The Monongalia County Development Authority v. The Traveler's Indemnity Company of Connecticut et al

Filing 47

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS 35 MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS 37 MOTION FOR SUMMARY JUDGMENT. Pursuant to Federal Rule of Civil Procedure 58, the Clerk is DIRECTED to enter judgmenton this matter. Signed by Senior Judge Frederick P. Stamp, Jr on 3/27/2019. (copy counsel of record)(jmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
THE MONONGALIA COUNTY
DEVELOPMENT AUTHORITY,
Plaintiff,
v.

Civil Action No. 1:18CV22
(STAMP)

THE TRAVELER’S INDEMNITY
COMPANY OF CONNECTICUT,
THE TRAVELER’S
INDEMNITY COMPANY,
THE PHOENIX INSURANCE COMPANY
and THE TRAVELER’S INSURANCE
COMPANY,
Defendants.

MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
I.

Background

The plaintiff, The Monongalia County Development Authority
(“MCDA”), originally filed its complaint in the Circuit Court of
Monongalia County, West Virginia.
The

Phoenix

Insurance

Company

ECF No. 1-2.
(“Phoenix”)

and

The defendants,
The

Travelers

Insurance Company (“Travelers”), timely removed the civil action to
this Court.1
provided

ECF No. 1.

insurance

under

The plaintiff alleges that it was
a

policy

for

the

Monongalia

County

Commission (“County Commission”) sold and serviced by the Dyer

1

At oral argument, on March 22, 2019, counsel for the
plaintiff indicated that it is his understanding that “Phoenix is
a wholly owned subsidiary of Travelers, or at least a related
company, and they jointly market and serve insurance.” Counsel for
the defendants did not object to this characterization, and stated
“Phoenix is a subsidiary of the Travelers umbrella.”

Insurance Group (“Dyer”).

ECF No. 1-2 at 7.

MCDA was also

allegedly insured under a separate Travelers policy.

Id.

SouthCo Development LLC (“SouthCo”) had previously filed a
civil action against MCDA.

The plaintiff contends that the

Id.

County Commission, on behalf of MCDA filed a claim under Travelers
Policy #ZLP-14T25627 seeking indemnification and defense from
defendants in the SouthCo action. Id. at 8. The plaintiff further
alleges that Phoenix summarily denied coverage under that policy,
and transferred the claim to Travelers Policy #680-241L2418.

Id.

Travelers purportedly denied the claim stating that the alleged
injury did not fall under the coverage, and that Phoenix later
provided a detailed denial of coverage under Travelers Policy
#ZLP-14T25627. Id. Phoenix allegedly determined that MCDA was not
entitled to insurance coverage since it was not a “board” of the
County Commission.

Id.

The plaintiff alleges claims based on

breach of contract, unfair trade practices in violation of West
Virginia Code § 33-11-1, et seq., bad faith, and promissory
estoppel.

Id. at 8-13.

The plaintiff seeks damages, interest,

attorneys’ fees, and all costs of the action.

Id. at 13.

On October 26, 2018, the defendants filed a motion for summary
judgment.

ECF No. 35.

The defendants assert that the sole issue

in this case is whether MCDA would constitute a “board” and,
therefore, would be insured under the County Commission’s policy
with Phoenix.

ECF No. 36 at 10.

The defendants cite the insurance

contract language which defines “board” as “any board, commission,

2

or other governmental unit or department that: (1) is under your
jurisdiction; and (2) is funded and operated as part of your total
operating budget.”

Id. at 11.

The defendants conclude that MCDA

is not an insured under the Public Entity Management Liability
Coverage Form of Phoenix’s policy insuring the County Commission,
because it is not under the County Commission’s jurisdiction, and
is not funded and operated as part of the County Commission’s total
operating

budget.

Id.

For

support

that

MCDA

is

a

public

corporation which is not under the jurisdiction or control of the
County Commission, but rather is an autonomous public corporation
managed and controlled by its board of members, defendants cite the
following:

the enabling statute for the Development Authority, W.

Va. Code § 7-21-1, et seq., the Development Authority Bylaws, the
County Commission Jurisdictional Statute, W. Va. Code § 7-1-3, et
seq., and the testimony of MCDA’s corporate designee.
11-15.

Id. at

Moreover, defendants assert that the doctrine of estoppel

cannot extend insurance coverage since there was no representation
of

coverage

made

by

Phoenix

or

its

agent.

