); see also id. § 38.2-2206(B)
(mandating that UIM coverage extend to “any person who uses the motor vehicle to
which the policy applies, with the expressed or implied consent of the named insured”).
The Policy’s “Schedule of Coverages and Covered Autos” (i.e., the “Declarations Pages”
or “Schedule”) lists the insurance coverages that Purnell purchased. These coverages are
identified on the Declarations Pages as limited “to those autos shown as covered autos.”
J.A. 68. 4 Covered autos are designated by a code listed next to a particular coverage on
the Schedule, and the “Motor Carrier Coverage Form” defines each code. Under the
Schedule, the Policy extends liability coverage to all autos designated by code “61,”
which is defined as “Any Auto” on the Motor Carrier Coverage Form. J.A. 134.
Bruce Levine brought the current action as administrator of Castillo’s estate and is the
proper party before the Court.
Virginia law treats uninsured and underinsured coverages similarly, so case law that
applies to one applies to the other as well. See Seals v. Erie Ins. Exch., 674 S.E.2d 860, 863 n.2
(Va. 2009) (“While previous cases have distinguished uninsured motorist coverage from liability
coverage, those distinctions equally apply to underinsured motorist coverage, which is a similar
concept . . . .”). We designate “uninsured/underinsured motorists” as “UIM” for convenience.
We have omitted alterations, citations, footnotes, and internal quotation marks here and
throughout this opinion, unless otherwise noted.
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However, for UIM coverage—as opposed to liability coverage—the Schedule restricts
covered autos to those designated by code “62,” which the Motor Carrier Coverage Form
defines as “Owned Autos Only.” J.A. 134. The Policy lists only three vehicles on the
“Schedule of Covered Autos You Own,” none of which are the rented Penske truck.
The Declarations Pages also reference the UIM endorsement for the limits of that
particular coverage, which provides that Wausau would “pay in accordance with the
Virginia Uninsured Motorists Law, all sums the insured is legally entitled to recover as
damages from the owner or operator of an uninsured motor vehicle.” J.A. 105. For UIM
purposes, an insured party is defined as “[a]nyone . . . occupying a covered auto.” J.A.
105. The UIM endorsement defines “covered auto” as “a motor vehicle, or a temporary
substitute, with respect to which the bodily injury or property damage liability coverage
of the policy applies.” J.A. 104.
Castillo’s estate and Gabarette filed separate suits against the alleged negligent
driver in the Fairfax County, Virginia, Circuit Court. 5 Because of the driver’s limited
insurance coverage, the Plaintiffs also brought an action in the same state court against
Wausau for a declaration as to UIM coverage under the Policy and their entitlement to
that coverage. Wausau removed the declaratory judgment action to the U.S. District
Court for the Eastern District of Virginia on the basis of diversity jurisdiction pursuant to
These suits were not resolved before the initiation of this case, and we are unaware of
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28 U.S.C. § 1332. Wausau and Castillo’s estate filed cross-motions for summary
The district court granted Wausau’s motion for summary judgment and denied
Castillo’s estate’s motion regarding UIM coverage. 7 Applying Virginia law, the district
court analyzed the Policy and held that the plain language of its terms dictated that the
UIM coverage applied only to those vehicles that Purnell owned. Because Purnell did not
own the Penske truck, it was not a “covered auto,” and therefore the Plaintiffs were not
entitled to UIM coverage.
The Plaintiffs filed a timely notice of appeal, and we have jurisdiction pursuant to
28 U.S.C. § 1291.
We review a district court’s decision to grant summary judgment de novo.
OpenRisk, LLC v. Microstrategy Servs. Corp., 876 F.3d 518, 527 (4th Cir. 2017).
“Summary judgment is appropriate when there are no genuine issues of material fact and
the moving party . . . is entitled to judgment as a matter of law.” Id. The facts in this case
are not in dispute.
Wausau filed a motion for summary judgment on all claims by the Plaintiffs. Castillo’s
estate filed a cross-motion for summary judgment on its claims against Wausau. Although
Gabarette defended himself against Wausau’s motion, he did not file his own motion for
The district court also addressed several additional issues that are not before the Court
in this appeal.
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Because this case was removed to federal court pursuant to diversity jurisdiction,
we apply Virginia law, which governs any substantive issues. Stahle v. CTS Corp., 817
F.3d 96, 99–100 (4th Cir. 2016) (“Because federal jurisdiction in this matter rests in
diversity, our role is to apply the governing state law.”). Courts in Virginia apply
traditional principles of contract interpretation when reviewing insurance policies.
