UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1389
ADMIRAL INSURANCE COMPANY,
Plaintiff – Appellee,
v.
ACE AMERICAN INSURANCE COMPANY; ILLINOIS UNION INSURANCE
COMPANY,
Defendants – Appellants.
Appeal from the United States District Court for the Western
District of Virginia, at Harrisonburg. Samuel G. Wilson,
District Judge. (5:08-cv-00055-sgw-jgw)
Argued: December 3, 2009 Decided: January 20, 2010
Before KING, DUNCAN, and DAVIS, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: John L. Williams, COZEN O’CONNOR, Seattle, Washington,
for Appellants. Thomas Collier Mugavero, WHITEFORD, TAYLOR &
PRESTON, LLP, Falls Church, Virginia, for Appellee. ON BRIEF:
Thomas M. Jones, David J. Walton, COZEN O’CONNOR, Seattle,
Washington, for Appellants. Valerie L. Tetro, WHITEFORD,
TAYLOR & PRESTON, LLP, Falls Church, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
ACE American Insurance Company (“Ace”) and Illinois Union
Insurance Company (“Illinois Union”) appeal from the district
court’s judgment in favor of Admiral Insurance Company
(“Admiral”) in this insurance coverage dispute. As explained
below, we affirm the district court.
I.
A.
Admiral, Ace, and Illinois Union provided insurance
coverage to American HomePatient, Inc. (“AHP”), a company
headquartered in Tennessee that provides home medical services
and equipment. On May 16, 2006, AHP’s employee, Brewer E.
Hoover, Jr., shot and killed two co-employees and himself during
business hours at AHP’s workplace in Harrisonburg, Virginia. On
July 6, 2006, the estates of the two murdered employees, Bonnie
Sue H. Crump and Gary A. Gibson, each brought nearly identical
wrongful death actions in the Circuit Court for Rockingham
County, Virginia (the “state trial court”), against both AHP and
Hoover’s estate. Against AHP, each complaint asserted claims,
inter alia, of negligent retention and failure to provide a safe
workplace. The state trial court had occasion to outline the
factual allegations of the complaints in a March 2007 decision.
See Crump v. Morris, No. CL06-00547(L) (Va. Cir. Ct. Mar. 12,
2
2007) (the “State Decision”). 1 As described in the State
Decision, the complaints alleged the following:
[Ms. Crump, Mr. Gibson, and Mr. Hoover] all
worked together in the AHP office, formerly located at
182 Neff Avenue in Harrisonburg, Virginia. During
that time, [their] immediate supervisor was Greg
Taylor . . . , a district manager of AHP.
At some point, Mr. Hoover became romantically
infatuated with Ms. Crump, and Mr. Hoover apparently
believed that Ms. Crump and Mr. Gibson were having an
extra-marital affair. Mr. Hoover confronted Ms. Crump
about his belief on March 24, 2006, after entering her
office and slamming her door. Mr. Hoover shook his
fist and pointed in Ms. Crump’s face while shouting at
her for lying about the affair.
Ms. Crump reported the assault to Mr. Taylor, the
District Manager, by leaving telephone messages for
him on the evening of March 24, 2006. In addition,
Ms. Crump left another message for Mr. Taylor on March
27, 2006, indicating that she was afraid to return to
work. However, Mr. Taylor never contacted Ms. Crump
regarding those telephone messages.
Mr. Hoover continued to act in a threatening
manner towards Ms. Crump, which prompted Ms. Crump to
keep a cane at her desk for protection. In addition,
Ms. Crump was afraid to visit the restroom unless
accompanied by another employee. Several other
employees reported Mr. Hoover’s strange behavior to
Mr. Taylor in emails and voiced their concerns in
weekly office meetings attended by Mr. Taylor.
However, Mr. Taylor and AHP did not take any
responsive action.
On May 16, 2006, Mr. Hoover reported to work with
.38 and .40 caliber handguns. Mr. Hoover first shot
Mr. Gibson, killing him with a single shot to the
1
The State Decision is found at J.A. 510-18. (Citations
herein to “J.A. ” refer to the contents of the Joint Appendix
filed by the parties in this appeal.)
3
head. Ms. Crump and two of her coworkers were in the
front of the office preparing for their workday when
they heard this gunshot. Mr. Hoover then came from
the rear of the office and began shooting at Ms.
Crump, who was hit several times. One of her
coworkers pulled Ms. Crump into an office and closed
the door. However, Mr. Hoover shot through the door,
and then entered the office, executing Ms. Crump,
shooting her at point-blank range in the head. Mr.
Hoover committed suicide shortly after the shootings
when the police officers entered the building.
