Bruce Levine v. Employers Ins. Co. of Wausau

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 17-1342

BRUCE LEVINE, Administrator of the Estate of Carlos Bolanos Castillo,
deceased,

Plaintiff – Appellant,

and

MARCO A. GABARETTE,

Plaintiff,

v.

EMPLOYERS INSURANCE COMPANY OF WAUSAU,

Defendant – Appellee,

and

JESSICA LYNN COBLE; PURNELL FURNITURE SERVICES, INC.; PENSKE
TRUCK LEASING COMPANY, INCORPORATED,

Defendants.

------------------------------

VIRGINIA TRIAL LAWYERS ASSOCIATION,

Amicus Supporting Appellant,

VIRGINIA ASSOCIATION OF DEFENSE ATTORNEYS,

Amicus Supporting Appellee.
 No. 17-1432

MARCO A. GABARETTE,

Plaintiff – Appellant,

and

BRUCE LEVINE, Administrator of the Estate of Carlos Bolanos Castillo,
deceased,

Plaintiff,

v.

EMPLOYERS INSURANCE COMPANY OF WAUSAU,

Defendant – Appellee,

and

JESSICA LYNN COBLE; PURNELL FURNITURE SERVICES, INC.; PENSKE
TRUCK LEASING COMPANY, INCORPORATED,

Defendants.

------------------------------

VIRGINIA TRIAL LAWYERS ASSOCIATION,

Amicus Supporting Appellant,

VIRGINIA ASSOCIATION OF DEFENSE ATTORNEYS,

Amicus Supporting Appellee.

Appeals from the United States District Court for the Eastern District of Virginia, at
Alexandria. Gerald Bruce Lee, District Judge. (1:16-cv-00355-GBL-TCB)

2
Argued: January 23, 2018 Decided: April 12, 2018

Before WILKINSON, AGEE, and WYNN, Circuit Judges.

Affirmed by published opinion. Judge Agee wrote the majority opinion, in which Judge
Wilkinson joined. Judge Wynn wrote a dissenting opinion.

ARGUED: Eugene C. Miller, WEINER, SPIVEY & MILLER, PLC; Kevin Michael
Leach, TURBITT, O’HERRON & LEACH, PLLC, Burke, Virginia, for Appellants.
Edwin Ford Stephens, CHRISTIAN & BARTON, LLP, Richmond, Virginia, for
Appellee. Dominick Michael Mullori, Jr., Woodbridge, Virginia, for Amicus Virginia
Trial Lawyers Association. ON BRIEF: Alexander S. de Witt, FREEBORN & PETERS
LLP, Richmond, Virginia, for Amicus Virginia Association of Defense Attorneys.

3
AGEE, Circuit Judge:

Carlos Bolanos Castillo was killed and Marco A. Gabarette was injured in a motor

vehicle accident during the course of their employment. Castillo’s estate and Gabarette

filed declaratory judgment actions seeking coverage under the uninsured/underinsured

motorists endorsement of a third party’s insurance policy for payment of the wrongful

death and personal injury damages from the accident. The district court held that the

policy did not extend coverage to Castillo’s estate or Gabarette and granted summary

judgment to the insurer. They now appeal. Because the plain language of the policy

supports the district court’s determination, we affirm the judgment of the district court.

I.

Purnell Furniture Services, Inc. (“Purnell”), a Virginia company, hired Castillo

and Gabarette (collectively, the “Plaintiffs”) as independent contractors to deliver

furniture in northern Virginia. 1 Purnell regularly hired such independent contractors to

deliver its furniture in the contractors’ vehicles. For this particular delivery, the originally

scheduled contractors were unable to fulfill the order, and Purnell inquired whether the

Plaintiffs could do the job. Due to Purnell’s last-minute request, the Plaintiffs did not

have a sufficient vehicle available, so Purnell permitted them to use a truck for that

delivery that Purnell had rented from Penske.

1
For convenience, we include Castillo’s estate within the “Plaintiffs” definition and only
distinguish between Castillo and his estate where indicated.

4
 Gabarette drove the truck with Castillo as passenger. En route to their destination,

they pulled over on the side of the interstate so Castillo could check on the security of the

furniture load. Another driver then struck the rented Penske truck, killing Castillo and

injuring Gabarette. 2

At the time of the accident, Purnell had a motor vehicle insurance policy (the

“Policy”) issued by Employers Insurance Co. of Wausau (“Wausau”), which includes an

uninsured/underinsured motorists (“UIM”) 3 endorsement as required by the applicable

state law of Virginia. See Va. Code Ann. § 38.2-2206(A); see also id. § 38.2-2206(B)

(mandating that UIM coverage extend to “any person who uses the motor vehicle to

which the policy applies, with the expressed or implied consent of the named insured”).

The Policy’s “Schedule of Coverages and Covered Autos” (i.e., the “Declarations Pages”

or “Schedule”) lists the insurance coverages that Purnell purchased. These coverages are

identified on the Declarations Pages as limited “to those autos shown as covered autos.”

J.A. 68. 4 Covered autos are designated by a code listed next to a particular coverage on

the Schedule, and the “Motor Carrier Coverage Form” defines each code. Under the

Schedule, the Policy extends liability coverage to all autos designated by code “61,”

which is defined as “Any Auto” on the Motor Carrier Coverage Form. J.A. 134.

