Nationwide Mutual Insurance v. Overlook, LLC
2011 U.S. Dist. LEXIS 55282
| E.D. Va. | 2011Background
- Nationwide seeks a declaratory judgment on its duty to defend and indemnify Overlook for Edmonds’ state court claims regarding defective drywall from China.
- Edmonds’ Norfolk Circuit Court suit alleges the drywall is inherently defective, emits sulfide gases, harms health, damages the home, and seeks various damages and remedies.
- Nationwide asserts the Pollution Exclusion bars coverage for Edmonds’ claims under the policies; the matter involves multiple Nationwide policies (property, liability, and excess liability).
- Edmonds’ related Wiltz and Amato actions were filed after Nationwide’s complaint and are not addressed here; discovery was stayed pending resolution of the legal issues on Edmonds’ action.
- The court applies Virginia insurance-contract law, uses the Eight Corners Rule for defense obligations, and holds that Nationwide has no duty to defend Edmonds’ claim but defers indemnity ruling for non-Edmonds units due to lack of litigated facts.
- The Supreme Court of Virginia declined to accept a certified question, and the court proceeds with the pollution-exclusion analysis under Virginia law under a limited scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Pollution Exclusion bar Nationwide’s duty to defend Edmonds’ claim? | Nationwide argues the exclusion unambiguously removes coverage. | Overlook/Edmonds contend the exclusion is ambiguous and should be construed in Overlook’s favor. | Pollution Exclusion applies; no duty to defend Edmonds’ claims under the exclusion. |
| Is Nationwide’s duty to indemnify Overlook triggered for Edmonds’ claims or only after litigated facts? | Indemnification depends on litigated facts; Edmonds’ claims could inform coverage. | Indemnity requires underlying factual findings; proceed after state court resolution. | Indemnity duty remains abeyant pending litigated facts; defense obligation resolved, indemnity deferred. |
| Are Edmonds’ allegations within the definition of pollutants and the exclusion’s scope unambiguous? | Gases from drywall may be pollutants or not; exclusion may be ambiguous. | Gases are pollutants and effects fall within discharge/dispersal/escape terms. | Gases meet pollutant definition; exclusion unambiguously applies to Edmonds’ allegations. |
Key Cases Cited
- City of Chesapeake v. States Self-Insurers Risk Retention Grp., Inc., 271 Va. 574 (Va. 2006) ( Pollution exclusion applies to indoor pollutants; Virginia law governs contract interpretation)
- National Electrical Mfrs. Ass’n v. Gulf Underwriters Ins. Co., 162 F.3d 821 (4th Cir. 1998) (Pollution exclusion not limited to traditional environmental pollution under some laws)
- Assicurazioni Generali, S.p.A. v. Neil, 160 F.3d 997 (4th Cir. 1998) (Pollution exclusion interpreted based on contract language; not necessarily broad in all contexts)
- Parker v. Hartford Fire Ins. Co., 222 Va. 33 (Va. 1981) (Duty to defend can attach when complaint could support covered and non-covered theories)
- Fuisz v. Selective Ins. Co. of Am.|, 61 F.3d 238 (4th Cir. 1995) (Duty to defend may arise where pleadings present multiple theories of liability)