State Decision 2-3. Additionally, each complaint alleged that
Hoover’s “conduct towards [Crump and Gibson] was based upon his
personal jealousy and did not arise from any known employment
issues with either [Crump, Gibson, or AHP].” J.A. 73, 82.
The state trial court and the Virginia Workers’
Compensation Commission (the “state commission”) both determined
that, based on workers’ compensation law, the deaths of Crump
and Gibson did not arise out of their employment with AHP. In
the state trial court, AHP initially demurred to both wrongful
death actions, arguing that they were barred by Virginia’s
workers’ compensation exclusivity provision, see Va. Code Ann.
§ 65.2-307, because the deaths arose out of and in the course of
Crump’s and Gibson’s employment, see id. § 65.2-300(A)
(providing that workers’ compensation covers “personal injury or
death by accident arising out of and in the course of the
employment”). By its State Decision, the state trial court
overruled AHP’s demurrers, explaining that, although the deaths
had occurred “in the course of” Crump’s and Gibson’s employment,
4
they did “arise out of” such employment, in that the shootings
were “not directed against [Crump and Gibson] as employees or
because of their employment.” State Decision 5.
Following the State Decision, AHP sought a ruling from the
state commission that it had exclusive jurisdiction over the
wrongful death actions. On July 18, 2007, the state commission
determined that, for workers’ compensation purposes, the deaths
of Crump and Gibson did not arise out of their employment with
AHP. Next, back in the state trial court, AHP filed pleas in
bar, again asserting that the workers’ compensation exclusivity
provision barred the wrongful death actions. The state trial
court conducted an evidentiary hearing and subsequently
overruled AHP’s pleas in bar on July 31, 2007.
B.
Admiral had issued AHP a “Commercial General Liability
Policy” (the “Admiral Policy”) in which it agreed to pay “those
sums that the insured becomes legally obligated to pay as
damages because of ‘bodily injury.’” J.A. 293. The Admiral
Policy explicitly excludes coverage, however, for “[a]ny
obligation of the insured under a workers’ compensation . . .
law,” and for “‘[b]odily injury’ to . . . [a]n ‘employee’ of the
insured arising out of and in the course of . . . [e]mployment
by the insured.” Id. at 294 (emphasis added). The Admiral
5
Policy has an “Each Occurrence Limit” of $1 million. Id. at
289.
Meanwhile, Ace had issued AHP a “Workers Compensation and
Employers Liability Insurance Policy” (the “Ace Policy”). Under
the “Workers Compensation Insurance” portion of the Ace Policy,
Ace agreed to pay “the benefits required of [AHP] by the workers
compensation law.” J.A. 387. Under the “Employers Liability
Insurance” portion of the Policy, Ace agreed to pay for
“[b]odily injury includ[ing] resulting death,” on the condition
that “[t]he bodily injury must arise out of and in the course of
the injured employee’s employment by [AHP].” Id. at 388
(emphasis added). The limit of Ace’s liability under its
“Employers Liability Insurance” coverage for “Bodily Injury by
Accident” is $1 million for “each accident.” Id. at 393.
Finally, Illinois Union had issued AHP an “Excess Umbrella
Policy” (the “Illinois Union Umbrella Policy”), providing
coverage in excess of the Admiral and Ace Policies. The
Illinois Union Umbrella Policy’s “Excess Liability” coverage is
“subject to the same terms and conditions as the ‘underlying
insurance.’” J.A. 439. The Umbrella Policy has a “General
Aggregate Limit” of $10 million. Id. at 412.
Admiral denied coverage to AHP for the Crump and Gibson
suits by letter of December 13, 2006, and Ace provided a defense
to AHP under a reservation of rights confirmed by letter to AHP
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of August 2, 2007. Before trial in either matter, AHP and the
plaintiffs engaged in unsuccessful mediation efforts. The Crump
suit proceeded first to trial, in September 2007, and the jury
returned a verdict against AHP in the sum of $3.1 million.
Thereafter, the parties again attempted mediation before trial
of the Gibson suit. Because Ace and Illinois Union required
Admiral’s contribution before they would offer their coverage
limits, Admiral participated in the mediation. Ultimately, the
parties were able to reach a global settlement of both suits for
the aggregate sum of $3.6 million. Admiral paid $1 million, Ace
paid $1 million, and Illinois Union paid $1.6 million. As a
condition thereof, the three insurers reserved the right to
pursue indemnification and contribution claims against each
other.
C.
