PRESENT: ALL THE JUSTICES
GOVERNMENT EMPLOYEES
INSURANCE COMPANY
OPINION BY
v. Record No. 022242 JUSTICE G. STEVEN AGEE
JUNE 6, 2003
HOLMES S. MOORE, ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
M. Langhorne Keith, Judge
This case arises from the parties' declaratory judgment
actions in the Circuit Court of Fairfax County seeking a
determination of Government Employees Insurance Company's
("GEICO") liability under a Pacesetter Plus Personal Umbrella
Liability Insurance policy ("umbrella policy") issued to Holmes
S. Moore and Maude E. Moore (collectively, the "Moores").
Holmes S. Moore ("Mr. Moore") presented claims to GEICO stemming
from an automobile accident in Calvert County, Maryland, in
which he was injured while a passenger in a car driven by his
wife, Maude E. Moore ("Mrs. Moore"). At the time of the
accident GEICO insured the Moores under two policies, a Family
Combination Automobile Insurance Policy (the "automobile
policy") and the umbrella policy.
GEICO paid all the claims presented under the automobile
policy but sought a declaratory judgment that it was not liable
under the umbrella policy for any damages claimed by Mr. Moore.
The trial court held that GEICO was liable under the umbrella
policy to provide liability coverage to Mrs. Moore for the
personal injury damages asserted by her husband.
We awarded GEICO this appeal in which it raises these
issues:
(1) Whether Virginia Code § 38.2-2204 (the "omnibus
clause") applies to the umbrella policy so as to render void the
policy's exclusion for damages resulting from "[p]ersonal injury
to . . . any insured." (2) Whether the Virginia endorsement to
the umbrella policy is vague and ambiguous and therefore
construed against GEICO so as to render the exclusion provision
void. (3) Whether the umbrella policy's "severability of
interests" clause mandates liability coverage to Mrs. Moore for
Mr. Moore's claim against her regardless of the exclusion.
For the reasons discussed below, we disagree with the trial
court's resolution of these issues and will therefore reverse
the trial court's judgment.
I. FACTS AND PROCEEDINGS BELOW
Mr. Moore was a passenger in a vehicle driven by his wife
and involved in an automobile accident with a bus in Maryland.
Mrs. Moore's negligence was a proximate cause of the accident in
which her husband was severely injured. The Moores owned the
vehicle jointly and were insured under the automobile policy and
the umbrella policy issued by GEICO. The automobile policy
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provided liability coverage up to $300,000 per person. The
umbrella policy carried a coverage limit of $1,000,000.
GEICO paid the property damage and bodily injury claims
made under the automobile policy by Mr. Moore and the injured
bus passengers. Mr. Moore then brought a negligence action
against his wife in Maryland seeking further compensatory
damages for his injuries. The Moores allege that GEICO is
liable, under the umbrella policy, to provide coverage to Mrs.
Moore for any damages sustained by her husband and recovered in
the Maryland suit. GEICO responds that Mr. Moore's claims,
whether made directly or through his wife, are barred by a
specific exclusion in the umbrella policy.
GEICO and Mr. Moore entered into a contract for the
umbrella policy designating him as the named insured. The
umbrella policy provides $1,000,000 in excess liability coverage
for "damages on behalf of an insured arising out of an
occurrence, subject to the terms and conditions of this policy."
The policy defines "[d]amages" as "the total of: . . . damages
an insured must pay (1) legally; or (2) by agreement with our
written consent; because of personal injury or property damage
covered by this policy." (Emphasis added).
In denying coverage for Mr. Moore's claim, GEICO relies on
the following exclusion provision in the policy.
Part III — EXCLUSIONS
3
We do not cover damages resulting from:
. . . .
10. Personal injury to any insured.
GEICO contends that this exclusion covers Mr. Moore and
Mrs. Moore as insureds and, therefore, that any personal injury
damages claimed by either is outside the scope of the umbrella
policy's coverage.
The Virginia endorsement to the umbrella policy amends the
"definitions" section of the policy and provides the following
definition of "insured" in Section 5A:
"Insured" means:
You and your spouse if a resident of your
household; both with respect to a non-owned auto
furnished for regular use by you or your spouse,
only if the auto is insured in a primary auto
policy. (Emphasis modified)
The definition section of the policy, unamended by the
Virginia endorsement, provides "you" means "the 'named insured'
in the declarations and spouse."
