St. Paul Fire & Marine Ins. Co. v. S.L. Nusbaum & Co., Inc.

• Decision Date: 15 June 1984
• Docket Number: No. 811391,811391
• Court: Virginia Supreme Court
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY v. S.L. NUSBAUM & COMPANY, INC. Record

Page 734

316 S.E.2d 734

227 Va. 407

ST. PAUL FIRE & MARINE INSURANCE COMPANY v. S.L. NUSBAUM & COMPANY, INC.

Record No. 811391.

Supreme Court of Virginia.

June 15, 1984.

James C. Howell, Norfolk (Willcox, Savage, Dickson, Hollis & Eley, P.C., Norfolk, on briefs), for appellant.

Robert C. Nusbaum, Norfolk (Linda S. Laibstain, Hofheimer, Nusbaum, McPhaul & Brenner, Norfolk, on brief), for appellee.

Present: All the Justices.

PER CURIAM.

This appeal requires us to examine, in the context of an "errors and omissions" policy insuring a real estate firm, the applicability of an exclusion of claims arising out of property management from coverage under the policy.

S.L. Nusbaum & Company, Inc., filed a motion for declaratory judgment, alleging that it was covered by a "professional liability" policy of insurance issued by St. Paul Fire & Marine Insurance Company, that Nusbaum was being sued by a party asserting a claim covered by the policy, but that St. Paul had refused to defend the claim. St. Paul's answer raised several affirmative defenses, including the existence of a clause in the policy which excludes coverage for any claims which "arise out or of in connection with the management or sale of property developed, constructed or owned by the Insured, or any firm or corporation in which the Insured has a financial interest, or by any firm coming under the same financial control as the Named Insured." St. Paul contended that the claim against Nusbaum fell within the exclusion.

In a jury trial, after Nusbaum had rested, St. Paul moved to strike Nusbaum's evidence. The motion was denied, renewed at the end of the evidence, and again denied. Thereupon, Nusbaum moved the court to strike St. Paul's evidence and enter summary judgment. The parties agreed that no material facts were genuinely in dispute requiring resolution by the jury and submitted the case to the court as a question of law. The court granted Nusbaum's motion, discharged the jury, and entered summary judgment for Nusbaum in the amount of $45,268.28. We granted St. Paul an appeal, limited to the question whether the event giving rise to the claim occurred in the context of property management, and was thus excluded from coverage under the policy.

Nusbaum is a real estate brokerage firm in the Tidewater area which engages in commercial leasing, commercial and apartment property management, sales, and development. In 1977, Nusbaum applied to St. Paul for "real estate agents errors and omissions coverage." Such a policy covers the insured against claims arising out of negligent errors or omissions occurring in the conduct of the insured's business as a real estate agent, subject to certain specified exclusions. St. Paul required a written application from Nusbaum, in which a breakdown of the firm's gross income for the preceding year (1976) was set forth. Nusbaum stated that it had engaged in real estate sales, which had produced $95,757, property management, which had produced $884,040, and development, which had produced no income in 1976. Nusbaum specifically agreed, in the application, that property management would be excluded from coverage. St. Paul was concerned that the proposed policy would exclude nearly 90% of Nusbaum's business, and accordingly requested and obtained a letter from Nusbaum stating, "we accept the policy with the understanding that property management is excluded...." St. Paul then issued the policy, effective July 30, 1977, containing the property-management exclusion quoted above. The policy was successively renewed through 1979.

In 1979, Nusbaum was engaged in commercial leasing and property management at the Hilltop North Shopping Center in Virginia Beach. The stockholders, officers, and directors of Nusbaum owned a majority interest in the firm which was developing the shopping center.

In early 1979, while negotiating a lease with Charles J. Brady, a prospective tenant in the center, Edward Goldmeier, a Nusbaum employee, inadvertently misstated to Brady that...