On June 30, 2008, Admiral filed a complaint in the Western
District of Virginia, invoking subject matter jurisdiction under
28 U.S.C. § 1332, and seeking indemnification and/or
contribution from Ace and Illinois Union as the primary and
excess insurers for the losses at issue. On July 25, 2008, Ace
and Illinois Union filed counterclaims against Admiral, seeking
indemnification and/or contribution, plus other relief. Ace
sought, inter alia, recovery of its costs in defending AHP —
approximately $383,500 after AHP’s payment of its $250,000 self-
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insured retention under the Ace Policy. For its part, Illinois
Union sought, inter alia, recovery of $1 million of its $1.6
million settlement payment on the theory that Admiral was liable
for a $2 million share of the settlement (not just the $1
million it paid) because the shootings of Crump and Gibson
constituted two “occurrences.”
The parties filed cross-motions for summary judgment on
October 31, 2008. In its Memorandum Opinion of March 24, 2009,
the district court carefully assessed the parties’ contentions,
and ultimately determined to grant Admiral’s summary judgment
motion and deny those of Ace and Illinois Union. See Admiral
Ins. Co. v. ACE Am. Ins. Co., No. 5:08-cv-00055 (W.D. Va. Mar.
24, 2009) (the “District Court Opinion”). 2 Admiral’s primary
contention was that it was entitled to summary judgment “because
the deaths of Crump and Gibson arose out of and in the course of
their employment with AHP and are therefore covered under Ace’s
‘Workers Compensation and Employer Liability Policy’ and
excluded from coverage under Admiral’s ‘Commercial General
Liability Policy.’” District Court Opinion 5-6. Ace and
Illinois Union maintained, however, that the phrase “arising out
of” employment in the Admiral and Ace Policies holds “the same
‘well-defined’ meaning it has under workers’ compensation law”;
2
The District Court Opinion is found at J.A. 614-29.
8
as such, the district court was “constrained to conclude,” as
the state trial court and the state commission had ruled, “that
Crump’s and Gibson’s deaths did not arise out of their
employment.” Id. at 6. According to Ace and Illinois Union,
Admiral was thus obliged to defend and indemnify AHP.
In assessing the parties’ contentions, the district court
first recognized that, because the Admiral Policy “was delivered
to AHP’s Tennessee headquarters, Tennessee law governs the
interpretation of its policy language.” District Court Opinion
7 & n.5 (citing Seabulk Offshore, Ltd. v. Am. Home Assurance
Co., 377 F.3d 408, 418-19 (4th Cir. 2004)). The court then
observed that, under Tennessee law, “courts must give policy
language its ‘common and ordinary meaning,’” id. at 8 (citing
Tata v. Nichols, 848 S.W.2d 649, 650 (Tenn. 1993)) — without
giving controlling force to definitions in workers’ compensation
law that have not been expressly incorporated into the policy,
id. at 8-10 (citing Blue Diamond Coal Co. v. Holland-Am. Ins.
Co., 671 S.W.2d 829 (Tenn. 1984); Tenn. Farmers Mut. Ins. Co. v.
Cherry, No. W2007-00342COAR3CV, 2008 WL 933479 (Tenn. Ct. App.
Apr. 7, 2008); Am. Indem. Co. v. Foy Trailer Rentals, Inc., No.
W2000-00397COAR3CV, 2000 WL 1839131 (Tenn. Ct. App. Nov. 28,
2000)). The court concluded that the “arising out of”
employment language in the Admiral Policy exclusion “is plain
and unambiguous,” and that workers’ compensation law, having not
9
been explicitly referenced in the exclusion, “is irrelevant to
its meaning.” Id. at 8. The court further concluded that the
deaths of Crump and Gibson “arose out of” their employment — as
that phrase is commonly and ordinarily understood — in that
“both employees were killed on AHP’s premises, during working
hours, by a co-employee, and both wrongful death suits sought to
hold AHP liable for its failings as an employer.” Id. at 6.
Based on this analysis, the district court rejected Ace and
Illinois Union’s contention that Admiral was required to
indemnify AHP. See District Court Opinion 15. Furthermore, the
court rejected Ace and Illinois Union’s assertion that Admiral
was yet obligated to defend AHP in light of the allegations in
the Crump and Gibson complaints that Hoover’s “conduct towards
[Crump and Gibson] was based upon his personal jealousy and did
not arise from any known employment issues with either [Crump,
Gibson, or AHP].” See id. at 12-13 (recognizing that, under
Tennessee law, “[a]n insurer owes its insured a duty to defend
unless ‘it is plain from the face of the complaint that the
allegations fail to state facts that bring the case within or
potentially within the policy’s [coverage]’” (quoting Drexel
Chem. Co. v. Bituminous Ins. Co., 933 S.W.2d 471, 480 (Tenn. Ct.
