Opinion ID: 1030739
Heading Depth: 1
Heading Rank: 3

Heading: Relevant Facts and Relevant Procedural History

Text: In February 2000, Eastern Data Systems, Inc. (EDSI), an installer of communications wiring, purchased a business auto liability insurance policy, with a $1,000,000.00 limit, from State Auto Insurance Company (State Auto). At the time, EDSI was located in Beckley, West Virginia. In October 2002, Engineering Professional Services (EPS), located in New Jersey, purchased one-hundred percent of EDSI's stock, making EDSI a wholly owned subsidiary of EPS. EDSI continued to operate at its Beckley location. Effective January 1, 2003, EDSI merged into one of EPS's affiliated operating companies, EPS Network Solutions, Inc. (Network Solutions), giving Network Solutions a West Virginia location of operation. In light of the merger (the Merger), in February 2003, the vehicles previously owned by EDSI were retitled to Network Solutions. Notably, the business auto liability insurance policy originally issued by State Auto to EDSI in February 2000 was renewed until its cancellation in May 2004 (the State Auto BAP) with EDSI listed as the named insured. On May 26, 2003, Network Solutions employee Burt Kennedy blacked out while driving on company business in Washington State and caused a multiple vehicle accident (the Accident). At the time of the Accident, Burt Kennedy was driving a 1996 Ford van owned by Network Solutions, which van EDSI had owned prior to the Merger. At the time of the Accident, the State Auto BAP specifically listed the 1996 Ford van on the schedule of covered autos. At the time of the Accident, EPS also had a business auto insurance policy, with a $1,000,000.00 limit, in force with Federal Insurance Company (the Federal BAP). The parties do not dispute that the Federal BAP also provided coverage for Network Solutions. Federal Insurance Company (Federal) settled all of the personal injury and property damage claims arising from the Accident against itself, EPS, EDSI, Burt Kennedy, and State Auto for a total of $851,510.55. Federal also incurred $1,891.50 in related costs to settle the claims. Federal then sought contribution from State Auto to reimburse it for one-half of the total settlement amount and one-half of the related costs. State Auto disputed Federal's contribution claim on the basis, inter alia, that the State Auto BAP contained a non-assignment clause (the Non-Assignment Clause), which nullified such policy as it pertained to EPS or Network Solutions. The Non-Assignment Clause provided: Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured. (J.A. 28). State Auto never received a request to assign the State Auto BAP to Network Solutions or EPS, prior to the Accident. Federal took the position that the State Auto BAP transferred to Network Solutions by operation of law, on January 1, 2003, pursuant to West Virginia Code § 31D-11-1107(a)(3), which provides, in relevant part: When a merger takes effect... [a]ll property owned by, and every contract right possessed by, each corporation or other entity that merges into the survivor is vested in the survivor without reversion or impairment[.] Id. From here forward, we will refer to this code section as West Virginia's Merger/Transfer Statute. On August 15, 2005, State Auto filed the present declaratory judgment action against EDSI and Network Solutions, seeking a declaration that it has no duty to defend or provide coverage to Network Solutions, EPS, or Burt Kennedy for the damages arising from the Accident. Federal intervened as a defendant and filed a counterclaim against State Auto seeking a declaration that State Auto has a duty to defend and provide coverage to Network Solutions, EPS, and Burt Kennedy. As part of its counterclaim, Federal sought reimbursement for one-half of the total amount that it paid to settle the underlying claims arising from the Accident and one-half of its related costs. On cross-motions for summary judgment, the district court held in favor of Federal on its counterclaim, reasoning that EDSI's rights under the State Auto BAP transferred to Network Solutions by operation of law, pursuant to West Virginia's Merger/Transfer Statute, despite the existence of the Non-Assignment Clause in the State Auto BAP. In reaching this holding, the district court concluded that State Auto had not forecast sufficient evidence for a reasonable jury to find that the risk of insuring Network Solutions under the State Auto BAP was greater than insuring EDSI under the same policy. With respect to Federal's counterclaim, the district court entered a monetary judgment in favor of Federal for $426,701.00, representing one-half of the total amount that Federal paid to settle the underlying claims arising from the Accident and one-half of its related costs. The district court also denied State Auto's motion for summary judgment and granted summary judgment in favor of Federal, Network Solutions, and EDSI with respect to State Auto's claim for declaratory relief. State Auto challenges the district court's grant of summary judgment in favor of Federal, Network Solutions, and EDSI with respect to its claim for declaratory relief and the district court's grant of summary judgment in favor of Federal with respect to Federal's counterclaim. We have already decided that the district court did not err in concluding that State Auto failed to forecast sufficient evidence at summary judgment for a reasonable jury to find that the risks of insuring Network Solutions under the State Auto BAP were greater than the risks of insuring EDSI under the same policy. Accordingly, the certified questions set forth in Part I of this Order of Certification contemplate this decision.