Id.

at

18-23.

Defendants further contend that the terms set forth in the SouthCo
complaint are excluded by the terms of Phoenix’s policy insuring
the County Commission.2

Id. at 23-34.

2

After the defendants filed a motion for summary judgment (ECF
No. 35), counsel for the plaintiff and counsel for the defendants
filed a stipulated dismissal without prejudice of The Traveler’s
Insurance Company of Connecticut and The Traveler’s Insurance
Company as parties in the above-styled action. ECF No. 7. This
Court approved that stipulation. ECF No. 39.
3

Plaintiff filed a response in opposition to defendants’ motion
for summary judgment.

ECF No. 41.

In its response to defendants’

motion for summary judgment, plaintiff asserts that there are
factual issues that preclude ruling on coverage, namely that
defendants’ representatives were found to have affirmatively stated
to the County Commission that MCDA was covered by the policy.
at 3-5.

Id.

Plaintiff further contends that MCDA falls under the

County Commission’s jurisdiction, arguing, among other things,
that: (1) MCDA is a creation of the County Commission, (2) that the
County Commission is the only entity that is capable of appointing
or removing members from MCDA’s Board of Directors, and (3) that
certain expenditures of development funds require the approval of
the County Commission. Id. at 6. Next, plaintiff argues that with
regards to funding, there is no policy provision requiring that the
entirety of funds spent by MCDA come from the County Commission or
a provision that defines funding.

Id. at 8.

Referencing the

County Commission’s annual budget, plaintiff asserts that the
County Commission provides funding to MCDA in a variety of ways.
Id. at 8-9. Plaintiff further contends that defendants have waived
the right to raise other policy exclusions, because they failed to
list the exclusions in its declination of coverage letter that
found MCDA not insured under the County Commission’s policy.
at 13-16.

Id.

Lastly, plaintiff asserts that, with respect to the

underlying claims in the SouthCo civil action, the negligence

4

claims are distinct enough from the contract claims under West
Virginia law to allow for coverage.

Id. at 18.

Defendants then filed a reply to plaintiff’s response in
opposition to defendants’ motion for summary judgment. ECF No. 42.
In their reply, defendants state that there are no material issues
of

fact

precluding

expectations

or

summary

estoppel

judgment

claims

for

on

MCDA’s

coverage.

reasonable
Id.

at

2.

Specifically, defendants state that MCDA failed to provide proof of
a representation, to offer any evidence of prejudice, and that it
had been issued a separate policy of insurance through Travelers
from 2001 to 2016, in which it had property coverage and general
liability coverage on a building that it owned and out of which it
operated. Id. at 2-5. Next, defendants reiterate that MCDA is not
under the jurisdiction of the County Commission and is not funded
and operated as part of the County Commission’s total operating
budget.

Id. at 6.

Specifically, defendants indicate that MCDA

failed to address: (1) the County Commission’s jurisdictional
statute that fails to specifically list MCDA; (2) MCDA’s broad
range of powers granted by statute; (3) that MCDA is a legal entity
being a public corporation by statute; and (4) that the County
Commission does not have the power to manage and control MCDA. Id.
at 7-8. Moreover, defendants state that plaintiff fails to explain
how MCDA is operated out of the County Commission, and to provide
sufficient evidence of funding that it received that enables it to
function.

Id. at 8.

Defendants further argue that principles of

5

contract interpretation do not support a finding that MCDA is
Id. at 10.

insured under the County Commission’s policy.

In

response to plaintiff’s argument that defendants waived their right
to raise other policy exclusions, defendants note that Phoenix
determined

that

MCDA

was

not

an

insured

and

so

those

other

potential exclusions were moot and that MCDA’s attempt to create
coverage by an implied waiver runs against law set forth in Syl.
Pt. 6, Potesta v. United States Fid. & Guar. Co., 202 W. Va. 308,
504 S.E.2d 135 (1998), which held that an implied waiver could not
be used to extend insurance coverage beyond the terms of the
insurance contract. Id. at 11. Lastly, defendants assert that the
underlying claims in the SouthCo civil action are barred by breach
of contract, fraudulent conduct, and unlawful personal gains policy
exclusions.

Id. at 11-13.

Plaintiff also filed a motion and memorandum in support of
summary judgment on the issue of insurance coverage.
and 38.

ECF Nos. 37

First, plaintiff asserts that insurance coverage was

denied based upon an erroneous belief that MCDA is not funded or
under the jurisdiction of the County Commission.