TravCo Ins. Co. v. Ward, 736 S.E.2d 321, 324 (Va. 2012). The intent of the parties is the
focus of the inquiry. Id. at 325. A court will construe unambiguous terms of the policy
according to their plain meaning. Id. Importantly, no contract provision “will be treated
as meaningless if a reasonable meaning can be given to it, and there is a presumption that
the parties have not used words needlessly.” Id. Indeed, “[e]ach phrase and clause of an
insurance contract should be considered and construed together and seemingly conflicting
provisions harmonized when that can be reasonably done, so as to effectuate the intention
of the parties as expressed therein.” Id.; accord Nationwide Mut. Ins. Co. v. Akers, 340
F.2d 150, 154 (4th Cir. 1965) (“To construe each clause or endorsement in isolation and
without reference to the other policy provisions would do violence to basic contract law
for insurance contracts, like other contracts, must be read and construed as a whole and
If an insurance policy is ambiguous, however, it is ordinarily construed against the
insurance company. St. Paul Fire & Marine Ins. Co. v. S.L. Nusbaum & Co., 316 S.E.2d
734, 736 (Va. 1984) (“The courts, accordingly, have been consistent in construing the
language of such policies, where there is doubt as to their meaning, in favor of
that interpretation which grants coverage, rather than that which withholds it. Where two
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constructions are equally possible, that most favorable to the insured will be adopted.
Language in a policy purporting to exclude certain events from coverage will be
construed most strongly against the insurer.”). The insurer has the burden of proving lack
of coverage. Ward, 736 S.E.2d at 325.
In this case, the plain language of the Policy resolves the issue. In construing
similar insurance policy provisions, the Supreme Court of Virginia has been clear that the
designating language of the declarations page determines the applicability of UIM
coverage. Bayer v. Travelers Indem. Co., 267 S.E.2d 91, 91 (Va. 1980) (per curiam)
(answering in the negative “the question [of] whether a claimant, injured while a
passenger in his own uninsured automobile during a collision with another uninsured
vehicle, may recover under the uninsured motorist endorsement of a liability policy
written on other vehicles owned by the driver of the claimant’s automobile”); see
Nationwide Mut. Ins. Co. v. Hill, 439 S.E.2d 335, 337 (Va. 1994) (explaining that, in
Bayer, “[t]he declarations page of [the] policy contained a specific section addressing
vehicles included for the purpose of the UM coverage,” which the Bayer court relied on
for its holding); see also Akers, 340 F.2d at 154 (holding that a Virginia UIM
endorsement “must be construed with other provisions of the policy in which the
uninsured motorist endorsement is incorporated” and therefore concluding that UIM
“coverage is restricted to those automobiles described in the declarations”).
The Supreme Court of Virginia’s decisions in Bayer and Hill control our decision
here. In Bayer, the plaintiff, Bayer, was riding as a passenger in his own uninsured
vehicle, which was driven by Whitaker, who did have an automobile insurance policy
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with UIM coverage. 267 S.E.2d at 91–92. The two men were “road testing the vehicle”
when they were in an accident with another driver whose car was also uninsured. Id. at
92. Of the three men, only Whitaker had insurance, so Bayer sought to establish UIM
coverage under Whitaker’s insurance policy for injuries Bayer sustained in the accident.
The UIM endorsement of Whitaker’s policy extended coverage to “any . . . person
while occupying an insured automobile.” Id. The term “insured automobile” was defined
as “an automobile registered in Virginia with respect to which the bodily injury and
property damage liability coverages of the policy apply.” Id. Bayer contended that his
case depended upon resolution of the issue of “whether the vehicle in which he was
riding was an insured automobile within the meaning of the endorsement.” Id. He argued
that, because Whitaker was a named insured under the policy and was driving Bayer’s
vehicle with permission, “the omnibus provisions of Whitaker’s policy afforded Whitaker
protection in the operation of the automobile.” Id. And because Whitaker was protected
while in Bayer’s automobile for liability purposes, Bayer was “the occupant of an
automobile with respect to which the bodily injury and property damage liability
coverages of the policy apply.” Id. In other words, because “Whitaker’s liability coverage
followed Whitaker into the Bayer vehicle, . . . the vehicle thereby became insured” for
UIM purposes. Id.
The Supreme Court of Virginia disagreed with Bayer. First, the court held that the
policy “was issued to Whitaker individually and covered two described motor vehicles.”
Id. at 93. Next, the court noted that the UIM endorsement “was subject to the insuring
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agreements of the automobile and garage liability provisions of the policy; they covered
Whitaker’s use of a non-owned automobile only if Whitaker became legally obligated to
pay damages.” Id. And finally, Bayer “did not qualify as a person insured under any of
the basic liability provisions of the policy.” Id.
