Case Title: Autumn Ridge, L.P. v. Acordia of Virginia Insurance

Citation: 

Docket Number: 041934

State: virginia

Court: Virginia Supreme Court

Date: 2005-06-09T00:00:00Z

Document:
Present:  All the Justices 
 
AUTUMN RIDGE, L.P., ET AL. 
 
v.  Record No. 041934  OPINION BY JUSTICE CYNTHIA D. KINSER 
 
 
 
 
 
 
 
 
June 9, 2005 
ACORDIA OF VIRGINIA INSURANCE AGENCY, 
INC. T/A ACORDIA OF VIRGINIA 
 
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH 
A. Joseph Canada, Jr., Judge 
 
 
The appellants, 12 limited partnerships,1 brought this 
action against Acordia of Virginia Insurance Agency, Inc. 
t/a Acordia of Virginia (Acordia), under the Multiple 
Claimant Litigation Act, Code § 8.01-267.1 et seq.  The 
limited partnerships asserted claims for negligence and 
breach of contract due to Acordia’s failure to include them 
as named insureds on a builders risk insurance policy and 
sought recovery of the premiums each limited partnership 
had paid.2  The circuit court entered judgment for Acordia, 
finding that the limited partnerships “can show no damages 
for which they have not already been compensated.”  We 
conclude, however, that, when no loss has occurred that 
                                                 
1  The names of the 12 limited partnerships are: Autumn 
Ridge, L.P.; Bridgeport, L.P.; Culpepper Landing of SC, 
L.P.; Hampton Ridge, L.P.; Madison Ridge, L.P.; Woodbridge 
Partners, L.P.; Northwoods of SC, L.P.; Tierra Contenta II, 
L.P.; Salem Ridge, Limited Partnership; Sunchase of GA, 
L.P.; Tierra Contenta, Limited Partnership; and Woodburn, 
L.P. 
 
2  The limited partnerships also asserted a claim for 
unjust enrichment but later nonsuited that claim. 
 
2
would have been covered by the requested insurance policy, 
the measure of damages for failure to procure insurance is 
the amount paid by the intended insured as the premium.  
Therefore, we will reverse the judgment of the circuit 
court. 
RELEVANT FACTS AND PROCEEDINGS 
The limited partnerships each owned a separate multi-
family housing project.  The projects were financed by 
proceeds realized from selling, on the open market, tax 
credits authorized by various state housing authorities.  
Because of the financing arrangement, each project was 
required to provide a “cost certification” to the 
respective state housing authorities, which included the 
costs of a builders risk insurance policy. 
National Housing Corporation (NHC) performed 
administrative tasks for the limited partnerships, 
including, among other things, procuring necessary 
insurance for them.  In that regard, NHC contracted with 
Acordia, an insurance broker, to purchase a builders risk 
insurance policy to insure the 12 limited partnerships and 
each partnership’s respective housing project.3  NHC did not 
                                                 
3  Acordia also contracted to include in the builders 
risk insurance policy two other entities that are not 
parties to this action: Genito Glenn, L.P. and National 
Housing Building Corporation.  See Acordia of Virginia Ins. 
 
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own any of the housing projects but, as acknowledged by the 
parties, acted as the limited partnerships’ agent for the 
purpose of procuring the builders risk insurance policy at 
issue in this case. 
Acordia contracted with Security Insurance Company of 
Hartford (Security) to provide the requested insurance.  
The policy named NHC as the “insured” and listed the 
housing projects owned by the limited partnerships as 
“covered properties.”  The policy, however, did not include 
the limited partnerships that actually owned the housing 
projects as “named insureds.”  Acordia had no explanation 
why the limited partnerships were not included as named 
insureds on the policy and admitted that it had failed to 
comply with the applicable standard of care, or was 
negligent or in breach of its contract, by not including 
the limited partnerships as named insureds on the builders 
risk insurance policy.  In addition, an adjuster for the 
company underwriting the builders risk insurance policy 
stated that the owners of the property and “the people 
. . . insured [under that policy] were different entities 
and, therefore, the owners of the property had no insurable 
                                                                                                                                                 
Agency, Inc. v. Genito Glenn, L.P., 263 Va. 377, 380, 560 
S.E.2d 246, 247 (2002) and National Hous. Bldg. Corp. v. 
Acordia of Virginia Ins. Agency, Inc. 267 Va. 247, 249, 591 
S.E.2d 88, 89 (2004). 
 
