Court Opinion

ID: 1031327
Source: CourtListenerOpinion
Date Created: 2013-07-05 08:29:33.681949+00
Date Added: 2024-06-11T12:39:39.692044
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 09-1389

ADMIRAL INSURANCE COMPANY,

                Plaintiff – Appellee,

           v.

ACE AMERICAN    INSURANCE    COMPANY;   ILLINOIS   UNION   INSURANCE
COMPANY,

                Defendants – Appellants.

Appeal from the United States District Court for the Western
District of Virginia, at Harrisonburg.     Samuel G. Wilson,
District Judge. (5:08-cv-00055-sgw-jgw)

Argued:   December 3, 2009                   Decided:   January 20, 2010

Before KING, DUNCAN, and DAVIS, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: John L. Williams, COZEN O’CONNOR, Seattle, Washington,
for Appellants.    Thomas Collier Mugavero, WHITEFORD, TAYLOR &
PRESTON, LLP, Falls Church, Virginia, for Appellee.     ON BRIEF:
Thomas M. Jones, David J. Walton, COZEN O’CONNOR, Seattle,
Washington, for Appellants.      Valerie L. Tetro,     WHITEFORD,
TAYLOR & PRESTON, LLP, Falls Church, Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

      ACE American Insurance Company (“Ace”) and Illinois Union

Insurance Company (“Illinois Union”) appeal from the district

court’s    judgment        in   favor    of     Admiral     Insurance       Company

(“Admiral”) in this insurance coverage dispute.                    As explained

below, we affirm the district court.

                                         I.

                                         A.

      Admiral,      Ace,    and    Illinois      Union     provided        insurance

coverage     to    American     HomePatient,      Inc.    (“AHP”),     a    company

headquartered in Tennessee that provides home medical services

and   equipment.      On    May   16,   2006,    AHP’s    employee,    Brewer    E.

Hoover, Jr., shot and killed two co-employees and himself during

business hours at AHP’s workplace in Harrisonburg, Virginia.                      On

July 6, 2006, the estates of the two murdered employees, Bonnie

Sue H. Crump and Gary A. Gibson, each brought nearly identical

wrongful   death     actions      in   the    Circuit    Court   for   Rockingham

County, Virginia (the “state trial court”), against both AHP and

Hoover’s estate.       Against AHP, each complaint asserted claims,

inter alia, of negligent retention and failure to provide a safe

workplace.        The state trial court had occasion to outline the

factual allegations of the complaints in a March 2007 decision.

See Crump v. Morris, No. CL06-00547(L) (Va. Cir. Ct. Mar. 12,

                                         2
2007)    (the   “State   Decision”). 1   As   described   in   the   State

Decision, the complaints alleged the following:

          [Ms. Crump, Mr. Gibson, and Mr. Hoover] all
     worked together in the AHP office, formerly located at
     182 Neff Avenue in Harrisonburg, Virginia.      During
     that time, [their] immediate supervisor was Greg
     Taylor . . . , a district manager of AHP.

          At some point, Mr. Hoover became romantically
     infatuated with Ms. Crump, and Mr. Hoover apparently
     believed that Ms. Crump and Mr. Gibson were having an
     extra-marital affair. Mr. Hoover confronted Ms. Crump
     about his belief on March 24, 2006, after entering her
     office and slamming her door.    Mr. Hoover shook his
     fist and pointed in Ms. Crump’s face while shouting at
     her for lying about the affair.

           Ms. Crump reported the assault to Mr. Taylor, the
     District Manager, by leaving telephone messages for
     him on the evening of March 24, 2006.      In addition,
     Ms. Crump left another message for Mr. Taylor on March
     27, 2006, indicating that she was afraid to return to
     work.    However, Mr. Taylor never contacted Ms. Crump
     regarding those telephone messages.

          Mr. Hoover continued to act in a threatening
     manner towards Ms. Crump, which prompted Ms. Crump to
     keep a cane at her desk for protection. In addition,
     Ms. Crump was afraid to visit the restroom unless
     accompanied by another employee.        Several other
     employees reported Mr. Hoover’s strange behavior to
     Mr. Taylor in emails and voiced their concerns in
     weekly   office  meetings  attended  by   Mr.  Taylor.
     However, Mr. Taylor and AHP did not take any
     responsive action.

