UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 10-1439

BRYAN BROTHERS INCORPORATED, a Virginia corporation; JOSEPH 

KOBER; DORIS LANSING; KARL SCHOELLER; MILDRED SCHOELLER,

Plaintiffs - Appellants,

v.

CONTINENTAL CASUALTY COMPANY, an Illinois corporation,

Defendant - Appellee.

Appeal from the United States District Court for the Eastern 

District of Virginia, at Richmond. Henry E. Hudson, District 

Judge. (3:09-cv-00675-HEH)

Argued: January 25, 2011 Decided: March 24, 2011

Before MOTZ and WYNN, Circuit Judges, and Irene C. BERGER, 

United States District Judge for the Southern District of West 

Virginia, sitting by designation.

Affirmed by unpublished opinion. Judge Wynn wrote the opinion, 

in which Judge Motz and Judge Berger concurred.

ARGUED: Collin Jefferson Hite, MCGUIREWOODS, LLP, Richmond, 

Virginia, for Appellants. Richard A. Simpson, WILEY REIN, LLP, 

Washington, D.C., for Appellee. ON BRIEF: Kenneth W. Abrams, 

MCGUIREWOODS, LLP, Richmond, Virginia, for Appellants. Charles 

C. Lemley, Kimberly A. Ashmore, WILEY REIN, LLP, Washington, 

D.C., for Appellee.
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Unpublished opinions are not binding precedent in this circuit.
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WYNN, Circuit Judge:

In this appeal, accounting firm Bryan Brothers 

Incorporated, seeks coverage under a professional liability 

insurance policy issued by Continental Casualty Company for 

liability arising from illegal acts of a former Bryan Brothers’s 

employee. Under the policy, it is a condition precedent to 

coverage that no insured has knowledge, prior to the inception 

of the policy, of an act that is reasonably likely to become the 

basis for a claim. Because Bryan Brothers had such knowledge, 

we conclude that the claims at issue are not covered. 

Therefore, we affirm the district court’s grant of summary 

judgment to Continental Casualty Company. 

I.

The parties stipulated all material facts. Continental 

Casualty Company issued a professional liability insurance 

policy effective from July 1, 2008 to July 1, 2009 to cover 

certain liabilities arising from Bryan Brothers’s accounting 

services. In pertinent part, the “Coverage Agreements” provide:

A. In accordance with all the terms and conditions of 

this policy, we will pay on your behalf all sums 

in excess of the deductible, up to our limits of 

liability, that you become legally obligated to 

pay as damages and claim expenses because of a 

claim that is both first made against you and 

reported in writing to us during the policy period 

by reason of an act or omission in the performance 
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of professional services by you or by any person 

for whom you are legally liable provided that:

 . . .

2. prior to the effective date of this policy, 

none of you had a basis to believe that any 

such act or omission, or interrelated act or 

omission, might reasonably be expected to be 

the basis of a claim . . . .

(“prior knowledge provision”).

The policy also contains the following “Exclusion”:

This Policy does not apply to:

. . .

D. any claim based on or arising out of a dishonest, 

illegal, fraudulent, criminal or malicious act by 

any of you. We shall provide you with a defense 

of such claim unless or until the dishonest, 

illegal, fraudulent, criminal or malicious act 

has been determined by any trial verdict, court 

ruling, regulatory ruling or legal admission, 

whether appealed or not . . . .

(“bad acts exclusion”). Finally, the following appears under 

the “Policy Conditions” heading:

L. Innocent Insureds

If coverage under this Policy would be excluded 

as a result of any criminal, dishonest, illegal, 

fraudulent, or malicious acts of any of you, we 

agree that the insurance coverage that would 

otherwise be afforded under this Policy will 

continue to apply to any of you who did not 

personally commit, have knowledge of, or 

participate in such criminal, dishonest, illegal, 

fraudulent or malicious acts or in the 

concealment thereof from us.

(“innocent insureds provision”). The policy defines “you” as 

the named insured (Bryan Brothers) and “any person who is or 
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becomes a partner, officer, director, associate, or employee of 

the named insured, but only for professional services performed 

on behalf of the named insured.” 

In February 2009, Bryan Brothers discovered that Deborah 

Whitworth, the firm’s account clerk from 1999 to 2009, had 

stolen funds from eight clients’ accounts. Whitworth’s thefts 

began in 2002 and the last theft occurred sometime after July 1, 

2008, during the policy period. The victims asserted tort 

claims against Bryan Brothers.

