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Nationwide Mutual Fire Insurance Co. v. Erie Insurance Exchange

Supreme Court of Virginia

April 13, 2017

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, ET AL.
v.
ERIE INSURANCE EXCHANGE, ET AL.

         FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTY Carroll A. Weimer, Judge

         PRESENT: All the Justices

          OPINION

          CLEO E. POWELL, JUSTICE

         In this declaratory judgment action, Nationwide Mutual Fire Insurance Company and Nationwide Mutual Insurance Company (collectively "Nationwide") requested that the Circuit Court for Prince William County ("trial court") determine the priority of five separate insurance policies provided by Nationwide and Erie Insurance Exchange ("Erie"). The trial court concluded that the order of priorities and coverages were: (1) Nationwide Business Auto Policy, $1, 000, 000; (2) Nationwide Commercial General Liability Policy ("Nationwide CGL Policy"), $1, 000, 000; (3) Nationwide Commercial Umbrella Liability Policy ("Nationwide Umbrella Policy"), $1, 000, 000; (4) Erie Commercial Auto Policy ("Erie Auto Policy"), $1, 000, 000; (5) Erie Business Catastrophe Liability Policy, $5, 000, 000. Nationwide appeals.

         I. BACKGROUND

         East Coast Insulators, Inc. ("East Coast") and Rodriguez Construction ("Rodriguez") entered into a subcontract for construction related services.[1] East Coast lent a vehicle to Rodriguez for the performance of work pursuant to their subcontract. Moises Rodriguez Manzur ("Manzur") drove East Coast's vehicle in the course of his employment with Rodriguez. On October 4, 2013, he struck a vehicle operated by Martin Klaiber, who later died as a result of the collision. Stephanie Klaiber, the Personal Representative of the Estate of Martin Klaiber ("the Estate"), filed a wrongful death suit against Manzur and East Coast in the Circuit Court of Loudoun County on December 10, 2013 (the "Tort Action"). East Coast was later nonsuited from the Tort Action on July 24, 2014.[2]

         East Coast was insured under an Erie Commercial Auto Policy ("Erie Auto Policy"). Erie also provided East Coast with a Business Catastrophe Liability Policy containing a Commercial Liability Umbrella Coverage Form (collectively "Erie Umbrella Policy"). East Coast's subcontract with Rodriguez contained an insurance provision requiring Rodriguez to obtain primary insurance to cover bodily injury caused by accident. Rodriguez purchased insurance policies from Nationwide, including (1) Nationwide Business Auto Policy ("Nationwide Auto Policy"); (2) Nationwide Commercial General Liability Policy ("Nationwide CGL Policy"); and (3) Nationwide Commercial Umbrella Liability Policy ("Nationwide Umbrella Policy"). The subcontract also contained an indemnification provision that obligated Rodriguez to indemnify East Coast against any injuries that arose from work performed under the subcontract.

         On August 11, 2014, Erie and Manzur filed the present lawsuit against Nationwide and the Estate seeking a declaration of the priority of liability coverage between the Erie and Nationwide policies. Nationwide thereafter filed a counterclaim and cross-claim for declaratory judgment against Erie, Manzur, and the Estate. Nationwide requested that the trial court find that Erie's policies provided primary liability coverage. Erie argued that the indemnification agreement required Nationwide's policies to provide primary liability coverage.

         Following a bench trial, the trial court ruled in favor of Erie, holding that the indemnification provision in the subcontract between East Coast and Rodriguez controlled and "establishe[d] East Coast Insulators' right to indemnification from Rodriguez Construction through its insurer Nationwide." The trial court went on to state that the indemnification provision:

is nothing more than a contract between the parties to predetermine the allocation of potential risk of loss and Virginia law favors such contracts between competent parties for a valid purpose as set forth in Farmers Insurance Exchange v[.] Enterprise Leasing Co[.], 281 Va. 612');">281 Va. 612, [708 S.E.2d 852 (2011)] at page 619 . . ., which states, the general rule is that an indemnity agreement between the insurers or a contract with an indemnification clause may shift an entire loss to a particular insurer, notwithstanding the existence of another insurance clause in its policy.

         Applying the indemnification provision in the subcontract, the trial court then determined the priority of coverage as: (1) Nationwide Auto Policy, (2) Nationwide CGL Policy; (3) Nationwide Umbrella Policy; (4) Erie Auto Policy; and (5) Erie Umbrella Policy.

         This appeal followed.

         II. ANALYSIS

         A. Standard of Review

         "Courts interpret insurance policies, like other contracts, in accordance with the parties' intentions as determined from the words they have used in their contract. The interpretation of policy provisions presents a question of law that we consider de novo." Lower Chesapeake Assoc. v. Valley ...


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