          On May 16, 2006, Mr. Hoover reported to work with
     .38 and .40 caliber handguns.   Mr. Hoover first shot
     Mr. Gibson, killing him with a single shot to the

     1
       The State Decision is found at J.A. 510-18.    (Citations
herein to “J.A.    ” refer to the contents of the Joint Appendix
filed by the parties in this appeal.)

                                     3
     head. Ms. Crump and two of her coworkers were in the
     front of the office preparing for their workday when
     they heard this gunshot.    Mr. Hoover then came from
     the rear of the office and began shooting at Ms.
     Crump, who was hit several times.          One of her
     coworkers pulled Ms. Crump into an office and closed
     the door. However, Mr. Hoover shot through the door,
     and then entered the office, executing Ms. Crump,
     shooting her at point-blank range in the head.    Mr.
     Hoover committed suicide shortly after the shootings
     when the police officers entered the building.

State Decision 2-3.           Additionally, each complaint alleged that

Hoover’s “conduct towards [Crump and Gibson] was based upon his

personal jealousy and did not arise from any known employment

issues with either [Crump, Gibson, or AHP].”                       J.A. 73, 82.

     The      state        trial    court        and    the        Virginia       Workers’

Compensation Commission (the “state commission”) both determined

that, based on workers’ compensation law, the deaths of Crump

and Gibson did not arise out of their employment with AHP.                               In

the state trial court, AHP initially demurred to both wrongful

death   actions,      arguing      that    they       were    barred     by    Virginia’s

workers’ compensation exclusivity provision, see Va. Code Ann.

§ 65.2-307, because the deaths arose out of and in the course of

Crump’s      and   Gibson’s         employment,         see        id.     § 65.2-300(A)

(providing that workers’ compensation covers “personal injury or

death   by   accident       arising    out       of   and    in    the   course    of   the

employment”).         By    its    State   Decision,         the   state      trial   court

overruled AHP’s demurrers, explaining that, although the deaths

had occurred “in the course of” Crump’s and Gibson’s employment,

                                             4
they did “arise out of” such employment, in that the shootings

were “not directed against [Crump and Gibson] as employees or

because of their employment.”          State Decision 5.

       Following the State Decision, AHP sought a ruling from the

state commission that it had exclusive jurisdiction over the

wrongful death actions.         On July 18, 2007, the state commission

determined that, for workers’ compensation purposes, the deaths

of Crump and Gibson did not arise out of their employment with

AHP.     Next, back in the state trial court, AHP filed pleas in

bar, again asserting that the workers’ compensation exclusivity

provision barred the wrongful death actions.                The state trial

court    conducted     an      evidentiary     hearing    and     subsequently

overruled AHP’s pleas in bar on July 31, 2007.

                                       B.

       Admiral   had   issued    AHP   a    “Commercial   General    Liability

Policy” (the “Admiral Policy”) in which it agreed to pay “those

sums    that   the   insured    becomes     legally   obligated     to   pay   as

damages because of ‘bodily injury.’”               J.A. 293.      The Admiral

Policy    explicitly     excludes      coverage,      however,    for    “[a]ny

obligation of the insured under a workers’ compensation . . .

law,” and for “‘[b]odily injury’ to . . . [a]n ‘employee’ of the

insured arising out of and in the course of . . . [e]mployment

by the insured.”        Id. at 294 (emphasis added).              The Admiral

                                        5
Policy has an “Each Occurrence Limit” of $1 million.                           Id. at

289.