In turn, Bryan Brothers filed for insurance coverage of the 

victims’ claims but Continental Casualty Company denied Bryan 

Brothers’s claim for coverage by letter dated March 16, 2009. 

Continental Casualty Company indicated that Whitworth fit within 

the policy’s definition of “you” because she committed the 

thefts as an employee performing professional services for Bryan 

Brothers. Because Whitworth “had reason to believe as early as 

2002, before the inception of the policy on [7]-1-08, that her 

acts might be the basis of a claim, the terms of the coverage 

agreements are not met and coverage is precluded on that basis.” 

In other words, Continental Casualty Company denied coverage 

under the prior knowledge provision because Whitworth had reason 

to believe, before the effective date of the policy, that her 

thefts might become the basis for claims. Bryan Brothers later 
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settled with its affected clients and brought this suit for 

coverage under the policy.

The parties filed cross-motions for summary judgment. 

Bryan Brothers argued that the prior knowledge provision was an 

exclusion from, as opposed to a condition precedent to, 

coverage. Bryan Bros. Inc. v. Cont’l Cas. Co., 704 F. Supp. 2d 

537, 540-41 (E.D. Va. 2010). And because Whitworth was the only 

person with prior knowledge of her thefts, the innocent insureds 

provision saved coverage for any insured other than Whitworth. 

Id. Continental Casualty Company, on the other hand, argued 

that the prior knowledge provision was a condition precedent 

that precluded coverage if unfulfilled. Id. at 540. Further, 

Continental Casualty Company argued that coverage was not denied 

because Whitworth’s acts were “illegal” under the bad acts 

exclusion; consequently, the innocent insureds provision was not 

triggered to save coverage otherwise precluded by the prior 

knowledge provision. Id. at 541. 

The district court granted summary judgment to Continental 

Casualty Company based on Whitworth’s prior knowledge. The bad 

acts exclusion and the innocent insureds provision were 

therefore not applicable.*

 * The district court also held that Whitworth’s thefts 

during the policy period were “interrelated” to her pre-policy 

thefts. Therefore, the district court determined that claims 

 The court also found these provisions 

(Continued)
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to be unambiguous, rejecting Bryan Brothers’s argument that they 

were ambiguous and must be construed in favor of coverage. Id.

at 542. Bryan Brothers appeals. 

II.

We review a grant of summary judgment de novo, viewing all 

facts and inferences in favor of the nonmoving party. 

Providence Square Assocs., L.L.C. v. G.D.F., Inc., 211 F.3d 846, 

850 (4th Cir. 2000). Summary judgment is appropriate if “there 

is no genuine dispute as to any material fact and the movant is 

entitled to judgment as a matter of law.” Fed. R. Civ. P. 

56(a). 

Virginia law governs this insurance dispute. Virginia 

courts “‘interpret insurance policies, like other contracts, in 

accordance with the intention of the parties gleaned from the 

words they have used in the document.’” Transcon. Ins. Co. v. 

RBMW, Inc., 262 Va. 502, 512, 551 S.E.2d 313, 318 (2001)

(quoting Floyd v. N. Neck Ins. Co., 245 Va. 153, 158, 427 S.E.2d 

193, 196 (1993)). “Because insurance policies usually are 

drafted by insurers, [Virginia courts] construe ambiguous policy 

 

based on thefts during the policy period were also precluded 

because of Whitworth’s prior knowledge. Id. at 542-43. Bryan 

Brothers does not challenge that ruling on appeal.
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language purporting to exclude certain occurrences from coverage 

most strongly against the insurer.” Va. Farm Bureau Mut. Ins. 

Co. v. Williams, 278 Va. 75, 81, 677 S.E.2d 299, 302 (2009).

Virginia has long followed the rule that if the insured 

fails to fulfill a condition of an insurance policy, the 

insurer’s coverage obligation is not triggered. See State Farm 

Mut. Auto. Ins. Co. v. Arghyris, 189 Va. 913, 924-25, 55 S.E.2d 

16, 21 (1949); Combs v. Hunt, 140 Va. 627, 643, 125 S.E. 661, 

666 (1924); Va. Fire & Marine Ins. Co. v. J.I. Case Threshing 

Mach. Co., 107 Va. 588, 590-91, 59 S.E. 369, 369-70 (1907). 

