International Fidelity Insurance Company v. Western Virginia Water Authority
Filing
63
MEMORANDUM OPINION. Signed by District Judge Glen E. Conrad on 9/28/2012. (lab)
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2 65 .4 l .. s d n h s n ot r sin n , F C r u s n t o an t a t s
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y
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8 33 ha ho d
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me
diput I C' rg t t $85,23. pr vi d i ha be n pr ry r t i d i a es r
s e FI S i ht o he
8 33, o de t d e ope l e a ne n n c ow
a c t .( c e No 4- , . ) Th Auh rt ag e , o v r t t e a s Can li n
c omt Do k t . 1 Ex A. e to iy ru s h we e ,ha b c u e r el s o
l rl aly en ild t a y oft r t i d f nds I C c l m a acli f t mone
onge eg l tte o n
he e ane u , FI amot ke a m or he
y
et r TheAut iywrtsi isbreft tûatt tmeI C padFe gu on' cli Canel
ihe .
hort ie n t i ha ' l he i FI i r s s am, r l
g
onl had arg t t $35, 98t i ba a eon t c r c .TheAut iy pr de t s
y
i ht o he
865. mpad l nc
he onta t
hort ovi d hi
t adb lnc t I C o Aug s 4, 01 . ( c e No 5 a 8) Th s t eAuh rt a es i
mp i aa e o FI n u t 2 1' Do k t . 3 t . u ,h t o i v r,t
'
y
f fle isoblgai t Ca ne l a I C,i Ca nel' se d,c nnotma acai t tCa nel
ulil d t i ton o r l, nd FI n r ls t a a
ke l m ha r l
c dno .Ho ver t sa s ri ove l
oul t we , hi s e ton rookst sa e ntbyt Su e Cour ofVigni i
he tt me
he pr me
t
ri a n
XL Spec at t ta sley doe m o et n m e ey se i ot s soft prncpa .XL
i ly ha tr t
s r ha
r l tp nt he hoe
he i i l
Sp cat 2 9Va a 3 9(t j ac nr co d f ut o ab n e c n tu to c nr c,
e il 6 . t 6 tlf o ta tr ea l n o d d o sr cin o ta t a
y,
l
s
pe f m i ste y ma r ove r t i
ror ng tr t y ec r e anagehel by t o re n t ug t c r c o c ul not
d he wne ve ho h he onta t r o d
rcove s hrti . A s eyhasrg st t rti df ndst ta editnc fom, nd
e r uc eanage'
). urt
iht o he eane u ha r si t r a
gr t rt n,t e oft c r c or I ;s e a s Fi lt & Cas Co.v.Cone ve Cont a tnc
ea e ha hos
he onta t . d. e l o de iv
.
nha r
r ci
Co.1 9Va 1 6 1 9 4 ( 9 2 (( h szeyi e t ldt b s b o ae t t rg t whc
, 5 . 2 , 3 - 0 1 3 ) t T) e l t s n ie o e u r g td o he ih s ih
(
r
t
t o i ha t orco d a s ta i t s h f
he blgee d o,
ul s er ga ns, uc undsupon t prncpa c r t ' de a tt
he i i l ontacor s f ul o
t e e ne sayt r i reis ff t outa ma t c eet c r t' .
he xtnt ce sr o embu s tel or he ly de o omplt he ontac.)
'
M or ove ,l C' r g st t e ie ba a e oft co r c w e e e t bls d on t da e
e r Fl s i ht o he ntr l nc
he nt a t r s a ihe
he t
i i s t bond. Se W es e n Ca ua t & Sur t 36 F. a 489- The f tt tCa nel
t s ued he
e
t r s lv
e v, 2 2d t
90.
ac ha r l
7
i o ry r ceve t Contac Re ana a
mpr pe l e i d he
r t t i ge mounta trt Bond wasi s d snotdi nih
fe he
s ued oe
mi s
I C' pr e si rg st t s f .
