90 Va. Cir. 279
Norfolk Cir. Ct.2015Background
- Kortney Jackson, a mentally disabled adult, suffered second-degree burns on November 26, 2011 while in care of CDS employee/independent contractor Antiniece Middleton.
- Plaintiffs’ counsel sent a December 20, 2011 demand letter to Community Direct Services (CDS) naming CDS and Middleton and advising counsel had been retained and asserting injuries and an attorney’s lien.
- CDS admitted it received a letter from plaintiffs dated December 20, 2011; the court accepts that the attached Exhibit 4 is that letter.
- Certain Underwriters issued a claims-made general and professional liability policy to CDS effective February 23, 2012 (retroactive to Feb. 23, 2009).
- The policy contains Exclusion (1)(C): no coverage for claims arising out of incidents that, as of the insurer’s first policy period inception, had resulted in bodily/personal injury of which an insured was aware and could reasonably have foreseen might result in a claim.
- Plaintiffs sued CDS and Middleton on July 11, 2012. Certain Underwriters filed for declaratory judgment seeking a ruling that Exclusion (1)(C) bars coverage for the Jacksons’ claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Exclusion (1)(C) bars coverage for the Jacksons’ claim | CDS did not treat the December 20, 2011 demand letter as a "claim," so exclusion shouldn’t apply | Receipt of demand letter naming CDS and describing injuries made CDS aware and it could reasonably foresee a claim arising | Exclusion (1)(C) applies; undisputed facts show CDS was aware and could reasonably foresee a claim, so no coverage |
| Whether Va. Code § 38.2-2226 (notice/waiver) prevents insurer from relying on Exclusion (1)(C) | Plaintiffs argue insurer’s failure to timely notify claimant under § 38.2-2226 waives the exclusion defense | Insurer’s defense is that contract language excludes coverage as to pre-policy incidents; § 38.2-2226 addresses breaches by insured, not coverage disputes based on policy terms | § 38.2-2226 does not apply; insurer did not rely on an insured’s breach and thus did not waive the exclusion defense |
Key Cases Cited
- PMA Capital Ins. Co. v. US Airways, Inc., 271 Va. 352 (contract terms are enforced as written)
- Seal v. Erie Ins. Exch., 277 Va. 558 (insurance policies are construed to effectuate parties’ intent from policy language)
- Dudas v. Glenwood Golf Club, 261 Va. 133 (summary judgment inferences must favor nonmovant unless forced)
- Smith by Rosen v. Smith, 254 Va. 99 (summary judgment is a drastic remedy; caution against supplanting trial)
- General Accident Fire & Life Assurance Corp. v. Cohen, 203 Va. 810 (summary judgment appropriate only where no amount of evidence could affect result)