Asplundh Tree Expert v. Pacific Employers

Decision Date22 April 2005
Docket NumberRecord No. 040797.
PartiesASPLUNDH TREE EXPERT COMPANY v. PACIFIC EMPLOYERS INSURANCE COMPANY.
CourtVirginia Supreme Court

D. Hayden Fisher (Temple W. Cabell, Richmond; Jayne A. Pemberton, Washington, DC; Schaffer & Cabell, on briefs), Richmond, for appellant.

Douglas M. Palais (Charles G. Meyer, III; Mike F. Melis; Craig T. Merritt; LeClair Ryan; Christian & Barton, on brief), Richmond, for appellee.

Present: HASSELL, C.J., KEENAN, KOONTZ, KINSER, LEMONS, and AGEE, JJ., and COMPTON, S.J.

KOONTZ, Justice.

In this appeal, we consider whether the chancellor erred in determining that the trial court retained jurisdiction in a pending declaratory judgment action brought by an insurer to determine its obligations under its business motor vehicle liability insurance policy after the insurer funded a settlement of the underlying tort action brought against the policyholder by an injured party. We further consider whether the chancellor erred in determining that the insurer was not liable on the policy and in directing the policyholder to refund to the insurer the amount tendered to fund the settlement.

BACKGROUND

While the record in this case is voluminous, we need recite only those facts necessary to our resolution of the issues presented in this appeal.1 See, e.g., WJLA-TV v. Levin, 264 Va. 140, 146, 564 S.E.2d 383, 386 (2002). Under familiar principles, we will recite those facts in the light most favorable to the appellee, which prevailed on those issues in the trial court. Id.

Asplundh Tree Expert Company (Asplundh), a Pennsylvania corporation, employed Shawn E. Wimmer and Christopher Weeks through its regional operations office in Roanoke as part of a brush clearing crew led by Asplundh's foreman, Robbie W. Pertee. Pertee and the other members of the crew lived in West Virginia. The brush clearing work was performed in Virginia under Asplundh's contract with the Virginia Department of Transportation. Asplundh permitted Weeks to drive a company truck in order to transport the members of the crew to the day's worksite in Virginia and to return them to West Virginia at the end of the work day. Each night, Weeks would park the truck at a designated meeting place, and members of the crew who wished to ride to the next day's worksite in the company truck understood that they were to meet Weeks there in the morning. However, members of the crew were not required to ride to the worksite in the company truck, and Weeks was not permitted to use the truck for personal business.

On the morning of August 21, 2001, Wimmer, Pertee, and Jimmy W. Thompson, another member of the crew, met Weeks at the designated place in order to ride with him to the worksite. David J. Rose, who previously had been employed by Asplundh on a different crew and was seeking a position on Pertee's crew, also rode with Weeks. As was customary, Weeks intended to stop somewhere along the way so that he and the other passengers could have breakfast. Pertee intended to contact his supervisor at that time to set up a meeting for Rose to be reinstated as an Asplundh employee. While traveling on Interstate 81 in Botetourt County, Weeks lost control of Asplundh's vehicle and it ran off the highway. All the passengers suffered injuries. Wimmer and Rose were severely injured.

At the time of this accident, Asplundh insured its company vehicles though a business motor vehicle liability insurance policy issued by Pacific Employers Insurance Company (Pacific Employers). In pertinent part, the policy expressly excluded from coverage any bodily injury to an Asplundh employee "arising out of and in the course of: . . . [e]mployment by [Asplundh]; or [p]erforming the duties related to the conduct of [Asplundh's] business." A further provision of the policy excluded from coverage any bodily injury for which Asplundh may be held liable "under any workers compensation ... or any similar law."

In a letter dated October 9, 2001, Asplundh notified Marsh Risk Services, an agent for Pacific Employers, of the August 21, 2001 accident. Asplundh advised Pacific Employers in this letter that following the accident Asplundh had treated all potential claims arising from the accident as being subject to workers' compensation.

