Present: Carrico, C.J., Compton, Stephenson, Lacy, Keenan, 

Koontz, JJ., and Whiting, Senior Justice 

VIRGINIA ELECTRIC AND POWER COMPANY 

OPINION BY JUSTICE LAWRENCE L. KOONTZ, v. Record No. 951919 September 13, 1996 

NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY 

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 

Melvin R. Hughes, Jr., Judge 

 In this appeal we consider whether, under a liability policy 

which excludes coverage for suits for bodily injury filed by "an 

employee" of the insured, an insurance company has an obligation 

to defend an insured where such a suit is brought by an 

individual who would be deemed a statutory employee of the 

insured under the Virginia Workers' Compensation Act. 

 The essential facts of the case are not in dispute. In 

October 1989, Commercial Courier Express (Commercial Courier) 

entered into a contract with Virginia Electric and Power Company 

(VEPCO) to provide designated courier services to VEPCO. The 

contract included provisions which referenced Commercial 

Courier's existing general liability policy (the policy) with 

Northbrook Property and Casualty Insurance Company (Northbrook). 

 As required by its contract with VEPCO, Commercial Courier 

submitted and Northbrook accepted an addendum to the policy 

adding VEPCO as an additional insured for suits arising out of 

courier services Commercial Courier provided to VEPCO. The 

policy included a standard "duty to defend" clause, as well as 

various exclusions from coverage. One such exclusion eliminated 

Northbrook's liability for bodily injury to an employee of the 

insured for injuries "arising out of and in the course of 
employment by the Insured." In the context of this case, VEPCO 

is the insured party. 

 On March 23, 1990, Margaret C. Laveri (Laveri), a Commercial 

Courier employee, delivered parcels to VEPCO's office at One 

James River Plaza. Subsequently, in a suit filed against VEPCO, 

Laveri alleged that while making the delivery she fell and was 

injured after stepping on a slippery substance in VEPCO's 

delivery area. 

 VEPCO requested that Northbrook defend the Laveri suit under 

the duty to defend clause in Commercial Courier's liability 

policy. Northbrook denied coverage, and VEPCO proceeded to 

successfully defend the Laveri suit on its own by asserting that 

Laveri was its statutory employee as defined by the Virginia 

Workers' Compensation Act. Code § 65.2-302. VEPCO asserted 

that, as a statutory employee, Laveri's sole remedy was under the 

Act, Code § 65.2-307, thus barring the civil suit. 

 VEPCO then filed a bill of complaint seeking a declaratory 

judgment that Northbrook had wrongly refused to provide a defense 

to VEPCO as an additional insured under Commercial Courier's 

policy. Northbrook moved to dismiss on the ground that VEPCO had 

an adequate remedy at law. The chancellor transferred the case 

to the law docket, granting VEPCO leave to file a motion for 

judgment. VEPCO thereafter filed a motion for judgment asserting 

that Northbrook had breached its duty to defend and seeking 

damages in the amount of the legal fees expended in defending the 

Laveri suit. 

 The parties filed cross-motions for summary judgment. In 
its motion, Northbrook asserted various defenses including the 

exclusion of coverage for a claim filed by an employee. 

Following an ore tenus hearing, the trial court rejected VEPCO's 

assertion that the exclusion did not apply to a statutory 

employee, reasoning that the language of the exclusion of 

coverage for injuries to an employee "suggest[s] an employee in 

the context of workers['] compensation." Accordingly, the trial 

court found that Northbrook properly refused to defend the suit 

on the ground that Laveri was "an employee of [VEPCO]." We 

awarded VEPCO this appeal. 

 We have previously addressed at length the question of an 

insurer's duty to defend, holding that the "obligation to defend 

is broader than [the] obligation to pay, and arises whenever the 

complaint alleges facts and circumstances, some of which would, 

if proved, fall within the risk covered by the policy." Lerner 

v. Safeco, 219 Va. 101, 104, 245 S.E.2d 249, 251 (1978). In 

Lerner, we went on to say "that such a provision [to defend] 

places no obligation on the insurer to defend an action against 

the insured when, under the allegations of the complaint, it 

would not be liable under its contract for any recovery therein 

had." Id. (citing Travelers Indem. Co. v. Obenshain, Committee, 

219 Va. 44, 46, 245 S.E.2d 247, 249 (1978)). In addition, we 

have explained that: 

 [I]f it is doubtful whether the case alleged is covered 

by the policy, the refusal of the insurer to defend is 

at its own risk. London Guar. Co. v. White & Bros., 

Inc., 188 Va. 195, 199-200, 49 S.E.2d 254, 256 (1948). 

 And, if it be shown subsequently upon development of 

the facts that the claim is covered by the policy, the 

insurer necessarily is liable for breach of its 

covenant to defend. Id. at 200, 49 S.E.2d at 256. 
Brenner v. Lawyers Title Ins. Corp., 240 Va. 185, 189, 397 S.E.2d 

100, 102 (1990). 

 However, as will become apparent from our analysis in the 

present case and is perhaps self-evident, the obligation to 

defend is not negated merely by the unsuccessful assertion of a 

claim otherwise facially falling within the risks covered by the 

policy. Various defenses applicable to specific factual 

circumstances may be successfully asserted against claims 

otherwise covered by the policy. The insurer has the obligation 

to defend the insured in such circumstances even though the 

obligation to pay is not ultimately invoked. It is in this 

context that the obligation to defend is said to be broader than 

the obligation to pay. Stated differently, the insurer has a 

duty to defend against risks covered by the policy even though 

the defense successfully litigates the issue of its lack of 

obligation to pay the claim. 

