Court Opinion

ID: 988608
Source: CourtListenerOpinion
Date Created: 2013-07-03 22:54:44.118912+00
Date Added: 2024-06-11T12:39:37.176809
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

GIRARD ENOCH OSBORNE,
Plaintiff-Appellant,

v.

NATIONAL UNION LIFE INSURANCE
                                                               No. 94-1790
COMPANY OF PITTSBURGH,
PENNSYLVANIA; HANSON INDUSTRIES,
INCORPORATED; MW MANUFACTURERS,
INCORPORATED,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Virginia, at Danville.
Jackson L. Kiser, Chief District Judge.
(CA-93-18-D)

Argued: April 5, 1995

Decided: February 21, 1996

Before MURNAGHAN and MOTZ, Circuit Judges, and
BUTZNER, Senior Circuit Judge.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Stephen Garland Bass, Sr., CARTER, CRAIG, BASS,
BLAIR & KUSHNER, Danville, Virginia, for Appellant. Robert
Andrew Mullen, WOOTEN & HART, P.C., Roanoke, Virginia, for
Appellees. ON BRIEF: Dale Thomas Blair, CARTER, CRAIG,
BASS, BLAIR & KUSHNER, Danville, Virginia, for Appellant.
David B. Hart, WOOTEN & HART, P.C., Roanoke, Virginia, for
Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

I.

On August 29, 1988, Appellant Girard Osborne was driving a truck
in Virginia on behalf of his employer, MW Manufacturers, Inc.
Another driver, who has never been identified, forced Osborne off of
the road. Osborne sustained serious injuries in the ensuing accident.

At the time of the accident, Osborne was covered by two separate
insurance policies. He had purchased motor vehicle insurance from
State Farm Fire and Casualty Company that covered him while he
was driving on the job and that provided uninsured motorist (UM)
coverage of up to $100,000. MW Manufacturers, through its parent
company, Hanson Industries, had purchased motor vehicle insurance
from Appellee National Union Fire Insurance Company of Pittsburgh
that covered MW's employees while they were driving on the job and
that provided the minimum UM coverage permitted by state law,
$25,000.1 See Va. Code Ann. §§ 38.2-2206(A), 46.2-472. Under state
law, National Union was the primary insurer and State Farm was the
secondary insurer. See Va. Code Ann. § 38.2-2206(B).
_________________________________________________________________
1 At trial and on appeal, Osborne contended that the limit of National
Union's UM coverage was $2,000,000, not $25,000. Because we hold
that National Union may deny all coverage whatsoever, we need not
decide whether National Union's liability would have been equal to or
greater than the minimum level of coverage mandated by Virginia law.

                    2
Pursuant to Va. Code Ann. § 38.2-2206(E), 2 Osborne filed suit in
the Circuit Court of Henry County against "John Doe," the un-
identified driver who caused Osborne's accident, and served process
upon both State Farm and National Union. After obtaining a judgment
for $299,750, Osborne sought payment under both policies.

Osborne settled his claim against State Farm for $65,000. National
Union, however, refused to make any payment whatsoever, prompt-
ing Osborne to file the instant action against the company. National
Union successfully removed the action to federal district court pursu-
ant to 28 U.S.C. § 1441.3

The district court granted National Union's subsequent motion for
summary judgment. The court noted that the insurance contract con-
tained a clause stating that "[t]his insurance does not apply to any
claims settled without our consent," then found that Osborne had set-
tled the claim with State Farm without National Union's consent.
Though National Union had not proven that it had been prejudiced by
Osborne's dealings with State Farm, and though no decision of a Vir-
ginia court was precisely on point, the district court found that a "fair
and careful reading" of Virginia law suggested that the validity of a
consent-to-settlement clause in an insurance contract in no way
depends upon a finding of prejudice to the insurer.

