Erie Insurance Property & Casualty Company v. Wellford

Filing 15

MEMORANDUM OPINION AND ORDER pursuant to the 10 MOTION by Erie Insurance Property & Casualty Company for Summary Judgment, which the court is construing as a motion for default judgment, is GRANTED; the HomeProtector Policy does not provide cov erage for Mr. Wellford in the underlying lawsuit; Erie does not have a duty to defend or indemnify Mr. Wellford pursuant to the HomeProtector Policy; the PCL Policy does not provide coverage for Mr. Wellford; and Erie does not have a duty to defend or indemnify Mr. Wellford in the underlying lawsuit pursuant to the PCL Policy. Signed by Judge Joseph R. Goodwin on 7/31/2018. (cc: counsel of record; any unrepresented party) (taq)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
ERIE INSURANCE PROPERTY
& CASUALTY COMPANY,
Plaintiff,
v.

CIVIL ACTION NO. 2:17-cv-02976

JOHN H. WELLFORD, III,
Defendant.

MEMORANDUM OPINION AND ORDER
I.

Introduction
Pending before the court is the plaintiff’s Motion for Summary Judgment [ECF

No. 10]. The defendant has not responded. The Motion [ECF No. 10], which the court
is construing as a motion for default judgment, is GRANTED.
II.

Background
On March 12, 2015, an engineered material arresting system (“EMAS”)

collapsed at Yeager Airport in Charleston, West Virginia. Pet. for Declaratory J. Ex.
1, at ¶¶ 19, 21 [ECF No. 1-1] (“Underlying Compl.”). At the time, Theodore and
Rebecca Carter lived near Yeager Airport. “Notwithstanding the fact that the
[Carters’] home remained intact and undamaged . . . [Yeager] Airport, [John] Wellford
and Corotoman demolished the [Carters’] home on March 13, 2015, stating some days
or weeks later that an ‘emergency’ necessitated the demolition.” Id. ¶ 48. The Carters

allege that Mr. Wellford, “was on the [Carters’] property and ordered the demolition
of the [Carters’] home.” Id. ¶ 16. The Carters allege that Mr. Wellford ordered that
their home be demolished either on “the mistaken belief that [Yeager] Airport had
purchased the Carters’ home,” id. ¶ 73, or in his role as agent for Corotoman with the
intent that Corotoman purchase the property after demolition and condemnation, id.
¶ 82.
On January 30, 2017, the Carters filed an amended complaint against the
Central Regional West Virginia Airport Authority (“Yeager Airport”), Corotoman,
Inc., and John H. Wellford, III in the Circuit Court of Kanawha County, West
Virginia. Id. ¶¶ 2–4. In the Complaint, the Carters seek to recover damages from the
demolition of their home. See id. ¶ 16.
On March 13, 2015, the date that Mr. Wellford directed the demolition of the
Carters’ home, he was insured under two insurance policies provided by Erie
Insurance Property & Casualty Company (“Erie”): (1) an Erie ExtraCover
HomeProtector Insurance Policy, Policy No. Q26-5550008 (“HomeProtector Policy”)
[ECF No. 1-2], and (2) an Erie Personal Catastrophe Liability Insurance Policy, Policy
No. Q50-5500234 (“PCL Policy”) [ECF No. 1-3]. On or about February 22, 2017, Mr.
Wellford provided Erie notice of the underlying lawsuit through written
communication with his insurance agent. Aff. Erie Ins. Prop. & Cas. Co. 1–2 [ECF
No. 13]. Erie investigated Mr. Wellford’s claim, determined no coverage existed for

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the underlying lawsuit under either policy, and issued a denial dated April 27, 2017.

Id. at 4–12.
On May 18, 2017, Erie filed this declaratory judgment action against Mr.
Wellford pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. Pet.
Declaratory J. Erie seeks four declarations: (1) the HomeProtector Policy does not
provide coverage for the Underlying Lawsuit, (2) Erie has no duty to defend or
indemnify Mr. Wellford under the HomeProtector Policy in the Underlying Lawsuit,
(3) the PCL Policy does not provide coverage for the Underlying Lawsuit, (4) Erie has
no duty to defend or indemnify Mr. Wellford under the PCL Policy in the Underlying
Lawsuit. Id. at 13–14.
Mr. Wellford was personally served the summons on June 10, 2017. Summons
[ECF No. 4]. He has not made an appearance in this action. On July 7, 2017, the
Clerk entered default. Clerk’s Entry Default [ECF No. 7]. On December 29, 2017, Erie
filed a Motion for Summary Judgment [ECF No. 10].
III.

Legal Standard

Because the Clerk has entered default, the court’s authority to enter judgment
against the defendant is properly characterized as the power to enter default
judgment. See United Fin. Cas. Co. v. Milton Hardware, LLC, No. 3:17-2002, 2018
WL 2207130, at *1 (S.D. W. Va. May 14, 2018). Therefore, the court will construe the
motion as one for default judgment, not summary judgment.
After default is entered by the clerk, a party may move the court for default
judgment under Rule 55(b). Indeed, applying to the court for default judgment is

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necessary where, as here, the plaintiff’s claim is not for a sum certain or made certain
by computation. Fed. R. Civ. P. 55(b). Upon default, all of the well-pleaded facts
alleged in the complaint as to liability may be taken as true. See Ryan v.

Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001) (quoting Nishimatsu
Constr. Co. v. Hous. Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). “Although the
clear policy of the Rules is to encourage dispositions of claims on their merits, trial
judges are vested with discretion, which must be liberally exercised, in entering
[default] judgments . . . .” United States v. Moradi, 673 F.2d 725, 727 (4th Cir. 1982)
(citations omitted). The court, however, must not enter default judgment that
“differ[s] in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.
R. Civ. P. 54(c).
I have previously explained that:
[a]s a general principle, this court is wary of entering
default judgment in a suit for declaratory relief. By nature,
a declaratory judgment action is jurisdictionally unique. I
am uncomfortable with the idea of providing declaratory
relief where the merits of a case have not been fully
litigated. See Restatement 2d Judgment § 33 (stating that
a court “should not make a declaration upon default on the
basis of the pleadings alone but should require the plaintiff
to present enough evidence to warrant the granting of
declaratory relief”).
My concern about entering declaratory judgment by
default is particularly pronounced in insurance disputes.
When a declaratory judgment action is brought by an
insurance carrier, the suit may influence the way courts
later interpret other identical policies. I do not believe that
an individual insured's failure to respond in a given action
is sufficient justification for a declaration that may later
affect non-party policy holders.

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Teachers Ins. Co. v. Prather, No. 2:11-cv-397, 2012 WL 90095, at *2 (S.D. W. Va. Jan.
11, 2012).
IV.

Discussion
Erie argues that the “business pursuits exclusion” under both policies excludes

the underlying lawsuit from coverage. Mem. Law Supp. Pet’r’s Mot. Summ. J [ECF
No. 11]. “[W]here the provisions of an insurance policy contract are clear and
unambiguous they are not subject to judicial construction or interpretation, but full
effect will be given to the plain meaning intended.” Keffer v. Prudential Ins. Co. of

Am., 172 S.E.2d 714, 715 (W. Va. 1970). “[D]etermination of the proper coverage of
an insurance contract when the facts are not in dispute is a question of law.” Tennant

v. Smallwood, 568 S.E.2d 10, 13 (W. Va. 2002). Under West Virginia law, “included
in the consideration of whether an insurer has a duty to defend is whether the
allegations in the [underlying] complaint . . . are reasonably susceptible of an
interpretation that the claim may be covered by the terms of the insurance policy.”

West Virginia Fire & Cas. Co. v. Stanley, 602 S.E.2d 483, 486 (W. Va. 2004) (citations
omitted).
“An insurer wishing to avoid liability on a policy purporting to give general or
comprehensive coverage must make exclusionary clauses conspicuous, plain and
clear, placing them in such a fashion as to make obvious their relationship to other
policy terms . . . .” Satterfield v. Erie Ins. Prop. & Cas., 618 S.E.2d 483, 487 (W. Va.
2005). The business pursuits exclusion is “a standard feature of homeowner’s
insurance policies. It is intended as a limitation upon the comprehensive personal

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liability coverage provided in such policies.” Camden Fire Ins. Ass’n v. Johnson, 294
S.E.2d 116, 117 (W. Va. 1982). The term business pursuits, “when used in a clause of
an insurance policy excluding from personal liability coverage injuries ‘arising out of
business pursuits of any insured’, contemplates a continuous or regular activity
engaged in by the insured for the purpose of earning a profit or a livelihood.” Id. at
119.
The HomeProtector Policy states, “We do not cover . . . Bodily injury, property
damage or personal injury arising out of business pursuits of anyone we protect.”
HomeProtector Policy 25. The HomeProtector Policy defines business as “any fulltime, part-time or occasional activity engaged in as a trade, profession or occupation,
including farming.” Id. at 12. The PCL Policy states, “We do not cover personal injury
or property damage arising out of business pursuits or business property of anyone
we protect.” PCL Policy 10–11. The PCL Policy defines business as “any activity
engaged in as a trade, profession or occupation, other than farming.” Id. at 9.
In their complaint, the Carters’ allege that Mr. “Wellford was acting as an
agent and/or apparent agent for both [] Corotoman and [] [Yeager] Airport” when he
ordered that their home be demolished. Underlying Compl. ¶ 4. They offer two
alternative theories for his order. First, they allege that Mr. Wellford entered into a
consulting agreement with Yeager Airport to assist with the EMAS collapse, and
acting pursuant to this agreement, Mr. Wellford ordered that their house be
demolished because Yeager Airport incorrectly believed it had previously purchased
the house. Id. ¶¶ 73, 82. Alternatively, the Carters’ allege that Mr. Wellford directed

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the demolition of their house as an agent of Corotoman, so that Corotoman could later
obtain the property through the legal process of condemnation. Id. ¶¶ 86–90.
Under either set of facts, the demolition occurred as a part of a business pursuit
by Mr. Wellford, as defined in the HomeProtector Policy and the PCL Policy.
Therefore, neither policy provides coverage for Mr. Wellford in the underlying
lawsuit, and Erie does not have a duty to defend or indemnify Mr. Wellford in the
underlying lawsuit.
V.

Conclusion
For the reasons stated herein, the plaintiff’s Motion for Summary Judgment

[ECF No. 10], which the court is construing as a motion for default judgment, is
GRANTED. It is hereby DECLARED that:
1. The HomeProtector Policy does not provide coverage for Mr. Wellford
in the underlying lawsuit;
2. Erie does not have a duty to defend or indemnify Mr. Wellford in the
underlying lawsuit pursuant to the HomeProtector Policy;
3. The PCL Policy does not provide coverage for Mr. Wellford in the
underlying lawsuit; and
4. Erie does not have a duty to defend or indemnify Mr. Wellford in the
underlying lawsuit pursuant to the PCL Policy.
The court DIRECTS the Clerk to send a copy of this Order to counsel of record
and any unrepresented party.
ENTER:

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July 31, 2018