2
Bruce Levine brought the current action as administrator of Castillo’s estate and is the
proper party before the Court.
3
Virginia law treats uninsured and underinsured coverages similarly, so case law that
applies to one applies to the other as well. See Seals v. Erie Ins. Exch., 674 S.E.2d 860, 863 n.2
(Va. 2009) (“While previous cases have distinguished uninsured motorist coverage from liability
coverage, those distinctions equally apply to underinsured motorist coverage, which is a similar
concept . . . .”). We designate “uninsured/underinsured motorists” as “UIM” for convenience.
4
We have omitted alterations, citations, footnotes, and internal quotation marks here and
throughout this opinion, unless otherwise noted.

5
However, for UIM coverage—as opposed to liability coverage—the Schedule restricts

covered autos to those designated by code “62,” which the Motor Carrier Coverage Form

defines as “Owned Autos Only.” J.A. 134. The Policy lists only three vehicles on the

“Schedule of Covered Autos You Own,” none of which are the rented Penske truck.

The Declarations Pages also reference the UIM endorsement for the limits of that

particular coverage, which provides that Wausau would “pay in accordance with the

Virginia Uninsured Motorists Law, all sums the insured is legally entitled to recover as

damages from the owner or operator of an uninsured motor vehicle.” J.A. 105. For UIM

purposes, an insured party is defined as “[a]nyone . . . occupying a covered auto.” J.A.

105. The UIM endorsement defines “covered auto” as “a motor vehicle, or a temporary

substitute, with respect to which the bodily injury or property damage liability coverage

of the policy applies.” J.A. 104.

Castillo’s estate and Gabarette filed separate suits against the alleged negligent

driver in the Fairfax County, Virginia, Circuit Court. 5 Because of the driver’s limited

insurance coverage, the Plaintiffs also brought an action in the same state court against

Wausau for a declaration as to UIM coverage under the Policy and their entitlement to

that coverage. Wausau removed the declaratory judgment action to the U.S. District

Court for the Eastern District of Virginia on the basis of diversity jurisdiction pursuant to

5
These suits were not resolved before the initiation of this case, and we are unaware of
any resolution.

6
28 U.S.C. § 1332. Wausau and Castillo’s estate filed cross-motions for summary

judgment. 6

The district court granted Wausau’s motion for summary judgment and denied

Castillo’s estate’s motion regarding UIM coverage. 7 Applying Virginia law, the district

court analyzed the Policy and held that the plain language of its terms dictated that the

UIM coverage applied only to those vehicles that Purnell owned. Because Purnell did not

own the Penske truck, it was not a “covered auto,” and therefore the Plaintiffs were not

entitled to UIM coverage.

The Plaintiffs filed a timely notice of appeal, and we have jurisdiction pursuant to

28 U.S.C. § 1291.

II.

We review a district court’s decision to grant summary judgment de novo.

OpenRisk, LLC v. Microstrategy Servs. Corp., 876 F.3d 518, 527 (4th Cir. 2017).

“Summary judgment is appropriate when there are no genuine issues of material fact and

the moving party . . . is entitled to judgment as a matter of law.” Id. The facts in this case

are not in dispute.

6
Wausau filed a motion for summary judgment on all claims by the Plaintiffs. Castillo’s
estate filed a cross-motion for summary judgment on its claims against Wausau. Although
Gabarette defended himself against Wausau’s motion, he did not file his own motion for
summary judgment.
7
The district court also addressed several additional issues that are not before the Court
in this appeal.

7
 Because this case was removed to federal court pursuant to diversity jurisdiction,

we apply Virginia law, which governs any substantive issues. Stahle v. CTS Corp., 817

F.3d 96, 99–100 (4th Cir. 2016) (“Because federal jurisdiction in this matter rests in

diversity, our role is to apply the governing state law.”). Courts in Virginia apply

traditional principles of contract interpretation when reviewing insurance policies.

TravCo Ins. Co. v. Ward, 736 S.E.2d 321, 324 (Va. 2012). The intent of the parties is the

focus of the inquiry. Id. at 325. A court will construe unambiguous terms of the policy

according to their plain meaning. Id. Importantly, no contract provision “will be treated

as meaningless if a reasonable meaning can be given to it, and there is a presumption that

the parties have not used words needlessly.” Id. Indeed, “[e]ach phrase and clause of an

insurance contract should be considered and construed together and seemingly conflicting

provisions harmonized when that can be reasonably done, so as to effectuate the intention

of the parties as expressed therein.” Id.; accord Nationwide Mut. Ins. Co. v. Akers, 340

F.2d 150, 154 (4th Cir. 1965) (“To construe each clause or endorsement in isolation and

without reference to the other policy provisions would do violence to basic contract law

for insurance contracts, like other contracts, must be read and construed as a whole and

not piecemeal.”).

If an insurance policy is ambiguous, however, it is ordinarily construed against the

insurance company. St. Paul Fire & Marine Ins. Co. v. S.L. Nusbaum & Co., 316 S.E.2d

734, 736 (Va. 1984) (“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. Where two

8
constructions are equally possible, that most favorable to the insured will be adopted.

Language in a policy purporting to exclude certain events from coverage will be

construed most strongly against the insurer.”). The insurer has the burden of proving lack

of coverage. Ward, 736 S.E.2d at 325.