At trial, the Moores argued that the phrase beginning with
"both" in Section 5A of the Virginia endorsement rendered the
term "insured" vague and ambiguous. Accordingly, they contended
that the policy exclusion for personal injury damages to an
"insured" is vague and ambiguous and must be construed against
the insurer to provide coverage to the Moores. GEICO disagreed,
arguing that there is a scrivener's error substituting "both"
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for "but" in the Virginia endorsement and that any ambiguity did
not affect a material term of the policy.
The Moores further contended in their declaratory judgment
action that Code § 38.2-2204(A), the omnibus clause, applied to
the umbrella policy and rendered the exclusion void. Lastly,
the Moores contended that the severability of interests clause
in the policy should be construed as applying only to Mrs.
Moore, the party against whom the liability claim was being
made, and not against Mr. Moore, therefore requiring coverage
for her.
The trial court's declaratory judgment order declared that
GEICO is required to provide coverage under the umbrella policy. 1
This appeal followed.
1
The trial court found that:
1. Exclusion 10 of GEICO's pacesetter plus Policy Number
P4124672, hereinafter the "pacesetter plus policy", as
defined by Section 5(A) of the Virginia Endorsement, is in
violation of the omnibus clause "Virginia Code Section
38.2-2204", and is therefore void;
2. Section 5(A) of the Virginia Endorsement to the
pacesetter plus policy is vague and ambiguous; is construed
against GEICO and in favor of coverage for Maude E. Moore
providing liability coverage to her for personal injuries
sustained by Holmes S. Moore in the December 22nd, 1999,
automobile accident for up to the full amount of the
pacesetter plus policy coverage for One Million Dollars
($1,000,000.00);
3. The severability of interest clause of the pacesetter
plus policy applies separately to each insured, Holmes S.
Moore and Maude E. Moore; and any exclusion of liability
coverage in the policy for an insured applies to the
individual claiming coverage; Maude E. Moore and not Holmes
S. Moore;
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II. ANALYSIS
A. Application of the Omnibus Clause
to the Umbrella Policy
The Moores contend that the umbrella policy is one of
"bodily injury or property damage liability insurance . . .
issued . . . upon any motor vehicle . . . principally garaged
. . . in this Commonwealth" under Code § 38.2-2204(A). They
argue that the umbrella policy is written upon the automobile in
which the accident occurred and therefore that the omnibus
clause applies to void any exclusion from coverage under Code
§ 38.2-2204(D). The trial court's order does not specify the
reason for the court's holding that the omnibus clause applies;
however, the trial judge stated from the bench that the umbrella
policy exclusion violated the omnibus clause because there is
"no difference between Mr. Moore as a plaintiff and Mr. X as a
plaintiff." In any event, we disagree with the Moores and the
trial court that the omnibus clause applies to the umbrella
policy.
4. GEICO is liable to provided [sic] liability coverage to
Maude E. Moore for personal injuries sustained by Holmes S.
Moore caused by the auto accident of December 22nd, 1999,
for up to One Million Dollars ($1,000,000.00) under the
pacesetter plus policy, over and above the underlying
policy limits of Three Hundred Thousand Dollars
($300,000.00) of GEICO's family automobile policy, number
209-66-21-0, issued to Holmes S. Moore for the period
October 7th, 1999, to April 7th, 2000, and in effect at the
time of the December 22nd, 1999, accident . . . .
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First and foremost, the Moores' argument fails, and the
trial court erred, because the umbrella policy is not a policy
issued "upon any motor vehicle" as contemplated by the omnibus
clause. While the automobile policy is clearly within the ambit
of the omnibus clause, the policy is written by its plain terms
to insure the automobile and the Moores by virtue of their use
of that automobile. The automobile policy specifically
identifies the Moores' vehicle as an "owned automobile" and in
the agreement GEICO specifically agrees to pay for "bodily
injury . . . arising out of the ownership, maintenance or use of
the owned automobile."
By contrast, the umbrella policy's plain terms contain no
explicit agreement to insure against incidents causally related
to ownership of an automobile, but instead provide general
liability insurance for "damages" upon an "occurrence." Nowhere
does the umbrella policy undertake to insure the Moores' vehicle
as the automobile policy does. The umbrella policy provides
personal insurance for general liability.
We have clearly recognized that a general liability policy,
simply because it can provide coverage for a claim related to a
motor vehicle, aircraft or a watercraft accident, does not come
within the ambit of the omnibus clause because the policy is not
written upon the car, plane or boat. In Continental Ins. Co. v.
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State Farm Fire and Cas. Co., 238 Va. 209, 380 S.E.2d 661
(1989), Continental's insured owned a boat which, while being
operated by the owner's friend, struck and caused injury to a
third party. The Continental policy specifically insured the
boat and provided "boating liability," but also contained an
"excess over other insurance" clause. Id. at 210, 380 S.E.2d at
662.