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interest under [the] policy.”  When asked whether a claim 
would have been paid to NHC instead of the owners of the 
projects, knowing that NHC was not the owner, he responded, 
“Only in a mistake.” 
Acordia invoiced NHC for the total amount of the 
premium for the builders risk insurance policy.  NHC paid 
that sum to Acordia, which then deducted its commission and 
forwarded the remainder of the premium to Security.  Each 
limited partnership was supposed to reimburse NHC for its 
proportionate share of the premium, which was based on the 
estimated value of each partnership’s housing project at 
the time of completion.4 
Prior to this action filed by the 12 limited 
partnerships, Genito Glenn, L.P. (Genito), Autumn Ridge, 
L.P. (Autumn Ridge), Sunchase of GA, L.P. (Sunchase) and 
Madison Ridge, L.P. (Madison Ridge) suffered losses at 
their respective housing projects.  Security paid the 
losses at Autumn Ridge and Sunchase by issuing checks 
payable to NHC.  Those checks listed NHC as the “assured.”  
A senior vice-president for Acordia admitted that Security 
                                                 
4  When a housing project was completed, it was removed 
from the builders risk insurance policy by an endorsement.  
Because the premium was paid for an entire year in advance, 
the endorsements sometimes resulted in premium refunds, 
which Acordia credited to the account of the named insured, 
NHC. 
 
5
paid NHC because Security did not know at the time of 
payment that the limited partnerships even existed and that 
they were the owners of the housing projects.  Security 
denied Madison Ridge’s claim because the loss was not a 
covered loss under the builders risk insurance policy. 
When Genito made a claim under the builders risk 
insurance policy, Security denied coverage on the ground 
that Genito was not a named insured under the policy.5  
Genito then filed an action against Acordia for its failure 
to include Genito as an insured on the builders risk 
insurance policy and successfully recovered economic loss 
damages for Acordia’s negligent performance of its 
contractual obligations.  Acordia of Virginia Ins. Agency, 
Inc. v. Genito Glenn, L.P., 263 Va. 277, 380-81, 560 S.E.2d 
246, 247 (2002). 
 
When the 12 limited partnerships discovered that they 
were not listed as named insureds on the builders risk 
insurance policy for which they claimed to have paid 
premiums, they filed this action against Acordia.  After 
hearing evidence ore tenus, the circuit court concluded in 
a letter opinion, which was incorporated into its final 
                                                 
5  In a declaratory judgment action, a federal district 
court held that Genito was not a named insured under the 
builders risk insurance policy.  Genito Glenn, L.P. v. 
Security Ins. Co. of Hartford, No. 2:98cv1314 (E.D. Va. 
Oct. 27, 1999). 
 
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order, that the “[limited partnerships’] damages in 
contract [were] limited to [their] losses due to the breach 
. . . [and they] simply already [had] been restored to the 
condition in which they would have been had the contract 
been performed as promised” due to Security’s payment of 
the claims made for losses at the housing projects owned by 
Autumn Ridge and Sunchase as well as the judgment in favor 
of Genito against Acordia.  Relying on Link Associates v. 
Jefferson Standard Life Insurance Company, 223 Va. 479, 291 
S.E.2d 212 (1982), the court reasoned that “[w]hen [Genito] 
chose to pursue recovery for the amount of its denied 
claim, it foreclosed NHC’s option of recovering the 
consideration it paid for the benefits under the builder’s 
risk policy.”  In the circuit court’s view, the limited 
partnerships had accepted the benefits of the builders risk 
insurance policy “by their acceptance of, and successful 
action at law for, amounts equal to benefits they would 
have received under a valid policy.” 
 
The circuit court also concluded that the measure of 
damages for a breach of contract to procure insurance is 
the amount of loss that would have been subject to 
insurance coverage and not the return of paid premiums.  
The circuit court rejected the holding in Ingrams v. Mutual 
Assurance Society, 40 Va. (1 Rob.) 661, 668 (1843), 
 
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because, in the court’s view, a subsequent case, Virginia 
First Savings & Loan Association v. Wells, 224 Va. 691, 
695, 299 S.E.2d 370, 372 (1983), superseded the 
precedential value of Ingrams.  We awarded the 12 limited 
partnerships this appeal. 
ANALYSIS 
 
The limited partnerships assert several assignments of 
error.  The overriding question, however, is whether the 
circuit court erred in concluding that the 12 limited 
partnerships are not entitled to a return of the premiums 
they claimed to have paid for the builders risk insurance 
policy as damages for Acordia’s admitted breach of contract 
and/or negligence in failing to procure insurance coverage.  
To decide that question, we apply certain legal principles 
regarding contracts of insurance. 
 