In this case, the plain language of the Policy resolves the issue. In construing

similar insurance policy provisions, the Supreme Court of Virginia has been clear that the

designating language of the declarations page determines the applicability of UIM

coverage. Bayer v. Travelers Indem. Co., 267 S.E.2d 91, 91 (Va. 1980) (per curiam)

(answering in the negative “the question [of] whether a claimant, injured while a

passenger in his own uninsured automobile during a collision with another uninsured

vehicle, may recover under the uninsured motorist endorsement of a liability policy

written on other vehicles owned by the driver of the claimant’s automobile”); see

Nationwide Mut. Ins. Co. v. Hill, 439 S.E.2d 335, 337 (Va. 1994) (explaining that, in

Bayer, “[t]he declarations page of [the] policy contained a specific section addressing

vehicles included for the purpose of the UM coverage,” which the Bayer court relied on

for its holding); see also Akers, 340 F.2d at 154 (holding that a Virginia UIM

endorsement “must be construed with other provisions of the policy in which the

uninsured motorist endorsement is incorporated” and therefore concluding that UIM

“coverage is restricted to those automobiles described in the declarations”).

The Supreme Court of Virginia’s decisions in Bayer and Hill control our decision

here. In Bayer, the plaintiff, Bayer, was riding as a passenger in his own uninsured

vehicle, which was driven by Whitaker, who did have an automobile insurance policy

9
with UIM coverage. 267 S.E.2d at 91–92. The two men were “road testing the vehicle”

when they were in an accident with another driver whose car was also uninsured. Id. at

92. Of the three men, only Whitaker had insurance, so Bayer sought to establish UIM

coverage under Whitaker’s insurance policy for injuries Bayer sustained in the accident.

Id.

The UIM endorsement of Whitaker’s policy extended coverage to “any . . . person

while occupying an insured automobile.” Id. The term “insured automobile” was defined

as “an automobile registered in Virginia with respect to which the bodily injury and

property damage liability coverages of the policy apply.” Id. Bayer contended that his

case depended upon resolution of the issue of “whether the vehicle in which he was

riding was an insured automobile within the meaning of the endorsement.” Id. He argued

that, because Whitaker was a named insured under the policy and was driving Bayer’s

vehicle with permission, “the omnibus provisions of Whitaker’s policy afforded Whitaker

protection in the operation of the automobile.” Id. And because Whitaker was protected

while in Bayer’s automobile for liability purposes, Bayer was “the occupant of an

automobile with respect to which the bodily injury and property damage liability

coverages of the policy apply.” Id. In other words, because “Whitaker’s liability coverage

followed Whitaker into the Bayer vehicle, . . . the vehicle thereby became insured” for

UIM purposes. Id.

The Supreme Court of Virginia disagreed with Bayer. First, the court held that the

policy “was issued to Whitaker individually and covered two described motor vehicles.”

Id. at 93. Next, the court noted that the UIM endorsement “was subject to the insuring

10
agreements of the automobile and garage liability provisions of the policy; they covered

Whitaker’s use of a non-owned automobile only if Whitaker became legally obligated to

pay damages.” Id. And finally, Bayer “did not qualify as a person insured under any of

the basic liability provisions of the policy.” Id.

As relevant to the case now before us, the Supreme Court of Virginia later

clarified its Bayer holding in Hill:

The UM endorsement definitions considered in Bayer are identical
to the definitions contained in the [insurance] policy here. However, to
determine whether these definitions were satisfied, providing UM coverage
for Bayer, the Court in Bayer looked to other relevant portions of the
policy.
The Court in Bayer held that at least two portions of the policy’s
provisions precluded coverage from Bayer under the UM endorsement.
First, the Court concluded that only owned vehicles were covered by the
policy. Although specific policy provisions were not recited in the opinion,
the basis for this holding is clear from the record on file with the Court. The
declarations page of Whitaker’s policy contained a specific section
addressing vehicles included for the purpose of the UM coverage. Only
“automobiles owned by the Named Insured” were designated for insurance
coverage under the UM endorsement and, therefore, the policy did not
cover a vehicle owned by Bayer.

439 S.E.2d at 337. 8

Here, as in Bayer, the Declarations Pages of the Policy limit the UIM coverage to

only certain automobiles: code 62 autos. The Motor Carrier Coverage Form defines code

62 as “Owned Autos Only.” J.A. 134. Because the Penske truck is not listed in the Policy

8
In Hill, the Supreme Court of Virginia held that the plaintiff was entitled to UIM
coverage because the insurance policy “did not limit the definition of the vehicle to one owned
by the named insured, as the policy did in Bayer; nor did it include any language which would
restrict the definition of ‘insured vehicle’ to a vehicle identified or described in the policy
provisions.” 439 S.E.2d at 337–38. The court noted that the declarations page was not part of the
record in the case before it. Id. at 338 n.2.

11
as one of the owned vehicles, there is no UIM coverage related to it under the Policy.