As relevant to the case now before us, the Supreme Court of Virginia later
clarified its Bayer holding in Hill:
The UM endorsement definitions considered in Bayer are identical
to the definitions contained in the [insurance] policy here. However, to
determine whether these definitions were satisfied, providing UM coverage
for Bayer, the Court in Bayer looked to other relevant portions of the
The Court in Bayer held that at least two portions of the policy’s
provisions precluded coverage from Bayer under the UM endorsement.
First, the Court concluded that only owned vehicles were covered by the
policy. Although specific policy provisions were not recited in the opinion,
the basis for this holding is clear from the record on file with the Court. The
declarations page of Whitaker’s policy contained a specific section
addressing vehicles included for the purpose of the UM coverage. Only
“automobiles owned by the Named Insured” were designated for insurance
coverage under the UM endorsement and, therefore, the policy did not
cover a vehicle owned by Bayer.
439 S.E.2d at 337. 8
Here, as in Bayer, the Declarations Pages of the Policy limit the UIM coverage to
only certain automobiles: code 62 autos. The Motor Carrier Coverage Form defines code
62 as “Owned Autos Only.” J.A. 134. Because the Penske truck is not listed in the Policy
In Hill, the Supreme Court of Virginia held that the plaintiff was entitled to UIM
coverage because the insurance policy “did not limit the definition of the vehicle to one owned
by the named insured, as the policy did in Bayer; nor did it include any language which would
restrict the definition of ‘insured vehicle’ to a vehicle identified or described in the policy
provisions.” 439 S.E.2d at 337–38. The court noted that the declarations page was not part of the
record in the case before it. Id. at 338 n.2.
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as one of the owned vehicles, there is no UIM coverage related to it under the Policy.
This result is plainly required by not only the Bayer decision but by the clear public
policy of Virginia as to UIM insurance coverage. Indeed, “[i]n Virginia, uninsured
motorist coverage is meant to protect an insured motorist, his family and permissive users
of his vehicle against the peril of injury by an uninsured wrongdoer, not to provide
insurance coverage upon each and every uninsured vehicle to everyone.” Bayer, 267
S.E.2d at 93 (emphasis added). 9
The thrust of the Plaintiffs’ case is that the required UIM endorsement has a
definition of “covered auto” that is broader than the UIM limitation of the Policy’s
Declarations Pages. However, the Supreme Court of Virginia rejected a similar argument
in Bayer. Moreover, Virginia follows the well-settled principle in contract law of
applying specific provisions of a contract over more general provisions dealing with the
same subject matter. Appalachian Reg’l Healthcare v. Cunningham, 806 S.E.2d 380, 385
n.9 (Va. 2017) (“When two provisions of a contract conflict with one another, and one
provision specifically addresses the dispute at hand while the other remains general, we
have consistently held that the specific provision will govern over the general.”).
Comparing the two provisions at issue in this case, the Policy’s Declarations Pages place
limitations on UIM coverage that are more specific than the generic UIM endorsement
In addition, the record contains no evidence that Purnell ever paid a premium for UIM
coverage for rented vehicles. See J.A. 70–71 (hired autos schedule listing premiums for liability
and physical damage coverages only).
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which, according to the Plaintiffs, provides coverage to any vehicle covered by the Policy
whatsoever. See id. The Plaintiffs’ view is simply not consonant with Virginia law.
To this end, another Supreme Court of Virginia case is on point: Stone v. Liberty
Mutual Insurance Co., 478 S.E.2d 883 (Va. 1996). In Stone, the plaintiff was an
employee of a restaurant who made pizza deliveries in his own vehicle. Id. at 883. While
making a delivery, he was injured in an accident with another driver. Id. That driver’s
insurance policy limits were inadequate to fully compensate Stone for his injuries, so he
sought UIM coverage under the restaurant’s automobile insurance policy. Id. The terms
of the restaurant’s policy limited UIM coverage to “include only those autos [the
restaurant] owns.” Id. at 884. Stone argued that, because his vehicle was covered by the
liability provisions of the restaurant’s policy, which extended liability coverage to certain
non-owned vehicles, Virginia law required the insurer to extend UIM coverage to him
regardless of the policy’s defined terms for UIM coverage. Id.; see Va. Code Ann. § 38.22206(B) (defining an “Insured” person for UIM purposes in part as “any person who uses
the motor vehicle to which the policy applies, with the expressed or implied consent of
the named insured”). Therefore, Stone contended that the policy’s limiting UIM coverage
to certain owned vehicles was invalid. 478 S.E.2d at 884. The insurer, on the other hand,
argued that it could “limit who is an insured without violating the provisions of
subsection (B) of the statute.” Id. at 885.
