Erie Ins. Exchange v. EPC MD 15, LLC
822 S.E.2d 351
Va.2019Background
- EPC MD 15, LLC (EPC) was the named insured on an Erie Insurance Exchange commercial property policy covering EPC’s Maryland real property; Cyrus Square LLC (Cyrus Square) was not named or added as an insured.
- The policy included an “Extensions of Coverage” clause permitting temporary coverage for “newly acquired buildings” and related property for 90 days after acquisition, but did not define “acquired.”
- Nine months after policy issuance EPC became the sole member of Cyrus Square, a Virginia LLC that owned a building in Winchester, Virginia.
- Within 90 days after that membership acquisition, Cyrus Square’s building suffered fire damage; EPC sought coverage under the policy’s “newly acquired buildings” extension, asserting that by acquiring Cyrus Square EPC had “acquired” the building.
- Erie denied coverage; EPC sued and the circuit court granted summary judgment for EPC, finding “acquired” ambiguous and construing it against Erie to mean mere control.
- The Virginia Supreme Court reviewed de novo whether the policy’s extensions covered property owned by an acquired subsidiary and reversed, holding the policy did not cover Cyrus Square’s building.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a parent’s acquisition of sole membership in an LLC-owned subsidiary constitutes "acquisition" of the subsidiary’s real property under a "newly acquired buildings" extension | EPC: "Acquired" is ambiguous and includes mere control; by obtaining sole membership EPC acquired Cyrus Square’s property | Erie: "Acquired" reasonably means the named insured itself obtained the property; ownership by a distinct entity is not covered | Held for Erie: The policy’s text and context show "acquired" requires the named insured to actually acquire the property, not merely control the owner |
| Whether the policy should be construed against the insurer due to ambiguity | EPC: Dictionary meanings show multiple plausible senses of "acquired," so contra proferentem applies | Erie: Contextual reading yields a plain meaning favoring insurer; contra proferentem applies only if genuinely ambiguous after holistic interpretation | Held for Erie: Court found EPC’s interpretation unreasonable and not an "equally possible" reading; no ambiguity sufficient to invoke contra proferentem |
Key Cases Cited
- TravCo Ins. v. Ward, 284 Va. 547 (insurer and insured intent gleaned from policy language)
- Appalachian Reg’l Healthcare v. Cunningham, 294 Va. 363 (ambiguity exists only where reasonable competing meanings are equally possible)
- Liverpool & London & Globe Ins. v. Bolling, 176 Va. 182 (principles of contract construction apply to insurance policies)
- Mission Residential, LLC v. Triple Net Props., LLC, 275 Va. 157 (LLC is a separate legal entity from its members)
- Babcock & Wilcox Co. v. Areva NP, Inc., 292 Va. 165 (contracts construed as whole; avoid focusing on isolated terms)