Court Opinion

ID: 6316837
Source: CourtListenerOpinion
Date Created: 2022-02-23 20:00:47.027461+00
Date Added: 2024-06-11T09:00:32.326040
License: Public Domain

PUBLISHED

                       UNITED STATES COURT OF APPEALS
                           FOR THE FOURTH CIRCUIT

                                       No. 20-1452

UNITED FINANCIAL CASUALTY COMPANY,

                     Plaintiff - Appellee,

              v.

GREG ALLEN BALL,

                     Defendant - Appellant

and

MILTON HARDWARE, LLC; BUILDERS DISCOUNT, LLC; RODNEY PERRY;

                    Defendants.

Appeal from the United States District Court for the Southern District of West Virginia, at
Huntington. Robert C. Chambers, District Judge. (3:17-cv-02002)

Argued: December 7, 2021                                     Decided: February 23, 2022

Before WILKINSON, NIEMEYER, and AGEE, Circuit Judges.

Question certified to the Supreme Court of Appeals of West Virginia by published order.
Judge Niemeyer directed entry of the order with the concurrences of Judge Wilkinson and
Judge Agee.

ARGUED: Stephen Brooks Farmer, FARMER, CLINE & CAMPBELL, PLLC,
Charleston, West Virginia, for Appellant. Susan Renee Snowden, JACKSON KELLY
PLLC, Martinsburg, West Virginia, for Appellee. ON BRIEF: Jennifer D. Roush,
FARMER, CLINE & CAMPBELL, PLLC, Charleston, West Virginia, for Appellant.

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NIEMEYER, Circuit Judge:

                             ORDER OF CERTIFICATION

       The United States Court of Appeals for the Fourth Circuit, exercising the privilege

afforded by the State of West Virginia through the Uniform Certification of Questions of

Law Act, W. Va. Code §§ 51-1A-1 to 51-1A-13, requests that the Supreme Court of

Appeals of West Virginia exercise its discretion to accept the following question:

       When an exclusion in an automobile liability insurance policy violates West
       Virginia Code § 33-6-31(a) because it would deny coverage to a permissive
       user of an insured automobile, must the insurance company provide the
       permissive user with the full liability coverage available under the policy or
       the minimum liability coverage required by the Motor Vehicle Safety
       Responsibility Law, W. Va. Code § 17D-1-1 et seq.?

We acknowledge that the Supreme Court of Appeals may reformulate this question. See

W. Va. Code §§ 51-1A-4, 51-1A-6(a)(3). In our view, there is no controlling appellate

decision, constitutional provision, or West Virginia statute that definitively answers this

question, and the answer will be determinative of an issue in a case currently pending

before our court.     Accordingly, we conclude that the question is appropriate for

certification. See id. § 51-1A-3.

                                                 I

       The facts relevant to the certified question are undisputed. On October 25, 2016,

employees of Milton Hardware, LLC, were performing construction work at the home of

Rodney Perry in Milton, West Virginia. At one point during the work, Milton Hardware’s

owner authorized Perry to move one of Milton Hardware’s trucks, which was blocking the

driveway. As Perry was moving the truck in reverse, however, he accidentally struck Greg

                                             3
Ball, a Milton Hardware employee, temporarily pinning him between the truck Perry was

driving and another Milton Hardware truck. As a result, Ball sustained serious injuries that

required hospitalization.

       At the time of the accident, Milton Hardware had a commercial automobile liability

insurance policy issued by United Financial Casualty Company, which provided $1 million

in liability coverage to Milton Hardware and to any person using Milton Hardware’s

vehicles with its permission. Based on this provision, Ball demanded that United Financial

indemnify him for the injuries that he claimed were caused by Perry’s negligence. United

Financial denied coverage and commenced an action in federal court against the named

insureds, Milton Hardware and Builders Discount, LLC, as well as Perry and Ball, seeking

a declaratory judgment that it had no obligation to cover Perry’s liability to Ball. It asserted

that coverage for Perry’s liability to Ball was barred by two exclusions in the policy — a

“Worker’s Compensation” exclusion and an “Employee Indemnification and Employer’s

Liability” exclusion. Ball filed a crossclaim against Perry, seeking damages for his

negligence, and a counterclaim against United Financial for a declaratory judgment that,

among other things, the Worker’s Compensation exclusion did not apply and that the

Employee Indemnification and Employer’s Liability exclusion violated West Virginia

Code § 33-6-31(a). Ball also sought money damages from United Financial, alleging

breach of contract, breach of the covenants of good faith and fair dealing, unfair trade

practices, and common law bad faith.