This result is plainly required by not only the Bayer decision but by the clear public

policy of Virginia as to UIM insurance coverage. Indeed, “[i]n Virginia, uninsured

motorist coverage is meant to protect an insured motorist, his family and permissive users

of his vehicle against the peril of injury by an uninsured wrongdoer, not to provide

insurance coverage upon each and every uninsured vehicle to everyone.” Bayer, 267

S.E.2d at 93 (emphasis added). 9

The thrust of the Plaintiffs’ case is that the required UIM endorsement has a

definition of “covered auto” that is broader than the UIM limitation of the Policy’s

Declarations Pages. However, the Supreme Court of Virginia rejected a similar argument

in Bayer. Moreover, Virginia follows the well-settled principle in contract law of

applying specific provisions of a contract over more general provisions dealing with the

same subject matter. Appalachian Reg’l Healthcare v. Cunningham, 806 S.E.2d 380, 385

n.9 (Va. 2017) (“When two provisions of a contract conflict with one another, and one

provision specifically addresses the dispute at hand while the other remains general, we

have consistently held that the specific provision will govern over the general.”).

Comparing the two provisions at issue in this case, the Policy’s Declarations Pages place

limitations on UIM coverage that are more specific than the generic UIM endorsement

9
In addition, the record contains no evidence that Purnell ever paid a premium for UIM
coverage for rented vehicles. See J.A. 70–71 (hired autos schedule listing premiums for liability
and physical damage coverages only).

12
which, according to the Plaintiffs, provides coverage to any vehicle covered by the Policy

whatsoever. See id. The Plaintiffs’ view is simply not consonant with Virginia law.

To this end, another Supreme Court of Virginia case is on point: Stone v. Liberty

Mutual Insurance Co., 478 S.E.2d 883 (Va. 1996). In Stone, the plaintiff was an

employee of a restaurant who made pizza deliveries in his own vehicle. Id. at 883. While

making a delivery, he was injured in an accident with another driver. Id. That driver’s

insurance policy limits were inadequate to fully compensate Stone for his injuries, so he

sought UIM coverage under the restaurant’s automobile insurance policy. Id. The terms

of the restaurant’s policy limited UIM coverage to “include only those autos [the

restaurant] owns.” Id. at 884. Stone argued that, because his vehicle was covered by the

liability provisions of the restaurant’s policy, which extended liability coverage to certain

non-owned vehicles, Virginia law required the insurer to extend UIM coverage to him

regardless of the policy’s defined terms for UIM coverage. Id.; see Va. Code Ann. § 38.2-

2206(B) (defining an “Insured” person for UIM purposes in part as “any person who uses

the motor vehicle to which the policy applies, with the expressed or implied consent of

the named insured”). Therefore, Stone contended that the policy’s limiting UIM coverage

to certain owned vehicles was invalid. 478 S.E.2d at 884. The insurer, on the other hand,

argued that it could “limit who is an insured without violating the provisions of

subsection (B) of the statute.” Id. at 885.

The Supreme Court of Virginia agreed with the insurer, holding that the UIM

statute did not “require that all the same vehicles and insureds be covered under both

liability and uninsured motorist coverages of the same policy.” Id. Instead, the statute

13
mandated only “that uninsured motorist coverage be provided to those who are in . . . the

motor vehicles listed in the policy, as opposed to any vehicle to which the policy might

apply.” Id. at 886.

Stone refutes the Plaintiffs’ argument here and weighs in favor of Wausau. Like

the restaurant’s policy in Stone, the Policy here specifically limits UIM coverage to

owned vehicles, while extending liability coverage to certain non-owned vehicles. The

Plaintiffs seek to use the broad language in the endorsement to support UIM coverage

despite this limitation, but the limitation is clearly permitted by Virginia state law, as

Stone plainly held. The Plaintiffs therefore cannot use the broad language in the UIM

endorsement to gain UIM coverage.

Failing on that argument, the Plaintiffs also contend that the Policy’s provisions

here are nonetheless ambiguous and that the Policy should be construed against Wausau.

Although ambiguous provisions are ordinarily construed against the insurer, the reason

for this preference is that insurance companies are typically the drafters of insurance

policies. Appalachian Reg’l Healthcare, 806 S.E.2d at 386 n.10 (noting that the

“principle that insurance policies should be interpreted in favor of insureds” “exists in

part because insurance policies are contracts whose language is ordinarily selected by

insurers rather than by policyholders”). But here, the generic UIM endorsement is solely

the creation of the Virginia State Corporation Commission (“SCC”), which requires the

endorsement for every motor vehicle policy issued in Virginia. In contrast, the Policy’s

Declarations Pages, which were written by Wausau, have no ambiguity as the covered

autos provision is clear: there is no UIM coverage for the non-owned Penske truck. In

14
that circumstance, “[t]he interpretative presumption favoring insureds . . . plays no role in

our analysis.” Id.

The Policy’s UIM endorsement is word-for-word the same as the form required by

the SCC. Compare Va. State Corp. Comm’n, Uninsured Motorists Endorsement

(Virginia) (2002), https://www.scc.virginia.gov/boi/co/pc/auto/ca/CA21211102.pdf

(saved as ECF opinion attachment), with J.A. 104–07. Because the SCC adopted this

form, Wausau was required to use it. See Va. Code Ann. § 38.2-2220 (stating that, “after

any standard form is adopted by the [SCC], no insurer shall use any form covering

substantially the same provisions contained in the standard form unless it is in the precise

language of the form filed and adopted by the [SCC]” (emphasis added)); see also J.A.