The Supreme Court of Virginia agreed with the insurer, holding that the UIM
statute did not “require that all the same vehicles and insureds be covered under both
liability and uninsured motorist coverages of the same policy.” Id. Instead, the statute
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mandated only “that uninsured motorist coverage be provided to those who are in . . . the
motor vehicles listed in the policy, as opposed to any vehicle to which the policy might
apply.” Id. at 886.
Stone refutes the Plaintiffs’ argument here and weighs in favor of Wausau. Like
the restaurant’s policy in Stone, the Policy here specifically limits UIM coverage to
owned vehicles, while extending liability coverage to certain non-owned vehicles. The
Plaintiffs seek to use the broad language in the endorsement to support UIM coverage
despite this limitation, but the limitation is clearly permitted by Virginia state law, as
Stone plainly held. The Plaintiffs therefore cannot use the broad language in the UIM
endorsement to gain UIM coverage.
Failing on that argument, the Plaintiffs also contend that the Policy’s provisions
here are nonetheless ambiguous and that the Policy should be construed against Wausau.
Although ambiguous provisions are ordinarily construed against the insurer, the reason
for this preference is that insurance companies are typically the drafters of insurance
policies. Appalachian Reg’l Healthcare, 806 S.E.2d at 386 n.10 (noting that the
“principle that insurance policies should be interpreted in favor of insureds” “exists in
part because insurance policies are contracts whose language is ordinarily selected by
insurers rather than by policyholders”). But here, the generic UIM endorsement is solely
the creation of the Virginia State Corporation Commission (“SCC”), which requires the
endorsement for every motor vehicle policy issued in Virginia. In contrast, the Policy’s
Declarations Pages, which were written by Wausau, have no ambiguity as the covered
autos provision is clear: there is no UIM coverage for the non-owned Penske truck. In
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that circumstance, “[t]he interpretative presumption favoring insureds . . . plays no role in
our analysis.” Id.
The Policy’s UIM endorsement is word-for-word the same as the form required by
the SCC. Compare Va. State Corp. Comm’n, Uninsured Motorists Endorsement
(saved as ECF opinion attachment), with J.A. 104–07. Because the SCC adopted this
form, Wausau was required to use it. See Va. Code Ann. § 38.2-2220 (stating that, “after
any standard form is adopted by the [SCC], no insurer shall use any form covering
substantially the same provisions contained in the standard form unless it is in the precise
language of the form filed and adopted by the [SCC]” (emphasis added)); see also J.A.
477 (district court stating, “The UM/UIM Endorsement is a standard form promulgated
by the Virginia State Corporation Commission.”); Opening Br. 24 (conceding that the
UIM endorsement “is a standard form promulgated by the Virginia Corporation
Commission”). It would be illogical to penalize an insurance company for using a form it
is required to use by law, especially when the highest court of the state has directly held
that an insurance company may limit the vehicles that are subject to UIM coverage under
the required endorsement. See Stone, 478 S.E.2d at 885–86 (holding that insurance
policies may limit UIM coverage to owned vehicles without violating state law). And
unlike the government-mandated UIM endorsement, the Declarations Pages were a result
of contract negotiations by the parties. “This language which the parties contracted to
cannot simply be ignored.” Bartolomucci v. Fed. Ins. Co., 770 S.E.2d 451, 455 (Va.
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Finally, the Plaintiffs rely on a case that they did not cite below: Seals v. Erie
Insurance Exchange, 674 S.E.2d 860 (Va. 2009). If anything, Seals supports the rationale
of the district court in the case at bar. In Seals, the plaintiff “was injured in an accident
with an underinsured driver while test driving a vehicle owned by [a dealership].” Id. at
861. The dealership’s UIM coverage had a provision similar to the one in this case stating
that it covered anyone “occupying a covered auto.” Id. And, as in the standard UIM
endorsement form in this case, the endorsement in Seals defined “covered auto” as “a
motor vehicle . . . with respect to which the bodily injury or property damage liability
coverage of the policy applies.” Id. The trial court looked to the liability provision of the
policy, which stated that liability coverage was not available to customers of the
dealership who have their own auto insurance. Id. On appeal, analyzing the plain
language of the policy, the Supreme Court of Virginia determined that the trial court
“incorrectly focused on whether [the plaintiff], as the driver of the vehicle, was entitled to
liability coverage to determine if he was entitled to underinsured motorist coverage.” Id.
at 863. Instead, the proper course was to look to the declarations page, which showed the
automobile being test driven was covered by the dealership’s policy for liability. Id.
Because the UIM endorsement provided coverage to occupants of those vehicles named
on the declarations page with liability coverage, regardless of whether the occupants
themselves had liability coverage under the policy, the test-driven vehicle was a covered
auto, and the plaintiff was thus entitled to UIM coverage. Id. at 863–64.