A contract of insurance is “‘[a]n agreement by which 
one party for a consideration (which is usually paid in 
money, either in one sum, or at different times during the 
continuance of the risk), promises to make a certain 
payment of money upon the destruction or injury of 
something in which the other party has an interest.’”  
Cosmopolitan Life Ins. Co. v. Koegel, 104 Va. 619, 624, 52 
S.E. 166, 168 (1905); accord Sims v. Commonwealth, 71 S.W. 
929, 929 (Ky. 1903); Commonwealth v. Wetherbee, 105 Mass. 
 
8
149, 160 (1870).  The risk undertaken by the insurer is an 
essential element of a contract of insurance, and no 
premium is due from the insured unless the risk attaches.  
Smithart v. John Hancock Mut. Life Ins. Co., 71 S.W.2d 
1059, 1062 (Tenn. 1934); Huntington Ins. Agency v. County 
Court of Wyoming County, 127 S.E. 64, 65 (W. Va. 1925).  
Likewise, if, through no fault or fraud by the insured, the 
risk never attaches under a policy of insurance, the 
insurer must return any premium paid by the insured.  
Kansas City Col. of Osteopathic Med. v. Employers’ Surplus 
Lines Ins. Co., 581 F.2d 299, 301-02 (1st Cir. 1978); Tyler 
v. Capitol Indem. Ins. Co., 110 A.2d 528, 531-32 (Md. 
1955); Parsons, Rich & Co. v. Lane, 106 N.W. 485, 494 
(Minn. 1906); Latta v. Farmers County Mut. Fire Ins. Co., 
313 S.E.2d 214, 215 (N.C. Ct. App. 1984); see Young Am., 
Inc. v. Union Cent. Life Ins. Co., 101 F.3d 546, 548 (8th 
Cir. 1996) (employer entitled to refund of premiums paid 
under mistaken belief that corporate officers were eligible 
insureds). 
 
Clearly, a risk never attached as to each of the 12 
limited partnerships because they were not included as 
named insureds on the builders risk insurance policy.  See 
Busby v. Simmons, 406 S.E.2d 628, 630 (N.C. Ct. App. 1991) 
(the term “ ‘[n]amed insured’ has a common sense and 
 
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explicit meaning[;] [i]t is the named individual (or 
corporation) on the declarations page of the policy”).  
Indeed, Security denied Genito’s claim because it was not a 
named insured.  Acordia, 263 Va. at 381, 560 S.E.2d at 248.  
Also, the adjuster for the company underwriting the 
builders risk insurance policy testified that the owners of 
the housing projects “had no insurable interest under [the] 
policy” as issued.  Contrary to Acordia’s argument, failure 
to include the limited partnerships as named insureds on 
the policy was not merely a defect in the coverage or terms 
of the policy.  It was tantamount to no coverage for the 
limited partnerships, i.e., no contract of insurance.  See 
Acordia, 263 Va. at 390, 560 S.E.2d at 253 (Acordia could 
not rely on the terms of the builders risk insurance policy 
that did not include Genito as a named insured).  Despite 
the fact that the risk did not attach, the circuit court 
concluded that the limited partnerships’ measure of damages 
was the amount of any losses that would have been subject 
to insurance and not a return of premiums.  We do not 
agree. 
 
In Ingrams, this Court stated the following 
principles: 
[I]f through mistake, misinformation, or any 
other innocent cause, an insurance be made 
without any interest whatsoever in the thing 
 
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insured, . . . the insurer shall return the whole 
premium . . . .  For the premium paid by the 
insured, and the risk which the insurer takes 
upon himself, are considerations each for the 
other; they are correlatives, whose mutual 
operation constitutes the essence of the contract 
of insurance.  The insurer shall not be exposed 
to the risk without receiving the premium; nor 
shall he retain the premium, which was the price 
of the risk, if in fact he runs no risk at all, 
though it be by the neglect, or even the fault of 
the party insuring, that the risk be not run. 
 
40 Va. at 668; see also Mutual Life Ins. Co. of New York v. 
Brown, 137 Va. 278, 283-84, 293, 119 S.E. 142, 144, 147 
(1923) (approving trial court’s decision to return premiums 
to insured after insurance company cancelled policy). 
 