477 (district court stating, “The UM/UIM Endorsement is a standard form promulgated

by the Virginia State Corporation Commission.”); Opening Br. 24 (conceding that the

UIM endorsement “is a standard form promulgated by the Virginia Corporation

Commission”). It would be illogical to penalize an insurance company for using a form it

is required to use by law, especially when the highest court of the state has directly held

that an insurance company may limit the vehicles that are subject to UIM coverage under

the required endorsement. See Stone, 478 S.E.2d at 885–86 (holding that insurance

policies may limit UIM coverage to owned vehicles without violating state law). And

unlike the government-mandated UIM endorsement, the Declarations Pages were a result

of contract negotiations by the parties. “This language which the parties[] contracted to

cannot simply be ignored.” Bartolomucci v. Fed. Ins. Co., 770 S.E.2d 451, 455 (Va.

2015).

15
 Finally, the Plaintiffs rely on a case that they did not cite below: Seals v. Erie

Insurance Exchange, 674 S.E.2d 860 (Va. 2009). If anything, Seals supports the rationale

of the district court in the case at bar. In Seals, the plaintiff “was injured in an accident

with an underinsured driver while test driving a vehicle owned by [a dealership].” Id. at

861. The dealership’s UIM coverage had a provision similar to the one in this case stating

that it covered anyone “occupying a covered auto.” Id. And, as in the standard UIM

endorsement form in this case, the endorsement in Seals defined “covered auto” as “a

motor vehicle . . . with respect to which the bodily injury or property damage liability

coverage of the policy applies.” Id. The trial court looked to the liability provision of the

policy, which stated that liability coverage was not available to customers of the

dealership who have their own auto insurance. Id. On appeal, analyzing the plain

language of the policy, the Supreme Court of Virginia determined that the trial court

“incorrectly focused on whether [the plaintiff], as the driver of the vehicle, was entitled to

liability coverage to determine if he was entitled to underinsured motorist coverage.” Id.

at 863. Instead, the proper course was to look to the declarations page, which showed the

automobile being test driven was covered by the dealership’s policy for liability. Id.

Because the UIM endorsement provided coverage to occupants of those vehicles named

on the declarations page with liability coverage, regardless of whether the occupants

themselves had liability coverage under the policy, the test-driven vehicle was a covered

auto, and the plaintiff was thus entitled to UIM coverage. Id. at 863–64.

Seals is in concert with our conclusion here, as both cases are resolved by the plain

language of the respective declarations pages. Although the court in Seals followed the

16
language used in the UIM endorsement—the same language used in this case—it was the

declarations page that identified the vehicles that were covered under the UIM

endorsement. Thus, Seals is of no benefit to the Plaintiffs.

The dissent’s reading of the Policy would lead to absurdity, potentially with

disastrous results for Virginia insurers and insureds alike. Virginia courts will not read

contracts to produce absurd results. Transit Cas. Co. v. Hartman’s, Inc., 239 S.E.2d 894,

896 (Va. 1978) (“While any ambiguity must be resolved against the insurer, the

construction adopted should be reasonable, and absurd results are to be avoided.”). There

is no way to cabin the dissent’s interpretation to this case only, mainly because the UIM

endorsement is a standard, required form. Because the parties are required to use the UIM

endorsement form, a policy would automatically extend UIM coverage to every vehicle

to which it extended liability coverage: a public policy choice made at no place in

Virginia law. For example, if an auto insurance policy provides liability coverage to hired

or borrowed vehicles—as the Policy does, see J.A. 70—then by the dissent’s reasoning

those vehicles must be covered by the UIM endorsement even where the parties bargain

to exclude that coverage, as the Declarations Pages and premium record show here. This

is an absurd result and one not in line with the Supreme Court of Virginia’s ruling in

Stone (the dissent’s discussion of which is relegated to a footnote). See 478 S.E.2d at 885

(holding that Virginia’s UIM statute does not “require that all the same vehicles and

insureds be covered under both liability and uninsured motorist coverages of the same

policy”).

17
 As a court sitting in diversity, we are bound to apply state law, not create it, as the

dissent would do. Stahle, 817 F.3d at 99–100. So when the Supreme Court of Virginia

holds that parties may contract to limit UIM coverage to certain vehicles, Stone, 478

S.E.2d at 885, and that courts should look to the declarations page to determine which

vehicles have UIM coverage, Bayer, 267 S.E.2d at 93; Hill, 439 S.E.2d at 337, we cannot

by fiat compel UIM coverage for non-owned vehicles when an insurer and insured

contract to limit that coverage to only owned vehicles.

As previously noted, Virginia law permits the insurer to limit UIM coverage to

owned vehicles via the declarations page, despite the inclusive wording of the SCC-

mandated UIM endorsement. See Stone, 478 S.E.2d at 886; Hill, 439 S.E.2d at 337.

Wausau so limited the UIM coverage in this case, and the district court properly followed

the terms of the Policy to award summary judgment to it.

III.

For these reasons, the judgment of the district court is

AFFIRMED.