Seals is in concert with our conclusion here, as both cases are resolved by the plain
language of the respective declarations pages. Although the court in Seals followed the
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language used in the UIM endorsement—the same language used in this case—it was the
declarations page that identified the vehicles that were covered under the UIM
endorsement. Thus, Seals is of no benefit to the Plaintiffs.
The dissent’s reading of the Policy would lead to absurdity, potentially with
disastrous results for Virginia insurers and insureds alike. Virginia courts will not read
contracts to produce absurd results. Transit Cas. Co. v. Hartman’s, Inc., 239 S.E.2d 894,
896 (Va. 1978) (“While any ambiguity must be resolved against the insurer, the
construction adopted should be reasonable, and absurd results are to be avoided.”). There
is no way to cabin the dissent’s interpretation to this case only, mainly because the UIM
endorsement is a standard, required form. Because the parties are required to use the UIM
endorsement form, a policy would automatically extend UIM coverage to every vehicle
to which it extended liability coverage: a public policy choice made at no place in
Virginia law. For example, if an auto insurance policy provides liability coverage to hired
or borrowed vehicles—as the Policy does, see J.A. 70—then by the dissent’s reasoning
those vehicles must be covered by the UIM endorsement even where the parties bargain
to exclude that coverage, as the Declarations Pages and premium record show here. This
is an absurd result and one not in line with the Supreme Court of Virginia’s ruling in
Stone (the dissent’s discussion of which is relegated to a footnote). See 478 S.E.2d at 885
(holding that Virginia’s UIM statute does not “require that all the same vehicles and
insureds be covered under both liability and uninsured motorist coverages of the same
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As a court sitting in diversity, we are bound to apply state law, not create it, as the
dissent would do. Stahle, 817 F.3d at 99–100. So when the Supreme Court of Virginia
holds that parties may contract to limit UIM coverage to certain vehicles, Stone, 478
S.E.2d at 885, and that courts should look to the declarations page to determine which
vehicles have UIM coverage, Bayer, 267 S.E.2d at 93; Hill, 439 S.E.2d at 337, we cannot
by fiat compel UIM coverage for non-owned vehicles when an insurer and insured
contract to limit that coverage to only owned vehicles.
As previously noted, Virginia law permits the insurer to limit UIM coverage to
owned vehicles via the declarations page, despite the inclusive wording of the SCCmandated UIM endorsement. See Stone, 478 S.E.2d at 886; Hill, 439 S.E.2d at 337.
Wausau so limited the UIM coverage in this case, and the district court properly followed
the terms of the Policy to award summary judgment to it.
For these reasons, the judgment of the district court is
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WYNN, Circuit Judge, dissenting:
Consider the auto insurance policy at issue in this case, which has two relevant
components. The first—the Declarations Pages—states that the Liability portion of the
policy covers “Any ‘Auto’” and that the Uninsured/Underinsured Motorist (“UIM”)
portion covers “Owned ‘Autos’ Only.”
J.A. 68, 148.
The second—the UIM
Endorsement—provides that, for purposes of that Endorsement, a “[c]overed auto” is “a
motor vehicle . . . with respect to which the ‘bodily injury’ or ‘property damage’ liability
coverage of the policy applies.” J.A. 104 (emphasis added). In other words, because the
Liability policy covers “Any ‘Auto,’” so too must the UIM policy, notwithstanding the
fact that the Declaration Pages state UIM coverage applies to “Owned ‘Autos’ Only.”
J.A. 68, 148.
Even the craftiest of lawyers would find it difficult to claim such
documents are not ambiguous. Yet that is precisely what the majority opinion concludes.
Ante at 9.
The majority opinion asserts that several decisions by the Supreme Court of
Virginia dictate that conclusion. But a close reading of those decisions reveals that the
Supreme Court of Virginia has not addressed—much less decided—the proper result
when, as here, an insurance policy’s Declarations Pages conflict with an Endorsement
included in the same policy. Absent a controlling decision from the Virginia Supreme
Court, this Court should follow settled state law governing the interpretation of
ambiguous coverage terms in insurance contracts, which holds that the ambiguous terms
should be construed in favor of coverage. Rather than applying this settled Virginia law,
the majority opinion engages in complex legal gymnastics, resolving the ambiguity
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through interpretive principles that lack any basis in Virginia law.
The majority opinion maintains that the Supreme Court of Virginia’s decisions in
Bayer v. Travelers Indemnity Co., 267 S.E.2d 91 (Va. 1980) (per curiam), and
Nationwide Mutual Insurance Co. v. Hill, 439 S.E.2d 335 (Va. 1994), “control” this case.
