Admiral Ins. Co. v. Marsh
| Decision Date | 25 June 2013 |
| Docket Number | Civil Action No. 3:12cv601-JAG |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | ADMIRAL INSURANCE COMPANY, Plaintiff, v. HENRY L. MARSH, FREDERICK H. MARSH, HILL, TUCKER & MARSH, P.L.L.C., and ALZENA MAYFIELD Defendants. |
This matter comes before the Court on cross motions for summary judgment filed by Admiral Insurance Company ("Admiral") (Dk. No. 47) and Henry, L. Marsh, Fredrick H. Marsh, and Hill, Tucker & Marsh, PLLC (collectively "the Marsh defendants") (Dk. No. 49). Additionally, the Marsh defendants filed a motion to stay the Court's determination of the duty to indemnify. (Dk. No. 52.)
Admiral seeks a declaratory judgment from this Court on its duty to defend the Marsh defendants in a legal malpractice lawsuit. Alzena Mayfield sued the Marsh defendants in state court (the "Mayfield complaint") for malpractice based on the Marsh defendants' handling of a defamation action against her.
Admiral seeks a declaration that it does not owe a duty to defend the Marsh defendants because the Mayfield complaint falls within one of the insurance policy exclusions. Admiral argues that the following exclusions relieve Admiral of its duty to defend: Count I-Admiral owes no coverage under the 2007 - 2008 policy due to a lack of written notice; Count II-Admiralowes no coverage under the Past Acts Exclusion of the 2010 - 2011 Policy; Count Ill-Admiral owes no coverage under the 2010 - 2011 Policy because the Marsh defendants' acts fall outside the policy's coverage; and Count V-Admiral owes no coverage under the 2010 - 2011 Policy for the unauthorized settlement. The Court GRANTS in part and DENIES in part Admiral's motion for summary judgment. The Court GRANTS the motion as to Count I, but DENIES the motion as to Counts II, III, and V.1
The Marsh defendants also seek summary judgment from the Court in the form of a declaration that Admiral owes a duty to defend the Marsh defendants against the Mayfield suit. The Court GRANTS the Marsh defendants' motion for summary judgment. The Court DENIES as MOOT the Marsh defendants' motion to stay the Court's determination of Admiral's duty to indemnify.
Thus, the Court finds that Admiral owes the Marsh defendants a duty to defend the state malpractice action. The state court dismissed with prejudice the Mayfield complaint on May 21, 2013. The state court found the Mayfield complaint barred by the applicable statute of limitations. Nonetheless, this Court has still issued its opinion on the duty to defend in the event that Mayfield appeals.2
Admiral provided professional liability coverage to the Marsh defendants from July 3,2006, through July 3, 2011. Sometime prior to August 2006, Mayfield alleges that she and the Marsh defendants had a meeting at Mayfield's home. Henry Marsh allegedly admitted to Mayfield that he and his law firm violated duties owed to Mayfield when they represented her in three prior legal matters. To settle Mayfield's complaint against them:
Mr. Marsh offered to handle any and all litigation against [Mayfield] and/or her son without charge for one year provided [Mayfield] agreed to accept this offer as full compensation in exchange for [Mayfield] and her son agreeing not to pursue any right or remedy they might have against [the Marsh defendants].
(Mayfield's Am. Comp. ¶ 10, Dk. No. 23-3.) Mayfield accepted the offer and asked the Marsh defendants to defend her in a defamation lawsuit.
The Marsh defendants defended Mayfield in the defamation action from August 2006 through April 2007. Again, they allegedly committed malpractice. The jury in the defamation action returned a $250,000 verdict against Mayfield. Mayfield sued the Marsh defendants for breach of contract and malpractice in handling the defamation case.
In September and October of 2010, the Virginia State Bar found that Fredrick Marsh and Henry Marsh had committed professional misconduct based on the facts alleged above.
Summary judgment becomes appropriate when the movant establishes that no genuine dispute of any material fact exists and the party is thereby entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). After an adequate period for discovery, Rule 56(c) mandates a grant of summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322. The Court resolves all genuine factual disputes and inferences in favor of the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam).
Once the movant satisfies its showing for summary judgment, the burden shifts to the non-moving party to establish a genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-88 (1986). The non-movant may not rest on claims within its pleading, but "must come forward with specific facts showing that there is a genuine issue for trial." Id. at 587 (internal quotation marks & emphasis omitted). When a court faces cross motions for summary judgment, as it does here, "the court must review each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (internal quotation omitted).