FI S e- xitng iht o ho e unds
Suc ar ul i s
h es t s uppore b t polc r a o unde l i t prncpl ofe t e
td y he i y e s ns
ry ng he i i e quiabl
s ogai a wel. Sur te ,lkebond oblg s r quiepori nsofc r t lpa
ubr ton s l
e is i
i ee , e r
to
ontac ua yment t be
so
rti e i o d rt ic n iieac nrco t fns wo ko ap oe t Hee I C wa a
ean d n r e o n e tv z o ta tr o i ih r n rj c. r ,FI s
sgna or t t Es r Agr e e r ii t tfvepe c ntoft co r c prc ber t ne i
i t y o he c ow
e m nt equ rng ha i
re
he nta t ie eai d n
aspaaea c t u tl fe tePrj c ' c mpein Th I d mni Ag e me t p cfc ly
e rt c omt n ia tr h oe ts o lto . e n e t r e n s e iial
y
m e i ne t tI C woul ha rgh st t r ui d f
nto d ha FI
d ve i t o he e ne undsi e hangef isa ee ntt
n xc
or t gr me o
bond Car l. Sur te lke I C r l on t c l tr lt obt i fom e c ow a e nt i
nel
e is i FI e y he olae a hey an r s r gr eme s n
dec d ng whe he t bond con r c o s a t y ar e il t t r t i d f
ii
t ro
t a t r , nd he e ntted o he e a ne undsi t prnci l
f he i pa
def uls
a t.
The Aut iy ar ue t tI C ha no cl i t t Cont a tRe a na unl si c n s
hort g s ha FI s
a m o he
r c t i ge es t a how
t tt Aut iy ç t ral at r 'I C' c r c wih Cn ne lt s h a e e t tI C
ha he hort i e i ly le ed' FI S onta t t r l o uc n xt nt ha FI
ma
wa dic r d fo isoblgai unde t Bo
s s ha ge r m t i tons
r he nd.I C de e t scai by a g ngt tt
FI f nds hi l m
r ui ha he
A ut iy' f iur t es a i h t es r a co n ount d t a m a e i a t r ton oft
hort s a l e o t bls he c ow c unt m
e o
t ral le a i
he
co r c . ' H ow ever,t si s m or pr ry bel
nt a t
hi s ue
e ope l
ongsi t a l i ofI C' dem a f t
n he na ys s FI S
nd or he
'l s
n uppor oft sa gumentI C p rplae teRettmett id o St tsi a dGu rn vj 7
t hi r
, FI aa l ss h
r
sae n Thrl f tevhp n aa t 3 :
r
( )I teo l e (ee WVW A)at t ice s tesc nd r o lg rs(ee I C)rs o ls
1 f h bi e h r ,
g
cs o n rae h e o ay bio' h r, FI ik f os
b ...d cesn i p tnila ii t c u etepicp lo l o (ee Can l t b a te
y
e raig t oe ta bly o a s h rn ia bi r h r, rel o e r h
s
t
g
j
c sso p roma c ,h sc n m' o l o (FQ i dsh re .. a dtesc n ay o io
ot f efr n e te e o d y bi r II s ic ag d . n h e o d r bl r
g
g
(FI h sacam a an th o lg e( VWA). .
I C) a li g is te bie W
.
( )l teo ie (
4 f h bl e WVW A)i iste sc n ayo lg rs(Fl s s rt sau (n ti c s
g
mpar h eo d r bio ' I C') uey tts i hs ae
tru h p e tr p y n o tertia et tdsiae I C' c laeaj...b)beoete
ho g rmaue a me t f h ean g ha isp td FI S oltrl ( fr h
s c n m' o l o (FI p ro ms a p ri n o t e s c nd r o l to E t i c s p y n
e o d y b i r I C! e f r
g
o t f h e o ay b i in i h s a e a me t
o
ga
n
t F r u o ,fh s c n ayo l o (FQ te p roms . .
o eg sn)ite e o d r bi r I I h n efr : .
g
(i frtebe ei o a itn e b n fcay (ee F r uo )wh c n e fre tesc n ay
i o h n ft f n ne d d e eiir h r , eg sn o a n oc h e o d r
)
o iainnowi sa dn sc i ar n : . tesc ndr o l o (FI h sacam a ant
bl to t t tn ig u h mp ime t . .h e o ay bi r I C) a li g is
g
h
g
te o ie (
h bl e WVWA)wih rs c t s c p roma c t te e tn t ts c i ar n
g
t epet o u h efr n e o h xe t ha u h mp ime t
wo dh v dsh r e tesc n ayo io (FI wi rs e tota pef r n e
ul a e ic ag d h e o d r bl r I C) t ep c t h t roma c .
g
h
( c e No 5la 1 )
Do k t . t 2.
