Court Opinion

ID: 613193
Source: CourtListenerOpinion
Date Created: 2011-09-06 19:15:46+00
Date Added: 2024-06-11T14:57:30.823853
License: Public Domain

UNPUBLISHED

                 UNITED STATES COURT OF APPEALS
                     FOR THE FOURTH CIRCUIT

                            No. 10-1530

BRETON, LLC;   HEMAN   WARD,   INCORPORATED;    B&H     MANAGEMENT
COMPANY,

               Plaintiffs - Appellees,

         v.

GRAPHIC ARTS MUTUAL INSURANCE COMPANY, d/b/a Utica National
Insurance Group,

               Defendant – Appellant,

         and

JEFFERSON-PILOT LIFE INSURANCE COMPANY,        Merged    with   the
Lincoln National Life Insurance Company,

               Defendant.

                            No. 10-1571

BRETON, LLC;   HEMAN   WARD,   INCORPORATED;    B&H     MANAGEMENT
COMPANY,

               Plaintiffs - Appellants,

         v.

GRAPHIC ARTS MUTUAL INSURANCE COMPANY, d/b/a Utica National
Insurance Group,

               Defendant – Appellee,
           and

JEFFERSON-PILOT LIFE INSURANCE COMPANY,    Merged   with   the
Lincoln National Life Insurance Company,

                 Defendant.

Appeals from the United States District Court for the Eastern
District of Virginia, at Alexandria.     Anthony John Trenga,
District Judge. (1:09-cv-00060-AJT-TRJ)

Argued:   May 12, 2011                Decided:   September 6, 2011

Before KING, SHEDD, and WYNN, Circuit Judges.

Reversed and remanded by unpublished opinion. Judge Wynn wrote
the majority opinion, in which Judge King joined.  Judge Shedd
wrote a concurring opinion.

ARGUED: Lon Arthur Berk, HUNTON & WILLIAMS, LLP, McLean,
Virginia, for Appellant/Cross-Appellees.  Charles Thomas Brown,
SILVER   &  BROWN,   Fairfax,   Virginia,  for   Appellee/Cross-
Appellants. ON BRIEF: Brian J. Gerling, HUNTON & WILLIAMS, LLP,
McLean, Virginia, for Appellant/Cross-Appellees.       Glenn H.
Silver, SILVER & BROWN, Fairfax, Virginia, for Appellee/Cross-
Appellants.

Unpublished opinions are not binding precedent in this circuit.

                                2
WYNN, Circuit Judge:

                Summary judgment is appropriate only “if the movant

shows that there is no genuine dispute as to any material fact

and the movant is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(a).                    After a fire damaged its warehouse,

Plaintiff Breton, LLC (“Breton”)1 sought a declaratory judgment

that       it   was   entitled      to    coverage       under    an     insurance      policy

issued by Graphic Arts Mutual Insurance Co. (“Graphic Arts”).

Breton also asserted that Graphic Arts breached the insurance

contract by denying coverage.                        Graphic Arts responded that it

was    not      obligated     to     provide         coverage    in     part    due    to     the

operation        of    an     exclusion         from    coverage        in     the    policy’s

Protective        Safeguards        endorsement.          Because       the    operation       of

that       exclusion       hinges    on    an    unresolved       factual       dispute,       we

reverse the district court’s grant of summary judgment in favor

of Breton and remand for further proceedings.

                                                I.

                On    April    1,    2002,       Graphic        Arts    issued       Breton     a

commercial insurance policy providing coverage for, inter alia,

fire       damage     to    Breton’s      warehouse       (“the        warehouse”).           The

       1
       Appellees include Breton, LLC, Heman Ward, Inc., and B&H
Management Company. For ease of reading, we will refer to these
parties collectively as “Breton.”

                                                 3
policy, which was renewed through April 1, 2008,                           includes   a

Protective     Safeguards              endorsement     stating    that,     “[a]s     a

condition of this insurance, you are required to maintain the

protective devices or services listed in the Schedule above.”

J.A. 1871.2     The only protective device or service referenced in

the Schedule is an Automatic Sprinkler System.3                     The endorsement

also contains an exclusion stating, “[Graphic Arts] will not pay

for loss or damage caused by or resulting from fire if, prior to

the   fire,    you    .       .    .   [f]ailed   to   maintain     any    protective

safeguard listed in the Schedule above, and over which you had

control, in complete working order.”                   J.A. 1871.     Additionally,

the   policy    has       a       Transfer   of   Rights   and    Duties    provision

stating, “[Breton’s] rights and duties under this policy may not

be transferred without [Graphic Arts’] written consent except in

the case of death of an individual named insured.”                    J.A. 1868.

