United States District Court, E.D. Virginia, Alexandria Division
Ellis, III, United Slates Distridt Judge
insurance coverage dispute arises from property damage caused
by a fire that occurred during a construction project at
Building 207 at Fort Belvoir, Virginia (the “Fort
Belvoir project”). The damage stemmed from roofing
activities by a subcontractor, defendant Y&J
Construction, Inc. (“Y&J”), that involved the
use of torches in the installation of the roof. The general
contractor's insurer, defendant Pennsylvania National
Mutual Insurance Company (“Penn”), paid for the
damage and subsequently filed a subrogation action against
Y&J to recover the amount paid. See Pa. Nat'l
Mut. Cas. Ins. Co. v. Y&J Constr., Inc., No.
15-cv-1283 (E.D. Va. Oct. 2, 2015) (Complaint) (the
“Subrogation Action”). Specifically, Penn, in the
Subrogation Action, has alleged (i) that Y&J acted
negligently in causing the Fort Belvoir fire on August 13,
2012; (ii) that Y&J breached its subcontracting agreement
with the general contractor on the Fort Belvoir project,
Autumn Contracting, Inc. (“Autumn Contracting”);
and (iii) that Y&J must indemnify Penn. See Id.
Y&J's insurer, Essex Insurance Company
(“Essex”), filed this declaratory judgment action
pursuant to 28 U.S.C. § 2201(a),  seeking:
(i) a declaration that Essex has no obligation to defend
Y&J in Penn's Subrogation Action against Y&J;
(ii) a declaration that Essex has no obligation to indemnify
Y&J for any judgment, settlement, or recovery in the
Subrogation Action; and
(iii) a declaration that Essex has no obligation to Penn,
including any obligation to indemnify Penn, with respect to
any subrogation rights Penn possesses as a result of
Penn's payment on behalf of its insured resulting from
the Fort Belvoir fire caused by Y&J.
full discovery and the disposition of pretrial motions, the
parties waived a jury, and a bench trial was held. During the
bench trial plaintiff presented three witnesses, and
defendant offered two. Importantly, it was undisputed that
Y&J's use of torches caused the fire at the Fort
Belvoir project on August 13, 2012, and that the insurance
policy (“the Policy”) that Essex issued to
Y&J included a roofing endorsement that excluded from
coverage damages arising from Y&J's use of torches.
Given that these essential facts were undisputed, during the
trial the parties focused on the following key issues: (i)
whether Y&J was given notice of the roofing endorsement
in the Policy; and (ii) whether Y&J is entitled to
reformation of the Policy's roofing endorsement to
include coverage of Y&J's torch work. The following
Findings of Fact and Conclusions of Law are issued pursuant
to Rule 52, Fed. R. Civ. P.
FINDINGS OF FACT
Essex was an insurance company organized under the laws of
Delaware, with its principal place of business in Glen Allen,
Essex contracted with an insurance broker, All Risks, Inc.
(“All Risks”), to underwrite, issue, and deliver
insurance policies on Essex's behalf. All Risks
underwrote the Policy at issue in this case.
Y&J was a corporation organized under the laws of
Maryland, with its principal place of business in Fulton,
Maryland. Y&J's president was Youngjae Jeon
(“Jeon”), and Y&J's general manager was
Ms. Jeon's husband, Duok Yun
Jeon, Y&J's president, is a registered nurse with a
master's degree in Hospital Administration who reads,
writes, and speaks English.
is a corporation organized under the laws of Pennsylvania
with its principal place of business in Harrisburg,
all relevant times, Y&J and Penn transacted or did some
business in Virginia.
Defendant Penn insured Autumn Contracting, the general
contractor on the Fort Belvoir project.
November 7, 2011, Autumn Contracting and Y&J executed a
Master Subcontracting Agreement, which agreement obligated
Y&J to perform roofing work on the Fort Belvoir project
and to obtain insurance coverage for that work.