On October 19, 2001, Wimmer filed suit against Weeks and Asplundh in the Circuit Court of McDowell County, West Virginia, seeking unspecified damages for the injuries he suffered in the August 21, 2001 accident.2 On November 13, 2001, Asplundh initiated a proceeding in the Virginia Workers' Compensation Commission (Commission) seeking a determination that Wimmer's claims were subject to the provisions of the Virginia Workers' Compensation Act. Wimmer opposed the proceeding, asserting that the Commission could not exercise jurisdiction over his claims while the West Virginia civil case was pending. When the Commission rejected Wimmer's assertion, Asplundh subsequently moved for summary judgment in the West Virginia civil case, contending that Wimmer's claims therein were barred by the exclusivity provision of workers' compensation law and moved to dismiss the case on that ground.3

During the proceedings in the West Virginia civil case and before the Commission, Asplundh was represented by its own counsel. Although it maintained intermittent communications with Pacific Employers concerning the civil case, Asplundh did not demand that Pacific Employers provide Asplundh with a defense. On October 24, 2002, Pacific Employers, pursuant to Code § 8.01-184, filed a bill of complaint in the Circuit Court of the City of Roanoke seeking a declaratory judgment that it was not liable on its policy of insurance with Asplundh for Wimmer's claims in the West Virginia civil case.4

Asplundh filed a grounds of defense and a separate motion to dismiss on November 19, 2002. Asplundh contended that the issue was whether Weeks' injuries arose out of his employment thereby causing workers' compensation to be the exclusive remedy. Accordingly, Asplundh maintained that declaratory judgment was not appropriate because Pacific Employers sought a "determination of disputed issues that must be determined in some future litigations between the parties." Asplundh relied upon USAA Cas. Insurance Co. v. Randolph, 255 Va. 342, 497 S.E.2d 744 (1998), for these assertions.

In the meantime, on November 22, 2002, Asplundh's counsel in the West Virginia civil case notified Asplundh that the motion previously filed in that case for summary judgment based on a workers' compensation bar had been denied.5 Apparently as a result of this denial, Asplundh's counsel entered into settlement negotiations with Wimmer. During this process there was a continual exchange of communications between representatives for Asplundh and Pacific Employers. The parties characterize the nature of these communications differently with respect to whether Pacific Employers was a willing participant in the settlement efforts, or was doing so solely in an effort to limit its potential liability and to avoid an allegation of bad faith by Asplundh. Regardless, Pacific Employers repeatedly asserted that its participation was subject to a reservation to stand on its rights as determined in the pending declaratory judgment proceeding.

On December 23, 2002, Pacific Employers agreed to fund a potential settlement of Wimmer's claims in the West Virginia case. Pacific Employers continued to maintain, however, that it was not abandoning any right it had to contest its liability under the insurance policy in question. Asplundh ultimately settled Wimmer's claim for $325,000 sometime in late 2002 or early 2003 with the funds provided by Pacific Employers.

The focus of the parties' dispute then returned to the declaratory judgment action in Virginia. On February 5, 2003, Asplundh filed a brief in support of its pending motion to dismiss. Asplundh abandoned its prior contention that under USAA the trial court lacked jurisdiction from the outset. Instead, Asplundh contended that under Liberty Mutual Ins. Co. v. Bishop, 211 Va. 414, 177 S.E.2d 519 (1970), the settlement of Wimmer's underlying tort claim eliminated the trial court's jurisdiction because there was no longer an actual controversy between Asplundh and Pacific Employers. Pacific Employers opposed the motion to dismiss contending that Liberty Mutual is distinguishable and that it had properly reserved its right to a determination of coverage under its policy in the pending declaratory judgment action.

The chancellor received oral argument from the parties and, on May 5, 2003, issued an opinion letter addressing Asplundh's motion to dismiss. The chancellor ruled that Pacific Employers' provision of funds for the settlement of Wimmer's claims in the West Virginia litigation did not bar Pacific Employers from seeking relief through declaratory judgment. The chancellor reasoned that because Pacific Employers was not a party to the West Virginia litigation, it had no opportunity to assert its position that Wimmer was an employee acting within the scope of his employment at the time of the accident. Accordingly, the chancellor concluded that it was proper for the trial court to retain jurisdiction over the declaratory judgment action to decide that issue. On May 19, 2003, the chancellor entered an order denying Asplundh's motion to dismiss and adopting by reference the rationale of the May 5, 2003 opinion letter.

The declaratory judgment action then proceeded ponderously, with the parties conducting exhaustive discovery and filing motions with supporting briefs and counter-briefs. Ultimately, the chancellor received ore tenus evidence in a four-day hearing beginning on October 6, 2003. In addition, the chancellor received some 18 depositions totaling approximately 2500 pages. The evidence in this exhaustive record was mostly duplicative or related to issues not raised in this appeal. Summarizing it in detail here would...

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