18
WYNN, Circuit Judge, dissenting:

Consider the auto insurance policy at issue in this case, which has two relevant

components. The first—the Declarations Pages—states that the Liability portion of the

policy covers “Any ‘Auto’” and that the Uninsured/Underinsured Motorist (“UIM”)

portion covers “Owned ‘Autos’ Only.” J.A. 68, 148. The second—the UIM

Endorsement—provides that, for purposes of that Endorsement, a “[c]overed auto” is “a

motor vehicle . . . with respect to which the ‘bodily injury’ or ‘property damage’ liability

coverage of the policy applies.” J.A. 104 (emphasis added). In other words, because the

Liability policy covers “Any ‘Auto,’” so too must the UIM policy, notwithstanding the

fact that the Declaration Pages state UIM coverage applies to “Owned ‘Autos’ Only.”

J.A. 68, 148. Even the craftiest of lawyers would find it difficult to claim such

documents are not ambiguous. Yet that is precisely what the majority opinion concludes.

Ante at 9.

The majority opinion asserts that several decisions by the Supreme Court of

Virginia dictate that conclusion. But a close reading of those decisions reveals that the

Supreme Court of Virginia has not addressed—much less decided—the proper result

when, as here, an insurance policy’s Declarations Pages conflict with an Endorsement

included in the same policy. Absent a controlling decision from the Virginia Supreme

Court, this Court should follow settled state law governing the interpretation of

ambiguous coverage terms in insurance contracts, which holds that the ambiguous terms

should be construed in favor of coverage. Rather than applying this settled Virginia law,

the majority opinion engages in complex legal gymnastics, resolving the ambiguity

19
through interpretive principles that lack any basis in Virginia law. Accordingly, I

respectfully dissent.

I.

The majority opinion maintains that the Supreme Court of Virginia’s decisions in

Bayer v. Travelers Indemnity Co., 267 S.E.2d 91 (Va. 1980) (per curiam), and

Nationwide Mutual Insurance Co. v. Hill, 439 S.E.2d 335 (Va. 1994), “control” this case.

Ante at 9. I disagree.

In Bayer, the claimant (Bayer) was a passenger in his own uninsured vehicle and

was injured when the driver of his car (Whitaker) collided with another uninsured

vehicle. See 267 S.E.2d at 91–92. Bayer thus sought to recover under Whitaker’s UIM

policy. See id. As in this case, the UIM Endorsement in Bayer stated that UIM coverage

applied to vehicles to which the Liability policy applied. See id. at 92. Significantly,

under the policy, Liability coverage extended to non-owned vehicles only when the

insured was at fault. See id. at 93. The court concluded that because (1) Bayer’s vehicle

was a “non-owned” vehicle for purposes of Whitaker’s policy, and (2) Whitaker was not

at fault, Bayer was not entitled to recover under Whitaker’s policy. See id.

The majority opinion makes much of the fact that fourteen years later, in Hill, the

Supreme Court of Virginia re-examined the record in Bayer and determined that, as in

this case, the Declarations Pages provided that only automobiles owned by the insured

were covered under the UIM policy. Ante at 11 (quoting Hill, 439 S.E.2d at 337). Under

the terms of the Declarations Pages, therefore, Bayer would not have been covered under

20
Whitaker’s policy, because Whitaker did not own the vehicle. See Hill, 439 S.E.2d at

337. According to the majority opinion in this case, Bayer, as clarified by Hill,

establishes that a coverage definition in the Declarations Pages controls, to the extent it

conflicts with a definition in an Endorsement. Ante at 12. But Hill’s clarification of

Bayer’s facts does not resolve the ambiguity at issue in this case. Unlike here—in which

there is a conflict between the Declarations Pages and the Endorsement as to whether

UIM coverage is available—Bayer was not entitled to coverage under the plain language

of both the Declarations Pages and the Endorsement. See Hill, 439 S.E.2d at 337. As a

result, the Supreme Court of Virginia did not consider, much less decide, the critical

question presented by this case: what to do when the language of the Declarations Pages

leads to a different result than the language of the Endorsement?

Hill also failed to address that question. As the majority opinion here notes, the

record in Hill did not include the Declarations Pages. Ante at 11 n.8 (citing Hill, 439

S.E.2d at 338 n.2). Faced with this omission, Hill treated the UIM policy as if it “did not

limit the definition of [a covered] vehicle to one owned by the named insured, as the

policy did in Bayer.” 439 S.E.2d at 337. In other words, the court assumed, without

having the Declarations Pages available, that they would not have excluded the vehicle at

issue from being covered. See id. Then, turning to the language in the Endorsement, the

court noted that, as in Bayer, the Endorsement stated UIM coverage applied to vehicles

covered by the Liability policy. See id. at 337–38. As in Bayer, the Liability policy

covered non-owned vehicles only if the insured was at fault. Id. at 338. Unlike in Bayer,

however, the driver from whom coverage was sought was also undisputedly at fault in

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Hill, so the Liability coverage—and by virtue of the definition in the Endorsement, the

UIM coverage—applied. See id. Accordingly, like the policy in Bayer, the Declarations

Pages and Endorsement in the policy at issue in Hill both led to the same result—just this

time, they both favored coverage. Hill, therefore, did not address the question at issue in

this case—how a court should resolve a discrepancy in terms of coverage between the

Declarations Pages and an Endorsement.