$28 5 44 unde t Pa ntBo Cl i ,Dee mi ng whe he t Aut iy m ae i ly
6,71.
r he yme
nd am
tr ni
t r he hort t ral
c s r n t i hi Fl s i s n he nt a t t na
a t r d t co r c 2i unne es a y i esabls ng l C ' rght i t Co r c Re ai ge, w hi h
le e he nt a t s
c
a e s part fom isc r c rght a whih ve td t dae i is d t Bo t Ca ne l
r e ae r t onta mal i s nd c se he t t s ue he nd o r l.
SeeXL Specaly, Va. t369(t t l Subog i i s r tont aiesbyopeai
i t 269 a
d abe r aton s ubogai hat rs
Equi
rton
oflw .l i notba ed o c r c orprviy ofpa tes b i pu ey e t bl i naur ,
a ts
s n onta t
it
ri , ut s r l quia e n t e
d p n e to tefcsa dcrl tn e o e c p riua c s .)( u tto mak a d
e e d n n h a t n icl a c s f a h a t lr a e' q oain r s n
ms
c
'
ctto so te ) seas Me hs& L. R. Do 1 U. 28 3 - 2( 8 7 (ç erg t
iain mi d ; e lo mp i
t
R. v. w, 20 S. 7, 010 1 8 ) s ih
Th
ofs oga i i notf mdedon c r c . I i a c e t e ofe t i e or e s e y f t
ubr ton s
ot
onta t t s r aur
quiy; s nf c d oll or he
pupo eo a c mpls igtee d o s b tnilusie a i i d pe d n o a yc nr cu l
r s f c o ihn h n s f u sa ta j tc ; nd s n e n e t f n o ta ta
r ltonsbewee t pa tes' Thec ur c l est tI C wase ildt t $85, 33
eai
t n he ri .
l.
o t oncud ha FI
ntte o he 823.
Con r c Re nag a s asCn n l de a t d,a t wilgr ntI C' moto f s
ta t ui e s oon
r e l f ule nd hus l a FI S in or umm a y
r
j d me to ta cam.
u g n n h t li
l.
l
Paym entBond C l m
ai
Tt i now t t i s ofm a e i la t r to I C a s s e r i b s m e f t
l ng
m
o he s ue
t ra le a i n, FI l o e ks e m ur e nt or he
$286, .4 pa nti m a t Fe gus n, g ngt tt Aut rt sf iu et pr ry r t i
5714 yme t de o r o ar ui ha he ho iy' al r o ope l e a n
c r tpa e sdic r ed I C' o i tonsasa sle y.I C a s t t ti i e ild t
ontac ym nt s ha g FI S blga i
tr t FI s ers ha t s ntte o
r i btr e e bec us ,ha i known t tt co r c r t i ge w a no be ng w ihhel by t
e m z s m nt a e d t
ha he nt a t e a na
s t i
t d
he
A ut iy,I C w oul have r f e t pa Fe gus sbo cl m .
hort FI
d
e us d o y r on' nd ai
The e i pr e ntunde Vigi al w and es whe ef t pr ii t ta oblgee'
r s ec de
r r ni a
le r or he oposton ha n i s
a tonsi vi ai n ofa c r c bewe n a owne a aco r c o wil i c rai
c i n olto
onta t t e n
r nd
nta t r l,n e t n
crumsnnc , s r aszeyfom iso i tonst pa t c r corsde .çgl t
ic f es dichage trt r t blgai o y he onta t ' bt çlf he
ow nerand cont act engage i pr i t cons iut a m at i change i t cons ructon
r or
n actces hat
tt e
er al
n he
t i
cont actpr sons and t contac ors
r
ovi i ,
he
r t ubsequenty def t on t cont act,t s et i
l
auls he
r
he ur y s
2Thi is i dic s d i
s s ue s s us e nga a I.B.i
t l i.
