Court Opinion

ID: 617750
Source: CourtListenerOpinion
Date Created: 2011-11-23 19:43:06+00
Date Added: 2024-06-11T17:50:42.326542
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 09-2182

SNL FINANCIAL, LC,

                Plaintiff - Appellee,

           v.

PHILADELPHIA INDEMNITY INSURANCE COMPANY,

                Defendant - Appellant.

Appeal from the United States District Court for the Western
District of Virginia, at Charlottesville.      Norman K. Moon,
Senior District Judge. (3:09-cv-00010-nkm-bwc)

Argued:   October 27, 2011                 Decided:   November 23, 2011

Before TRAXLER, Chief Judge, and GREGORY and KEENAN, Circuit
Judges.

Affirmed by unpublished opinion.        Judge Keenan wrote the
opinion, in which Chief Judge Traxler and Judge Gregory joined.

ARGUED: David Drake Hudgins, HUDGINS LAW FIRM, Alexandria,
Virginia, for Appellant. Thomas Eugene Albro, TREMBLAY & SMITH,
Charlottesville, Virginia, for Appellee.  ON BRIEF: Patricia D.
McGraw, TREMBLAY & SMITH, Charlottesville, Virginia; Dennis S.
Rooker, DENNIS S. ROOKER, P.C., Charlottesville, Virginia, for
Appellee.

Unpublished opinions are not binding precedent in this circuit.
KEENAN, Circuit Judge:

       In this insurance coverage dispute, Philadelphia Indemnity

Insurance Co. (Philadelphia) appeals the district court’s award

of summary judgment in favor of the plaintiff, SNL Financial, LC

(SNL).        The primary issue before us is whether the district

court erred in holding that SNL timely notified Philadelphia of

a   “claim,”        as   defined        in    SNL’s     insurance          policy,    thereby

contractually obligating Philadelphia to defend SNL against that

claim.        We hold that the district court correctly determined

that    SNL    complied         with    the    insurance        policy’s       notification

requirements        and,    therefore,        we    affirm         the    district     court’s

judgment.

                                              I.

       SNL,    which       is    in    the    business        of    providing        financial

information to its clients, purchased an insurance policy (the

policy) from Philadelphia in 2008.                      The policy covered losses,

including      damages      and       costs   for     legal    defense,       for     “claims”

against       SNL    involving         certain      employment           actions     occurring

during the policy period, which ran from August 1, 2008 through

August 1, 2009.          The policy was a renewal of an insurance policy

that   SNL     previously        purchased       from   Philadelphia          covering     the

                                               2
period from August 1, 2007 through August 1, 2008 (the original

policy). 1

      The policy defines the term “claim,” in relevant part, as:

      1.     a written demand           for   monetary        or    non-monetary
             relief; [or]

      2.     a judicial or civil proceeding commenced by the
             service of a complaint or similar pleading. 2

The   policy    provides     that   a    “claim”    is       made   when     SNL   “first

receive[s] notice of the Claim.”              The policy further states that

SNL must provide notice of any claim to Philadelphia “as soon as

practicable,” but not later than 60 days after the expiration

date of the policy if the claim was made during the policy

period.

      In     January    2008,   SNL      received        a    letter       from    Murray

Schwartz, a lawyer retained by Stephen Greenberg, a former SNL

employee.       In    that   letter,     Schwartz   asked          to    meet   with   SNL

representatives to discuss “certain discriminatory conduct that

occurred     during    the   course     of    [Greenberg’s]             employment     with

[SNL], including its [sic] termination.” 3

      1
       As pertaining to this appeal, the substantive portions of
the policy and the original policy are identical.
      2
       The policy includes six other definitions of a “claim,”
none of which are relevant to this appeal.
      3
       The full text of the body of Schwartz’s initial letter,
dated January 18, 2008, provides as follows:    “We have been
consulted by your former employee, Stephen Greenberg, to
address, on his behalf, certain discriminatory conduct that
(Continued)
                                          3
      After receiving this letter, SNL retained the services of

an attorney, Sean Gibbons.         Soon after retaining Gibbons, SNL

received    a   second   letter   from     Schwartz,   in    which    Schwartz

restated his request to meet with SNL representatives to “pursue

a possible amicable resolution of the issues.” 4              In neither of

his   two   letters   did   Schwartz   threaten   litigation     or    make   a

demand, monetary or otherwise, that SNL resolve any potential

lawsuit.