       On cross-motions for summary judgment, the district court granted United

Financial’s motion. The court concluded that because Ball “sustained his injuries while he

                                               4
was working within the course of his employment with Milton Hardware,” his injuries fell

within the scope of the Worker’s Compensation exclusion and “that, as a result, he [was]

barred from liability coverage under the policy.” The court also rejected Ball’s argument

that West Virginia Code § 33-6-31(a) required United Financial to extend liability coverage

to Perry as a permissive user of an insured automobile, reasoning that the exception in § 33-

6-31(h) applied to eliminate this requirement. See W. Va. Code § 33-6-31(h) (providing

that subsection (a) does “not apply to any policy of insurance to the extent that it covers

the liability of an employer to his or her employees under any workers’ compensation

law”). The court dismissed all of Ball’s counterclaims against United Financial, including

his state law claims for damages, and it declined to exercise supplemental jurisdiction over

Ball’s state law tort claim against Perry.

       On Ball’s appeal, we vacated the district court’s judgment and remanded for further

proceedings. United Financial Casualty Co. v. Ball, 941 F.3d 710 (4th Cir. 2019). We

held first that “because Ball’s negligence claim against Perry was a claim against a third

party, rather than a claim against his employer for workers’ compensation, the [policy’s]

Worker’s Compensation exclusion did not apply.” Id. at 712. We also “conclude[d] that

the policy’s broader exclusion for Employee Indemnification and Employer’s Liability,

which on its face would apply to exclude coverage for Perry’s liability to Ball, was

inoperable because its limitation of coverage contravened West Virginia Code § 33-6-31.”

Id. Specifically, United Financial had argued that “§ 33-6-31(a) [did] not apply because of

the workers’ compensation exception in subsection (h),” but we explained that because

“Ball’s claim against Perry [was] not a workers’ compensation claim, but rather a third-

                                             5
party common law tort claim, the exception in § 33-6-31(h) [did] not apply, and § 33-6-

31(a) continue[d] to override the restrictions of the Employee Indemnification and

Employer’s Liability exclusion.” Id. at 716. As we summarized,

       At bottom, we conclude that while the language of the Employee
       Indemnification and Employer’s Liability exclusion, considered alone, is
       sufficiently broad to deny Perry coverage for his liability to Ball, such a
       limitation of coverage for a permissive user of an insured vehicle contravenes
       West Virginia Code § 33-6-31(a) and thus renders the exclusion
       unenforceable. See Universal Underwriters Ins. Co. v. Taylor, 185 W. Va.
       606, 408 S.E.2d 358, 363 (1991) (recognizing “that any provision in an
       insurance policy which attempts to contravene W. Va. Code, 33-6-31(a) is of
       no effect” (cleaned up)); see also Burr [v. Nationwide Mut. Ins. Co.], 359
       S.E.2d [626, 631 (W. Va. 1987)]. Accordingly, we hold that the Employee
       Indemnification and Employee’s Liability exclusion cannot operate to deny
       Perry coverage under United Financial’s policy for his liability to Ball.

Id. at 717. Thus “conclud[ing] that United Financial may not deny liability coverage to

Perry by reason of either the Worker’s Compensation exclusion or the Employee

Indemnification and Employer’s Liability exclusion,” we remanded “for further

proceedings as to any unresolved issues raised by the parties.” Id.

       On remand to the district court, the parties disagreed on what level of coverage

United Financial was required to provide in view of our holding that the Employee

Indemnification and Employer’s Liability exclusion was unenforceable. And this dispute

brought into play West Virginia Code § 17D-4-2(b) (requiring minimum liability coverage

of $25,000 for bodily injury to a person injured in a motor vehicle accident), as well as our

prior holding under West Virginia Code § 33-6-31(a). United Financial argued that while

the exclusion was unenforceable up to the $25,000 minimum liability coverage required

by § 17D-4-2(b), it remained enforceable as to any amount above that statutory minimum.