 In applying these well established principles to determine 

Northbrook's obligation to defend in this particular case, we are 

concerned exclusively with the risks covered by the express 

provisions of the policy and the allegations of Laveri's motion 

for judgment. As it did in the trial court, Northbrook urges 

this Court to interpret the policy in the context of the 

provisions of the contract between VEPCO and Commercial Courier. 

 While referring to several provisions of that contract in 

rendering its judgment, the trial court expressly ruled that "the 

focus must remain on the insurance contract at issue between 
[Northbrook and VEPCO]." Assuming, without deciding, that the 

applicable rules of evidence would have permitted consideration 

of the provisions of the Commercial Courier/VEPCO contract to 

determine the intended coverage of the insurance policy, 

Northbrook's failure to assign cross-error to the trial court's 

failure to do so precludes our consideration of that issue. Rule 

5:18(b). 

 We turn then initially to the allegations of Laveri's motion 

for judgment. That pleading alleged that Laveri was a "business 

invitee" of VEPCO and that, as a result of VEPCO's negligent 

maintenance of its delivery area, she was injured while making a 

delivery to that area "in the course and scope of her then 

employment." Unquestionably, if proven at trial, these 

allegations would fall within the ambit of the risks for which 

the policy's general liability provisions for bodily injury 

afford protection to VEPCO. 

 A fair reading of the record makes it clear, and the parties 

are not in disagreement, that at the time of her injury Laveri 

was an employee of Commercial Courier. Similarly, it is clear 

that Northbrook's decision, and the risk it ran, not to defend 

against her claim was based on the provision of the policy that 

excluded coverage for bodily injury to an employee of the 

insured. Thus, the sole question is whether the trial court 

correctly ruled that Laveri's status as a statutory employee of 

VEPCO for purposes of workers' compensation brought her within 

the definition of the term "employee" as used in the coverage 

exclusion contained in the policy. 
 Exclusionary language in an insurance policy is to be 

construed most strongly against the insurer, and the burden is 

upon the insurer to prove that an exclusion applies. Johnson v. 

Insurance Co. of No. America, 232 Va. 340, 345, 350 S.E.2d 616, 

619 (1986). This is true whether the insurer is asserting the 

exclusion to deny liability for payment or to avoid its duty to 

defend the insured. Accordingly, Northbrook bears the burden of 

showing that the policy clearly intended the term "employee" as 

used in the exclusion to include a statutory employee as defined 

in Code § 65.2-302 of the Virginia Workers' Compensation Act. 

 Northbrook asserts that the policy contemplated use of the 

statutory definition of the term "employee" found in the Act, as 

shown by the use of the phrase "[a]n employee of the Insured 

arising out of and in the course of employment by the Insured" in 

the exclusion provision. (Emphasis added.) Indeed, the trial 

court agreed with this assertion, noting that: "It is significant 

that this policy language while mentioning the word 'employee' 

also mentions 'arising out of and in the course of employment,' 

words that suggest an employee in the context of workers['] 

compensation . . . ." We disagree. 

 The Act defines statutory employees for the specific purpose 

of applying workers' compensation laws. Thus, we hold that the 

statutory definition contained in the Act will not be applied to 

an insurance policy unless the policy provides by reference to 

the specific statute that the statutory definition is intended to 

be applied. Cf. United Services Auto. Ass'n v. Pinkard, 356 F.2d 

35, 37-38 (4th Cir. 1966) (workers' compensation rationale used 
where employee exclusion specifically precluded coverage for 

injury arising out of employment "if benefits thereof are in 

whole or in part either payable or required to be provided under 

any [workers'] compensation law"). 

 In American Reliance Insurance Co. v. Mitchell, 238 Va. 543, 

385 S.E.2d 583 (1989), an insurance policy "excluded coverage for 

'bodily injury to any farm employee . . . arising out of and in 

the course of his employment by any insured.'" Id. at 545, 385 

S.E.2d at 584. In addressing the employee exclusion clause, the 

insurance company urged the application of workers' compensation 

analysis to expand the definition of employee to include persons, 

including the injured party in that case, who would be eligible 

for workers' compensation benefits even though they were merely 

occasional or irregular laborers. We declined to apply workers' 

compensation definitions in interpreting the term "farm 

employee", holding that the plain and generally accepted meaning 

of employee "connotes continuous service of a person who works 

full time for another for a consideration." Id. at 549, 385 

S.E.2d at 586. 

 The same rationale we employed in Mitchell applies here. 

While it is true that the exclusion in the policy uses language 

evocative of a workers' compensation law definition of 

"employee," nothing in the policy expressly designates the Act as 

providing the definition for terms used in the coverage 

exclusion. Id. at 548, 385 S.E.2d at 586; cf. Pinkard, 356 F.2d 

at 37.*T Thus, as in Mitchell, the plain and generally accepted 

 

 *We note that a separate exclusion within the policy 
meaning of the term "employee" is controlling. Using that 

definition, we hold that, although deemed a statutory employee 

for purposes of workers' compensation, Code § 65.2-302, Laveri 

was not an employee of VEPCO within the plain meaning of the 

policy. Accordingly, the trial court erred in determining that 

the employee exclusion clause of the policy permitted Northbrook 

to refuse to fulfill its obligation to defend VEPCO. 

 For these reasons, we will reverse the judgment of the 

circuit court and enter judgment for VEPCO, and the case will be 

remanded for a determination of damages. 

Reversed and remanded. 

(..continued) 

excludes coverage for "[a]ny obligation of the Insured under a 

workers' compensation, disability benefits or unemployment 

compensation law or any similar law." In the trial court, 

Northbrook relied on this exclusion to bolster its argument that 

the policy excluded generally any claim that was subject to 

workers' compensation law. Northbrook did not reassert this 

argument on appeal.