“[I]f the condition is broken the policy is terminated, if the 

insurer so elects.” Arghyris, 189 Va. at 927, 55 S.E.2d at 22; 

accord Fidelity-Phenix Fire Ins. Co. of N.Y. v. Pilot Freight 

Carriers, Inc., 193 F.2d 812, 815-16 (4th Cir. 1952) (discussing 

the operation of conditions precedent to coverage under North 

Carolina law).

On the other hand, an insured may seek coverage for an 

event that is within the scope of the insuring clause but falls 

under a specific exclusion. In that scenario, the policy is not 

avoided and another policy provision, such as a savings clause, 

may preserve coverage. See Copp v. Nationwide Mut. Ins. Co., 

279 Va. 675, 683-84, 692 S.E.2d 220, 225 (2010) (holding that 

insurer had a duty to defend insured for a claim excluded by a 

homeowner’s policy but covered by an exception to the exclusion 
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in an umbrella policy); see also Calmar S.S. Corp. v. Scott, 345 

U.S. 427, 433-35 (1953) (discussing exclusions from coverage and 

exceptions in a war-risk maritime policy).

III.

Bryan Brothers argues that it is entitled to coverage under 

the innocent insureds provision because it did not share prior 

knowledge of Whitworth’s thefts. Bryan Brothers insists that 

the prior knowledge provision is an exclusion from coverage and 

that the innocent insureds provision saves coverage for the 

firm. Conversely, Continental Casualty Company maintains that 

the prior knowledge provision is a condition precedent that 

precludes coverage if unsatisfied.

The plain language and structure of the policy convince us 

that the prior knowledge provision is a condition precedent to 

coverage. In the first coverage agreement clause, Continental 

Casualty Company agrees to cover Bryan Brothers’s liability on 

claims made during the policy period “provided that . . . prior 

to the effective date of this policy, none of you had a basis to 

believe that any such act or omission, or interrelated act or 

omission, might reasonably be expected to be the basis of a 

claim” (emphasis added). This language may be rephrased to say 

that if any defined “you” knew prior to the effective date of 

the policy that an act or omission might become the basis for a 
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claim, any claims arising from such acts or omissions are not 

covered. Here, Bryan Brothers’s lack of prior knowledge is a 

condition of Continental Casualty Company’s agreement to cover 

Bryan Brothers’s liability from acts predating the policy. 

Because Whitworth had prior knowledge, “[t]here has been a 

failure to fulfill a condition upon which [Continental Casualty 

Company’s] obligation is dependent.” Arghyris, 189 Va. at 925, 

55 S.E.2d at 21. 

This interpretation melds with the concept of fortuity, a 

fundamental premise of insurance law. Insurers do not usually 

contract to cover preexisting risks and liabilities known by the 

insured. Thus, it is generally the insured’s duty to provide 

truthful and complete information so the insurer can fairly 

evaluate the risk it is contracting to cover. See, e.g., Combs 

v. Equitable Life Ins. Co. of Iowa, 120 F.2d 432, 437 (4th Cir. 

1941) (holding that an insured’s failure to disclose a heart 

condition breached a condition precedent to coverage on a life 

insurance policy); Arghyris, 189 Va. at 929, 55 S.E.2d at 23 

(holding that an insured’s failure to provide complete and 

timely information breached the policy’s cooperation clause, a 

condition precedent to coverage); Va. Fire & Marine Ins. Co. v. 

J.I. Case Threshing Mach. Co., 107 Va. 588, 590-91, 59 S.E. 369, 

369-70 (1907) (stating that the insured’s failure to disclose an 

encumbrance on his property breached the condition precedent 
11

that the insured property be unencumbered). If the insured 

fails to comply with a clear condition required by the insurer, 

it is typically not liable on the policy.

Here, the prior knowledge provision essentially makes 

fortuity a condition of coverage. The prior knowledge provision 

indicates in clear and unambiguous language Continental Casualty 

Company’s unwillingness to cover liability arising from prior 

acts or omissions that any insured might reasonably expect to 

result in a claim. 

Because Continental Casualty Company denied Bryan 

Brothers’s claim for failure of a condition precedent to 

coverage, we are not persuaded by Bryan Brothers’s argument for 

coverage pursuant to the innocent insureds provision. Although 

the facts of this case might have supported a denial of coverage 

under the bad acts exclusion, there is no indication that 

coverage was denied on that basis. Thus, the innocent insureds 

provision, which appears to be an exception to the bad acts 

exclusion, was not implicated. 