ECF No. 38 at 4.

With respect to the jurisdictional issue, plaintiff asserts that
the County Commission created MCDA, is the sole entity capable of
appointing and removing members of the Board of Directors of MCDA,
and that certain expenditures of development funds require the
explicit approval of the County Commission.

Id. at 5-6.

With

respect to the funding issue, plaintiff contends that MCDA is

6

funded by the County Commission in a variety of ways (i.e. grants
of real estate and the partial payment of the salary of MCDA’s
director).

Id. at 9-12.

Plaintiff also references the County

Commission’s annual budget to support its conclusion.

Id. at 13.

Plaintiff then states that coverage exists even if MCDA is not a
“board” under the policy, because MCDA and the County Commission
reasonably expected insurance coverage.
Defendants

Phoenix

and

Travelers

Id. at 12-19.
filed

a

memorandum

in

opposition to plaintiff’s motion for summary judgment on the issue
of insurance.

ECF No. 40.

First, defendants assert that MCDA is

not insured by Phoenix since it is not under the jurisdiction of
the County Commission and since MCDA is not funded and operated as
part of the County Commission’s total operating budget.
6-16.

Id. at

Second, defendants argue that the doctrine of reasonable

expectations does not afford coverage to MCDA under the County
Commission’s policy. Id. at 16. Specifically, defendants refer to
plaintiff’s complaint which alleges a claim based on promissory
estoppel.

Id.

at

19-20.

But,

even

if

asserted

correctly,

defendant contends that MCDA has not met the elements under either
estoppel or the reasonable expectations doctrine.

Id. at 20-25.

Plaintiff then filed a reply to defendants’ response to
plaintiff’s motion for summary judgment on the issue of insurance.
ECF No. 43.

First, plaintiff asserts that MCDA is under the

jurisdiction of the County Commission and that it is funded by the
County Commission; therefore, it qualifies as an insured under the

7

Policy.

Id. at 2-6.

Second, plaintiff asserts that defendants
Id. at 6-9.

raised factual issues that preclude summary judgment.

By court order, counsel for the parties appeared before the
Court to present oral argument on the fully briefed motions for
summary judgment on March 22, 2019.

See ECF No. 44.

For the reasons set forth below, defendants’ motion for
summary judgment is granted and plaintiff’s motion for summary
judgment is denied.
II.

Applicable Law

Under Federal Rule of Civil Procedure 56(c), summary judgment
is

appropriate

if

interrogatories,

and

“the

pleadings,

admissions

on

depositions,
file,

answers

together

with

to
the

affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law.”

The party seeking summary judgment bears the

initial burden of showing the absence of any genuine issues of
material fact.
(1986).

See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23

“The burden then shifts to the nonmoving party to come

forward with facts sufficient to create a triable issue of fact.”
Temkin v. Frederick County Comm’rs, 945 F.2d 716, 718 (4th Cir.
1991), cert. denied, 502 U.S. 1095 (1992)(citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)).
However, as the United States Supreme Court noted in Anderson,
“Rule 56(e) itself provides that a party opposing a properly
supported motion for summary judgment may not rest upon the mere

8

allegations or denials of his pleading, but . . . must set forth
specific facts showing that there is a genuine issue for trial.”
Anderson, 477 U.S. at 256. “The inquiry performed is the threshold
inquiry of determining whether there is the need for a trial —
whether, in other words, there are any genuine factual issues that
properly can be resolved only by a finder of fact because they may
reasonably be resolved in favor of either party.”

Id. at 250; see

also Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir.
1979) (Summary judgment “should be granted only in those cases
where it is perfectly clear that no issue of fact is involved and
inquiry into the facts is not desirable to clarify the application
of the law.” (citing Stevens v. Howard D. Johnson Co., 181 F.2d
390, 394 (4th Cir. 1950))).
In Celotex, the Court stated that “the plain language of Rule
56(c) mandates the entry of summary judgment, after adequate time
for discovery and upon motion, against a party who fails to make a
showing

sufficient

to

establish

the

existence

of

an

element

essential to that party’s case, and on which that party will bear
the burden of proof at trial.”

Celotex, 477 U.S. at 322.

Summary

judgment is not appropriate until after the non-moving party has
had sufficient opportunity for discovery.