Ante at 9. I disagree.
In Bayer, the claimant (Bayer) was a passenger in his own uninsured vehicle and
was injured when the driver of his car (Whitaker) collided with another uninsured
vehicle. See 267 S.E.2d at 91–92. Bayer thus sought to recover under Whitaker’s UIM
policy. See id. As in this case, the UIM Endorsement in Bayer stated that UIM coverage
applied to vehicles to which the Liability policy applied. See id. at 92. Significantly,
under the policy, Liability coverage extended to non-owned vehicles only when the
insured was at fault. See id. at 93. The court concluded that because (1) Bayer’s vehicle
was a “non-owned” vehicle for purposes of Whitaker’s policy, and (2) Whitaker was not
at fault, Bayer was not entitled to recover under Whitaker’s policy. See id.
The majority opinion makes much of the fact that fourteen years later, in Hill, the
Supreme Court of Virginia re-examined the record in Bayer and determined that, as in
this case, the Declarations Pages provided that only automobiles owned by the insured
were covered under the UIM policy. Ante at 11 (quoting Hill, 439 S.E.2d at 337). Under
the terms of the Declarations Pages, therefore, Bayer would not have been covered under
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Whitaker’s policy, because Whitaker did not own the vehicle. See Hill, 439 S.E.2d at
According to the majority opinion in this case, Bayer, as clarified by Hill,
establishes that a coverage definition in the Declarations Pages controls, to the extent it
conflicts with a definition in an Endorsement. Ante at 12. But Hill’s clarification of
Bayer’s facts does not resolve the ambiguity at issue in this case. Unlike here—in which
there is a conflict between the Declarations Pages and the Endorsement as to whether
UIM coverage is available—Bayer was not entitled to coverage under the plain language
of both the Declarations Pages and the Endorsement. See Hill, 439 S.E.2d at 337. As a
result, the Supreme Court of Virginia did not consider, much less decide, the critical
question presented by this case: what to do when the language of the Declarations Pages
leads to a different result than the language of the Endorsement?
Hill also failed to address that question. As the majority opinion here notes, the
record in Hill did not include the Declarations Pages. Ante at 11 n.8 (citing Hill, 439
S.E.2d at 338 n.2). Faced with this omission, Hill treated the UIM policy as if it “did not
limit the definition of [a covered] vehicle to one owned by the named insured, as the
policy did in Bayer.” 439 S.E.2d at 337. In other words, the court assumed, without
having the Declarations Pages available, that they would not have excluded the vehicle at
issue from being covered. See id. Then, turning to the language in the Endorsement, the
court noted that, as in Bayer, the Endorsement stated UIM coverage applied to vehicles
covered by the Liability policy. See id. at 337–38. As in Bayer, the Liability policy
covered non-owned vehicles only if the insured was at fault. Id. at 338. Unlike in Bayer,
however, the driver from whom coverage was sought was also undisputedly at fault in
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Hill, so the Liability coverage—and by virtue of the definition in the Endorsement, the
UIM coverage—applied. See id. Accordingly, like the policy in Bayer, the Declarations
Pages and Endorsement in the policy at issue in Hill both led to the same result—just this
time, they both favored coverage. Hill, therefore, did not address the question at issue in
this case—how a court should resolve a discrepancy in terms of coverage between the
Declarations Pages and an Endorsement.
Thus, neither Bayer nor Hill provides any guidance regarding whether we should
follow the definitions in the Declarations Pages or the Endorsement in determining
whether coverage is available. ∗
Accordingly, we must follow state law canons of
construction governing the interpretation of insurance contracts. Here, we have two
directives. First, the contract’s terms “must be considered and construed together, and
any internal conflicts between provisions must be harmonized, if reasonably possible, to
effectuate the parties’ intent.” Virginia Farm Bureau Mut. Ins. Co. v. Williams, 677
S.E.2d 299, 302 (Va. 2009) (Keenan, J.).
“When a disputed policy term is
unambiguous,” a court must apply the “plain meaning as written.” Id. Second, “if
disputed policy language is ambiguous and can be understood to have more than one
meaning, we construe the language in favor of coverage and against the insurer.” Id.;
The majority opinion also relies on Stone v. Liberty Mutual Insurance Co., 478
S.E.2d 883 (Va. 1996). In Stone, the Supreme Court of Virginia decided a question not at
issue in this case—what level of uninsured motorist insurance is required by Virginia
statute. Stone held that under the relevant statute, coverage is required only for owned
vehicles. See id. at 886. But Stone sets a floor for UIM coverage, not a ceiling. It in no
way bars an insurer from contracting to provide UIM coverage for non-owned vehicles,
or an insured from contracting with an insurer to obtain such coverage. The relevant
question here is whether the Defendant entered into such a contract.