The owner's friend was insured under a State Farm
homeowner's personal liability policy which covered claims for
bodily injury arising out of his use or operation of watercraft.
The State Farm policy also contained an "excess over other
insurance" clause. Id.
Continental contended that each policy's excess coverage
exclusion violated the omnibus clause and both were therefore
void so that each insurer must contribute pro rata to the
accident damages. We held that only Continental's policy
violated the omnibus clause because it was "issued upon
'watercraft'". The State Farm policy was not issued upon
watercraft, and thus the omnibus clause did not apply and no
contribution was due from State Farm. Id. at 212, 380 S.E.2d at
663. We had previously reached a similar conclusion in
Commercial Union Ins. Co. v. St. Paul Fire and Marine Ins. Co.,
211 Va. 373, 177 S.E.2d 625 (1970). "It is a personal liability
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policy and the 'omnibus clause' is not applicable to such a
policy." Id. at 376, 177 S.E.2d at 627.
For the same reasons noted in the foregoing cases, the
umbrella policy in the case at bar is one of general liability
and by its plain terms is not "issued upon a motor vehicle."
Therefore, the omnibus clause does not apply.
The Moores further argue that in this case the umbrella
policy is governed by the omnibus clause because it lists rating
information factors on the face of the policy. The rating
information listed includes a factor for the Moores' specific
vehicle. Listing such rating information, however, does not
convert the general liability policy into one issued "upon any
motor vehicle." The coverage terms of an insurance policy are a
matter of contract between the parties, but the insurer's rating
information is not. The plain language of Code § 38.2-2204 does
not support the view that insurance premium rating information
shown in a policy of general liability transforms that policy
into one written "upon any motor vehicle" and thus subject to
the omnibus clause.
In State Capital Ins. Co. v. The Mutual Assurance Soc. of
Virginia, 218 Va. 815, 241 S.E.2d 759 (1978), we considered
whether a contract of general liability insurance was covered by
the omnibus clause because the policy contained a watercraft
endorsement for boats of a certain horsepower. Several general
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liability homeowners policies provided coverage for injuries
sustained in a boating accident and all the policies contained
an excess over other insurance clause. The trial court ruled
that each insurer was to contribute pro rata to the total
recovery.
State Capital contended that a watercraft endorsement in
the Mutual Assurance policy converted it from a general
liability policy to one "issued . . . upon [a] watercraft" and
thus subject to the omnibus clause and primary liability. We
held that the omnibus clause did not apply because the Mutual
Assurance endorsement simply clarified an exclusion in its
policy by reference to a specific horsepower of an outboard
motor and was therefore not issued "upon [any] watercraft." 2
State Capital, 218 Va. at 819, 241 S.E.2d at 761.
2
Not only does the plain language of the umbrella
policy show it is not one "issued upon any motor vehicle", but
contrary to the trial court's view, there is a substantial
difference between Mr. Moore and Mr. X as a party plaintiff
under the insured's own general liability policy. The omnibus
clause is to protect the public from loss caused by negligent
permissive users of insured motor vehicles. See e.g. Transit
Casualty Co. v. Hartman's Inc., 218 Va. 703, 239 S.E.2d 894
(1978); Bankers & Shippers Ins. Co. v. Watson, 216 Va. 807, 224
S.E.2d 312 (1976); Safeco Ins. Co. of America v. Merrimack Mut.
Fire Ins. Co., 785 F.2d 480 (4th Cir. 1986). As these cases
illustrate, the omnibus clause cannot be used to convert a
third-party liability insurance policy into one that gives the
named insured first-party coverage. In each of the foregoing
cases, the named insured's general liability policy was found to
exclude that insured from coverage for his own damage claims.
10
For all these reasons, we conclude that the trial court
erred in determining that the omnibus clause applied to the
umbrella policy.
B. Exclusion for Personal Injury
in the Virginia Endorsement
An exclusion in the umbrella policy excludes from coverage
any damages for "[p]ersonal injury to . . . any insured." The
trial court ruled that the exclusion was void because it found
certain provisions of the Virginia endorsement vague and
ambiguous. Accordingly, the trial court determined that the
umbrella policy must be construed against GEICO and in favor of
providing liability coverage to Mrs. Moore for her husband's
claims.
In support of the trial court's ruling, the Moores argue
that Section 5A of the Virginia endorsement, which defines the
term "insured," is so vague and ambiguous that our case law
requires that the policy be interpreted in a manner that
provides them coverage. See Lower Chesapeake Assocs. v. Valley
Forge Ins. Co., 260 Va. 77, 532 S.E.2d 325 (2000) (finding that
the disputed policy language permitted more than one reasonable
interpretation and construing the policy in favor of providing
coverage). We disagree with the Moores' reading of the umbrella
Moreover, Mrs. Moore's argument would also fail under an
omnibus clause claim because as one of the "insureds" and owner
of the vehicle, she was not a permissive user.