See Oksanen v. Page

Mem’l Hosp., 912 F.2d 73, 78 (4th Cir. 1990), cert. denied, 502
U.S. 1074 (1992). In reviewing the supported underlying facts, all
inferences must be viewed in the light most favorable to the party

9

opposing the motion.

See Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986).
III.

Discussion

A.
MCDA is not an insured under the Public Entity Managment
Liability Coverage Form of Phoenix’s policy insuring the County
Commission
In this case, plaintiff MCDA contends that it was entitled to
indemnification and defense under an insurance policy issued by
defendants.

The County Commission’s Public Entity Management

Liability Policy Coverage Form insuring agreement contains the
following provisions:
SECTION I - PUBLIC ENTITY MANAGEMENT LIABILITY COVERAGE
1.

Insuring Agreement
a.
We will pay those sums that the insured
becomes legally obligated to pay as damages
because of loss to which this insurance
applies. We will have the right and duty to
defend the insured against any claim or ‘suit’
seeking those damages. However, we will have
no duty to defend the insured against any
claim or ‘suit’ seeking damages because of
loss to which this insurance does not apply.
We may, at our discretion, investigate any
‘wrongful act’ or claim and settle any claim
or ‘suit’.
b.

This insurance applies to loss only if:
(1) The loss is caused by a
‘wrongful
act’
committed
while
conducting duties by or on behalf of
you or ‘your boards’;
(2) The ‘wrongful act’ is committed
in the ‘coverage territory’,
(3) The ‘wrongful act’ was not
committed before the Retroactive
Date shown in the Declarations of
10

this Coverage Part or after the end
of the policy period; and
(4) A claim or ‘suit’ by a person
or organization that seeks damages
because of the loss is first made or
brought against any insured, in
accordance with Paragraph c. below,
during the policy period or any
Extended Reporting Period we provide
under
Section
VI
–
Extended
Reporting Periods.
ECF No. 37-4 at 2 (emphasis omitted).
SECTION II - WHO IS AN INSURED
1.
If you are designated in the Common Policy
Declarations as a pubic entity, you are an insured.
‘Your boards’ are also insureds. Your lawfully elected
or appointed officials, ‘executive officers’ or directors
are also insureds, but only with respect to their duties
as your elected or appointed officials, ‘executive
officers’ or directors.
2.

Each of the following is also an insured:
a.
Your ‘volunteer workers’, but only while
performing duties related to the conduct of
your business, and your ‘employees’, but only
for acts within the scope of their employment
by you or while performing duties related to
the conduct of your business.
b.
Members of ‘your boards’, but only for
the conduct of their duties for you or for
‘your boards’. ‘Employees’ of ‘your boards’
are also insureds, but only for work done
within the scope of their employment by ‘your
boards’, or their performance of duties
related to the conduct of the operations of
‘your boards’.
c.
Any legal representative of an insured
that has died, or become mentally incompetent,
insolvent or bankrupt, but only with respect
to duties as such. That representative will
have all the rights and duties of such insured
under this Coverage Part.

11

3.
Any of your lawfully elected or appointed officials,
‘executive officers’, directors or ‘employees’, or any
members of ‘your boards’, appointed at your request to
serve with an outside tax exempt entity will be deemed to
be acting within the scope of their duties for you.
Id. at 6.
“Your boards” is defined under the policy to mean:
36.

‘Your boards’:
a.
Means any board, commission, or other
governmental unit or department that:
(1)
and

Is under your jurisdiction;

(2) Is funded and operated as part
of your total operating budget.
Id. at 14 (emphasis added).
1.
Whether or not MCDA is funded and operated as part
of the County Commission’s total operating budget is
unclear due to contract ambiguity
As

stated

Management

above,

Liability

the

Policy

County

Commission’s

Coverage

Form

Public

insuring

Entity

agreement

defines the term “board” as partly one that “[i]s funded and
operated as part of your total operating budget.”

Id.

When

considering this term in light of the rest of the policy, the Court
finds this provision ambiguous.
The phrase “is funded and operated as part of your total
operating budget” is not defined by the policy and is reasonably
susceptible to multiple meanings. To qualify under this provision,
does

MCDA

Commission?
to MCDA?

have

to

receive

direct

funding

from

the

County

Or can the County Commission provide indirect funding
Does MCDA have to be totally funded by the County
12

Commission or can it be partially funded?