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accord Virginia Farm Bureau Mut. Ins. Co. v. Gile, 524 S.E.2d 642, 645 (Va. 2000).
“Language in a policy purporting to exclude certain events from coverage will be
construed most strongly against the insurer.” St. Paul Fire & Marine Ins. Co. v. S.L.
Nusbaum & Co., 316 S.E.2d 734, 736 (Va. 1984)
As explained above, the terms of the contract here cannot be harmonized. There is
simply no squaring two provisions, one of which purports to cover “Any Auto” and the
other of which purports to cover “Owned Autos Only.” The majority claims that the
more specific document (i.e. the Declarations Pages) should control, but that assertion
finds no support in the language of the policy or Virginia law. As to the language of the
policy, the Endorsement begins in boldface, all-caps type that states, “THIS
ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.”
J.A. 104. This language arguably establishes that the Endorsement should control.
As to Virginia law, perhaps the most instructive case from the Virginia Supreme
Court is Seals v. Erie Insurance Exchange, 674 S.E.2d 860 (Va. 2009). In that case,
Seals was test-driving a vehicle at a car dealership when he was hit by an underinsured
motorist. See id. at 861. The car dealership’s insurance company sought a declaratory
judgment stating that Seals was not covered under the dealership’s UIM policy. See id.
As with the Endorsement here—the UIM Endorsement in Seals defined a “covered auto”
as “a motor vehicle . . . with respect to which the bodily injury . . . liability coverage of
the policy applies.” Id. (emphasis omitted). The Seals court thus looked to the Liability
coverage, which stated “[w]e will pay all sums anyone we protect legally must pay for
property damage to autos.” Id. (emphasis omitted). The term “anyone we protect”
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included, among other definitions, “[a]nyone else while using an auto we insure with
your permission, except . . . your customer who has other available insurance with limits
at least equal to those required by law in the state where the auto is garaged.” Id.
Seals had other available insurance, so the insurance company
claimed he was not entitled to coverage under the dealership’s Liability policy and thus
also was not entitled to coverage under the UIM policy. See id.
The Supreme Court of Virginia disagreed. Although the court found that Seals
was not entitled to coverage under the Liability policy because he had his own personal
insurance, it nonetheless concluded that Seals was entitled to coverage under the UIM
Endorsement because the motor vehicle he was driving was covered under the language
of the UIM Endorsement. See id. at 862–64. In reaching that conclusion, the court said
“we begin . . . with the UM/UIM endorsement.” Id. at 863 (emphasis added). That
provision, like here, defined “anyone we protect” as “anyone else occupying a covered
auto.” Id. A “covered auto,” according to the Endorsement, was “a motor vehicle . . . to
which the bodily injury . . . liability coverage . . . applies.” Id. (emphasis added).
Because the definition from the Endorsement provided that the UIM policy applied to “a
motor vehicle . . . to which the bodily injury . . . liability coverage . . . applies,” then it
applied to the vehicle Seals was driving. Id. (emphasis added). Thus, since the vehicle
was covered under the Liability policy, and Seals was not personally excluded from the
UIM coverage, he was entitled to recover under the policy. See id.
Despite the majority opinion’s contention that the Declarations Pages controlled
the outcome in Seals, the opinion states that the “proper inquiry” in determining whether
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Seals was entitled to coverage under the UIM policy focused on the language of the UIM
Endorsement. Id. The reason the court then looked to the Declarations Pages was
because the Endorsement explicitly cross-referenced them, as is the case here. See id.
Accordingly, under Seals, the “proper inquiry” is to first look at the coverage provision in
the UIM Endorsement, and then look to the Declarations Pages definition crossreferenced by the Endorsement. Id.
Even if Seals does not control this case due to the conflict between the coverage
provisions in the Endorsement and the Declarations Pages, the Plaintiffs would
nonetheless be entitled to coverage because Virginia law dictates that ambiguous
provisions in insurance contracts be construed in favor of coverage. See Williams, 677
S.E.2d at 302. The majority opinion maintains that this principle should not apply here
because the language of the Endorsement was drawn verbatim from a form created by the
Virginia State Corporation Commission (“SCC”), which requires the Endorsement be
used for every motor vehicle policy issued in Virginia.
Virginia law does not support the majority opinion’s contention that the SCC form
abrogated the well-established rule that ambiguous provisions in insurance contracts must
be construed in favor of coverage.
Tellingly, neither the majority opinion nor the
Defendant cites a single Virginia case—nor have I found any—declining to apply this
canon. The majority opinion is correct that in Appalachian Regional Healthcare v.