      2
       Citations herein to “J.A. __” refer to the Joint Appendix
filed by the parties in this appeal.
      3
       The policy defines an Automatic Sprinkler System as:
     (1) Any automatic fire protective or extinguishing system,
including connected:
          (a) Sprinklers and discharge nozzles;
          (b) Ducts, pipes, valves and fittings;
          (c) Tanks, their component parts and supports; and
          (d) Pumps and private fire protection mains.
     (2) When supplied from an automatic fire protection system:
          (a) Non-automatic fire protective systems; and
          (b) Hydrants, standpipes and outlets.
     J.A. 1871.

                                              4
            On December 1, 2004, Breton leased the warehouse to

Joe Ragan’s Coffee, Ltd. (“Ragan”).4            The lease contract stated

in part:

    Tenant at its expense shall at all times maintain said
    Premises in good condition and repair, including all
    mechanical, plumbing, and electrical equipment and
    also in a clean, sanitary and safe condition in
    accordance with all directions, rules, and regulations
    of the . . . fire marshal . . . .

J.A. 1002.

            On December 2, 2007, a fire destroyed the warehouse.

An investigation by the local fire department revealed that the

valve controlling the supply of water to the sprinkler heads was

in the closed position, rendering the Automatic Sprinkler System

inoperable.    Based on this discovery, Graphic Arts asserted that

Breton   failed   to   maintain   an       Automatic   Sprinkler   System   as

required by the policy.       Alternatively, Graphic Arts contended

that insofar as Breton delegated the obligation to maintain the

sprinkler     system   to   Ragan,     this     delegation    violated      the

insurance contract and barred coverage.            On those bases, Graphic

Arts denied coverage.

            On January 21, 2009, Breton filed suit in the Eastern

District of Virginia seeking a declaratory judgment that Graphic

    4
       Prior to this lease agreement with Ragan, Breton leased
the   warehouse  to  Alexandria   Packaging &  Supply  Company
(“Alexandria Packaging”).   Graphic Arts had knowledge of both
rentals.

                                       5
Arts was obligated to provide coverage under the policy.                                    Breton

further alleged that Graphic Arts’ failure to provide coverage

constituted a breach of the insurance contract.                                 Graphic Arts

responded       that      Breton’s          failure        to    maintain       an     operable

sprinkler       system        in    the    warehouse       constituted      a     failure      to

satisfy     a     condition          placed     on    coverage       and     triggered         an

exclusion from coverage.                  Graphic Arts argued in the alternative

that Breton’s breach of the insurance contract’s Transfer of

Rights and Duties provision justified denying coverage.                                 Graphic

Arts accordingly sought a declaratory judgment that coverage was

barred.     On August 5, 2009, the parties filed cross-motions for

summary judgment.

            After a hearing, the district court granted Breton’s

motion for summary judgment on November 10, 2009.                                    First, the

district        court     held       that      Breton       satisfied       the       condition

precedent       to   coverage         included       in    the   Protective          Safeguards

endorsement.            The        district    court       concluded       that       the    word

“maintain” as used in the condition was ambiguous because it has

more than one           definition that could reasonably apply in the

context of the insurance policy.                     The district court interpreted

the ambiguous term in a manner favoring coverage, concluding

that   “maintain”         meant       “to     keep    in    existence.”           J.A.      2766.

Because    there        was    no    dispute     that      Breton    kept    an       Automatic

Sprinkler System in existence in the warehouse, the court held

                                                6
that    Breton      had    demonstrated        satisfaction           of   the    condition

precedent to coverage.

               Next, the district court concluded that the exclusion

did not apply to bar coverage.                      The district court found the

word “control” as used in the exclusion to be ambiguous and

again    applied      a   definition         effectuating       coverage,        ultimately

interpreting “control” to mean “physical control.”                            The district

court reasoned that Breton did not have such “control” over the

sprinkler system because it lacked “physical dominion over it or

unfettered access to it.”                J.A. 2770.        Because the requirement

to keep the sprinkler system in “complete working order” was

conditioned on Breton’s having physical control over the system,

the district court held that the exclusion was inapplicable.

               Finally, the district court held that Breton did not

violate    the      Transfer     of    Rights       and   Duties      provision     because

Breton did not transfer its duty to “maintain” the sprinkler

system    to    Ragan.      The       court    therefore       held    that      Breton    was

entitled       to    coverage     and        that    Graphic     Arts      breached        the

insurance      contract     by    denying          coverage.       The     court    awarded

damages,       including    the       cost    of    replacing      the     warehouse       and

Breton’s lost business income.