e il t adic r ofisoblgai t payt c r c orsdeb . XL Spe i lv,269Va. t
ntted o s ha ge t i tons o
he onta t ' t'
'
c at
a
3 0(iigSo t wo dBui e s l c v. e re sI s Co.2 5Va 1 4, 6871( 98 )) e as
7 ctn uh o
l r ,n . P els n . , 3 . 6 1 - 1 8 ) s e lo
d
Lu eme sM uu lCa u lyCo v. S.6 4F. d 1 5 1 4( e . r 2 1 (g e
mb r n ta s at . U. , 5 3 30 , 31 F d Ci. 01 ) çon )
ç
g o n f rd sh r e. .sta t eo lg eh sprj dc dtes rt b i o ryma ige ry
r u d o ic a g . i h t h bie a eu ie h uey y mprpel kn a l
c r c pa e s o ov pa e st t prnc paloblg i a m n ri ons s e wih
ont a t ym nt r er ym nt o he i i
i or n
nne nc it nt t
s e ii p y n she ue , o dto s o rtia ep o so i t eb n e c nr c.
p cfc a me t c d ls c n iin , r ean g r viins n h o d d o ta t).
'
W hehe t oblge sa tonsc tt eama e i ale a i i ba e a l a ti pa ton t g
t r he i e' c i
onsiut
t ral t r ton s s d t e s n r
he ood
f i o tep ry.S eP a k& W htet I c, 5 Va a 1 (d qe tesley i r q rdt
at f h at e ln
h
ist n .1 9 . t 7 EW h n h t t s e uie o
l
r
m a r i bur e nt f a l soc sone by t de a toft prncpa ,i hasarg t
ke em s me s or os ca i d he f ul he i i l t
iht o
r quiet owne st s how a i wha m n rt ha pe f me t i pa toft
e r he
r o how
nd n
t nne hey ve ror d her r he
c r c .... oblge i t bond i no onl r quiedt e r ie go f ih wiht sley
onta t
The i e n he
s t y e r o xe c s od at t he tr t
a t tmet oblgai nsa ea s e butt sgood f ih m us beke i olt i a l
t he i he i to r s um d, hi
at
t
pt nvi a e n 1
s e ntta a tonsa f c i t i rg sa oblgai nsc eae by t c r ta t
ubs que r ns c i
fe tng her i ht nd i to r t d he ontac nd he
bond.)
'
'
Ca e i whc as rt ' o iai n h v be nds h r e g n r lyiv leaprj c
ss n ih u ey s bl to s a e e ic ag d e e al n ov o e t
g
owne pr payi orove pa ng o a c ta tt s h a e e t ti m ae ily at r d t
r e ng
r yi n on r c o uc n xtnt ha t tra l le e he
szey' rg t a de p cai n b rd cn t ec nr co ' ic n iet c mpeeisp o e ti a
l t s ih s n x e tto s y e u ig h o ta trs n e tv o o lt t rj c n
r
tm ey a s tsacor m n r Se Contnen a I Co. Ciy ofVa.Be c 908F.Supp.
