Present: Carrico, C.J., Compton, Stephenson, Lacy, Hassell and
Keenan, JJ., and Whiting, Senior Justice
GIRARD ENOCH OSBORNE
OPINION BY JUSTICE A. CHRISTIAN COMPTON
v. Record No. 951117 January 12, 1996
NATIONAL UNION FIRE INSURANCE
COMPANY, ETC., ET AL.
UPON A QUESTION OF LAW CERTIFIED BY THE UNITED STATES
COURT OF APPEALS FOR THE FOURTH CIRCUIT
Acting pursuant to the provisions of our Rule 5:42, the
United States Court of Appeals for the Fourth Circuit certified
to this Court in June 1995 a question of Virginia law, which we
accepted by order entered in July 1995. The question deals with
a motor vehicle insurance coverage issue arising from an
exclusion contained in an uninsured motorist endorsement to an
insurance policy.
The following facts are set forth in the Fourth Circuit's
order of certification. In August 1988 in Henry County, Girard
Enoch Osborne, pursuant to his employment, was operating a truck
owned by his employer, MW Manufacturers, Incorporated, a party to
the federal litigation. Osborne was injured when the truck was
forced from the road and into a tree as the result of the
negligent operation of another vehicle by an unknown, and hence
uninsured, motorist.
National Union Fire Insurance Company of Pittsburgh,
Pennsylvania, the main party in the federal action, had issued to
Osborne's employer a policy of motor vehicle liability insurance
containing uninsured motorist (UM) coverage. This policy had
been purchased by the employer's parent company, Hanson
Industries, also a party to the federal suit. The uninsured
motorist coverage of that policy was limited to $25,000.
State Farm Fire and Casualty Company issued a similar policy
with like coverage to Osborne personally. That policy contained
a $100,000 limit for uninsured motorist coverage. Osborne was
covered by both policies, with National Union being the primary
insurer for the accident in question and State Farm being the
secondary insurer.
In December 1991, Osborne obtained a judgment against the
unknown motorist as "John Doe" in the Circuit Court of Henry
County for $299,750. According to applicable law, Code § 38.2-
2206(E), both insurers had responded for "John Doe."
Subsequently, Osborne sought payment under the uninsured
motorist provisions of both policies. He settled with State Farm
for $65,000 without National Union's consent. Thereafter,
National Union refused to pay Osborne any sum. The insurer
relied on an exclusion contained in its uninsured motorist
endorsement as follows: "This insurance does not apply to . . .
[a]ny claim settled without our consent."
Next, Osborne filed the present action in the Circuit Court
of Henry County seeking recovery under National Union's policy.
The defendants removed the proceeding to the United States
District Court for the Western District of Virginia.
The district court granted the insurer's motion for summary
judgment, deciding that the foregoing policy exclusion permitted
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denial of coverage because Osborne had settled the claim with
State Farm without National Union's consent. There was no proof
that National Union was prejudiced by Osborne's settlement.
Osborne appealed to the Fourth Circuit, contending that the
consent-to-settlement clause cannot, consistent with Virginia
law, bar recovery when no prejudice to the insurer has been
shown.
The question certified to this Court is: "Whether National
Union may deny UM coverage to Osborne on the grounds that Osborne
settled with State Farm without National Union's consent, when
National Union's UM contract contained a consent-to-settlement
clause but National Union was not prejudiced by the settlement."
We answer that question in the affirmative.
When the terms of an insurance policy are clear and
unambiguous, we give the words their ordinary meaning and enforce
the policy as written. Atlas Underwriters, Ltd. v. Meredith-
Burda, Inc., 231 Va. 255, 259, 343 S.E.2d 65, 68 (1986). In the
present case, the language of the consent-to-settlement provision
meets the test of clarity; plainly, the insurance does not apply
to any claim settled without National Union's consent.
Osborne implicitly contends that the exclusion should not
apply unless the insurer demonstrates that its subrogation rights
actually were harmed. Such a contention runs afoul of consistent
interpretations that we have made of similar policy provisions --
provisions, like the present exclusion, that are conditions of
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coverage rather than restrictions on coverage in violation of
statute.
For example, when an insured fails to comply with a policy
provision requiring timely notice of an accident, we have said
that "the insurance company need not show that it was prejudiced
by such a violation." State Farm Fire and Casualty Co. v.
Walton, 244 Va. 498, 504, 423 S.E.2d 188, 192 (1992). Accord
State Farm Fire and Casualty Co. v. Scott, 236 Va. 116, 120, 372
S.E.2d 383, 385 (1988); Lord v. State Farm Mut. Auto. Ins. Co.,
224 Va. 283, 284, 295 S.E.2d 796, 797 (1982).
Moreover, there was no requirement prior to 1966 that an
insurer demonstrate prejudice to successfully deny coverage on
account of breach of a cooperation clause. See State Farm Mut.
Auto. Ins. Co. v. Davies, 226 Va. 310, 314-15, 310 S.E.2d 167,
169 (1983). But, by a statutory amendment, the 1966 General
Assembly required prejudice to be established for the insurer to
rely on such breach. See Code § 38.2-2204(C). Likewise, the
General Assembly has required prejudice to be shown under certain
circumstances for violation of policy provisions requiring prompt
delivery of suit papers to the insurer. Id. See State Farm Mut.
Auto. Ins. Co. v. Porter, 221 Va. 592, 598, 272 S.E.2d 196, 199
(1980). However, the General Assembly, obviously aware of the
prejudice issue in connection with insurance policy conditions,
has not taken such action with reference to consent-to-settlement
clauses. And, we will not engage in judicial legislation on the
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subject by requiring a showing of prejudice here.
In conclusion, we note Osborne contends that the exclusion
in issue applies only to a settlement with the uninsured motorist
and not to the settlement with his own insurer, State Farm. He
also contends that the exclusion is invalid and void as against
public policy because it conflicts with certain provisions of our
uninsured motorist statute, Code § 38.2-2206. These contentions
are beyond the scope of the certified question. Hence, we do not
address them.
Accordingly, as we have said, the certified question is
answered affirmatively.
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