               Graphic Arts appealed, contending that the district

court     misread     the    policy      and        repeating      the     argument       that

Breton’s failure to “maintain” a sprinkler system in “complete

                                               7
working     order,”        or     alternatively          Breton’s       delegation      of

contractual duties to Ragan, barred coverage.                           Breton filed a

cross-appeal,       arguing        that    the       district      court     incorrectly

calculated the period of time for which Graphic Arts was liable

for Breton’s lost business income.

                                           II.

            “[W]e     review       de    novo    a     district    court’s      award   of

summary judgment, viewing the facts in the light most favorable

to the non-moving party.”               Lee v. York Cnty. Sch. Div., 484 F.3d

687, 693 (4th Cir. 2007).               Summary judgment is appropriate where

“the movant shows that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter

of law.”     Fed. R. Civ. P. 56(a).              Material facts are “facts that

might affect the outcome of the suit under the governing law.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

            Virginia        law    governs       the     issues    raised     on   appeal

because    this     suit     was    brought       in     the    Eastern      District   of

Virginia on the basis of the court’s diversity jurisdiction and

Graphic     Arts    delivered       the    insurance           policy   to    Breton    in

Virginia.     See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.

487,   496-97      (1941)    (holding      that      a   federal    court      exercising

diversity jurisdiction must apply the choice of law principles

of the State in which the federal court is located); Buchanan v.

                                             8
Doe, 246 Va. 67, 70, 431 S.E.2d 289, 291 (1993) (“[T]he law of

the place where a insurance contract is written and delivered

controls issue as to its coverage.”).

                                          A.

            Graphic Arts first contends that the district court

erred in concluding that Breton satisfied a condition placed on

coverage.    Paragraph 1a of the Protective Safeguards Endorsement

states: “[a]s a condition of this insurance, you are required to

maintain    the   protective       devices      or     services     listed       in    the

Schedule    above.”         J.A.   1871.             Graphic    Arts     argues       that

“maintain” is unambiguous as used in the condition and should be

interpreted as requiring Breton to “do something to determine

whether the system operates.”          Opening Brief of Appellant at 22.

            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 Mut.

Auto Ins., 237 Va. 148, 152, 375 S.E.2d 727, 729 (1989).                          If the

policy   language     is    unambiguous        the    court    simply    applies       the

terms as written.          State Farm Fire and Cas. Co. v. Walton, 244

Va. 498, 502, 423 S.E.2d 188, 191 (1992).

            However, when the language of an insurance contract is

ambiguous the terms are construed against the insurer.                       St. Paul

                                          9
Fire & Marine Ins. Co. v. S.L. Nusbaum & Co., 227 Va. 407, 411,

316 S.E.2d 734, 736 (1984) (“Insurance policies are contracts

whose language is ordinarily selected by insurers rather than by

policyholders.            The courts, accordingly, have been consistent in

construing the language of such policies, where there is doubt

as   to    their      meaning,        in   favor     of    that   interpretation       which

grants coverage, rather than that which withholds it.”); see

also Mollenauer v. Nationwide Mut. Ins. Co., 214 Va. 131, 132,

198 S.E.2d 591, 592 (1973) (per curiam) (“Where an insurance

policy is susceptible of two constructions, one of which would

effectuate coverage and the other not, it is the court’s duty to

adopt     that       construction          which     will     effectuate         coverage.”);

Central Sur. & Ins. Corp. v. Elder, 204 Va. 192, 197, 129 S.E.2d

651,      655    (1963)       (“[W]here        the        language      of   a    policy   is

susceptible          of    two     constructions,           it    is    to   be    construed

liberally       in    favor      of    the   insured       and    strictly       against   the

insurer.”).           We    therefore        must     first      determine       whether   the

district        court      erred      in     ruling       that    the    policy      language

constituting the condition precedent was ambiguous.

                “Language is ambiguous when it may be understood in

more than one way or when such language refers to two or more

things at the same time.”                    Salzi v. Virginia Farm Bureau Mut.

Ins. Co., 263 Va. 52, 55-56, 556 S.E.2d 758, 760 (2002); but see

TM Delmarva Power, LLC v. NCP of Va., LLC, 263 Va. 116, 119, 557

                                               10
S.E.2d 199, 200 (2002)          (“A contract is not ambiguous merely

because the parties disagree as to the meaning of the terms

used.”).     “A term is unambiguous only if, within its context, it

is not susceptible to more than one meaning.”                    Gates, Hudson &

Assoc., Inc., v. Fed. Ins. Co., 141 F.3d 500, 502 (4th Cir.

1997) (applying Virginia law).

           In      the   present   case,       the    word   “maintain”     “may   be

understood in more than one way,” which supports a finding of

ambiguity.      Salzi, 263 Va. at 55-56, 556 S.E.2d at 760.                 Black’s

Law Dictionary defines “maintain” in relevant part as:

    1. To continue (something).
    2. To continue in possession of (property, etc.).
         . . . .
    4. To care for (property) for purposes of operational
    productivity or appearance; to engage in general
    repair and upkeep.