       Meanwhile, Ace had issued AHP a “Workers Compensation and

Employers Liability Insurance Policy” (the “Ace Policy”).                         Under

the “Workers Compensation Insurance” portion of the Ace Policy,

Ace agreed to pay “the benefits required of [AHP] by the workers

compensation law.”          J.A. 387.          Under the “Employers Liability

Insurance”       portion    of    the   Policy,       Ace   agreed    to    pay     for

“[b]odily injury includ[ing] resulting death,” on the condition

that “[t]he bodily injury must arise out of and in the course of

the    injured     employee’s     employment        by   [AHP].”      Id.     at    388

(emphasis    added).        The    limit       of   Ace’s   liability      under    its

“Employers Liability Insurance” coverage for “Bodily Injury by

Accident” is $1 million for “each accident.”                 Id. at 393.

       Finally, Illinois Union had issued AHP an “Excess Umbrella

Policy”     (the    “Illinois      Union       Umbrella     Policy”),       providing

coverage    in     excess   of    the   Admiral       and   Ace    Policies.        The

Illinois Union Umbrella Policy’s “Excess Liability” coverage is

“subject to the same terms and conditions as the ‘underlying

insurance.’”        J.A. 439.       The Umbrella Policy has a “General

Aggregate Limit” of $10 million.               Id. at 412.

       Admiral denied coverage to AHP for the Crump and Gibson

suits by letter of December 13, 2006, and Ace provided a defense

to AHP under a reservation of rights confirmed by letter to AHP

                                           6
of August 2, 2007.          Before trial in either matter, AHP and the

plaintiffs engaged in unsuccessful mediation efforts.                            The Crump

suit proceeded first to trial, in September 2007, and the jury

returned    a    verdict    against       AHP   in    the    sum    of    $3.1    million.

Thereafter, the parties again attempted mediation before trial

of the Gibson suit.               Because Ace and Illinois Union required

Admiral’s contribution before they would offer their coverage

limits, Admiral participated in the mediation.                           Ultimately, the

parties were able to reach a global settlement of both suits for

the aggregate sum of $3.6 million.                   Admiral paid $1 million, Ace

paid $1 million, and Illinois Union paid $1.6 million.                                As a

condition       thereof,    the    three    insurers        reserved      the    right    to

pursue   indemnification           and    contribution        claims       against    each

other.

                                           C.

     On June 30, 2008, Admiral filed a complaint in the Western

District of Virginia, invoking subject matter jurisdiction under

28   U.S.C.        § 1332,        and      seeking       indemnification             and/or

contribution      from     Ace    and    Illinois     Union    as    the    primary      and

excess insurers for the losses at issue.                      On July 25, 2008, Ace

and Illinois Union filed counterclaims against Admiral, seeking

indemnification      and/or       contribution,        plus    other      relief.        Ace

sought, inter alia, recovery of its costs in defending AHP —

approximately $383,500 after AHP’s payment of its $250,000 self-

                                            7
insured retention under the Ace Policy.                        For its part, Illinois

Union sought, inter alia, recovery of $1 million of its $1.6

million settlement payment on the theory that Admiral was liable

for   a   $2     million     share    of     the      settlement        (not    just    the    $1

million     it    paid)    because         the   shootings         of   Crump    and    Gibson

constituted two “occurrences.”

      The      parties     filed     cross-motions           for   summary      judgment       on

October 31, 2008.           In its Memorandum Opinion of March 24, 2009,

the district court carefully assessed the parties’ contentions,

and ultimately determined to grant Admiral’s summary judgment

motion and deny those of Ace and Illinois Union.                                 See Admiral

Ins. Co. v. ACE Am. Ins. Co., No. 5:08-cv-00055 (W.D. Va. Mar.

24, 2009) (the “District Court Opinion”). 2                             Admiral’s primary

contention was that it was entitled to summary judgment “because

the deaths of Crump and Gibson arose out of and in the course of

their employment with AHP and are therefore covered under Ace’s

‘Workers       Compensation          and     Employer         Liability         Policy’       and

excluded       from   coverage        under          Admiral’s      ‘Commercial        General

Liability        Policy.’”         District          Court   Opinion      5-6.         Ace    and

Illinois Union maintained, however, that the phrase “arising out

of” employment in the Admiral and Ace Policies holds “the same

‘well-defined’ meaning it has under workers’ compensation law”;

      2
          The District Court Opinion is found at J.A. 614-29.

                                                 8
as such, the district court was “constrained to conclude,” as

the state trial court and the state commission had ruled, “that

Crump’s      and   Gibson’s      deaths   did    not    arise   out     of    their

employment.”         Id. at 6.     According to Ace and Illinois Union,

Admiral was thus obliged to defend and indemnify AHP.