                                             6
Ball and Perry, by contrast, argued that the exclusion was entirely unenforceable under

§ 33-6-31(a) and that therefore United Financial was required to provide Perry with

coverage of up to the full $1 million afforded by the policy.

       The district court entered summary judgment upholding United Financial’s position

in a memorandum opinion and order dated March 31, 2020. J.A. 484–92. It observed that,

in a series of cases, the “Supreme Court of Appeals of West Virginia has held that policy

exclusions that violate the state’s minimum coverage requirements set in the omnibus

clause and [the] Safety Responsibility Law (W. Va. Code § 17D-1-1 et seq.) are void” but

“has permitted these voided exclusions to apply above the minimum coverage

requirements.” J.A. 487 (citing, inter alia, Jones v. Motorists Mut. Ins. Co., 356 S.E.2d

634 (W. Va. 1987)). The court found that Gibson v. Northfield Insurance Co., 631 S.E.2d

598 (W. Va. 2005), and another case relied upon by Ball were distinguishable, and

accordingly it held that the policy’s Employee Indemnification and Employer’s Liability

exclusion was “unenforceable up to the minimum insurance coverage [of $25,000] required

by state law but operative as to any amount above the state’s mandatory minimum limits.”

J.A. 492. The court certified its ruling as a final judgment under Federal Rule of Civil

Procedure 54(b), and Ball filed an appeal to our court. Ball’s crossclaim against Perry and

certain of his counterclaims against United Financial remain pending in the district court

but have been stayed pending appeal.

                                             7
                                              II

       The sole issue presented by the second appeal now before us is a narrow one

regarding the level of liability coverage that United Financial must provide with respect to

Perry’s liability to Ball.

       Milton Hardware’s policy with United Financial provided for $1 million of liability

coverage to Milton Hardware and to any person using Milton Hardware’s vehicles with its

permission. Concededly, at the time of the accident, Perry was a permissive user of Milton

Hardware’s vehicle. But the policy also contained an Employee Indemnification and

Employer’s Liability exclusion, which provided that liability coverage did not extend to

“[b]odily injury to . . . [a]n employee of any insured arising out of or within the course of:

(i) [t]hat employee’s employment by any insured; or (ii) [p]erforming duties related to the

conduct of any insured’s business.” It provided further that “[t]his exclusion applies . . .

[w]hether the insured may be liable as an employer or in any other capacity.”

       Given that Ball was an employee of the named insured and was injured in the course

of his employment, this exclusion would, on its face, bar any coverage to Perry for his

liability to Ball. But West Virginia Code § 33-6-31(a) provides that, subject to limited

exceptions, automobile liability insurance policies must contain “a provision insuring the

named insured and any other person . . . using the motor vehicle with the consent, expressed

or implied, of the named insured.” W. Va. Code § 33-6-31(a).

       In the last appeal, we rejected United Financial’s argument that § 33-6-31(a) was

inapplicable because of the workers’ compensation exception in § 33-6-31(h). United

Financial Casualty Co., 941 F.3d at 715–17. Accordingly, we held that despite the broad

                                              8
language of the Employee Indemnification and Employer’s Liability exclusion, United

Financial could not, consistent with West Virginia law, deny liability coverage to Perry, a

permissive user of its insured’s vehicle. Id. at 717. We did not resolve, however, the level

of coverage that United Financial was required to provide to Perry. That issue was not

raised by the parties and argued to us. But on remand, the issue was raised and is now

presented to us in the second appeal.

       United Financial contends that it is obligated to provide only the $25,000 minimum

amount of coverage required by the Motor Vehicle Safety Responsibility Law, W. Va.

Code § 17D-4-2(b) (requiring “proof of ability to respond in damages for liability . . .

arising out of the . . . use of a motor vehicle . . . in the amount of $25,000 because of bodily

injury to or death of one person in any one accident”). And Ball contends that United

Financial is obligated to provide Perry with coverage in an amount of up to $1 million, as

provided in the policy.