Black’s    Law     Dictionary      1039    (9th       ed.    2009).     Similarly,

Webster’s New World Dictionary provides multiple definitions for

“maintain,” including: “1. to keep or keep up; carry on 2. to

keep in continuance or in a certain state, as of repair . . . 5.

to support by supplying what is needed.”                     Webster’s New World

Dictionary 363 (Warner Books ed. 1987).                 As the Supreme Court of

Virginia     has    recognized,     “the       word    ‘maintain’     has   several

meanings, each depending upon the context of the statement in

which it is used.”         Savage v. Com. ex rel. State Corp. Comm’n,

186 Va. 1012, 1020, 45 S.E.2d 313, 317 (1947).

                                          11
               Nonetheless,         Graphic        Arts    argues       that    the        district

court    strained       to       find   ambiguity         when     ignoring          the     “plain

meaning”       of    “maintain”         in    the      text   of    the      contract.             We

disagree.       As used in the insurance contract, “maintain” could

be reasonably interpreted, as Graphic Arts contends, to refer to

regular     repair         obligations         with       respect       to     the     Automatic

Sprinkler System.                However, as the district court noted, the

word    could       also    be     reasonably          interpreted        to    refer       to     an

obligation to continue to have an Automatic Sprinkler Sprinkler

system    in    the    warehouse.             Absent       any     clarification            in    the

policy, we conclude that “maintain” is ambiguous here.

               This conclusion is supported by other provisions of

the    contract.           We    note   that      “maintain”       is    also        used    in    an

exclusion from coverage, which we discuss below.                                     Rather than

read the terms of the policy in isolation, we must look to other

contract provisions that use a specific word to clarify its

intended meaning.               See Gates, 141 F.3d at 502-03.                  The exclusion

expressly      qualifies          the   word      “maintain”        with       the    words       “in

complete    working         order.”          As    the    district      court        recognized,

interpreting “maintain” to require ensuring operability would

render the “in complete working order” language in the exclusion

superfluous.         However, “no word or clause in a contract will be

treated as meaningless if a reasonable meaning can be given to

it, and parties are presumed not to have included needless words

                                                  12
in the contract.”    TM Delmarva Power, 263 Va. at 119, 557 S.E.2d

at 200.5

            Moreover, Graphic Arts cannot point to any contract

language defining the nature or degree of the obligations it

contends stem from the duty to “maintain.”            For instance, there

is no indication as to how frequently any purportedly required

inspections must take place, what components of the system would

need to be examined during an inspection, or how rapidly defects

revealed during an inspection must be repaired.           As the district

court noted, “to impose implied duties on an insured through the

vagaries of the word ‘maintain’—such as the duty to access,

inspect and repair a leased property—would necessarily require

an insured to guess at what its duties and responsibilities are,

something that Virginia law seeks to avoid when interpreting the

language of an insurance policy.”         J.A. 2767-68.

           In contrast, defining “maintain” as “to keep” would be

more likely to effectuate coverage, as it would simply require

the   continued   retention   of   an    Automatic   Sprinkler   System   in

order to satisfy the condition precedent.            Virginia law compels

our application of this definition.         Mollenauer, 214 Va. at 132,

198 S.E.2d at 592.    Because it is undisputed that Breton kept an

      5
       During oral argument, Graphic Arts argued that the use of
“maintain” in the exclusion should not be used to inform the
meaning of “maintain” in the condition placed on coverage.

                                    13
Automatic Sprinkler System in place at all relevant times, we

conclude that the district court did not err in finding that

Breton satisfied the condition placed on coverage.

                                       B.

            Next, Graphic Arts argues that Breton cannot enforce

the insurance agreement because Breton breached the contract by

violating    the    Transfer   of    Rights   and   Duties    provision.      We

disagree.    The provision states, “Your rights and duties under

this policy may not be transferred without our written consent

except in the case of death of an individual named insured.”

J.A. 1868.         Graphic Arts contends that Breton violated this

provision by leasing the warehouse to Ragan and, in the lease

contract, obligating Ragan to “maintain [the warehouse] in good

condition and repair.”         J.A. 1002.      Because Graphic Arts never

gave consent, written or otherwise, to a transfer of Breton’s

duties under the contract, Breton could not transfer its duty to

maintain the warehouse to another.             However that duty was not

“transferred”      when   Breton’s    lease    contract      with   Ragan   also

imposed a maintenance duty on the tenant.               This is so for two

reasons.    First, even if Breton delegated its duty to maintain

the   sprinkler      system    to   Ragan,    Breton   would    still   owe   a

maintenance duty to Graphic Arts.             See Restatement (Second) of

Contracts § 318 (“Unless the obligee agrees otherwise, neither

                                       14
delegation of performance nor a contract to assume the duty made

with the obligor by the person delegated discharges any duty or

liability      of     the    delegating      obligor.”).           Second,     the   lease

contract       between       Breton    and        Ragan    created     an    independent

maintenance duty owed by Ragan to Breton; it did not contemplate

the transfer of a duty owed by Breton to Graphic Arts.                                   In

short, the fact that Ragan owed Breton a similar duty to that

which       Breton    owed    Graphic       Arts    does     not    mean    that     Breton

transferred      its     duty     under     the    insurance       contract.       Because