Even assuming arguendo that the innocent insureds provision 

could be considered an exception to the prior knowledge 

provision, it is elemental that exclusions and exceptions in an 

insurance policy cannot expand the scope of agreed coverage. 

See Scott, 345 U.S. at 435 (explaining that overlapping 

exclusions and exceptions were plainly intended “to make certain 
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and doubly certain that the coverage of the policy as a whole is 

in no event enlarged”); Stanley Martin Cos., Inc. v. Ohio Cas. 

Grp., 313 F. App’x 609, 613 n.2 (4th Cir. 2009) (unpublished) 

(explaining that exclusions, and certain exceptions, could not 

expand the scope of the insuring clause in a general 

contractor’s liability policy) (citing Nationwide Mut. Ins. Co. 

v. Wenger, 222 Va. 263, 267, 278 S.E.2d 874, 876 (1981)). 

Therefore, the innocent insureds provision cannot provide 

coverage that is precluded by the plain language of the prior 

knowledge provision.

We reached a similar decision TIG Insurance Co. v. 

Robertson, Cecil, King & Pruitt, 116 F. App’x 423 (4th Cir. 

2004) (unpublished). There, a partner at a law firm represented 

on a written application for professional liability insurance 

that the firm was unaware of any act or omission that might 

reasonably be expected to become the basis for a claim. Prior 

to the application, the applicant-partner had misappropriated 

client funds without the firm’s knowledge. Id. at 424-25. The 

affected clients sued the firm, which sought coverage for 

liability on the clients’ claims. Id. Applying Virginia law, 

we held that the insurer could rescind the policy based on the 

applicant-partner’s misrepresentations. Id. at 426. We 

rejected the argument that coverage was saved for partners 

innocent of the misrepresentation because they did not “contract 
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for additional protection in the case of a partner making 

misrepresentations on behalf of the partnership on the 

application form.” Id. at 427. The same is true here because 

Bryan Brothers was free to bargain for additional coverage 

against acts of its employees.

Likewise, other courts have made the same interpretation of 

identical policy language. In Professional Asset Strategies v. 

Continental Casualty Co., No. 2:09-cv-1238-AKK, 2010 WL 4284991, 

at *1 (E.D. Ark. Aug. 27, 2010), an investment firm’s employee 

stole money from client accounts without the firm’s knowledge. 

The firm acquired professional liability insurance after the 

thefts. When the firm discovered the employee’s misconduct and 

its clients sued, the firm sought coverage, which was denied 

because the employee had prior knowledge of his thefts. Id. at 

*2. The court observed that “coverage exists only if this 

[prior knowledge] precondition is met, and is denied if anyone

meeting the definition of ‘you’ has knowledge of what might 

reasonably be a potential claim.” Id. at *5 (first underline 

added). 

In other words, no coverage exists if any ‘you’ had 

prior knowledge of the existence of a claim. Where 

there is no prior knowledge and coverage exists, the 

policy provides various exclusions, including [the bad 

acts exclusion]. However, in cases where the 

exclusion is because of ‘criminal, dishonest, illegal, 

fraudulent or malicious’ acts of a ‘you,’ then the 

‘innocent insured’ provision kicks in to restore 

coverage.
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Id. at *7; accord Cont’l Cas. Co. v. Walker, No. 4:07cv00298 

SWW, 2008 WL 8101840, at *4 (E.D. Ark. July 7, 2008) (rejecting 

contention that an innocent insured clause provided coverage for 

a claim not first made and reported during the policy period).

Finally, we decline Bryan Brothers’s request to find the 

pertinent language ambiguous and construe the policy in favor of 

coverage. Williams, 278 Va. at 81, 677 S.E.2d at 302 (“[I]f 

disputed policy language is ambiguous and can be understood to 

have more than one meaning, we construe the language in favor of 

coverage and against the insurer.”). But a plain reading of the 

pertinent policy language reveals that it is not susceptible to 

more than one meaning. Because the language of the prior 

knowledge provision is unambiguous and structured as a condition 

precedent to the coverage agreement, we will not contort the 

language to find an ambiguity.

IV.

In sum, we hold that the prior knowledge provision is a 

clear and unambiguous condition precedent to recovery on the 

policy. Because Whitworth had prior knowledge of her thefts, a 

condition precedent was unfulfilled, and the coverage agreement 

was not triggered. Additionally, exclusions and exceptions in 

the policy cannot provide coverage that is precluded by the 
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prior knowledge condition. Accordingly, we affirm the grant of 

summary judgment for Continental Casualty Company.

AFFIRMED