     In assessing the parties’ contentions, the district court

first recognized that, because the Admiral Policy “was delivered

to   AHP’s    Tennessee       headquarters,     Tennessee     law   governs    the

interpretation of its policy language.”                 District Court Opinion

7 & n.5 (citing Seabulk Offshore, Ltd. v. Am. Home Assurance

Co., 377 F.3d 408, 418-19 (4th Cir. 2004)).                     The court then

observed that, under Tennessee law, “courts must give policy

language its ‘common and ordinary meaning,’” id. at 8 (citing

Tata v. Nichols, 848 S.W.2d 649, 650 (Tenn. 1993)) — without

giving controlling force to definitions in workers’ compensation

law that have not been expressly incorporated into the policy,

id. at 8-10 (citing Blue Diamond Coal Co. v. Holland-Am. Ins.

Co., 671 S.W.2d 829 (Tenn. 1984); Tenn. Farmers Mut. Ins. Co. v.

Cherry, No. W2007-00342COAR3CV, 2008 WL 933479 (Tenn. Ct. App.

Apr. 7, 2008); Am. Indem. Co. v. Foy Trailer Rentals, Inc., No.

W2000-00397COAR3CV, 2000 WL 1839131 (Tenn. Ct. App. Nov. 28,

2000)).        The    court    concluded      that     the   “arising   out    of”

employment language in the Admiral Policy exclusion “is plain

and unambiguous,” and that workers’ compensation law, having not

                                          9
been explicitly referenced in the exclusion, “is irrelevant to

its meaning.”    Id. at 8.      The court further concluded that the

deaths of Crump and Gibson “arose out of” their employment — as

that phrase is commonly and ordinarily understood — in that

“both employees were killed on AHP’s premises, during working

hours, by a co-employee, and both wrongful death suits sought to

hold AHP liable for its failings as an employer.”             Id. at 6.

    Based on this analysis, the district court rejected Ace and

Illinois   Union’s     contention   that   Admiral      was    required   to

indemnify AHP.   See District Court Opinion 15.          Furthermore, the

court rejected Ace and Illinois Union’s assertion that Admiral

was yet obligated to defend AHP in light of the allegations in

the Crump and Gibson complaints that Hoover’s “conduct towards

[Crump and Gibson] was based upon his personal jealousy and did

not arise from any known employment issues with either [Crump,

Gibson, or AHP].”       See id. at 12-13 (recognizing that, under

Tennessee law, “[a]n insurer owes its insured a duty to defend

unless ‘it is plain from the face of the complaint that the

allegations fail to state facts that bring the case within or

potentially   within    the   policy’s   [coverage]’”    (quoting    Drexel

Chem. Co. v. Bituminous Ins. Co., 933 S.W.2d 471, 480 (Tenn. Ct.

App. 1996))).    In rejecting the duty-to-defend contention, the

court explained that

                                    10
       it was plain from the face of the Crump and Gibson
       complaints that their deaths arose out of and in the
       course of their employment with AHP.     Both wrongful
       death actions asserted that AHP, as Crump and Gibson’s
       employer, failed to provide a safe workplace and
       failed to exercise reasonable care in retaining a
       subordinate.   Each complaint alleged that Hoover, a
       co-employee, shot and killed Crump and Gibson during
       working hours at AHP’s workplace, even after Crump and
       other AHP employees placed AHP’s manager on notice
       about Hoover’s prior threatening behavior.         Each
       complaint sought to hold AHP liable as an employer
       because its negligence proximately caused Crump and
       Gibson’s deaths.     It is therefore clear that the
       complaints alleged that Crump and Gibson’s deaths
       resulted from their employment relationships with AHP
       and therefore arose out of and in the course of their
       employment for the purposes of Tennessee law.       The
       lone allegation that Hoover’s conduct “did not arise
       from any known employment issues with either [Crump,
       Gibson, or AHP]” does not change this result.
       Contextually, this allegation simply characterizes
       Hoover’s   personal   motivation.     Irrespective   of
       Hoover’s personal motivation, the other circumstances
       alleged in the complaints by themselves support only
       one conclusion:   Crump and Gibson’s deaths arose out
       of their employment with AHP.