Breton did not transfer its duties, we hold that the district

court did not err in finding that Breton did not breach the

contract’s Transfer of Rights and Duties provision.

                                             C.

               Finally, Graphic Arts contends that an exclusion in

the Protective Safeguards endorsement operates to bar coverage.

The exclusion states “[Graphic Arts] will not pay for loss or

damage caused by or resulting from fire if, prior to the fire,

you . . . [f]ailed to maintain any protective safeguard listed

in    the    Schedule       above,    and    over    which    you    had    control,    in

complete working order.”              J.A. 1871.

               As explained above, if this language is unambiguous,

the    court’s       role    is   simply     to    apply    the    contract     terms   as

written.       Walton, 244 Va. at 502, 423 S.E.2d at 191.                          However,

                                             15
the exclusion is qualified by the requirement that the insured

“had control” over the protective safeguard in question.                                  The

district court opined that “control” could be understood to mean

“legal control” or “physical control.”

               Black’s       Law    Dictionary      defines      “control”      as     “[t]he

direct or indirect power to govern the management and policies

of   a   person       or    entity,      whether     through      ownership     of     voting

securities, by contract, or otherwise; the power or authority to

manage, direct, or oversee . . . .”                       Black’s Law Dictionary 378

(9th     ed.    2009).         Webster’s      New     World      Dictionary      similarly

defines “control” as “1. power to direct or regulate 2. a means

of controlling; check 3. an apparatus to regulate a mechanism.”

Webster’s       New    World       Dictionary      137    (Warner     Books    ed.     1987).

Given the similarity of these definitions, the word “control”

would at first blush seem unambiguously to reference a power to

manage, direct, or regulate an object or entity.                              Yet, as the

district       court       noted,    a   reasonable       distinction     can     be    drawn

between the physical power to regulate an object or entity and

the legal power to do so.

               In     some     instances,       courts         construe   “control”         as

established through physical power over an object.                            For example,

Virginia       cases       addressing      whether       one    has   “control”      over   a

vehicle have equated the possession of keys to the vehicle with

control of the vehicle.                  See Bell v. Commonwealth, 21 Va. App.

                                             16
693, 699, 467 S.E.2d 289, 292 (1996) (holding that, for purposes

of statute criminalizing theft of vehicle from victim who had

“possession or control” of vehicle, victim’s possession of the

car   keys    was     sufficient      to    support     conviction);      see   also

Burchette v. Commonwealth, 15 Va. App. 432, 435-36, 425 S.E.2d

81,   84     (1992)    (reversing      conviction       based    on   constructive

possession and noting lack of evidence that defendant had keys

to vehicle in which contraband was found); but see Overbee v.

Commonwealth, 227 Va. 238, 243, 315 S.E.2d. 242, 244 (1984) (for

purpose of DUI statute, which requires driving or “operation” of

vehicle, mere possession of vehicle’s keys is not enough to

establish “actual physical control” of the vehicle).6                       Another

example can be found in United States v. Buculei, 262 F.3d 322

(4th Cir. 2001), where we discussed whether a child was under

the “control” of the defendant and rejected any argument that

“control”      required       legal    power     over     the    child,     instead

concluding     that     the    statute      in   question       contemplated    the

      6
       This conception of keys indicating “control” of a vehicle
is not unique to Virginia. See United States v. Sotelo-Rivera,
931 F.2d 1317, 1319 (9th Cir. 1991), cert. denied, 502 U.S. 1100
(1992) (deeming possession of vehicle’s keys evidence of control
over vehicle); United States v. Damsky, 740 F.2d 134, 139 (2d
Cir.), cert. denied, 469 U.S. 918 (1984) (holding that defendant
had dominion and control of vehicle once he was given the key
thereto); United States v. Jackson, 529 F. Supp. 1047, 1050 (D.
Md. 1981) (finding exclusive control over vehicle obtained upon
possession of keys).

                                           17
exercise    of   physical       power   over    the   child.         Id.   at     331-33

(analyzing language of 18 U.S.C. § 2251A(b)(2)).