Based upon the words of

the insurance policy alone, it is impossible for this Court to
determine what is meant by the phrase “is funded and operated as
part of your total operating budget.”
Moreover, at oral argument, counsel for both parties indicated
that they have not found any case law, treatise, or other authority
to clarify the ambiguity in “funded and operated.”
Therefore, the ambiguities in the policy’s definition of “your
boards” with respect to “is funded and operated as part of your
total operating budget” creates a question of fact as to the
objectively

reasonable

expectations

insurance contract was entered into.

of

the

parties

when

the

However, the next section of

this opinion explains why despite this ambiguity, this Court finds
MCDA is not an insured under the Public Entity Management Liability
Coverage Form of Phoenix’s policy insuring the County Commission.
2.
MCDA is not “under the jurisdiction” of the County
Commission
Although

the

Public

Entity

Management

Liability

Policy

Coverage Form insuring agreement does not define “jurisdiction,”
the term should be given its plain, ordinary meaning, and the court
may turn to dictionary definitions for instruction.

Grand China

Buffett & Grill, Inc. v. State Auto Property & Casualty Company,
260 F. Supp. 3d 616, 624 (N.D. W. Va. 2017) (citing Syl. Pt. 9,
Nat’l Union Fire Ins. Co. of Pittsburgh v. Miller, 228 W. Va. 739,
724 S.E.2d 343, 352 (2012)).

Based on a review of multiple

13

reputable

dictionaries,

“jurisdiction”

may

be

assigned

the

definition urged by the defendants.
According to Merriam-Webster’s Dictionary, “jurisdiction” is
defined as:
1: the power, right, or authority to interpret and apply
the law . . .[,] 2a: the authority of a sovereign power
to govern or legislate[,] b: the power or right to
exercise authority . . .[,] 3: the limits or territory
within which authority may be exercised.
2 0 1 9 ,

M e r r i a m - W e b s t e r . c o m

(27

https://www.merriam-webster.com/dictionary/jurisdiction
February 2019).

Black’s Law Dictionary defines “jurisdiction” as:

1. A government’s general power to exercise authority
over all persons and things within its territory . . .[,]
2. A court’s power to decide a case or issue a decree .
. . [,] 3. A geographic area within which political or
judicial authority may be exercised . . . [,] 4. A
political or judicial subdivision within such an area
. . .
Jurisdiction, Black’s Law Dictionary (10th ed. 2014).
Although the defendants and the plaintiff look to different
factors

to

jurisdiction

determine
of

the

whether
County

or

not

Commission,

MCDA

falls

under

“jurisdiction”

is

the
not

necessarily an ambiguous term if its ordinary meaning is otherwise
clear. See Mylan Laboratories, Inc. v. Am. Motorists Ins. Co., 226
W. Va. 307, 700 S.E.2d 518, 529 (2010).

“The mere fact that

parties do not agree to the construction of a contract does not
render it ambiguous.

The question as to whether a contract is

ambiguous is a question of law to be determined by the court.”
Syl. Pt. 4, Blake v. State Farm Mut. Auto. Ins. Co., 224 W. Va.

14

317, 685 S.E.2d 895 (2009) (citing Syl. Pt. 1, Berkeley County Pub.
Serv. Dist. v. Vitro Corp. of America, 152 W. Va. 252, 162 S.E.2d
189 (1968)).

“A court, however, should read policy provisions to

avoid ambiguities and not torture the language to create them.”
Blake, 224 W. Va. at 323, 685 S.E.2d at 901 (quoting West Virginia
Ins. Co. v. Lambert, 193 W. Va. 681, 458 S.E.2d 774 (1995)).
Turning to the facts of this case, West Virginia Code § 7-1-3
sets forth the jurisdiction of the County Commission. That section
provides:
The county commissions . . . shall have jurisdiction in
all matters of probate, the appointment and qualification
of personal representatives, guardians, committees,
curators and the settlement of their accounts and in all
matters relating to apprentices. They shall also . . .
have the superintendence and administration of the
internal police and fiscal affairs of their counties,
including the establishment and regulation of roads,
ways, streets, avenues, drives and the like, and the
naming or renaming thereof, in cooperation with local
postal authorities, the division of highways and the
directors of county emergency communications centers, to
assure uniform, nonduplicative conversion of all rural
routes to city-type addressing on a permanent basis,
bridges, public landings, ferries and mills, with
authority to lay and disburse the county levies. They
shall, in all cases of contest, judge of the election,
qualification and returns of their own members, and of
all county and district officers . . .
That particular section of the Code is titled “Jurisdiction,
powers, and duties[.]”