      Over the next few months, Gibbons and Schwartz engaged in

discussions concerning Greenberg’s grievances.              In June, Gibbons

learned that Schwartz had prepared a draft complaint against SNL

occurred during the course of his employment with your company,
including its [sic] termination.    We write, at this time, to
advise you of our desire to meet with your representative to
discuss these issues.     Our hope would be to arrive at an
amicable resolution of the issues that exist.         Given the
circumstances that exist here, we believe such a discussion is
warranted and might well prove helpful.    If you would be good
enough to have your designated representative contact our
office, we would be pleased to arrange and participate in such a
meeting.   We trust you share our sentiment and will have us
contacted to that end, so that together, we may join in efforts
to resolve the matter.”
      4
       The full text of the body of Schwartz’s second letter,
dated January 25, 2008, provides as follows:     “On January 18,
2008, we wrote in an effort to resolve certain issues that exist
with respect to the above-referenced matter. In that letter, a
copy of which is attached, we expressed our belief that a
meeting with the appropriate person designated by you might
prove helpful.   To that end, we once again invite you to have
your personal representative contact us so that we can pursue a
possible amicable resolution of the issues, at this time.”

                                       4
on    behalf    of   Greenberg.        However,          Schwartz      refused    to    send

Gibbons a copy of the draft complaint, and declined Gibbons’

request     that     Schwartz      “present        [him]       with     a   demand      that

[Gibbons] would take to” SNL.

       Schwartz later allowed James Clark, a friend of Gibbons who

also is an attorney, to come to Schwartz’s office in New York to

review the draft complaint.             During Clark’s visit to Schwartz’s

office,    which     occurred    on    July       30,    2008,     Schwartz      permitted

Clark to view the draft complaint, which had not been signed.

Schwartz prohibited Clark from taking notes during his review,

and   an   intern     in   Schwartz’s    office          “supervised”       Clark      as   he

examined       the   document.        Although         Clark     was   unable     to    make

contemporaneous        written     notes,        Clark    stated       in   a   memorandum

written    to    Gibbons    that      same       day    that     the   draft     complaint

alleged two causes of action and, in an ad damnum clause, sought

compensatory and punitive damages in the total amount of $16

million.

       Immediately after reviewing the draft complaint, Clark had

a brief conversation with Schwartz, during which Clark “asked if

[Schwartz] had a demand that he was prepared to make.”                           Schwartz

declined Clark’s invitation to issue a demand, stating that he

“was awaiting the latest report from Mr. Greenberg’s doctor.”

Before     leaving     Schwartz’s      office,           Clark    asked     Schwartz        to

                                             5
contact Gibbons after Schwartz received the doctor’s report and

was “prepared to make a demand.”

      During    this   same      time       period,      SNL    was     engaged    in

discussions with Philadelphia concerning renewal of the original

policy.     In its renewal application submitted on July 30, 2008,

SNL avowed that it had not been the subject of, or involved in,

any   litigation   during     the    previous       12   months.       Philadelphia

approved the renewal application and issued the policy to SNL,

providing coverage for the period between August 1, 2008 and

August 1, 2009.

      On October 3, 2008, Greenberg filed a complaint against SNL

in a New York state court, asserting causes of action for age

and   employment   discrimination.            SNL    received      a   copy   of   the

complaint by mail on October 20, 2008, and provided notice of

the complaint to Philadelphia on October 27, 2008.

      After receiving notice of the complaint filed against SNL,

Philadelphia sent a letter to SNL disclaiming any duty to defend

SNL against Greenberg’s lawsuit, and declining to pay for SNL’s

defense or for any damages assessed against SNL.                       Philadelphia

based     its   decision    on      SNL’s    alleged      failure       to    provide

Philadelphia with timely notice of Greenberg’s claim, and SNL’s

alleged failure to disclose the existence of pending litigation

when the original policy was renewed in August 2008.

                                        6
      In response to Philadelphia’s decision to deny coverage,

SNL   filed    a   declaratory       judgment      action      in   a    Virginia   state

court seeking a declaration that Philadelphia had a duty under

the   policy       to    defend     SNL   against        Greenberg’s       claim.        In

response, Philadelphia filed an answer and counterclaim seeking

a declaratory judgment that Philadelphia did not have a duty

either to defend or indemnify SNL.                       Philadelphia also sought

rescission of the policy based on SNL’s statement in its renewal

application that SNL was not involved in any “litigation” during

the preceding twelve months.