            In contrast, even without physical control, one may

have legal power over an object or entity (i.e. legal control).

See Brock v. Hamad, 867 F.2d 804, 807 (4th Cir. 1989) (holding

that, for purposes of Fair Labor Standards Act, defendant had

“control”   over    multiple      rental      properties     because       “[a]ll     the

properties managed and controlled by the defendant were owned by

the    defendant,   or     by    the    defendant     and    his     wife,       or   the

defendant and his mother,” and FLSA regulations defined control

as    existing   “‘where    total       ownership     is    vested    in     a    single

person, family unit, [or] partnership.’”) (quoting 29 C.F.R. §

779.223 (1987)); see also Fitzpatrick v. United States, 410 F.2d

513, 516 n.3 (5th Cir. 1969) (noting that the lack of a “key or

ownership paper” indicates lack of control) (emphasis added).

            Indeed, courts have previously distinguished between

the exercise of “physical control” and “legal control.”                               See,

e.g., United States v. Joshua, 607 F.3d 379, 387 (4th Cir. 2010)

(noting, in the habeas corpus context, the distinction between

physical     and     legal         control       when       addressing           custody

determination); see also In re Video Depot, Ltd., 127 F.3d 1195,

1198 (9th Cir. 1997) (“Arlynn no longer had legal control over

the funds, even if he retained physical control over them.”).

                                         18
                 As the foregoing discussion demonstrates, there are at

least      two    interpretations          of     the     word     “control”.       Because

interpreting        “control”        to    mean      either      “physical   control”     or

“legal      control”         would   be    reasonable         in   the   context    of   the

insurance contract at issue, we conclude that the term “control”

is ambiguous here.              See Salzi, 263 Va. at 55-56, 556 S.E.2d at

760.       Again, when faced with an ambiguous contractual term, we

must construe it liberally in favor of the insured.                             Elder, 204

Va. at 197, 129 S.E.2d at 655.                       Interpreting “control” to mean

legal control would create more instances in which the exclusion

could be triggered.              As the district court observed, “one would

expect fire insurance policies to be often issued, as in this

case, to persons who own the insured property.”7                                J.A. 2770.

Consequently,           if    “control”      meant        “legal    control,”      in    many

instances         the    exclusion        would      be    triggered     merely     by   the

insured’s ownership of the premises.                       By contrast, interpreting

“control” to mean “physical control” would give greater effect

to the qualification in the exclusion.8                            Accordingly, we will

       7
       Indeed, to enter into a valid fire insurance contract, the
insured must have a legal or equitable interest in the covered
property.   See Liverpool & London & Globe Ins. Co. v. Bolling,
176 Va. 182, 188-89, 10 S.E.2d 518, 520 (1940).
       8
       Moreover, by construing “control” as meaning “physical
control” we read the contract such that the insured is only
required to perform duties which he is physically able to
perform.

                                                19
construe   “control”    as    used    in    the    exclusion      to   require   the

insured’s physical control over the Automatic Sprinkler System.

            To determine whether Breton had a contractual duty to

maintain   the    Automatic    Sprinkler         System   “in    complete   working

order,” it is necessary to determine whether Breton had physical

control over the system.             Whether or not Breton had physical

control    over   the   sprinkler      system       therefore      constitutes     a

“material fact” necessary to the resolution of this case.                        See

Anderson, 477 U.S. at 248.             Because this material fact is in

dispute, summary judgment is inappropriate.                     Fed. R. Civ. Pro.

56(a).

            Importantly, all of the controls for the warehouse’s

Automatic Sprinkler System, including the water supply valve,

were located within the warehouse in a Sprinkler Room.                       Breton

argued that it did not have access to that room and therefore

lacked    physical   control    over       the    sprinkler      system.     Breton

contended that before it leased the warehouse to Ragan, a former

tenant, Alexandria Packaging, changed all of the locks in the

warehouse and did not provide Breton with keys.                        According to

Breton, when Ragan purchased the assets of Alexandria Packaging

and leased the warehouse from Breton, Ragan received the keys

from Alexandria.        Breton asserts that Ragan then changed the

                                       20
locks9 and never gave Breton a copy of the keys, meaning that

only Ragan had physical access to the Sprinkler Room.                         All told,

Breton contends that during Alexandria Packaging’s and Ragan’s

lease of the warehouse, Breton “had no access to the Sprinkler

Room and had no control over the Sprinkler Room.”10                    J.A. 711.