Cunningham, 806 S.E.2d 380 (Va. 2017), the Supreme Court of Virginia stated that the
canon “exists in part because ‘[i]nsurance policies are contracts whose language is
ordinarily selected by insurers rather than by policyholders.’” Id. at 386 n.10 (quoting
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Gov’t Emps. Ins. Co. v. Moore, 580 S.E.2d 823, 828 (Va. 2003)) (emphasis added). But
in Cunningham, the Supreme Court of Virginia expressly declined to address application
of the canon because it found the contract at issue was not ambiguous. See 806 S.E.2d at
386 n.10. Thus, the quoted language is dicta, and, more importantly, provides no support
for the contention that the canon is inapplicable when the state drafts an Endorsement.
Indeed, given that an insurer’s status as the drafter of the contract is only a “part” of the
rationale behind the canon, Cunningham implies that other reasons would still favor
applying the canon, even when the insurer is not the drafter. Id. That would seem to be
particularly true when, as here, a state regulator has rendered a judgment as to what
language should be included in an insurance contract.
The majority opinion concludes by arguing that my reasoning leads to “absurdity”
by espousing “a public policy choice made at no place in Virginia law”—that an
automobile insurance policy “extend[s] UIM coverage to every vehicle to which it
extended liability coverage.” Ante at 17. Not so. There is no dispute that the language
of the SCC’s required UIM Endorsement defines “[c]overed auto” as “a motor vehicle . .
. with respect to which the ‘bodily injury’ or ‘property damage’ liability coverage of the
policy applies.” J.A. 104 (emphasis added). And the SCC’s requirement that insurance
contracts include this form language is amenable to at least two interpretations, neither of
which support the majority opinion’s assertion that my position leads to “absurdity.”
On the one hand, the Endorsement’s required language could be treated as the
reasoned judgment of a state regulator creating a new standard of UIM coverage, above
the minimum required by statute. To be sure, the Supreme Court of Virginia has held
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that the statute does not require UIM coverage for non-owned vehicles. See Stone, 478
S.E.2d at 886. But that does not necessarily mean that the SCC, as a state administrative
body, cannot—and did not—use the form to create a regulatory requirement above the
floor created by the statute. If that is indeed the case, the Endorsement would not lead to
“absurdity,” but would instead represent a “public policy choice” made by the
Commonwealth of Virginia, rather than one created by this Court. Ante at 17.
On the other hand, one could view the Endorsement’s definition of “[c]overed
auto” as providing a default definition from which the parties can agree to deviate
through negotiated contractual provisions. To do so, however, the contract would need to
include language clearly establishing that the parties intended to limit UIM coverage—
language which the policy at issue here lacks and which would prevent the “absurdity”
feared by the majority. Id. For example, the parties could include language in the
Uninsured/Underinsured Motorist Endorsement, the definition of ‘covered vehicles’
indicated in these Declarations controls.” Yet, the policy at issue here makes no mention
of the conflicting language in the Declarations Pages and the Endorsement, nor does it
expressly provide that the coverage language in the Declarations Pages controls.
Considering that the Endorsement, by its own terms, “CHANGES THE POLICY,” J.A.
104, the insurance company’s acquiesce to this conflict is as much evidence that the
Endorsement controls as it is to the contrary. In other words, we are left without clear
evidence as to how the parties in this case wanted that conflict resolved. We should
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therefore construe this ambiguous aspect of the contract in favor of coverage.
Williams, 677 S.E.2d at 302.
Deciding between these two possibilities is a complex question of state law not
raised by the parties in this case. As such, we are left with another level of ambiguity—
not just the internal ambiguity between the documents themselves but also the ambiguity
created by the competing positions of different branches of the Virginia government. The
majority writes its opinion under the guise of federalism, but the majority is merely
choosing to rely on language in an opinion of the Supreme Court of Virginia over
language in a form promulgated by a state regulator—form language that does not even
necessarily conflict with the state court opinion. That decision no doubt advances the
majority opinion’s policy objective. But “[a]s a court sitting in diversity, we are bound to
apply state law, not create it.” Ante at 18. We should therefore not be establishing state
policy, particularly when doing so potentially requires choosing between the policy
preferences of two different branches of state government. Rather, we should follow
undisputed state law regarding the proper approach to interpreting Virginia insurance
contracts: construe ambiguous provisions in favor of coverage. See Williams, 677 S.E.2d
This Court should recognize the multi-layered ambiguity presented by the
documents in this case and apply that canon of construction. The Plaintiffs should thus
be entitled to coverage under the policy, and the district court should be reversed.
Nothing presented by this case justifies the majority’s efforts to create an unprecedented
Pg: 29 of 29
exception to a well-established principle of state law. For these reasons, I respectfully
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