As counsel for the defendants correctly

indicated at oral argument, nowhere within § 7-1-3, et seq., is
there any power or jurisdiction mentioned with respect to MCDA or
development authorities more generally.

Further, albeit the Code

references certain types of entities, commissions, and boards,

15

those entities are distinguished from development authorities in
that they are not legal entities, but rather are arms of the County
Commission.

Unlike those entities, MCDA is a public corporation,

created under West Virginia Code § 7-12-1.

Specifically, § 7-12-1

states:
[T]he governing body of every municipality and the county
commission of every county is hereby authorized to create
and establish a public agency to be known as a
development authority. The name of the authority shall
contain the words “development authority,” together with
the designation of the municipality or the county within
which such authority is intended to operate . . . any
municipal development authority shall have the exclusive
right to exercise its powers granted pursuant to this
article within the boundaries of the municipality.
(emphasis added).
Section 7-12-3 then provides:
The management and control of a county authority, its
property, operations, business and affairs shall be
lodged in a board . . . who shall be appointed by the
county commission and be known as members of the
authority.
The county commission shall appoint one
member to represent the county commission on the board
and, for each municipality located within the county, the
county commission shall appoint one member to represent
the municipality . . . If a member resigns, is removed
or for any other reason his membership terminates during
his term of office, a successor shall be appointed by the
county commission to fill out the remainder of his term
. . . The county commission may at any time remove any
member of the board by an order duly entered of record
and may appoint a successor member for any member so
removed.
Other persons, firms, unincorporated associations, and
corporations, who reside, maintain offices, or have
economic interests . . . in the county, shall be eligible
to participate in and request the county commission to
appoint members to the development authority as the said
authority shall by its bylaws provide.
(emphasis added).
16

Section 7-12-7 then lists various powers vested in MCDA, and
§ 7-12-8 specifically provides that:
The authority may incur any proper indebtedness and issue
any obligations and give any security therefor which it
may deem necessary or advisable in connection with
carrying out its purposes as hereinbefore mentioned. No
statutory limitation with respect to the nature, or
amount, interest rate or duration of indebtedness which
may be incurred by municipalities or other public bodies
shall apply to indebtedness of the authority. No
indebtedness of any nature of the authority shall
constitute an indebtedness of the governing body of the
municipality or county commission of the municipality or
county in which the commission is intended to operate or
any municipality situated therein, or a charge against
any property of said county commission, municipalities,
or other appointing agencies. The rights of creditors of
the authority shall be solely against the authority as a
corporate body and shall be satisfied only out of
property held by it in its corporate capacity.
(emphasis added).
Not only does MCDA have the “exclusive right to exercise its
powers[,]” is accountable for its own debts, and controls its
funds, but also the County Commission is not required to make any
contribution to MCDA.

See W. Va. Code §§ 7-12-11 and 7-12-12.

First, despite the County Commission’s authority to appoint
and remove members of MCDA’s board, this Court finds that such
power to appoint and remove, which depending on whether the power
of appointment or removal is sought to be used, could partly be
shared by “[o]ther persons, firms, unincorporated associations, and
corporations,

who

reside,

maintain

offices,

or

have

economic

interests . . . in the county[,]” is insufficient for the Court to
find

that

MCDA

falls

within

the

Commission.
17

jurisdiction

of

the

County

Second, although MCDA is permitted to exercise the right of
eminent domain if an order of the County Commission authorizes
exercise

of

the

right

of

eminent

domain

(see

W.

Va.

Code

§ 7-12-7a), that statute does not necessarily permit the County
Commission to manage and control MCDA.

Management and control is

vested in MCDA’s board by statute and by MCDA’s bylaws.

See W. Va.

Code § 7-12-3; ECF No. 35-7 at 2 (“Management and control of the
Authority is lodged in a board of members”).
Therefore, this Court finds that plaintiff MCDA is not an
insured under the Public Entity Managment Liability Coverage Form
of Phoenix’s policy insuring the County Commission.

Consequently,

it is unnecessary for this Court to decide whether any exclusions
are applicable and whether the defendants have waived any such
exclusion.
B. The doctrine of estoppel cannot extend insurance coverage to
MCDA
In

its

complaint,

MCDA

stated

that

“Travelers

made

representations and promises to both [p]laintiff and the Monongalia
County

Commission

that

the

Boards

of

the

Monongalia

County

Commission would be covered under Traveler’s Policy #ZLP-14T25627.”
ECF No. 1-2 at 12-13.

