James River Ins. Co. v. Doswell Truck Stop, LLC

827 S.E.2d 374

JAMES RIVER INSURANCE COMPANY, Appellant,

v.DOSWELL TRUCK STOP, LLC, et al., Appellees.

Record No. 180624

Supreme Court of Virginia.

May 16, 2019

Upon consideration of the record, briefs, and argument of counsel, the Court is of the opinion that there is reversible error in the judgment of the circuit court.

Doswell Truck Stop, LLC ("DTS") operates a truck stop in Doswell, Virginia. The truck stop premises include a gas station/convenience store, a hotel, a repair garage/truck wash, and approximately 24 acres of vacant land. At all times relevant to the present case, DTS was insured under a Commercial General Liability Policy (the "Policy"), issued by James River Insurance Company ("James River"). The Policy contained an Absolute Auto, Aircraft and Watercraft Exclusion endorsement (the "Auto Exclusion") which precludes coverage for bodily injury and property damage arising out of the maintenance of any "auto."¹ The Auto Exclusion specifically stated:

"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft. Use includes operation and "loading or unloading". Use also includes the handling and placing of persons by an insured into, onto or from an aircraft, "auto" or watercraft.

This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the "occurrence" which caused the "bodily injury" or "property damage" involved the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft.

In June 2016, James T. Smith ("Smith") filed a personal injury lawsuit against DTS for injuries he allegedly suffered as a result of a tire explosion. According to Smith’s complaint, he sought to have DTS repair or replace a tire on his tractor-trailer. During the course of the repair, a DTS employee invited Smith into the garage area. The tire was secured within an OSHA-compliant steel cage designed for inflating damaged truck tires. However, while Smith was present, the DTS employee over-inflated the tire, causing it to explode and injure Smith.

DTS filed an insurance claim with James River, but James River denied coverage on the basis that DTS’s claim was precluded by the Auto Exclusion. DTS filed a declaratory judgment action against James River, seeking a determination of whether the Policy covered Smith’s injury. DTS and James River both filed motions for summary judgment. In its motion, DTS argued that the term "maintenance" in the Auto Exclusion was ambiguous because it is subject to two meanings: (1) regular repair operations and (2) a possessory interest other than ownership or use. DTS asserted that both definitions of maintenance are equally possible in the context of the Auto Exclusion and, therefore, the circuit court should adopt the construction that is most likely to effectuate coverage. Alternatively, DTS contended that an independent basis existed for coverage under the Policy. Specifically, DTS claimed that Smith’s complaint contained a premises liability claim that would not be precluded by the Auto Exclusion.

The circuit court ruled in favor of DTS. In a letter opinion, the circuit court determined that the Auto Exclusion was ambiguous with respect to the meaning of "maintenance" of an auto. It also adopted DTS’s argument on premises liability as an alternative basis for granting summary judgment. The circuit court further awarded DTS $7,000 in attorneys’ fees as compensation for the fees DTS had already incurred in defending Smith’s claim.

1. Ambiguity of the word "Maintenance"

James River first assigns error to the circuit court’s determination that the term "maintenance," as used in the Policy, is ambiguous. In determining whether a term is ambiguous, a court cannot look at the term in isolation; it must look at the term in the context of the entire contract. See Babcock & Wilcox Co. v. Areva NP, Inc. , 292 Va. 165, 180, 788 S.E.2d 237 (2016) (recognizing that the proper interpretation of a contract requires a court to avoid placing emphasis on individual terms "wrenched from the larger contractual context"). In other words, a contractual term is not ambiguous merely because it is subject to multiple interpretations when viewed in isolation. Rather, a contractual term is ambiguous when it is subject to multiple interpretations in view of the entire contractual context.

Under Virginia law, conflicting interpretations reveal an ambiguity only where they are reasonable. A "reasonable" or "fairly claimed" interpretation is one of two competing interpretations that are "equally possible" given the text and context of the disputed provision.

Erie Ins. Exch. v. EPC MD 15, LLC , 297 Va. 21, 29, 822 S.E.2d 351 (2019) (citations omitted).

Notwithstanding the fact that "maintenance" is the term at issue in the present case, DTS focuses its argument on the meaning of its root word: maintain. As DTS correctly notes, the term "maintain" is used throughout the Policy in a manner indicating that it should be interpreted as meaning "to keep." According to DTS, this interpretation of "maintain" informs the interpretation of "maintenance."

Although the word "maintenance" is derived from the word "maintain," the terms are used differently throughout the Policy and, therefore, can have distinct meanings. Notably, the Policy’s definition of "mobile equipment" uses both terms in a manner that clearly...