Opinion ID: 1059209
Heading Depth: 2
Heading Rank: 3

Heading: The Severability of Interests Clause

Text: Having determined that the omnibus clause does not apply to the umbrella policy and that the exclusion for personal injury to the insured applies to Mr. Moore, we must next ascertain the effect, if any, of the policy's severability of interests clause (the severability clause) which states: This insurance applies separately to each insured. This provision shall not increase our liability limit for one occurrence. The trial court ruled that the severability clause applied separately to each insured and that any exclusion of liability coverage in the policy for an insured applies only to the insured claiming coverage, Mrs. Moore, not Mr. Moore. In support of the trial court's ruling, the Moores argue that, notwithstanding that Mr. Moore is undoubtedly an insured under the umbrella policy, the severability clause requires that he not be considered as such because it is another insured, Mrs. Moore, who claims coverage in this instance. The Moores rely on Bankers & Shippers Ins. Co. v. Watson, 216 Va. 807, 224 S.E.2d 312 (1976), to support their position. We disagree and conclude that the trial court's ruling on the severability clause was erroneous. In Bankers & Shippers, a case involving claims by injured third parties against a permissive user (an employee of the named insured), [w]e construed . . . the severability of interests clause to serve its designed purpose of making certain that, when a claim is asserted by a member of the public against a permissive user, the latter becomes `the insured,' with respect to that claim, under the named insured's liability insurance contract. Hartman's, 218 Va. at 708, 239 S.E.2d at 897 (emphasis added). However, we noted in Bankers & Shippers that the named insured, in the policy under consideration in that case, was excluded from coverage. 216 Va. at 815, 224 S.E.2d at 317. Similarly, in Hartman's we rejected a contorted construction of the severability clause which attempted to excise from the policy its plain language excluding the named insured from coverage. [O]nly the interests of the direct parties to the insurance contract, the named insured and the insurer, are in issue, and only a strained application of the severability of interests clause can overcome the effect of the exclusion clause. To adopt such a strained application would ignore the clearly expressed intention of the parties, would enlarge the obligations undertaken originally by the insurer, and would permit a windfall to Hartman. A rule of reason applies to avoid these results. Hartman's, 218 Va. at 709, 239 S.E.2d at 897; see also Safeco Ins. Co. of America v. Merrimack Mut. Fire Ins. Co., 785 F.2d 480 (4th Cir.1986) (applying Hartman's and Bankers & Shippers ). The severability clause, under the Bankers & Shippers and Hartman's analysis, prevents an insurer from denying a permissive user liability coverage under the named insured's policy by invoking an exclusion of insureds. This serves to protect members of the public injured by the negligence of a permissive user. Conversely, applying the Moores' version of the Bankers & Shippers analysis to the severability clause in the case at bar would place Mr. Moore, although he is a named insured in privity with the insurer, in the same position as a third-party member of the public. To do so would contradict the obvious intention of the parties and, as noted in Hartman's and Safeco, convert the umbrella policy from a third-party excess liability policy into a first-party personal injury policy. There is no authority for applying the severability clause in such a manner. For these reasons, we conclude the trial court erred in its interpretation of the severability clause and in its holding that the umbrella policy's exclusion only applied to Mrs. Moore and not to Mr. Moore.