i l nd ai f t y nne . e
i t l ns. v. t
a h,
341
( D. . 9 5 (id n t a p e y n o o e hafteo ii l o ta ta t c n tttda
E. Va 1 9 ) fn i g h t rpa me t f v r l h rgna c nr c momt o si e
u
C t ilvarai ' t c r c t dic r edt s eyfo isoblgains;Sout
ç era iton'of he onta that sha g he urt rm t i to )
ma
hwood
Buides 235Va.a 1 71(i ngt to pa
l r,
t 70- fndi ha ve ymen of$31, 0ona o i na conrc of
t
00
n rgi l ta t
$79, mno e t amaei atrto t tdic r edt s ey' o i tons.Subsani
500 untd o
tral leain ha sha g he ur t s blgai )
t tal
pr pa e di i s a ke pi ce oft c l t a a s e y co i er w he i de i st e e
e ym nt m nihes
y e
he ola er l ur t ns d s
n t c de o nt r
10
i t abond ag ee ntwih aco r cor M a pa ntbo ,i udi t o a is i t s
no
r me
t
nta t . ny yme
nds ncl ng he ne t s ue n hi
ca e i or r t t unde l ng c t c i co r c i t t bond a ee e ,t r by of e i
s , nc po a e he
ryi ons nz ton nt a t n o he
gr m nt he e
f rng
s c t t t s r t t tt c r c orwilnotdeful on isoblgai t s onta t s.
e miy o he u ey ha he onta t
l
a t t i tons o ubc r cor
( c e No. - a 1)
Do k t 1 3 t .
I t sca e t m a e i la t r ton a l ed i t t e ym e ' oft pori oft
n hi s , he t r a le a i leg s he d pa nt' he ton he
pr
c r c t ts dhavebe r t i d i es r On at t lco r c prc ofo r$1. m ilon,
onta t ha houl
en ea ne n c ow.
o a nta t ie ve 8 li
$85, 23. - r h1 fvepe c nt wa pr ma ur l dibt s t Ca n l. Thecour fndst s
8 33 0ug y i r e - s e t ey s l ed o r e l
r
t i hi
s a lrs i s t nta l dipr tonaet t muc l r rn o si vol d i t e c s s
m le um s ubsa ily s opori t o he
h a ge m unt n ve n hos a e
i whih t s ey' oblg i wer de m e t ha bee dic r d.I bot Sout
n c he ur t s i atons e e d o ve n s ha ge n h
hwood a
nd
Contne a ,t c r notd t sg fca sz o t pa m e si r ai t t o i na
i ntl he ou t e he inii nt ie f he y nt n elton o he rgi l
c r c i deenui ngt tt c r csha be n m ae i ly atr bypr pa e .The
onta t n t ni ha he onta t d e
t ral le ed
e ym nt
r ltve i i fc nc oft $85823, i c
ea i nsgnii a e he , 33 n ompa ion t t t a c r c prc i t sc e
rs o he ot l onta t ie n hi as
m iia esag ns fndi a m a e i la t r ton.
lt t
ai t i ng
t ra le a i
Addii nal t r i no s
to ly, he e s howi ofba f ih onbe l oft Aut rt i f ii t
ng
d at
haf he ho iy n alng o
r t i t s s TheSupr meCour ofVigi aha i i d t tba f ih die t d a t s ey
e an he um .
e
t
r ni s mple ha d at r c e t he ur t
i no ne s a y t a s w i ofm a e i la t r ton. Se Sou hwood Buide s 235 Va. t 1
s t ce s r o ho ng
t r a le a i
e t
l r,
a 70
(A spaaes o ngo p eu iet t es rt i ume e s r b c u eamaeil e ito i
ç e rt h wi f rj dc o h u ey s r c say e a s
t
tra d v ain,n
isl, sa ls ss fiin p eu ie' .Ho v r i e au tn maeil leaincams i i
tef e tb ihe u fce t rj dc .) we e ,n v laig tra atrto li ,t s
'
c ea t ts m e c t ha c i r d w he he t oblge a t ly t ok i o ac ountwha ef e t
l r ha o
our s ve ons de e
t r he i e c ua l o nt c
t fc
pr pa ntwo d ha ont rght oft s ey.l Con i nt l t Cour not d t tt
e yme
ul ve he i s he ur t n
tne a ,he
t e ha he
oblge wasunc
i e
once ne a tpa ng t co r c orea l orf de ec i w or be us d he
r d bou yi he nt a t
ry or f tve
k ca e k
t
s t wo l awa sb a alb et c mpeet ej ba do p yf rt rp is' 9 8F. p . t
mey ud l y e v ia l o o lt h o n /r a o he e ar. 0 Su p a
'
348. The Cour f
t ound t oblge sc pl e l c ofc e n f w he herpr pa e t t
he i e' om et a k
onc r or
t
e ym nt o he
c nr co wo l d so r g i fo c mpeigtej b as t b ssf rds h r i gt esley'
o ta tr ud ic u a e t r m o ltn h o omd a i o ic ag n h t t s
r
oblgai .l ;seas Plnk& W his t,15 Va a 1 (e rngoblgee t e r s I
i tons d. e lo n
tet 9 . t 7 rquii
i s o xecie t
good
fih'wihr pec t t szey' rght t
at ' t es t o he lrt s i s koughou t pe i c rdbyt bo .