            Graphic     Arts,    in    contrast,       asserts    that       Breton   had

control    over   the   sprinkler      system.         Paul    Graf,     a    corporate

designee of Graphic Arts, testified that Breton “had control”

because “it’s their sprinkler system and they are in control of

their own property.”            J.A. 1316.         Graphic Arts also disputed

Breton’s    contention     that       Ragan      had   sole    control        over    the

sprinkler    system:      “[I]t       was    disputed    whether       Joe    Ragan    or

Breton had control of the sprinkler system.”                     Response Brief of

Cross Appellee at 12.           Leona Ragan, a corporate designee of Joe

Ragan Coffee, Ltd., testified that her company had neither the

keys nor access to the Sprinkler Room.

            We    are   unwilling      to    conclude,    as     did   the     district

court,     that   Breton’s      lack    of       “unfettered     access”        to    the

     9
       The record includes an invoice indicating that Baldino’s
Lock & Key charged Ragan for changing certain unidentified locks
in the warehouse.
     10
        It bears mention that during an insurance inspection
prior to the fire, Breton’s representative asserted that a
contractor employed to work on the sprinkler system, rather than
Ragan, had the keys to the Sprinkler Room.

                                            21
Sprinkler Room meant that Breton lacked the requisite “physical

control” over the Automatic Sprinkler System to trigger the duty

to maintain the system “in complete working order.”                             However,

under our interpretation of the contract, if Breton was entirely

unable to enter the warehouse to access the sprinkler system,

then it had no such duty.

            Here, the exclusion only obligated Breton to keep “in

complete    working     order”    those      protective       services     or   devices

listed in the contract and “over which [Breton] had [physical]

control.”    The only protective device or service listed                       was the

Automatic Sprinkler System.             The qualification “and over which

you   had   control,”    must,     to   be     given    any    effect,     operate   to

distinguish between protective devices or services with respect

to which Breton had a duty and those devices or services with

respect to which no such duty existed.                    See Berry v. Klinger,

225 Va. 201, 208, 300 S.E.2d 792, 796 (1983) (“Where possible,

meaning must be given to every clause [in a contract].”).                         Since

only one device was listed in the contract, the distinction

contemplates Breton’s loss of control over the sprinkler system

and further permits such a loss of control to absolve Breton of

a duty to maintain the sprinkler system “in complete working

order.”      If    Graphic       Arts   wanted     to    protect     against       this

possibility, it could have easily included language obligating

the   insured     to   retain     physical      control       over   the    sprinkler

                                          22
system.     It    did    not   do   so,    and    we   will     not   construe   the

resulting contractual ambiguity to the detriment of Breton.

            In light of the competing factual assertions regarding

Breton’s ability to access the Automatic Sprinkler System, we

cannot agree with the district court that as a matter of law the

exclusion   was    not     triggered.          Until   the    resolution   of    this

material factual dispute, summary judgment is inappropriate.

                                        III.

            In    moving    for     summary      judgment,     Breton   failed     to

establish that there were no genuine disputes of material fact.

As such, the district court erred when granting summary judgment

in favor of Breton.            Accordingly, we reverse and remand for

further proceedings.11

                                                             REVERSED AND REMANDED

     11
        On cross-appeal, Breton challenges the district court’s
calculation of damages awarded for the breach of contract by
Graphic Arts. Because we reverse the grant of summary judgment,
we need not address this argument.

                                          23
SHEDD, Circuit Judge, concurring:

            I agree that summary judgment should be reversed, but

for reasons different than the majority.

            First,       in    the    context     of    the   insurance       policy   at

issue,    the    term    “maintain”      is     not     ambiguous.      The   fact   that

“maintain” may have several meanings does not necessarily result

in ambiguity, nor is that fact dispositive here; rather, the

real question is whether, in the context of a fire insurance

policy, it is reasonable to interpret “maintain” as meaning to

merely have a sprinkler system in place. See Resource Bankshares

Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 640 (4th Cir.

2005)    (“The    real    question,       then,       is    whether,    when    read   in

context, a reasonable purchaser of insurance would believe that

[interpretation].”).            The majority concludes that it is. In my

opinion, this is not a reasonable interpretation in light of the

fundamental      purpose       of    insurance,       which   is   to   allocate     risk

between    the    insurer      and    insured.        See   Autumn     Ridge,   L.P.   v.

Acordia of Virginia Ins. Agency, Inc., 613 S.E.2d 435, 438-39

(Va. 2005).

            The condition in the Protective Safeguards Endorsement

requiring   Breton       “to    maintain”       an     automatic     sprinkler   system

creates a duty on Breton, which is a condition precedent to

coverage. As such, Breton must comply with this condition before

the insurance becomes effective. In other words, in order for

                                           24
Graphic Arts to agree to assume the risk of loss resulting from

fire,     this    protective       safeguard       –   a    safeguard         that     would

minimize    or    prevent     that    risk     –   must     be   in     place.    To      read

“maintain” as meaning to merely “have” a sprinkler system                                    –

regardless of whether it actually works - eliminates the purpose

of that duty in allocating risk. Further, such an interpretation

renders    the    condition     completely         meaningless        because     in      this

context    having      a    non-working,     non-functioning            system       is   the

factual equivalent of having no system at all (for purposes of

risk allocation). See TM Delmarva Power, LLC v. NCP of Virginia,

LLC, 557 S.E.2d 199, 200 (Va. 2002) (“[N]o word or clause in a

contract will be treated as meaningless if a reasonable meaning

can be given to it.”).