It contends that it is entitled to relief

because “Traveler’s knew or should have known that [p]laintiff
would reasonably rely on said representations and promise[,] [ ]
[p]laintiff relied on Traveler’s representations and promises to
its detriment[, and] [ ] [p]laintiff has suffered losses because of
its reliance on Traveler’s representations and promises.”
18

In Potesta, 202 W. Va. 308, 317, 504 S.E.2d 135 (emphasis
omitted), the Supreme Court of Appeals stated:
In order to rely on the doctrine of estoppel to prevent
an insurer, who has previously stated one or more reasons
for denying coverage, from asserting other, previously
unarticulated reasons for denying coverage, the insured
must prove that s/he was induced to act or refrain from
acting to her/his reasonable reliance on the previously
stated ground(s) for declination.
“Thus, in order to raise estoppel in the context of an insurance
contract

one

must

first

be

an

insured,

and

also

must

reasonably relied upon a representation of the insurer.”

have
West

Virginia Mut. Ins. Co. v. Vargas, 933 F. Supp. 2d 847, 859 (N.D. W.
Va. 2013).
To the extent MCDA argues that the Court may expand the
coverage based on promissory estoppel, such an argument fails as a
matter of law.

“Generally, the principles of waiver and estoppel

are inoperable to extend insurance coverage beyond the terms of an
insurance contract.”

Potesta, 504 S.E.2d at 137.

There are three

exceptions to this general rule.
Exceptions to the general rule that the doctrine of
estoppel may not be used to extend insurance coverage
beyond the terms of an insurance contract, include, but
are not necessarily limited to, instances where an
insured has been prejudiced because: (1) an insurer’s, or
its agent’s, misrepresentation made at the policy’s
inception resulted in the insured being prohibited from
procuring the coverage s/he desired; (2) an insurer has
represented the insured without a reservation of rights;
and (3) the insurer has acted in bad faith.
Syl. Pt. 7, Potesta, 202 W. Va. 308, 504 S.E.2d 135 (emphasis
added).

19

These exceptions are inapplicable to MCDA since it is not an
insured

under

defendants’

policy.

Here,

it

Commission — not MCDA — that is insured.

is

the

County

MCDA also cannot

establish that it reasonably relied on any representations of
defendants

regarding

coverage.

The

alleged

representations

occurred after the issuance of the policy and cannot give rise to
an

estoppel

claim.

ECF

No.

35-12

at

5-6.

Moreover,

any

representations that occurred prior to issuance of the policy were
not

by

defendants’

agents.3

Id.;

ECF

No.

35-8

at

55-60.

Therefore, this Court finds that the doctrine of estoppel cannot
extend insurance coverage to MCDA.
C.
The doctrine of reasonable expectations does not afford
coverage to MCDA under the County Commission’s policy
MCDA asserts that it is entitled to coverage based on the
doctrine of reasonable expectations since “both the Monongalia
County Commission and the MCDA had a reasonable expectation of
coverage under the Policy. This expectation was fostered by agents
of the [d]efendants.”

ECF No. 38 at 16-18.

Plaintiff further

contends that “the County Commission made multiple representations
to the MCDA of that fact.”

Id. at 18.

Typically, the doctrine of reasonable expectations is applied
in circumstances where the policy language is ambiguous.

3

Jenkins

Defendants indicate that MCDA was insured under a separate
policy with Travelers for almost 15 years on a building that it
owned, located on Hartman Run Road. See ECF No. 35-16. However,
MCDA’s coverage with Travelers on that building is not relevant for
determining
whether
or
not
MCDA
reasonably
relied
on
representations of defendants regarding coverage.
20

v. State Farm Mut. Auto. Ins. Co., 632 S.E.2d 346, 352 (W. Va.
2006).

However, “[t]he West Virginia Supreme Court has held that

the language of an insurance policy need not be ambiguous to
trigger the doctrine of reasonable expectations.”

Essex Ins. Co.

v. Neely, No. 5:04CV139, 2008 WL 619194 *6 (N.D. W. Va. Mar. 4,
2008) (citing Romano v. New England Mut. Life Ins. Co., 362 S.E.2d
334 (W. Va. 1987); Keller v. First Nat’l Bank, 403 S.E.2d 424 (W.
Va. 1991)).
Supp.

2d

American Equity Ins. Co. v. Lignetics, Inc., 284 F.