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policy and conclude that the trial court erred in holding the
exclusion provision inoperative.
Contracts of insurance, however, are not made by
or for casuists or sophists, and the obvious
meaning of their plain terms is not to be
discarded for some curious, hidden sense, which
nothing but the exigency of a hard case and the
ingenuity of an acute mind would discover.
Contracts of insurance, like other contracts, are
to be construed according to the sense and
meaning of the terms which the parties have used;
and, if they are clear and unambiguous, their
terms are to be taken in their plain, ordinary
and popular sense."
Bawden v. American Ins. Co., 153 Va. 416, 426, 150 S.E. 257, 260
(1929) (quoting Delaware Ins. Co. v. Greer, 120 F. 916, 920-21
(8th Cir. 1903)). See Imperial Fire Ins. Co. v. Coos Co., 151
U.S. 452, 463 (1894).
Section 5A of the Virginia endorsement, the flawed clause,
states as follows:
5. "Insured" means:
A. You and your spouse if a resident
of your household; both with respect to
a non-owned auto furnished for regular
use by you or your spouse, only if the
auto is insured in a primary auto
policy (some emphasis added).
GEICO readily concedes the term "both" erroneously replaced
the word "but" in the Virginia endorsement. As evidence that
this word substitution was unintentional, GEICO points to the
version of the Virginia endorsement approved by the State
Corporation Commission in 1990. Although the approved Virginia
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endorsement form contained the word "but," for reasons unknown,
an apparent typographical error substituted the word "both" in
later versions of the form attached to umbrella policies issued
by GEICO. GEICO contends that this error does not render the
exclusion clause of the umbrella policy void and that the plain
language of the umbrella policy, read as a whole, clearly
identifies Mr. Moore as an "insured" who is excluded from
coverage.
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. Where two 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.
St. Paul Fire & Marine Ins. Co. v. S. L. Nusbaum & Co., 227 Va.
407, 411, 316 S.E.2d 734, 736 (1984) (emphasis added) citing
Ayres v. Harleysville Mut. Cas. Co., 172 Va. 383, 2 S.E.2d 303
(1939); Fidelity & Casualty Co. v. Chambers, 93 Va. 138, 24 S.E.
896 (1896); United States Mutual Accident Assn. v. Newman, 84
Va. 52, 3 S.E. 805 (1887). "[D]oubtful, ambiguous language in
an insurance policy will be given an interpretation which grants
coverage, rather than one which withholds it." Granite State
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Ins. Co. v. Bottoms, 243 Va. 228, 234, 415 S.E.2d 131, 134
(1992).
We find that the meaning of the "both clause" 3 in the
Virginia endorsement leaves no doubt, under the facts of this
case, as to the plain meaning of the exclusion. Mr. Moore is
unquestionably shown as the named insured on the face of the
policy in the declarations. The definition section of the
policy defines the term "you" to mean the "named insured in the
declarations and spouse." While the Virginia endorsement
changes the definition of "insured" from that in the
definitional section of the policy, it does not change the
definition of "you."
Under the Virginia endorsement, the term "Insured"
undoubtedly means "[y]ou and your spouse" – regardless of the
meaning of the "both clause". There is no vagueness or
ambiguity here as to who are the insureds. The insured is "you"
and that means Mr. Moore, the named insured in the declaration,
and his spouse, Mrs. Moore. Such an insured is excluded from
coverage for any personal injury to that insured under the plain
terms of the exclusion clause: "[p]ersonal injury to . . . any
insured."
3
By "both clause" we mean the following portion of section
5A of the Virginia endorsement: "both with respect to a non-
owned auto furnished for regular use by your or your spouse,
only if the auto is insured in a primary auto policy."
14
While the "both clause" is unclear, that lack of clarity is
immaterial to the plain meaning of the preceding provision. Any
ambiguity in the "both clause" affects the use of a non-owned
automobile which is simply immaterial to the facts of the case
at bar. Had the Moores been driving a non-owned automobile, the
"both clause" might have been material, but that argument is
moot since the Moores unquestionably owned the vehicle involved
in the accident.