      At Philadelphia’s request, the case was removed from the

state court to the United States District Court for the Western

District of Virginia.               After considering the parties’ cross-

motions   for      summary     judgment,         the   district         court   issued   a

memorandum         opinion        granting       SNL’s      motion        and     denying

Philadelphia’s motion. 5            The district court held that “the plain

meaning of the applicable policy provision[s] demonstrates that

SNL satisfied the policy’s conditions by furnishing notice of

the   Greenberg         complaint    on   October        27,   2008.”       Philadelphia

timely noted an appeal.

      5
       In its memorandum opinion, the district court did not
address Philadelphia’s claim for rescission of the policy.
Although the district court denied SNL’s request for attorneys’
fees, SNL has not appealed from this determination.

                                             7
                                               II.

       Philadelphia raises two challenges to the district court’s

award of summary judgment in favor of SNL.                          Philadelphia first

contends that the district court erred in concluding that SNL

did    not      receive     notice     of     Greenberg’s     “claim”         until   October

2008.       According to Philadelphia, SNL received notice of a claim

both       in   January     2008,      when    Schwartz     wrote       the    two    letters

requesting a meeting with SNL to discuss Greenberg’s grievances,

and    in       July   2008,    when     Clark       reviewed     the    unsigned       draft

complaint in Schwartz’s office. 6                      Second, Philadelphia argues

that it is entitled to rescission of the policy, because SNL

purportedly        made     a   material       misrepresentation         on     its    renewal

application by stating that SNL had not been subject of, or

involved in, any litigation during the previous 12 months.

       This Court reviews de novo the district court’s award of

summary         judgment.       S.C.    Green       Party   v.    S.C.    State       Election

Comm’n, 612 F.3d 752, 755 (4th Cir. 2010).                         Under Rule 56(a) of

the     Federal        Rules    of   Civil      Procedure,       summary       judgment    is

appropriate         “if   the    movant       shows    that      there   is     no    genuine

       6
       Philadelphia does not maintain that any other evidence in
the record, including evidence of an August 2008 telephone
conversation between Schwartz and Gibbons during which Schwartz
made a demand of $1.2 million dollars, constitutes a “written
demand for monetary or non-monetary relief.” (Emphasis added.)

                                                8
dispute as to any material fact and the movant is entitled to

judgment as a matter of law.”

       In the present case, the parties agree that Virginia law

governs the resolution of this dispute.                   Under Virginia law,

“[a]n insurance policy is a contract, and, as in the case of any

other   contract,    the    words    used   are   given   their     ordinary        and

customary    meaning        when     they      are     susceptible        of        such

construction.”      Hill v. State Farm Mutual Auto. Ins., 375 S.E.2d

727, 729 (Va. 1989).         In the absence of any ambiguity, a court

must    “interpret     the    contract       by      examining     the     language

explicitly contained therein.”              Graphic Arts Mut. Ins. Co. v.

C.W. Warthen Co., 397 S.E.2d 876, 877 (Va. 1990).                        “Contracts

of   insurance   are   to    be    liberally    construed    in    favor       of   the

insured, but if they are plain and clear and not in violation of

law or inconsistent with public policy, [courts] are bound to

adhere to their terms.”           Pilot Life Ins. Co. v. Crosswhite, 145

S.E.2d 143, 146 (Va. 1965).

       The first issue raised by Philadelphia requires that we

determine when Greenberg made a “claim” against SNL, as that

term is defined under the policy.              If Philadelphia is correct in

its assertion that Greenberg made a “claim” in either January

2008 or July 2008, then Philadelphia was entitled to disclaim

coverage for defense of Greenberg’s lawsuit.                     However, if SNL

and the district court are correct that a “claim” was not made

                                        9
until October 2008, then the claim was subject to the policy as

renewed, and SNL’s written notice to Philadelphia on October 27,

2008 complied with the notice requirement of the policy.

     As applicable to the first issue raised by Philadelphia,

the term “claim” is defined in the policy, in relevant part, as

“a written demand for monetary or non-monetary relief.”                          There

is no ambiguity in this policy language.                        Therefore, we will

apply     the    plain     meaning      of    that     language     in   considering

Philadelphia’s argument that Greenberg made a “claim” to SNL in

January or July 2008.                See Graphic Arts Mut. Ins. Co., 397

S.E.2d at 877.