399,

405

(N.D.

W.

Va.

2003).

“[T]he

objectively

reasonable expectations of applicants and intended beneficiaries
regarding the terms of insurance contracts will be honored even
though a painstaking study of the policy provisions would have
negated those expectations.”

Syl Pt. 6, New Hampshire Ins. Co. v.

RRK, Inc., 736 S.E.2d 52 (W. Va. 2012) (quoting Syl. Pt. 8, Nat’l
Mut. Ins. Co. v. McMahon & Sons, Inc., 356 S.E.2d 488 (1987),
overruled on other ground by Potesta v. U.S. Fid. & Guar. Co., 504
S.E.2d 135 (1998)).

Under West Virginia law, the doctrine of

reasonable expectations may apply “in situations where . . . there
is a misconception about the insurance purchased.”

For example,

the doctrine may apply when “a policy provision on which denial of
coverage is based differs from the prior representations made to
the insured by the insurer.”

New Hampshire Ins. Co., 736 S.E.2d

at 58.
“However,

merely

raising

the

defense

of

reasonable

expectations is insufficient to survive a motion for summary

21

judgment.

The nonmoving party must demonstrate the existence of a

genuine issue of material fact.”

Essex, No. 5:04CV139, 2008 WL

619194 *6 (N.D. W. Va. Mar. 4, 2008).

Here, plaintiff must show

that a genuine issue of material fact exists relating to the
argument

that

defendants

created

a

misconception

about

the

insurance policy coverage that the County Commission purchased.
In support of its claim that the reasonable expectations
doctrine does not apply to the facts of this case, defendants point
to

the

testimony

of

Eldon

Callen,

Commission from 2011 through 2016.

who

served

on

the

County

ECF No. 40 at 20-22.

Mr.

Callen stated that he could not say with certainty whether any of
Travelers representatives ever made any representation concerning
whether MCDA would be covered under Travelers policy insuring the
County Commission.

ECF No. 40-4 at 32.

Mr. Callen stated that he

does not recall whether prior to the SouthCo suit being filed, any
representations were made by Mr. Horton that MCDA would be covered
as an insured under the County Commission’s policy with Travelers.
Id. at 55.

He further stated Fred Horton of Dyer did not make any

representations to him about MCDA coverage under Travelers policy.
Id. at 32-35.

Defendants assert that Mr. Callen’s testimony shows

that he had concluded that MCDA was covered on his own accord.
No. 40 at 20-21.

ECF

Defendants further note that plaintiff has not

provided any information in its responses to discovery that would
show representations made by Phoenix or its authorized agent at the

22

policy’s inception that MCDA was insured as a “board” under the
County Commission’s policy.
Plaintiff

also

points

Id. at 22-23.
to

Mr.

Callen’s

testimony

and

specifically references a portion of his testimony that states he
did not understand the type of insurance the County Commission had
through Travelers.

ECF No. 38 at 17.

Plaintiff references the

following portion of Mr. Callen’s deposition:
Q.
Were there any sort of bid packages that the County
Commission was provided?
A.
In my recollection, there was.
But I remember
specifically questioning in great detail that the
coverages were complete and all the entities were
covered.
Q.

What entities are you referring to?

A.
The Development Authority specifically, and all the
other things that were to be covered that were — to my
knowledge, was all part of the County.
Id. at 17.

Plaintiff explains that Mr. Callen stated that his

belief predated his term on the County Commission and that Mr.
Callen asked insurers whether “everything is covered” during a work
session/bid process related to the County Commission’s possible
purchase of insurance, which took place in late 2014 or 2015. Id.;
ECF No. 43 at 7-8.
This Court believes that Mr. Callen’s conclusion that he
thought MCDA would be covered under the County Commission’s policy
seems to be based upon his own assumptions and beliefs about
coverage and MCDA’s relation to the County Commission rather than
on any reasonable expectations created by the words or conduct of

23

defendants’ agents or other representatives.

Consequently, this

Court concludes that the doctrine of reasonable expectations does
not apply in this case.
IV.

Conclusion

For the reasons set forth above, defendants’ motion for
summary judgment (ECF No. 35) is GRANTED and plaintiff’s motion for
summary judgment (ECF No. 37) is DENIED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein. Pursuant to Federal
Rule of Civil Procedure 58, the Clerk is DIRECTED to enter judgment
on this matter.
DATED:

March 27, 2019

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

24