City of Virginia Beach v. Aetna Cas. & Sur. Co., Civ. A. No. 76-192-N.
| Citation | 426 F. Supp. 821 |
| Decision Date | 22 December 1976 |
| Docket Number | Civ. A. No. 76-192-N. |
| Parties | CITY OF VIRGINIA BEACH, Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of Virginia |
Harry E. McCoy, Seawell, McCoy, Dalton, Hughes, Gore & Timms, Norfolk, Va., Jay A. Richardson, Asst. City Atty., Virginia Beach, Va., for plaintiff.
Jack E. Greer, Williams, Worrell, Kelly & Greer, Norfolk, Va., for defendant.
This action was brought by the City of Virginia Beach, Virginia, seeking indemnification from its insurance carrier, the Aetna Casualty and Surety Company, for losses incurred by the City as a result of a judgment rendered against it in favor of owners of property abutting a waterway project in which the City was involved with the Federal Government. The parties will be referred to as City and Aetna and the property owners' action will be referred to as the Gorman suit. The City also seeks to recover its attorney's fees and costs expended in defending the property owners' action and attorney's fees arising in the prosecution of this action.
This Court has jurisdiction by virtue of diversity of citizenship of the parties (28 U.S.C. § 1332).
The parties agreed that the Court should make its findings of fact and conclusions of law from exhibits filed by the parties. The Court heard oral argument and has reviewed the briefs of the parties.
Aetna issued to the City new policies each year for the period in question, 1965 through 1975. The "Exclusions" in the various policies differed from time to time as will be discussed later but the substance of the "Insuring Agreements" remained the same in all the policies.
"Insuring Agreements" provided, in part, in the 1965 policy:
By endorsement, the term "accident" was defined as follows:
While the format for Insuring Agreements and for defining "accident" and "occurrence" changed in subsequent policies, there was no substantive change.
In February, 1965 the City adopted a resolution assuring the United States Army Corps of Engineers of its local cooperation in a Corps project to improve Lynnhaven Inlet on the Chesapeake Bay and its connecting inland waters. The project was designed and engineered entirely by the Corps. The purpose of the project was to remove pollution and to increase water quality in Broad and Linkhorn Bays, to provide for recreational facilities and better navigation and to improve shellfish production. One of the main endeavors was the dredging of Long Creek Channel and Long Creek Canal, bodies of water which connected the Lynnhaven River and Lynnhaven Inlet with Broad and Linkhorn Bays, to increase the tidal flow between Linkhorn and Broad Bays and Chesapeake Bay through Lynnhaven Inlet. The purpose of the increase of tidal flow was to improve water quality in Linkhorn and Broad Bays by a "flushing" action. City agreed to provide all lands, easements, and rights of way required for construction and subsequent maintenance of the improvements, including necessary retaining dikes, bulkheads and embankments or the cost of such retaining works. It implemented this assurance by obtaining an easement, dated March 29, 1965, from landowners abutting the Long Creek Canal to enter upon and remove any part of their tracts of land for the purpose of deepening, enlarging, and maintaining the canal channel. As a part of the consideration for the easement, City obligated itself to maintain, repair or reconstruct bulkheading located on the property as needed or necessary from the deepening, enlargement or maintenance of the canal channel. City transferred its rights under the easement to enter upon and remove any part of the land for the purpose of dredging and maintaining the canal to the United States but retained its obligations to the landowners to maintain, repair, or reconstruct the bulkheading.
Dredging began in late 1965. In February and March, 1966, the City, pursuant to its obligation under the easement, repaired bulkheading damaged as a result of dredging. It appears from the record that the original and subsequent maintenance dredging of 1968, 1970, and 1972 created a strong tidal current which unexpectedly scoured the bottom and sides of Long Creek Canal causing extensive deterioration of the timber bulkheads and erosion of the land which was to be protected by the bulkhead. The City subsequent to 1966 failed to repair or maintain the bulkheading as it deteriorated.
In April 1975, landowners privy to the easement given to the City recovered a judgment (in the Gorman litigation) against the City in the Circuit Court of the City of Virginia Beach for damages sustained by the bulkheads and resulting land erosion, the state court having held that the City was obligated under the easement agreement to maintain the bulkheads from 1965 in perpetuity.
City had promptly notified Aetna of the pending Gorman suit against it and requested that Aetna defend City from liability as provided in its insurance contract. Aetna refused on the grounds that any liability City might be charged with in the litigation was not covered under the insurance contract. City now sues Aetna for the costs expended in the defense of the Gorman litigation, the amount of the judgment awarded to the Gorman litigants and the attorney's fees expended in this suit.
Was the loss covered under the policy provisions?
As stated above, in all its policies issued to the City during the period in question, Aetna contracted subject to exclusions set forth in the policies to insure City against property damage resulting from an "accident" or "occurrence." The policy defined "occurrence" as a continuous or repeated exposure to conditions resulting in unexpected or unintended injury from the standpoint of the insured. (Emphasis added) Aetna argues that the term "occurrence" gives no protection against City's liability for bulkheading and land erosion damages because City manifested its expectation that such damage would occur by accepting the easement obligation to repair and maintain bulkheading damaged as a result of dredging. City counters that it intended by the easement obligation to repair bulkheading damaged by the actual dredging only and not by subsequent events proximately caused by the dredging. City concludes that bottom and side scouring currents which developed as a result of the dredging and which damaged the bulkheading and eroded the land were wholly unexpected by the engineers of the project and thus by the City as evidenced by the testimony of C. J. Robin (Supervisor of development and design for the Corps project) in the Gorman litigation. Thus, claims City, the damage caused by the unexpected scouring current falls within the policy language "injury to persons or tangible property which is neither expected nor intended from the standpoint of the insured." (Emphasis added)
This Court notes that the State Court in the Gorman litigation excluded parol evidence of City's intent with regard to its easement obligation that it only meant to repair damages done to the bulkheads during the dredging operation because the offered evidence conflicted with the clear meaning of the written easement provision. This Court is also of the opinion that the easement provision clearly obligates City to provide any maintenance or repair made necessary by the dredging, including subsequent events proximately caused by the dredging. However, we do agree with City that from its standpoint it had not expected nor intended the scouring currents which damaged the bulkheads and eroded the land, and that, therefore, the injuries for which City was held liable in the Gorman litigation did fall within the definition of "occurrence" in the policy. We note Aetna's objection that experts in the field testified in the Gorman case that the scouring current should have been expected nonetheless the policy provided that the injury be unexpected from the insured's standpoint.
The Court concludes that the judgment secured against the City in the Gorman litigation falls within the definition of "occurrence" contained in all of the policies issued from 1965 to 1975.
This is not the end of the problem, however, because of varying exclusions within the various policies issued during the 1965 to 1975 period. For convenience, we will consider the policies in three chronologically ordered groups (Group A: 1965 and 1966; Group B: 1967 through 1974; Group C: 1975).
Aetna charges that there are three exclusions in the policies of Group A which defeat coverage to the City. These include exclusions of:
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