These principles are still valid in Virginia and were 
not altered by this Court’s decision in Wells.  There, a 
mortgage lender had contracted to procure credit life 
insurance for a borrower.  224 Va. at 692, 299 S.E.2d at 
370.  The administratrix of the borrower’s estate sued the 
lender for breach of that contract because the lender never 
forwarded the borrower’s application to an insurance 
company even though the lender collected premiums for the 
insurance.  Id. at 692-93, 299 S.E.2d at 370-71.  On 
appeal, the issue was whether the trial court erred by 
placing on the lender the burden of proving that the 
borrower was uninsurable at the time he applied for the 
credit life insurance.  Id. at 694, 299 S.E.2d at 371.  The 
 
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parties agreed that the balance of the borrower’s loan 
would be the measure of damages if the administratrix was 
entitled to recover.  Id. at 693-94, 299 S.E.2d at 371.  It 
was in that context that we stated, “where a contract to 
procure insurance is breached, the measure of damages is 
the amount of loss which would have been subject to 
insurance, not the amount of insurance applied for.”  Id. 
at 695, 299 S.E.2d at 372.  There was no issue in Wells as 
to the measure of damages for breach of a contract to 
procure insurance when the intended insured has not 
suffered an actual loss that would have been covered by the 
insurance. 
 
Thus, we hold that, when the intended insured suffers 
a loss, the measure of damages for failure to procure 
insurance is the amount that would have been due under the 
policy.  However, when no loss has occurred, the measure of 
damages is the amount paid by the intended insured as the 
premium.6  Enyart v. Transamerica Ins. Co., 985 P.2d 556, 
                                                 
6  In support of its argument that the measure of 
damages for failure to procure insurance is the amount the 
insurer would have paid if the requested insurance had been 
obtained, Acordia cited Wheaton Nat’l Bank v. Dudek, 376 
N.E.2d 633, 636 (Ill. App. Ct. 1978); Kenyon v. Larsen, 286 
N.W.2d 759, 764 (Neb. 1980); and Kobbeman v. Oleson, 574 
N.W.2d 633, 635 (S.D. 1998).  In each of those cases, the 
insured had suffered an actual loss.  Thus, we agree that 
the proper measure of damages in those cases was the amount 
 
12
560-61 (Ariz. Ct. App. 1998); Everett v. O’Leary, 95 N.W. 
901, 902 (Minn. 1903); Simpson v. M-P Enters., Inc., 252 
So.2d 202, 207 (Miss. 1971).  “In case of a failure to 
issue a policy, the right to recover is fully matured when 
the agreement is violated, and the party to whom it was to 
be issued is not obliged to wait until his property is 
destroyed . . . before instituting an action for damages.”  
Everett, 95 N.W. at 902. 
 
We recognize that, in this case, the 12 limited 
partnerships seek a return of paid premiums not from the 
insurer, Security, but from Acordia.  That distinction does 
not change the applicable measure of damages.  The cause of 
action here arose out of a contract to procure insurance 
and Acordia’s admitted negligence and/or breach of that 
contract by failing to include the limited partnerships as 
named insureds on the builders risk insurance policy. 
 
The circuit court further erred in concluding that the 
limited partnerships failed to prove that they had suffered 
any damages for which they had not been compensated.  
Because of the payments for losses at Autumn Ridge’s and 
Sunchase’s respective housing projects, and the judgment 
recovered by Genito against Acordia, the court mistakenly 
                                                                                                                                                 
that would have been due under the respective insurance 
policies. 
 
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believed that the limited partnerships had been restored to 
the condition in which they would have been if Acordia had 
procured insurance listing the limited partnerships as 
named insureds.  Thus, the circuit court concluded that the 
limited partnerships “should be deemed to have accepted the 
benefits of the insurance contract to procure insurance by 
their acceptance of, and successful action at law for, 
amounts equal to benefits they would have received under a 
valid policy.” 
 
The court apparently reached this conclusion by 
characterizing the limited partnerships as subsidiaries of 
NHC.  The limited partnerships, however, were not 
subsidiaries of NHC; instead, they were separate, 
independent entities, each owning a different housing 
project.  As acknowledged by the limited partnerships in 
their pleadings and by Acordia at oral argument, NHC acted 
as the limited partnerships’ agent for the purpose of 
procuring the builders risk insurance policy.7  See Acordia, 
                                                 
7  Acordia argued on brief that the limited 
partnerships cannot claim privity of contract with Acordia 
and that each can assert a claim against Acordia only as a 
third-party beneficiary of NHC’s contract with Acordia to 
procure the builders risk insurance policy.  Acordia, 
however, acknowledged during oral argument that its 
argument on this point was misplaced in light of this 
Court’s decision in Acordia, 263 Va. at 386, 560 S.E.2d at 
251, holding that, “when NHC, acting as Genito’s agent, 
contracted with Acordia for insurance . . . , Genito then 
 
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263 Va. at 386, 560 S.E.2d at 251.  Even if the limited 
partnerships were subsidiaries of NHC, that status alone 
would not warrant the circuit court’s conclusion that the 
limited partnerships had been restored to the position in 
which they would have been if Acordia had fulfilled the 
contract to procure a builders risk insurance policy as 
promised.  See Richfood, Inc. v. Jennings, 255 Va. 588, 
592-93, 499 S.E.2d 272, 276 (1998) (a subsidiary is a 
separate corporate entity and that status alone is not a 
justification for a court to disregard the separate 
corporate structure). 
 