               Surely, Graphic Arts did not intend to require Breton

to have a non-working sprinkler system. See Virginia Farm Bureau

Mut.    Ins.     Co.   v.   Williams,    677       S.E.2d    299,       302   (Va.     2009)

(noting     that       insurance      provisions          must     be      construed       to

effectuate       the   parties'      intent).      “The    point      is   that      context

matters,” Resource Bankshares,               407 F.3d at 642, and in this

context, the requirement to “maintain” a sprinkler system is not

                                          25
ambiguous –           it necessarily means to have a sprinkler system

which is in working order.1

                 Second,     and     independent       of     the   general    duty    to

maintain a sprinkler system as a condition to have coverage, the

policy exclusion provides that Graphic Arts “will not pay for

loss . . . [if            Breton]    [f]ailed     to    maintain      [the     sprinkler

system]      .    .   .   over     which   [Breton]     had    control,   in   complete

working order.” J.A. 771. Leaving aside the lease at this point,

this       exclusion      clearly    and   independently        obligated     Breton   to

keep the sprinkler system in working order to ensure there was

coverage. The lease between Breton and Ragan does not change

this obligation. Breton controlled the premises as lessor and

cannot eliminate its obligation by merely leasing the property

to a third party.2

       1
       In fact, the conduct of both Breton and Graphic Arts
underscores this interpretation of “maintain.” In August 2007,
Graphic Arts indicated to Breton’s property manager that the
sprinkler system needed to be inspected. J.A. 2618. In response,
Breton’s property manager informed Graphic Arts that the
sprinkler was scheduled to be serviced later that month. Id. In
addition, just weeks before the fire, Graphic Arts sent a letter
reminding Breton to have the system inspected. J.A. 2017-21.
Under the district court’s interpretation of the duty to
maintain, these warnings by Graphic Arts – as well as Breton’s
response - would have been unnecessary because Breton had
fulfilled its duty under the policy by simply having the
sprinkler system – whether it worked or not - in place.
       2
        The   exclusion’s requirement that the  system   be
“maintain[ed] . . . in complete working order” underscores,
rather than undercuts, my reading of the general duty to
(Continued)
                                             26
           Notwithstanding the lease relationship between Breton

and   Ragan,    Breton   controlled     the    sprinkler   system   under   the

policy   between    Breton     and   Graphic    Arts.   That    Breton   somehow

would use its status as lessor to construct a barrier to its

access to the sprinkler system is of no moment. The lease offers

Breton no more excuse than if Breton had thrown away its keys to

the   control    room    for   the   express    purpose    of   defeating    the

exclusion – Breton’s obligation would still exist. An insured

simply cannot take steps to defeat its obligation under the

Policy and still claim coverage. See Parrish v. Wightman, 34

S.E.2d 229, 232 (Va. 1945) (noting general contract principle

that if a party “is the cause of the failure of performance of a

condition upon which his own liability depends, he cannot take

advantage of the failure”). Beyond that, Breton’s position that

Ragan had sole control of the sprinkler system is defeated by

the actual language of the lease. Under the lease, Breton had

“maintain” a system. Under the majority’s view, the general duty
(condition) is read to contrast with the exclusion because the
exclusion further elaborates on “maintain.” Such a reading leads
to the odd but inevitable result that a non-working system is
completely sufficient to satisfy the general duty. Further,
notwithstanding any disagreement with the majority about what
“maintain” means, the exclusion makes it clear that there will
be no payment for a loss unless the system is in complete
working order. Therefore, whether the focus is on the general
duty or the exclusion, for Breton to recover under the policy
the sprinkler system had to be in working order.

                                       27
“the right to enter the Premises . . . to examine the same as

well as to make any alterations and repairs . . . .” J.A. 1003.

That fact underscores Breton had both physical control – as the

majority    interprets          “control”    –   and    legal         control    over    the

sprinkler system. Simply put, under the facts and any reading of

the policy, Breton was in control of the sprinkler system and

was therefore obligated to keep the system in working order.

            However, aside from all of this, Graphic Arts conceded

during     oral     argument       that     there      is       a     question    of    what

constitutes       the     sprinkler     system      being       “in    complete      working

order.”    In     light    of    this   concession,         I       would   remand     for   a

resolution of that narrow issue.

                                            28