"Resolution of the instant matter through a grant of summary judgment is 'especially appropriate . . . because the construction of insurance contracts is a legal question well suited for resolution by the court.'" W. Am. Ins. Co. v. Johns Bros., Inc., 435 F. Supp. 2d 511, 513-14 (E.D. Va. 2006) (quoting Clark v. Metropolitan Life Ins. Co., 369 F.Supp.2d 770, 774 (E.D. Va. 2005)).
In Virginia, "the duty to defend 'arises whenever the complaint [against the insured] alleges facts and circumstances, some of which would, if proved, fall within the risk covered by the policy.'" Bohreer v. Erie Ins. Group, 475 F. Supp. 2d 578, 584 (E.D. Va. 2007) (quoting Va. Elec. & Power Co. v. Northbrook Prop. & Cas. Ins. Co., 252 Va. 265, 268, 475 S.E.2d 264, 265 (1996)). "[T]he burden rests on the insurer to establish the clear applicability of a particular exclusion from coverage." Fuisz v. Selective Ins. Co. of Am., 61 F.3d 238, 242 (4th Cir. 1995) (citing Johnson v. Ins. Co. of N. Am., 232 Va. 340, 345, 350 S.E.2d 616, 619 (1986)).
In order to determine whether allegations in an underlying lawsuit fall within the scope of the insurance policy's terms, Virginia applies the "Eight Corners Rule." CACI Int'l, Inc. v. St. Paul Fire & Marine Ins. Co., 566 F.3d 150, 155 (4th Cir. 2009). The Eight Corners Rule requires courts "'to compare the four corners of the insurance policy against the four corners of the underlying complaint [to determine] if any allegations may potentially be covered by the [exclusions in the] policy.'" Id. (quoting CACI Int'l, Inc. v. St. Paul Fire & Marine Ins. Co., 567 F. Supp. 2d 824, 829 (E.D. Va. 2008)) (second alteration added).
The Supreme Court of Virginia has repeatedly stated that "only the allegations in the complaint and the provisions of the insurance policy are to be considered in deciding whether there is a duty on the part of the insurer to defend and indemnify the insured." Copp v. Nationwide Mut. Ins. Co., 279 Va. 675, 683, 692 S.E.2d 220, 224 (2010) ().
"[W]here it appears clear that the insurer would not be liable under the policy for any judgment based on the allegations in the underlying complaint, [the insurer] has no duty . . . to defend." Morrow Corp. v. Harleysville Mut. Ins. Co., 101 F.Supp.2d 422, 426 (E.D. Va. 2000). The duty to defend imposes a broader duty than the duty to indemnify. Thus, "if there is no duty to defend . . . there [also] can be no duty to indemnify." Morrow Corp. v. Harleysville Mut. Ins. Co., 101 F. Supp. 2d 422, 427 (E.D. Va. 2000).
The insurer bears the burden to establish the clear applicability of a particular exclusion from coverage. Fuisz, 61 F.3d at 242. Id.
"An ambiguity, if one exists, must be found on the face of the policy." Granite State Ins. Co. v. Bottoms, 243 Va. 228, 233, 415 S.E.2d 131,134 (1992). "[L]anguage 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." Id. "[C]ontractual provisions are not ambiguous merely because the parties disagree about their meaning." Nextel WIP Lease Corp. v. Saunders, 276 Va. 509, 516, 666 S.E.2d 317, 321 (2008) (citing Dominion Sav. Bank, FSB v. Costello, 257 Va. 413, 416, 512 S.E.2d 564, 566 (1999)).
"Courts interpret insurance policies, like other contracts, in accordance with the intention of the parties gleaned from the words they have used in the document." Seals v. Erie Ins. Exchange, 277 Va. 558, 562, 674 S.E.2d 860, 862 (2009). If "the terms in a contract are clear and unambiguous, the contract is construed according to its plain meaning." Evanston Ins. Co., v. Harbor Walk Dev., LLC, 814 F. Supp. 2d 635, 643 (E.D. Va. 2011). When an insurer leaves words undefined in an insurance policy, "as in the case of any other contract, the words used are given their ordinary and customary meaning when they are susceptible of such construction." CACI Int'l, Inc., 566 F.3d at 158 (quoting Salzi v. Va. Farm...
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