       We recognize that West Virginia has two overlapping but distinct statutory

provisions addressing the omnibus clauses that are “automatically engrafted onto all

[automobile liability] policies issued in [the] State.” State Farm Mut. Auto. Ins. Co. v.

Universal Underwriters Ins. Co., 383 S.E.2d 791, 793 (W. Va. 1989); see also Black’s Law

Dictionary 1261 (10th ed. 2014) (defining an “omnibus clause” as “[a] provision in an

automobile-insurance policy that extends coverage to all drivers operating the insured

vehicle with the owner’s permission”).         First, as part of the Motor Vehicle Safety

Responsibility Law, West Virginia Code § 17D-4-12(b)(2) provides that a motor vehicle

liability policy must:

                                               9
       insure the person named therein and any other person, as insured, using any
       such vehicle or vehicles with the express or implied permission of such
       named insured, against loss from the liability imposed by law for damages
       arising out of the ownership, operation, maintenance or use of such vehicle
       or vehicles . . . subject to limits exclusive of interest and costs, with respect
       to each such vehicle, in the amounts required in section two of this article.

W. Va. Code § 17D-4-12(b)(2) (emphasis added). Section 2 of Chapter 17D, Article 4, in

turn, specifies the minimum amount of liability coverage that must be provided pursuant

to this statutory requirement — $25,000, as relevant here. Id. § 17D-4-2(b). Second, the

insurance chapter of the West Virginia Code also contains an omnibus clause requirement,

codified at § 33-6-31(a). See State Farm Mut. Auto. Ins. Co., 383 S.E.2d at 793. It directs:

       No policy or contract of bodily injury liability insurance, or of property
       damage liability insurance, covering liability arising from the ownership,
       maintenance or use of any motor vehicle, may be issued or delivered in this
       state to the owner of such vehicle . . . unless it contains a provision insuring
       the named insured and any other person, except a bailee for hire and any
       persons specifically excluded by any restrictive endorsement attached to the
       policy, responsible for the use of or using the motor vehicle with the consent,
       expressed or implied, of the named insured or his or her spouse against
       liability for death or bodily injury sustained or loss or damage occasioned
       within the coverage of the policy or contract as a result of negligence in the
       operation or use of such vehicle by the named insured or by such person . . . .

W. Va. Code § 33-6-31(a) (emphasis added).

       West Virginia law appears fairly settled that when an insurance policy fails to extend

the scope of liability coverage required by § 17D-4-12(b)(2), then the remedy is to require

the insurance company to provide such coverage but — in the words of that provision —

“subject to limits . . . in the amounts required in” § 17D-4-2. See, e.g., Jones, 356 S.E.2d

at 636; Dotts v. Taressa J.A., 390 S.E.2d 568, 573–74 (W. Va. 1990). The dispositive

question here is whether that same rule applies to an automobile liability policy that fails

                                              10
to extend the scope of liability coverage required by § 33-6-31(a) or whether, in those

circumstances, the policy’s own liability limits become applicable. While the court’s

reasoning in Gibson might suggest the latter, 631 S.E.2d at 603 n.8, 604–06, 609, there

does not appear to be any controlling authority definitively resolving this question. And

finding “no controlling appellate decision, constitutional provision or [West Virginia]

statute” that definitively answers that question, W. Va. Code § 51-1A-3, we conclude that

the question warrants certification to the Supreme Court of Appeals of West Virginia given

the potential impact a ruling on this issue may have in other cases.

                                              III

       Accordingly, under the privilege made available by the West Virginia Uniform

Certification of Questions of Law Act, it is hereby ORDERED: (1) that the question stated

above be, and the same hereby is, certified to the Supreme Court of Appeals of West

Virginia; (2) that the Clerk of this Court forward to the Supreme Court of Appeals of West

Virginia, under the official seal of this Court, a copy of this order and, to the extent

requested by the Supreme Court of Appeals of West Virginia, the original or a copy of the

record in this Court; and (3) that any request for all or part of the record be fulfilled by the

Clerk of this Court simply upon notification from the Clerk of the Supreme Court of

Appeals.

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