     Initially, we disagree that Schwartz’s letters in January

2008 contained “written demand[s] for monetary or non-monetary

relief.”         In    these    letters      written    on    Greenberg’s   behalf,

Schwartz:       1)    refers   to    “certain     discriminatory     conduct”     that

purportedly occurred during Greenberg’s employment with SNL; 2)

states     a    “desire”       to    meet    with     SNL’s     representatives     to

“discuss” the issues, with a “hope” of arriving at an “amicable

resolution”; and 3) requests that a SNL representative contact

Schwartz to arrange such a meeting.                     These statements do not

include    a    “demand”       for   any    relief,    either    monetary   or    non-

monetary.        Therefore, we conclude that neither letter sent by

Schwartz in January 2008 contained a “claim,” as that term is

defined in the policy.

                                             10
       Philadelphia      alternatively            argues,       however,       that    the

unsigned      draft    complaint,        which    Clark     viewed      in    Schwartz’s

office in July 2008, constituted a “claim,” within the meaning

of the policy definition.           We disagree with this argument.

       The    draft    complaint    that     Clark       read    was    unsigned,      and

Schwartz had refused to transmit a copy of the draft complaint

to   SNL.       Most   significantly,        however,       Schwartz         had   refused

Clark’s request that Schwartz make a demand, explaining that he

was not prepared to do so because Schwartz was waiting for a

report from Greenberg’s doctor.                  Schwartz’s statement to Clark

thus expressly disavowed any suggestion that the unsigned draft

complaint was intended as a “written demand for monetary or non-

monetary      relief.”     Therefore,        we    conclude      that    the       unsigned

draft complaint reviewed by Clark in Schwartz’s office in July

2008 did not constitute a “claim” within the meaning of the

policy definition.        Accordingly, we hold that Greenberg did not

make   a     “claim”   against     SNL    until     he   filed    his    complaint      in

October 2008, and that, therefore, SNL complied with the notice

requirement of the policy by reporting Greenberg’s claim later

that month.

       Philadelphia argues, nevertheless, that the district court

should have rescinded the policy because SNL falsely stated in

its renewal application that SNL had not been involved in any

“litigation” during the previous 12 months.                       In support of its

                                           11
argument, Philadelphia relies on the principle of Virginia law

that a misrepresentation of fact made by an insured may render

an insurance contract void if the misrepresentation is material

to the risk assumed by the insurer.               See Evans v. United Life &

Accident Ins. Co., 871 F.2d 466, 472 (4th Cir. 1989); Portillo

v.   Nationwide   Mut.      Fire   Ins.   Co.,    671    S.E.2d   153,    155    (Va.

2009); Hawkeye-Security Ins. Co. v. Gov’t Employees Insur. Co.,

154 S.E.2d 173, 176 (Va. 1967); see also Va. Code § 38.2-309.

We    disagree       with     Philadelphia’s       argument       that    such       a

misrepresentation occurred in the present case.

      Because the term “litigation” is not defined in either the

renewal application or the policy, we apply its ordinary and

common    meaning.      The    term   “litigation”       commonly   refers      to   a

lawsuit    or   legal    action,      including    all    proceedings     therein,

instituted in a court of law to enforce a right or to obtain a

remedy.    S & M Inv. Co. v. Tahoe Regional Planning Agency, 911

F.2d 324, 327 (9th Cir. 1990) (citing Black’s Law Dictionary 841

(5th ed. 1979)); Yockey v. Horn, 880 F.2d 945, 949 (7th Cir.

1989) (same).        As the definition of the term suggests in this

factual    context,     “litigation”       does   not    begin    until   a     legal

action is initiated by the filing of a complaint or a similar

document in a court of law.

      Contrary to Philadelphia’s contention, there was no pending

“litigation,” but only potential litigation, at the time SNL

                                          12
completed its renewal application in late July 2008 stating that

SNL was not the subject of, nor involved in, any “litigation”

during the previous 12 months.                Thus, Philadelphia’s assertion

that SNL’s application response was false cannot be sustained

without     effectively      rewriting       the     question     to    include    SNL

knowledge     of    a      “dispute”    or      of        “potential”    litigation.

Accordingly,       SNL’s    response     that        it    was   not    involved   in

“litigation”       was     not   a     misrepresentation           of    fact,     and

Philadelphia is not entitled to rescission of the policy.

                                       III.

     In conclusion, we hold that the district court did not err

in determining that SNL was entitled to coverage of Greenberg’s

lawsuit under the policy.              Therefore, we affirm the district

court’s judgment.

                                                                            AFFIRMED

                                         13