The Moores argue further that the definition of "insured"
applies to the Moores only if they were using a non-owned
automobile at the time of the accident. However, as we just
determined, their reading does not comport with the clear
meaning of the rest of the umbrella policy as to who is an
insured. Moreover, the Moores ignore the absurd result their
argument produces. If the "insured" is limited to the Moores
while using a non-owned automobile, that definition covers not
just the exclusion provision but applies to the policy as a
whole. The Moores' interpretation would mean that under the
umbrella policy they would only be insured while driving a non-
owned automobile, a concept directly contrary to the remainder
of the umbrella policy and the intent of the parties as
expressed through the policy's terms.
"While any ambiguity must be resolved against the insurer,
the construction adopted should be reasonable, and absurd
15
results are to be avoided." Transit Casualty Co. v. Hartman's
Inc., 218 Va. 703, 708, 239 S.E.2d 894, 896 (1978). The Moores'
argument produces an absurd result and we accordingly reject it.
For all the foregoing reasons, the trial court's ruling
that the exclusion clause is void was error.
C. The "Severability of Interests" Clause
Having determined that the omnibus clause does not apply to
the umbrella policy and that the exclusion for personal injury
to the insured applies to Mr. Moore, we must next ascertain the
effect, if any, of the policy's "severability of interests
clause" (the "severability clause") which states: "This
insurance applies separately to each insured. This provision
shall not increase our liability limit for one occurrence." The
trial court ruled that the severability clause applied
separately to each insured and that any exclusion of liability
coverage in the policy for an insured applies only to the
insured claiming coverage, Mrs. Moore, not Mr. Moore.
In support of the trial court's ruling, the Moores argue
that, notwithstanding that Mr. Moore is undoubtedly an "insured"
under the umbrella policy, the severability clause requires that
he not be considered as such because it is another insured, Mrs.
Moore, who claims coverage in this instance. The Moores rely on
Bankers & Shippers Ins. Co. v. Watson, 216 Va. 807, 224 S.E.2d
312 (1976), to support their position. We disagree and conclude
16
that the trial court's ruling on the severability clause was
erroneous.
In Bankers & Shippers, a case involving claims by injured
third parties against a permissive user (an employee of the
named insured), "[w]e construed . . . the severability of
interests clause to serve its designed purpose of making certain
that, when a claim is asserted by a member of the public against
a permissive user, the latter becomes 'the insured,' with
respect to that claim, under the named insured's liability
insurance contract." Hartman's, 218 Va. at 708, 239 S.E.2d at
897 (emphasis added). However, we noted in Bankers & Shippers
that the named insured, in the policy under consideration in
that case, was excluded from coverage. 216 Va. at 815, 224
S.E.2d at 317.
Similarly, in Hartman's we rejected a contorted
construction of the severability clause which attempted to
excise from the policy its plain language excluding the named
insured from coverage.
[O]nly the interests of the direct parties to the
insurance contract, the named insured and the
insurer, are in issue, and only a strained
application of the severability of interests
clause can overcome the effect of the exclusion
clause. To adopt such a strained application
would ignore the clearly expressed intention of
the parties, would enlarge the obligations
undertaken originally by the insurer, and would
permit a windfall to Hartman. A rule of reason
applies to avoid these results.
17
Hartman's, 218 Va. at 709, 239 S.E.2d 897; see also Safeco Ins.
Co. of America v. Merrimack Mut. Fire Ins. Co., 785 F.2d 480
(4th Cir. 1986) (applying Hartman's and Bankers & Shippers).
The severability clause, under the Bankers & Shippers and
Hartman's analysis, prevents an insurer from denying a
permissive user liability coverage under the named insured's
policy by invoking an exclusion of "insureds." This serves to
protect members of the public injured by the negligence of a
permissive user. Conversely, applying the Moores' version of
the Bankers & Shippers analysis to the severability clause in
the case at bar would place Mr. Moore, although he is a named
insured in privity with the insurer, in the same position as a
third-party member of the public. To do so would contradict the
obvious intention of the parties and, as noted in Hartman's and
Safeco, convert the umbrella policy from a third-party excess
liability policy into a first-party personal injury policy.
There is no authority for applying the severability clause in
such a manner.
For these reasons, we conclude the trial court erred in its
interpretation of the severability clause and in its holding
that the umbrella policy's exclusion only applied to Mrs. Moore
and not to Mr. Moore.
III. CONCLUSION
18
The trial court erred in determining that the omnibus
clause of Code § 38.2-2204(A) applied to the umbrella policy.
Further, the trial court erred in determining that the exclusion
in the umbrella policy was vague and ambiguous and thus
inoperative. The trial court also erred in its application of
the severability of interests clause.
Therefore, the judgment of the trial court will be reversed
and final judgment entered for GEICO.
Reversed and final judgment.
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