Subsequently, Y&J engaged Insurance Plus, an experienced,
licensed insurance agency based in Maryland, to provide
Y&J assistance in procuring commercial general liability
insurance for Y&J's roofing work on the Fort Belvoir
Insurance Plus is licensed to sell, solicit, and negotiate
insurance contracts in Virginia, and has offices in both
Maryland and Virginia.
Y&J selected Insurance Plus after looking through the
Korean business phone book, noting that Insurance Plus was a
Korean insurance agency, and learning that one of Insurance
Plus's employees, Jong Yang (“Yang”), spoke
Jeon and Yun, on behalf of Y&J, visited Yang at an
Insurance Plus office in Virginia on one occasion; during the
course of that visit, Jeon and Yun informed Yang that Y&J
was opening a roofing business and needed general liability
and worker's compensation insurance coverage.
Y&J advised Insurance Plus that Y&J's workers had
used torches on past roofing projects. Although Y&J
misrepresented in its insurance application how much of its
work dealt with new roofing, as opposed to repair work, Mr.
Yun stated that Y&J sought coverage for work involving
the use of asphalt, metal roofs, welding, and torches.
Yang at Insurance Plus assisted Jeon and Yun in filling out
the paperwork to obtain insurance coverage from a surplus
lines insurance carrier for Y&J's roofing work at the
Fort Belvoir project.
Essex's broker, All Risks, drafted the Policy in Maryland
on behalf of Essex.
Policy was issued to Y&J as a commercial general
liability insurance policy for the period running from
November 14, 2011 to November 14, 2012, in the amount of $1,
000, 000 for any occurrence and $2, 000, 000 in general
aggregate limit, subject to the terms and exclusions of the
Policy was sent to Insurance Plus from Maryland, and
delivered to Y&J in Maryland.
Insurance Plus also sent Y&J a certificate of liability
insurance that, on its face, stated that the certificate was
not the Policy and conferred no rights on the certificate
holder. D. Ex. 6.
Policy requires Essex to provide coverage for amounts that
Y&J becomes legally obligated to pay as damages due to
“bodily injury” or “property damage”
to which the Policy applies. See Policy (P. Ex. 2)
Specifically, “property damage” under the Policy
means, inter alia, “[p]hysical injury to
tangible property, including all resulting loss of use of
that property.” See Id. at CG 00 0112 07.
Policy includes a provision permitting a “person or
organization” to sue Essex on the “Coverage Part
[so long as] all of its terms have been complied with.”
Id. at CG 00 0112 07 § 3.
Policy further permits “[a] person or organization [to]
sue [the insurer] to recover on an agreed settlement or on a
final judgment against an insured, ” so long as the
damages are “payable under the terms of [the Policy]
and [not] in excess of the applicable limit of
Pursuant to the Policy, Essex has no duty to defend the
insured against any suit seeking damages for bodily injury or
property damage to which the insurance coverage does not
this respect, the Policy contains a roofing endorsement that
excludes from coverage any bodily injury, property damage,
personal injury, advertising injury, or any injury, loss, or
damage arising out of “[a]ny operations involving any
hot tar, wand, open flame, torch or heat applications, or
membrane roofing.” Id. M/E-191 (4/99), §
Policy also excludes from coverage “claims arising out
of breach of contract, whether written or oral, express or
implied, implied-in-law, or implied-in-fact….”
Id. MEGL 0001 05 10, § 1.
Essex would not have issued the insurance policy without a
roofing endorsement, and the Policy's premium would have
been significantly higher had Essex intended to cover the
torch work that caused the fire at the Fort Belvoir project.
November 9, 2011, before Y&J purchased the Policy, an
underwriter employed by All Risks sent Insurance Plus an
email advising that the Policy would include the roofing
endorsement. That November 9, 2011 email also attached the
roofing endorsement. See P. Ex. 33 (“I have
attached a copy of the roofing endt ME-191 (4/99).”).
That same day, November 9, 2011, All Risks also sent
Insurance Plus two insurance quotations for the Policy.
first quotation warned that the coverage Essex was offering
could differ from the coverage Y&J had requested.
Specifically, the quotation stated, “We are pleased to
submit our proposal . . . . Quote is based on the following
limits, coverage, etc. Please read quote carefully as