Case Title: Osborne v. National Union Fire Ins.

Citation: 

Docket Number: 951117

State: virginia

Court: Virginia Supreme Court

Date: 1996-01-12T00:00:00Z

Document:
Present:  Carrico, C.J., Compton, Stephenson, Lacy, Hassell and  
Keenan, JJ., and Whiting, Senior Justice 
 
 
GIRARD ENOCH OSBORNE 
 
OPINION BY JUSTICE A. CHRISTIAN COMPTON 
v.  Record No. 951117                   January 12, 1996 
 
NATIONAL UNION FIRE INSURANCE 
COMPANY, ETC., ET AL. 
 
 
UPON A QUESTION OF LAW CERTIFIED BY THE UNITED STATES 
 
COURT OF APPEALS FOR THE FOURTH CIRCUIT 
 
 
Acting pursuant to the provisions of our Rule 5:42, the 
United States Court of Appeals for the Fourth Circuit certified 
to this Court in June 1995 a question of Virginia law, which we 
accepted by order entered in July 1995.  The question deals with 
a motor vehicle insurance coverage issue arising from an 
exclusion contained in an uninsured motorist endorsement to an 
insurance policy. 
 
The following facts are set forth in the Fourth Circuit's 
order of certification.  In August 1988 in Henry County, Girard 
Enoch Osborne, pursuant to his employment, was operating a truck 
owned by his employer, MW Manufacturers, Incorporated, a party to 
the federal litigation.  Osborne was injured when the truck was 
forced from the road and into a tree as the result of the 
negligent operation of another vehicle by an unknown, and hence 
uninsured, motorist. 
 
National Union Fire Insurance Company of Pittsburgh, 
Pennsylvania, the main party in the federal action, had issued to 
Osborne's employer a policy of motor vehicle liability insurance 
containing uninsured motorist (UM) coverage.  This policy had 
been purchased by the employer's parent company, Hanson 
 
 
 
 
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Industries, also a party to the federal suit.  The uninsured 
motorist coverage of that policy was limited to $25,000. 
 
State Farm Fire and Casualty Company issued a similar policy 
with like coverage to Osborne personally.  That policy contained 
a $100,000 limit for uninsured motorist coverage.  Osborne was 
covered by both policies, with National Union being the primary 
insurer for the accident in question and State Farm being the 
secondary insurer. 
 
In December 1991, Osborne obtained a judgment against the 
unknown motorist as "John Doe" in the Circuit Court of Henry 
County for $299,750.  According to applicable law, Code § 38.2-
2206(E), both insurers had responded for "John Doe." 
 
Subsequently, Osborne sought payment under the uninsured 
motorist provisions of both policies.  He settled with State Farm 
for $65,000 without National Union's consent.  Thereafter, 
National Union refused to pay Osborne any sum.  The insurer 
relied on an exclusion contained in its uninsured motorist 
endorsement as follows:  "This insurance does not apply to . . . 
[a]ny claim settled without our consent." 
 
Next, Osborne filed the present action in the Circuit Court 
of Henry County seeking recovery under National Union's policy.  
The defendants removed the proceeding to the United States 
District Court for the Western District of Virginia. 
 
The district court granted the insurer's motion for summary 
judgment, deciding that the foregoing policy exclusion permitted 
 
 
 
 
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denial of coverage because Osborne had settled the claim with 
State Farm without National Union's consent.  There was no proof 
that National Union was prejudiced by Osborne's settlement. 
 
Osborne appealed to the Fourth Circuit, contending that the 
consent-to-settlement clause cannot, consistent with Virginia 
law, bar recovery when no prejudice to the insurer has been 
shown. 
 
The question certified to this Court is:  "Whether National 
Union may deny UM coverage to Osborne on the grounds that Osborne 
settled with State Farm without National Union's consent, when 
National Union's UM contract contained a consent-to-settlement 
clause but National Union was not prejudiced by the settlement." 
 We answer that question in the affirmative. 
 
When the terms of an insurance policy are clear and 
unambiguous, we give the words their ordinary meaning and enforce 
the policy as written.  Atlas Underwriters, Ltd. v. Meredith-
Burda, Inc., 231 Va. 255, 259, 343 S.E.2d 65, 68 (1986).  In the 
present case, the language of the consent-to-settlement provision 
meets the test of clarity; plainly, the insurance does not apply 
to any claim settled without National Union's consent. 
 
Osborne implicitly contends that the exclusion should not 
apply unless the insurer demonstrates that its subrogation rights 
actually were harmed.  Such a contention runs afoul of consistent 
interpretations that we have made of similar policy provisions -- 
provisions, like the present exclusion, that are conditions of 
 
 
 
 
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coverage rather than restrictions on coverage in violation of 
statute. 
 
For example, when an insured fails to comply with a policy 
provision requiring timely notice of an accident, we have said 
that "the insurance company need not show that it was prejudiced 
by such a violation."  State Farm Fire and Casualty Co. v. 
Walton, 244 Va. 498, 504, 423 S.E.2d 188, 192 (1992).  Accord 
State Farm Fire and Casualty Co. v. Scott, 236 Va. 116, 120, 372 
S.E.2d 383, 385 (1988); Lord v. State Farm Mut. Auto. Ins. Co., 
224 Va. 283, 284, 295 S.E.2d 796, 797 (1982). 
 
Moreover, there was no requirement prior to 1966 that an 
insurer demonstrate prejudice to successfully deny coverage on 
account of breach of a cooperation clause.  See State Farm Mut. 
Auto. Ins. Co. v. Davies, 226 Va. 310, 314-15, 310 S.E.2d 167, 
169 (1983).  But, by a statutory amendment, the 1966 General 
Assembly required prejudice to be established for the insurer to 
rely on such breach.  See Code § 38.2-2204(C).  Likewise, the 
General Assembly has required prejudice to be shown under certain 
circumstances for violation of policy provisions requiring prompt 
delivery of suit papers to the insurer.  Id.  See State Farm Mut. 
Auto. Ins. Co. v. Porter, 221 Va. 592, 598, 272 S.E.2d 196, 199 
(1980).  However, the General Assembly, obviously aware of the 
prejudice issue in connection with insurance policy conditions, 
has not taken such action with reference to consent-to-settlement 
clauses.  And, we will not engage in judicial legislation on the 
 
 
 
 
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subject by requiring a showing of prejudice here. 
 
In conclusion, we note Osborne contends that the exclusion 
in issue applies only to a settlement with the uninsured motorist 
and not to the settlement with his own insurer, State Farm.  He 
also contends that the exclusion is invalid and void as against 
public policy because it conflicts with certain provisions of our 
uninsured motorist statute, Code § 38.2-2206.  These contentions 
are beyond the scope of the certified question.  Hence, we do not 
address them. 
 
Accordingly, as we have said, the certified question is 
answered affirmatively.