Thus, neither Bayer nor Hill provides any guidance regarding whether we should

follow the definitions in the Declarations Pages or the Endorsement in determining

whether coverage is available. ∗ Accordingly, we must follow state law canons of

construction governing the interpretation of insurance contracts. Here, we have two

directives. First, the contract’s terms “must be considered and construed together, and

any internal conflicts between provisions must be harmonized, if reasonably possible, to

effectuate the parties’ intent.” Virginia Farm Bureau Mut. Ins. Co. v. Williams, 677

S.E.2d 299, 302 (Va. 2009) (Keenan, J.). “When a disputed policy term is

unambiguous,” a court must apply the “plain meaning as written.” Id. Second, “if

disputed policy language is ambiguous and can be understood to have more than one

meaning, we construe the language in favor of coverage and against the insurer.” Id.;

∗
The majority opinion also relies on Stone v. Liberty Mutual Insurance Co., 478
S.E.2d 883 (Va. 1996). In Stone, the Supreme Court of Virginia decided a question not at
issue in this case—what level of uninsured motorist insurance is required by Virginia
statute. Stone held that under the relevant statute, coverage is required only for owned
vehicles. See id. at 886. But Stone sets a floor for UIM coverage, not a ceiling. It in no
way bars an insurer from contracting to provide UIM coverage for non-owned vehicles,
or an insured from contracting with an insurer to obtain such coverage. The relevant
question here is whether the Defendant entered into such a contract.

22
accord Virginia Farm Bureau Mut. Ins. Co. v. Gile, 524 S.E.2d 642, 645 (Va. 2000).

“Language in a policy purporting to exclude certain events from coverage will be

construed most strongly against the insurer.” St. Paul Fire & Marine Ins. Co. v. S.L.

Nusbaum & Co., 316 S.E.2d 734, 736 (Va. 1984)

As explained above, the terms of the contract here cannot be harmonized. There is

simply no squaring two provisions, one of which purports to cover “Any Auto” and the

other of which purports to cover “Owned Autos Only.” The majority claims that the

more specific document (i.e. the Declarations Pages) should control, but that assertion

finds no support in the language of the policy or Virginia law. As to the language of the

policy, the Endorsement begins in boldface, all-caps type that states, “THIS

ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.”

J.A. 104. This language arguably establishes that the Endorsement should control.

As to Virginia law, perhaps the most instructive case from the Virginia Supreme

Court is Seals v. Erie Insurance Exchange, 674 S.E.2d 860 (Va. 2009). In that case,

Seals was test-driving a vehicle at a car dealership when he was hit by an underinsured

motorist. See id. at 861. The car dealership’s insurance company sought a declaratory

judgment stating that Seals was not covered under the dealership’s UIM policy. See id.

As with the Endorsement here—the UIM Endorsement in Seals defined a “covered auto”

as “a motor vehicle . . . with respect to which the bodily injury . . . liability coverage of

the policy applies.” Id. (emphasis omitted). The Seals court thus looked to the Liability

coverage, which stated “[w]e will pay all sums anyone we protect legally must pay for

property damage to autos.” Id. (emphasis omitted). The term “anyone we protect”

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included, among other definitions, “[a]nyone else while using an auto we insure with

your permission, except . . . your customer who has other available insurance with limits

at least equal to those required by law in the state where the auto is garaged.” Id.

(emphasis added). Seals had other available insurance, so the insurance company

claimed he was not entitled to coverage under the dealership’s Liability policy and thus

also was not entitled to coverage under the UIM policy. See id.

The Supreme Court of Virginia disagreed. Although the court found that Seals

was not entitled to coverage under the Liability policy because he had his own personal

insurance, it nonetheless concluded that Seals was entitled to coverage under the UIM

Endorsement because the motor vehicle he was driving was covered under the language

of the UIM Endorsement. See id. at 862–64. In reaching that conclusion, the court said

“we begin . . . with the UM/UIM endorsement.” Id. at 863 (emphasis added). That

provision, like here, defined “anyone we protect” as “anyone else occupying a covered

auto.” Id. A “covered auto,” according to the Endorsement, was “a motor vehicle . . . to

which the bodily injury . . . liability coverage . . . applies.” Id. (emphasis added).

Because the definition from the Endorsement provided that the UIM policy applied to “a

motor vehicle . . . to which the bodily injury . . . liability coverage . . . applies,” then it

applied to the vehicle Seals was driving. Id. (emphasis added). Thus, since the vehicle

was covered under the Liability policy, and Seals was not personally excluded from the

UIM coverage, he was entitled to recover under the policy. See id.

Despite the majority opinion’s contention that the Declarations Pages controlled

the outcome in Seals, the opinion states that the “proper inquiry” in determining whether

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Seals was entitled to coverage under the UIM policy focused on the language of the UIM

Endorsement. Id. The reason the court then looked to the Declarations Pages was

because the Endorsement explicitly cross-referenced them, as is the case here. See id.

Accordingly, under Seals, the “proper inquiry” is to first look at the coverage provision in

the UIM Endorsement, and then look to the Declarations Pages definition cross-

referenced by the Endorsement. Id.

Even if Seals does not control this case due to the conflict between the coverage

provisions in the Endorsement and the Declarations Pages, the Plaintiffs would

nonetheless be entitled to coverage because Virginia law dictates that ambiguous

provisions in insurance contracts be construed in favor of coverage. See Williams, 677

S.E.2d at 302. The majority opinion maintains that this principle should not apply here

because the language of the Endorsement was drawn verbatim from a form created by the

Virginia State Corporation Commission (“SCC”), which requires the Endorsement be

used for every motor vehicle policy issued in Virginia.