Id. at 13-14 (citation omitted).               Finally, the court agreed with

Admiral that, “because the deaths of Crump and Gibson arose out

of and in the course of their employment, Ace was obligated to

provide      coverage    under    its    ‘Employers    Liability     Insurance.’”

Id. at 15.      “Accordingly,” the court explained, “because Ace has

paid   its    policy     limit,   and    Illinois     Union’s   excess   coverage

mirrored      Ace’s     underlying      coverage,   Admiral     is   entitled   to

                                          11
indemnification       in   the   amount      of   $1   million       from    Illinois

Union.”    Id. at 16. 3

      Ace and Illinois Union have timely noted this appeal, and

we possess jurisdiction pursuant to 28 U.S.C. § 1291.

                                        II.

      On   appeal,     Ace   and   Illinois       Union     maintain        that   the

district court erred in awarding summary judgment to Admiral and

in   denying   such    judgment    to   them. 4        We   review    de    novo   the

      3
       On the day of its summary judgment decision (March 24,
2009), the district court issued a Final Order entering judgment
in favor of Admiral and against Ace and Illinois Union.      The
Final Order specified that Admiral “shall recover from Illinois
Union . . . in the amount of $1 million, plus interest and
costs.” J.A. 630. Thereafter, on April 7, 2009, Admiral filed
a motion to correct the judgment to allow prejudgment interest.
On May 1, 2009, the court issued an Amended Final Judgment
specifying that Admiral “shall recover from Illinois Union . . .
in the amount of $1 million, plus prejudgment interest at a rate
of 6% accruing from December 10, 2007 until March 24, 2009, and
postjudgment interest and costs accruing from today’s date.”
Id. at 676.
      4
       More specifically, Ace and Illinois make six appellate
contentions: (1) that Admiral breached its duty to defend AHP,
because it was evident from the face of the complaints in the
Crump and Gibson suits that the Admiral Policy exclusion does
not bar all possibility of coverage; (2) that the district
court’s broad construction of the Admiral Policy exclusion
contravened basic policy interpretation rules; (3) that the
Admiral Policy exclusion is inapplicable; (4) that Admiral is
estopped from denying its duties to defend and indemnify AHP;
(5) that an additional exclusion in the Admiral Policy does not
bar coverage; and (6) that Ace and Illinois Union are entitled
to judgment on their counterclaims for recovery of defense costs
(Continued)
                                        12
district court’s award of summary judgment to Admiral, viewing

the facts in the light most favorable to Ace and Illinois Union,

as the nonmoving parties.            See Lee v. York County Sch. Div., 484

F.3d 687, 693 (4th Cir. 2007).                      We must vacate the summary

judgment award unless “‘there is no genuine issue as to any

material    fact   and    [Admiral]        is   entitled      to    a   judgment      as   a

matter     of   law.’”        Id.    (quoting        Fed.    R.     Civ.   P.    56(c)).

Furthermore, if warranted by the uncontroverted facts, “we are

free to enter an order directing summary judgment in favor of”

Ace and Illinois Union.             Monahan v. County of Chesterfield, Va.,

95 F.3d 1263, 1265 (4th Cir. 1996) (internal quotation marks

omitted).

    Having fully and carefully considered the contentions of

the parties, we agree with the district court that Admiral was

not obliged to defend or indemnify AHP.                     We therefore affirm the

court’s    judgment      in   favor     of      Admiral      and    against     Ace    and

Illinois Union, essentially for the reasons explained in the

District Court Opinion of March 24, 2009.

                                                                                AFFIRMED

(Ace) and $1 million           of    its     $1.6    million       settlement    payment
(Illinois Union).

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