Present: All the Justices
S. F. (JANE DOE), AN INFANT, ETC., ET AL.
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 950120 November 3, 1995
WEST AMERICAN INSURANCE COMPANY
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
John E. Clarkson, Judge
In this appeal of a declaratory judgment, we consider
whether a provision in a liability insurance contract is
ambiguous, and we must determine the amount of insurance
available under the terms of the insurance contract to
satisfy any judgments that may be entered against the
insureds.
The West American Insurance Company filed its amended
motion for declaratory judgment against numerous infants and
their parents (collectively referred to as "claimants"),
James E. Owens, William F. Weeks, Thomas A. Conner, Margaret
Cody, Jean J. Ford, David L. Huffman, and Michael J. Coyle,
trading as Harbor View Associates (collectively referred to
as the "insureds"), and Century 21 Landmark Realty. West
American had issued a policy of liability insurance to the
insureds who are the owners of Harbor View Apartments,
located in Norfolk.
The claimants had filed seven separate lawsuits against
the insureds. The claimants alleged that the infant
claimants were sexually assaulted and/or molested on
multiple occasions by the insureds' resident manager,
Charles Raymond Vette. The claimants alleged that Century
21 Landmark Realty and the insureds were negligent in the
hiring, selection, retention, and supervision of Vette and
Century 21 Landmark Realty, and that these parties "knew or
should have known that Charles R. Vette had a history of
criminal behavior, was a known child molester, had been
convicted of child molestation and was on parole at the time
of the hiring, and knew or should have known Charles R.
Vette was unfit for the employment situation."
West American sought and obtained a declaration from
the trial court that the claimants' claims which arose "from
the alleged 'negligent hiring' of Vette[,] constitute[d] no
more than a single 'occurrence' as defined by the Policy and
applicable law" and, thus, West American's total potential
exposure to all the claimants is limited to $1,000,000. We
awarded the claimants an appeal.
West American's policy of insurance contains the
following provisions pertinent to this appeal:
SECTION II--COMPREHENSIVE BUSINESS LIABILITY
The Company will pay on behalf of the insured all
sums which the insured shall become legally
obligated to pay as damages because of bodily
injury . . . or personal injury caused by an
occurrence to which this insurance applies.
The total liability of the Company for all
damages, including . . . damages for care and loss
of services, as a result of any one occurrence
shall not exceed the limit of liability stated in
the Declarations as applicable to each occurrence.
. . . .
The above limits shall apply regardless of the
following:
1. the number of persons or organizations
insured under this policy;
2. the number of persons or organizations
who have sustained injury or damage;
3. the number of claims made or causes of
action or suits brought because of
injury or damage.
For the purpose of determining the limit of the
Company's liability, all bodily injury and
property damage arising out of a continuous or
repeated exposure to substantially the same
general conditions shall be considered as arising
out of one occurrence.
Section II of the policy, which contains definitions, states
in pertinent part:
[O]ccurrence means an accident, including
continuous or repeated exposure to conditions,
which results in bodily injury or property damage
neither expected nor intended from the standpoint
of the insured and with respect to personal
injury, the commission of an offense, or a series
of similar or related offenses.
The claimants contend that the policy's definition of
occurrence is ambiguous and, thus, this definition should be
construed so that the policy affords coverage to the
insureds. West American argues that its definition of
occurrence is unambiguous.
Recently, we stated the following principles which are
applicable here:
An ambiguity, if one exists, must be found on the
face of the policy. Nationwide Mutual Ins. Co. v.
Wenger, 222 Va. 263, 268, 278 S.E.2d 874, 877
(1981). And, language is ambiguous when it may be
understood in more than one way or when it refers
to two or more things at the same time. Lincoln
National Life Ins. Co. v. Commonwealth Container
Corp., 229 Va. 132, 136-37, 327 S.E.2d 98, 101
(1985). Finally, doubtful, ambiguous language in
an insurance policy will be given an
interpretation which grants coverage, rather than
one which withholds it. St. Paul Ins. v. Nusbaum
& Co., 227 Va. 407, 411, 316 S.E.2d 734, 736
(1984). American Reliance Ins. Co. v. Mitchell,
238 Va. 543, 547, 385 S.E.2d 583, 585 (1989).
Granite State Insurance Co. v. Bottoms, 243 Va. 228, 233-34,
415 S.E.2d 131, 134 (1992). Applying these principles, we
are of opinion that the definition of occurrence in West
American's insurance contract is indeed ambiguous because it
is susceptible to numerous interpretations. For example,
within the factual content of the claimants' motions for
judgment against West American's insureds, an occurrence
could be deemed as any one of the following: the insureds'
negligent hiring of Vette, or the insureds' negligent
supervision of Vette, or the insureds' negligent retention
of Vette. And, it is incumbent upon the insurer to use
language sufficiently clear to avoid any such ambiguity if
the insurer desires to limit its coverage. See St. Paul
Insurance, 227 Va. at 412, 316 S.E.2d at 736.
Because the definition of occurrence is ambiguous, we
must construe the policy in favor of the insureds and, thus,
we hold that the trial court erred by declaring that the
insurer's total potential exposure to the claimants is
limited to $1,000,000. Now, we must now determine the
maximum amount that the policy of insurance obligates the
insurer to pay to the claimants on behalf of its insureds in
the event a judgment is entered against them.
West American's declarations page provides a $1,000,000
limitation of liability for each occurrence. And, as quoted
above, the insurance contract contains the following
pertinent provision: "For the purpose of determining the
limit of the Company's liability, all bodily injury and
property damage arising out of a continuous or repeated
exposure to substantially the same general conditions shall
be considered as arising out of one occurrence." Each
infant claimant was allegedly subjected to Vette's repeated
acts of sexual molestation, and the injuries resulting from
those acts arose out of a "continuous or repeated exposure
to substantially the same general conditions." Thus, even
though each infant claimant was subjected to several acts of
sexual molestation, under the terms of the insurance
contract, these acts constitute only one occurrence per
infant claimant. Therefore, we hold that the insurance
contract requires West American to pay on behalf of its
insureds all sums which the insureds shall become legally
obligated to pay to the claimants for an amount not to
exceed $1,000,000 for each infant claimant. West American's
total potential exposure to all the claimants cannot exceed
a maximum total of $7,000,000.
Accordingly, we will reverse the judgment of the trial
court and enter a final judgment here declaring that the
insurer must pay on behalf of the insureds all sums which
they shall become legally obligated to pay in an amount not
to exceed $1,000,000 for each infant claimant.
Reversed and final judgment.