Virginia law does not support the majority opinion’s contention that the SCC form

abrogated the well-established rule that ambiguous provisions in insurance contracts must

be construed in favor of coverage. Tellingly, neither the majority opinion nor the

Defendant cites a single Virginia case—nor have I found any—declining to apply this

canon. The majority opinion is correct that in Appalachian Regional Healthcare v.

Cunningham, 806 S.E.2d 380 (Va. 2017), the Supreme Court of Virginia stated that the

canon “exists in part because ‘[i]nsurance policies are contracts whose language is

ordinarily selected by insurers rather than by policyholders.’” Id. at 386 n.10 (quoting

25
Gov’t Emps. Ins. Co. v. Moore, 580 S.E.2d 823, 828 (Va. 2003)) (emphasis added). But

in Cunningham, the Supreme Court of Virginia expressly declined to address application

of the canon because it found the contract at issue was not ambiguous. See 806 S.E.2d at

386 n.10. Thus, the quoted language is dicta, and, more importantly, provides no support

for the contention that the canon is inapplicable when the state drafts an Endorsement.

Indeed, given that an insurer’s status as the drafter of the contract is only a “part” of the

rationale behind the canon, Cunningham implies that other reasons would still favor

applying the canon, even when the insurer is not the drafter. Id. That would seem to be

particularly true when, as here, a state regulator has rendered a judgment as to what

language should be included in an insurance contract.

The majority opinion concludes by arguing that my reasoning leads to “absurdity”

by espousing “a public policy choice made at no place in Virginia law”—that an

automobile insurance policy “extend[s] UIM coverage to every vehicle to which it

extended liability coverage.” Ante at 17. Not so. There is no dispute that the language

of the SCC’s required UIM Endorsement defines “[c]overed auto” as “a motor vehicle . .

. with respect to which the ‘bodily injury’ or ‘property damage’ liability coverage of the

policy applies.” J.A. 104 (emphasis added). And the SCC’s requirement that insurance

contracts include this form language is amenable to at least two interpretations, neither of

which support the majority opinion’s assertion that my position leads to “absurdity.”

On the one hand, the Endorsement’s required language could be treated as the

reasoned judgment of a state regulator creating a new standard of UIM coverage, above

the minimum required by statute. To be sure, the Supreme Court of Virginia has held

26
that the statute does not require UIM coverage for non-owned vehicles. See Stone, 478

S.E.2d at 886. But that does not necessarily mean that the SCC, as a state administrative

body, cannot—and did not—use the form to create a regulatory requirement above the

floor created by the statute. If that is indeed the case, the Endorsement would not lead to

“absurdity,” but would instead represent a “public policy choice” made by the

Commonwealth of Virginia, rather than one created by this Court. Ante at 17.

On the other hand, one could view the Endorsement’s definition of “[c]overed

auto” as providing a default definition from which the parties can agree to deviate

through negotiated contractual provisions. To do so, however, the contract would need to

include language clearly establishing that the parties intended to limit UIM coverage—

language which the policy at issue here lacks and which would prevent the “absurdity”

feared by the majority. Id. For example, the parties could include language in the

Declarations Pages stating that, “notwithstanding the language of the

Uninsured/Underinsured Motorist Endorsement, the definition of ‘covered vehicles’

indicated in these Declarations controls.” Yet, the policy at issue here makes no mention

of the conflicting language in the Declarations Pages and the Endorsement, nor does it

expressly provide that the coverage language in the Declarations Pages controls.

Considering that the Endorsement, by its own terms, “CHANGES THE POLICY,” J.A.

104, the insurance company’s acquiesce to this conflict is as much evidence that the

Endorsement controls as it is to the contrary. In other words, we are left without clear

evidence as to how the parties in this case wanted that conflict resolved. We should

27
therefore construe this ambiguous aspect of the contract in favor of coverage. See

Williams, 677 S.E.2d at 302.

Deciding between these two possibilities is a complex question of state law not

raised by the parties in this case. As such, we are left with another level of ambiguity—

not just the internal ambiguity between the documents themselves but also the ambiguity

created by the competing positions of different branches of the Virginia government. The

majority writes its opinion under the guise of federalism, but the majority is merely

choosing to rely on language in an opinion of the Supreme Court of Virginia over

language in a form promulgated by a state regulator—form language that does not even

necessarily conflict with the state court opinion. That decision no doubt advances the

majority opinion’s policy objective. But “[a]s a court sitting in diversity, we are bound to

apply state law, not create it.” Ante at 18. We should therefore not be establishing state

policy, particularly when doing so potentially requires choosing between the policy

preferences of two different branches of state government. Rather, we should follow

undisputed state law regarding the proper approach to interpreting Virginia insurance

contracts: construe ambiguous provisions in favor of coverage. See Williams, 677 S.E.2d

at 302.

This Court should recognize the multi-layered ambiguity presented by the

documents in this case and apply that canon of construction. The Plaintiffs should thus

be entitled to coverage under the policy, and the district court should be reversed.

Nothing presented by this case justifies the majority’s efforts to create an unprecedented

28
exception to a well-established principle of state law. For these reasons, I respectfully

dissent.

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