Osborne appealed, arguing that his settlement with State Farm does
not bar recovery from National Union.
_________________________________________________________________
2 Section 38.2-2206(E) provides:

          If the owner or operator of any vehicle causing injury or dam-
          ages is unknown, an action may be instituted against the
          unknown defendant as "John Doe" . . . . Service [of process]
          upon the insurer issuing the policy shall be made as prescribed
          by law as though the insurer were a party defendant.. . . The
          insurer shall have the right to file pleadings and take other action
          allowable by law in the name of John Doe.
3 The parties were diverse--National Union was a Pennsylvania corpo-
ration with its principal place of business outside the Commonwealth of
Virginia and Osborne was a Virginia citizen--and Osborne was seeking
damages in excess of $50,000. See 28 U.S.C.§ 1332.

                     3
We must review the grant of summary judgment de novo. Bailey
v. Blue Cross & Blue Shield of Virginia, 67 F.3d 53, 56 (4th Cir.
1995).

II.

Osborne has argued that the consent-to-settlement provision
applies only to settlements with uninsured drivers, and not to settle-
ments with third-party insurers; that the consent-to-settlement provi-
sion is void because it conflicts with state laws requiring insurers to
provide UM coverage; and that National Union "apparent[ly] or
implied[ly] consent[ed]" to his settlement with State Farm. Each of
these contentions lacks merit. The consent-to-settlement clause
plainly states that it applies to "any claims," without regard to whether
the settlement is negotiated with the negligent driver or an insurer.
Virginia courts have permitted insurers to deny UM coverage due to
noncompliance with a consent-to-settlement clause when necessary to
protect "the insurer's power to preserve potential sources of recov-
ery." Virginia Farm Bureau Mut. Ins. Co. v. Gibson, 374 S.E.2d 58,
61-62 (Va. 1988). And the record simply does not support Osborne's
contention that he settled with State Farm with National Union's con-
sent.

What was less clear to us, however, was whether National Union
could deny coverage on the basis of Osborne's failure to comply with
the terms of the policy even if the company had not been prejudiced
by Osborne's actions. Finding no controlling precedent on that issue,
we submitted to the Supreme Court of Virginia the following certified
question:4

           Whether National Union may deny UM coverage to
           Osborne on the grounds that Osborne settled with State
           Farm without National Union's consent, when National
           Union's UM contract contained a consent-to-settlement
           clause but National Union was not prejudiced by the settle-
           ment.
_________________________________________________________________
4 In so doing, we acted pursuant to Article VI, Section 1, of the Consti-
tution of the Commonwealth of Virginia and Rule 5:42 of the Rules of
the Supreme Court of Virginia.

                     4
In an opinion dated January 12, 1996, the Supreme Court of Vir-
ginia answered our question in the affirmative. The court identified
three grounds for its ruling. First, observing that"[w]hen the terms of
an insurance policy are clear and unambiguous, we give the words
their ordinary meaning and enforce the policy as written," see Atlas
Underwriters, Ltd. v. Meredith-Burda, Inc., 343 S.E.2d 65, 68 (Va.
1986), the court determined that the consent-to-settlement provision
was plain and unambiguous. Op. at 3. Second, the court stated that it
had not required a showing of prejudice in other cases in which cover-
age was denied due to the insured's failure to comply with policy pro-
visions. Op. at 3-4; see, e.g., State Farm Fire and Casualty Co. v.
Walton, 423 S.E.2d 188, 192 (Va. 1992) (stating that if a violation of
a policy's provision requiring timely notice of an accident "is substan-
tial and material, the insurance company need not show that it was
prejudiced by such a violation" in order to deny coverage). Third, the
court observed that while the Virginia General Assembly has declared
that an insurer must demonstrate prejudice before denying coverage
due to the insured's failure to comply with certain policy provisions,
see, e.g., Va. Code Ann. § 38.2-2204(C) (stating that an insurer may
deny coverage due to an insured's failure to comply with a coopera-
tion clause only if the failure to cooperate prejudices the insurer), the
General Assembly "has not taken such action with reference to
consent-to-settlement clauses." Op. at 4.

Because, under Virginia law, National Union need not show preju-
dice in order to deny coverage on the basis of Osborne's failure to
comply with the consent-to-settlement provision of the National
Union policy, we hold that the district court did not err when it
granted National Union's motion for summary judgment.

III.

We have carefully reviewed each of Appellant's remaining argu-
ments and find them to be without merit. The decision of the district
court is accordingly

AFFIRMED.

                    5