The situation here is not analogous to that in Link 
Associates, a case relied on by the circuit court.  There, 
the controversy involved the financing of a shopping-center 
development and a lender’s commitment for a permanent loan 
in an amount less than what the borrower had requested.  
223 Va. at 481, 291 S.E.2d at 213.  Asserting mutual 
mistake and constructive fraud, the borrower sought to 
reform the contract by rescinding certain portions of 
                                                                                                                                                 
became a contracting party with Acordia, thereby 
establishing privity between those two entities.”  Thus, we 
do not address Acordia’s argument regarding third-party 
beneficiaries. 
Acordia also argued that NHC had an insurable interest 
in the various housing projects owned by the limited 
partnerships and that Security undertook a risk as to NHC.  
That issue is not before us in this appeal, and we will 
therefore not address it. 
 
15
ground leases executed by the borrower as security for the 
permanent financing.  Id.  The issue decided on appeal was 
whether the trial court had erred in finding that the 
borrower had waived and ratified certain misrepresentations 
made by the lender.  Id. at 484, 291 S.E.2d at 215.  
Finding that there was sufficient evidence to prove that 
the borrower had waived and ratified any actionable 
misrepresentations of the lender, we stated with approval 
the principle that a party cannot accept the benefits of a 
contract and then seek to be relieved of its obligations.  
Id. at 488-89, 291 S.E.2d at 218 (citing United States v. 
Idlewild Pharmacy, Inc., 308 F. Supp. 19, 23 (E.D. Va. 
1969)). 
 
In the present case, there was no contract of 
insurance that provided coverage to the limited 
partnerships; thus, there was no contract from which they 
could accept benefits.  Cf. Jones v. New York Life Ins. 
Co., 253 P. 200, 203 (Utah 1926) (the theory of waiver of 
the terms of a contract presupposes the existence of a 
valid contract).  Furthermore, if Acordia had fulfilled its 
contractual obligation to procure a builders risk insurance 
policy naming the 12 limited partnerships as insureds, each 
limited partnership would have its own claim for any loss 
sustained at its respective housing project.  Any recovery 
 
16
by a particular limited partnership would not have affected 
the right of another limited partnership to recover fully 
for a loss at a different housing project.  In other words, 
the circuit court had no basis to foreclose the limited 
partnerships from pursuing damages by attributing the 
recoveries by Genito, Autumn Ridge, and Sunchase to the 
other limited partnerships. 
 
The final issue is whether Autumn Ridge and Sunchase 
are entitled to a return of premiums since Security paid 
for losses sustained at their respective housing projects.  
Acordia argued that these two limited partnerships accepted 
the benefit that would have been afforded if they had been 
listed as named insureds on the builders risk insurance 
policy and cannot now recover premiums on the basis that 
the risk never attached.  We disagree. 
 
As we previously stated, there was no contract of 
insurance as to any of these limited partnerships.  Thus, 
Autumn Ridge and Sunchase cannot be deemed to have accepted 
the benefit of insurance or to have waived the failure of 
Acordia to include them as named insureds on the builders 
risk insurance policy.  See Silva v. National Am. Life Ins. 
Co. of California, 58 Cal. App. 3d 609, 618 (Cal. Ct. App. 
1976) (waiver presupposes the existence of a valid 
 
17
contract); Hodge v. National Fid. Ins. Co., 68 S.E.2d 636, 
640 (S.C. 1952) (same); Jones, 253 P. at 203 (same). 
 
However, Autumn Ridge and Sunchase acknowledged on 
brief that the amount paid by Security for their respective 
losses should be deducted from the amount of premium each 
paid.  Thus, they should recover only the net amount from 
Acordia as damages. 
CONCLUSION 
 
For these reasons, we will reverse the judgment of the 
circuit court and remand this case for a determination of 
the amount of damages which may be due the limited 
partnerships. 
Reversed and remanded.