App. 1996))). In rejecting the duty-to-defend contention, the
court explained that
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it was plain from the face of the Crump and Gibson
complaints that their deaths arose out of and in the
course of their employment with AHP. Both wrongful
death actions asserted that AHP, as Crump and Gibson’s
employer, failed to provide a safe workplace and
failed to exercise reasonable care in retaining a
subordinate. Each complaint alleged that Hoover, a
co-employee, shot and killed Crump and Gibson during
working hours at AHP’s workplace, even after Crump and
other AHP employees placed AHP’s manager on notice
about Hoover’s prior threatening behavior. Each
complaint sought to hold AHP liable as an employer
because its negligence proximately caused Crump and
Gibson’s deaths. It is therefore clear that the
complaints alleged that Crump and Gibson’s deaths
resulted from their employment relationships with AHP
and therefore arose out of and in the course of their
employment for the purposes of Tennessee law. The
lone allegation that Hoover’s conduct “did not arise
from any known employment issues with either [Crump,
Gibson, or AHP]” does not change this result.
Contextually, this allegation simply characterizes
Hoover’s personal motivation. Irrespective of
Hoover’s personal motivation, the other circumstances
alleged in the complaints by themselves support only
one conclusion: Crump and Gibson’s deaths arose out
of their employment with AHP.
Id. at 13-14 (citation omitted). Finally, the court agreed with
Admiral that, “because the deaths of Crump and Gibson arose out
of and in the course of their employment, Ace was obligated to
provide coverage under its ‘Employers Liability Insurance.’”
Id. at 15. “Accordingly,” the court explained, “because Ace has
paid its policy limit, and Illinois Union’s excess coverage
mirrored Ace’s underlying coverage, Admiral is entitled to
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indemnification in the amount of $1 million from Illinois
Union.” Id. at 16. 3
Ace and Illinois Union have timely noted this appeal, and
we possess jurisdiction pursuant to 28 U.S.C. § 1291.
II.
On appeal, Ace and Illinois Union maintain that the
district court erred in awarding summary judgment to Admiral and
in denying such judgment to them. 4 We review de novo the
3
On the day of its summary judgment decision (March 24,
2009), the district court issued a Final Order entering judgment
in favor of Admiral and against Ace and Illinois Union. The
Final Order specified that Admiral “shall recover from Illinois
Union . . . in the amount of $1 million, plus interest and
costs.” J.A. 630. Thereafter, on April 7, 2009, Admiral filed
a motion to correct the judgment to allow prejudgment interest.
On May 1, 2009, the court issued an Amended Final Judgment
specifying that Admiral “shall recover from Illinois Union . . .
in the amount of $1 million, plus prejudgment interest at a rate
of 6% accruing from December 10, 2007 until March 24, 2009, and
postjudgment interest and costs accruing from today’s date.”
Id. at 676.
4
More specifically, Ace and Illinois make six appellate
contentions: (1) that Admiral breached its duty to defend AHP,
because it was evident from the face of the complaints in the
Crump and Gibson suits that the Admiral Policy exclusion does
not bar all possibility of coverage; (2) that the district
court’s broad construction of the Admiral Policy exclusion
contravened basic policy interpretation rules; (3) that the
Admiral Policy exclusion is inapplicable; (4) that Admiral is
estopped from denying its duties to defend and indemnify AHP;
(5) that an additional exclusion in the Admiral Policy does not
bar coverage; and (6) that Ace and Illinois Union are entitled
to judgment on their counterclaims for recovery of defense costs
(Continued)
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district court’s award of summary judgment to Admiral, viewing
the facts in the light most favorable to Ace and Illinois Union,
as the nonmoving parties. See Lee v. York County Sch. Div., 484
F.3d 687, 693 (4th Cir. 2007). We must vacate the summary
judgment award unless “‘there is no genuine issue as to any
material fact and [Admiral] is entitled to a judgment as a
matter of law.’” Id. (quoting Fed. R. Civ. P. 56(c)).
Furthermore, if warranted by the uncontroverted facts, “we are
free to enter an order directing summary judgment in favor of”
Ace and Illinois Union. Monahan v. County of Chesterfield, Va.,
95 F.3d 1263, 1265 (4th Cir. 1996) (internal quotation marks
omitted).
Having fully and carefully considered the contentions of
the parties, we agree with the district court that Admiral was
not obliged to defend or indemnify AHP. We therefore affirm the
court’s judgment in favor of Admiral and against Ace and
Illinois Union, essentially for the reasons explained in the
District Court Opinion of March 24, 2009.
AFFIRMED
(Ace) and $1 million of its $1.6 million settlement payment
(Illinois Union).
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