t he rod ovee
he nd)
I C m a no a lga i he e, doe i a
FI
kes le ton r nor s t ppea fo t f cst ti c ul t tt
r r m he a t ha t o d, ha he
Aut rt aced i ba f ih i f ii t e lr t tt e c ow a oun ha be n esa ihe
ho iy t n d a t n alng o nsze ha he s r cc t d e tbls d.
W hi hpa t i uli e yt bl f t tm itkei t is oft t r pary c
c ry s tmatl o ame or ha sa s he s ue he hid- t ompl i ,bu i
ant t t
a ar t tunde no cic s a esw a t Aut rt a hi m o e t n ne i e i is
ppe s ha
r
r um t nc
s he ho iy nyt ng r ha glg nt n t
a tonsc e ni t es r w a ot . Thus t que ton oft Aut rt sg f t i
ci
onc r ng he c o cc mt
, he si
he ho iy' ood aih n
ha i t unde l ng c r c alowe g a i tfndi ama e i lat r ton.
ndlng he
ryi onta t s i hs ga ns i ng
t ra le a i
La ty,I C i ac
sl FI s ompe ae s ey, nd s d bee t t s f rs ers whe i
ns td ur t a houl
xpeced o ufe om iks n t
a e t apa ntbond c r ct Se C. Luc & Sonsv. t i ht 1 Va. 0, 95
gr es o
yme
onta . e S. k
Boawrc , 57
49 494-
( 9 2 (tt eisf rhr aen t r sof h c u tobes ile fo h e lsn s o f ly
1 3 ) C l te o ie r o wad t e o r t h ed d r m e de s e s r o l.
sr
The mus a deby t rc r c sa pa e r hi whi hby f i i e
y
t bi
hei onta t nd y ve yt ng c
ar nt ndmen c n bec r d
ta
ha ge
a ans t e '.I C c n a tdteAuh rt b f r ma i isp y n t F r us na
g i t h m.) FI o tce h t o i e oe kng t a me t o e g o nd
'
y
ds o ee t thermann b ln eo t c nr c ttld$1 96 931(h $8 ,2 3 ta
ic v r d ha t e iig aa c n he o ta t o ae 1 ,8 . te 58 3.3 h t
s dhavebe nrti dpl t $ 8 98t twa e nmalypadt I C) Thus a t
houl
e eane us he 33,65. ha s ve l i o FI .
, t he
tm e i pai Fer us I C c d notha e c e t ta hi m or t n t s a ot tw oul
i t d g on, FI oul
ve xpe t d ha nyt ng
e ha hi m m
d
be a ia e s di lt rs k t c risl s so t pa ntbo Thea r oft
val bl houl t ae ee o ove t os e n he yme
nd.
wa d he
$85, 23. on t Co r c Rea na c am plc I C i e c l t poston i e c e t be
8 33 he nta t ti ge l i a es FI n xa ty he ii t xpe t d o
i be o e m a ng t pa e t Fe g on.
n fr
ki he ym nt o r us
Aft consderng t s al si oft pr
er
i i he m l ze he epaym entnm ount asw el as t i entonsand
,
l he nt i
e
xpec a i oft pa test o houtt dipu e t co tfndst tt Aut iy' f iur t
t tons he r i hr ug
he s t , he ur i ha he hort s a l e o
12
r t i apori oft Conta tprc di nota
e an
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