SunTrust Mortgage, Inc. v. AIG United Guaranty Corp.
2011 U.S. Dist. LEXIS 45105
E.D. Va.2011Background
- SunTrust Mortgage filed a contract dispute against United Guaranty over insurance coverage for IOF Combo 100 loans under the Master Policy and the 2004 Flow Plan and 2005 Flow Plan.
- The policy excludes coverage for claims if the loan did not meet Reporting Program Guidelines, defined by the Reporting Program Manual under the Master Policy.
- The 2004 Flow Plan and 2005 Flow Plan designate underwriting guidelines as “SunTrust Mortgage guidelines that are currently being used and have been mutually agreed upon,” raising questions about which document actually governs IOF Combo 100 loan underwriting.
- ST contends UG approved and insured IOF Combo 100 loans under ST guidelines; UG contends the governing guidelines are UG-origin Reporting Program Guidelines amended by Gavin’s Guideline Matrix and emails.
- ST moves in limine to exclude parol evidence (emails, Guideline Matrix) purporting to modify the written policy’s unambiguous terms.
- The court concludes the policy language is patently ambiguous, and parol evidence cannot be admitted to alter the unambiguous written contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy is ambiguous on underwriting guidelines | ST: policy unambiguously requires ST guidelines; parol evidence cannot modify. | UG: policy is ambiguous; parol evidence (Gavin Matrix, emails) clarifies intended UG guidelines. | Patent ambiguity exists; parol evidence not admissible to interpret. |
| Whether Gavin emails and Guideline Matrix are admissible under parol evidence rules | ST: admissible only to show the policy is unambiguous; outside documents cannot modify. | UG: those documents amend the Reporting Program Manual under Section 1.37. | Parol evidence not admissible to modify unambiguous terms; conflict with 2005 Flow Plan remains. |
| Whether Virginia partial integration doctrine allows parol evidence | ST: partial integration not satisfied; documents were not contemporaneous complete integration. | UG: partial integration permits extrinsic evidence to supplement terms. | Partial integration not satisfied; evidence excluded. |
| Whether the policy contains a latent vs patent ambiguity affecting parol evidence | ST: ambiguity favors insured; parol evidence permissible to interpret. | UG: ambiguity should not be resolved via parol evidence to defeat policy terms. | Court finds patent ambiguity; nonetheless parol evidence excluded; insured favored by liberal construction. |
| What is the controlling document for IOF Combo 100 underwriting guidelines | ST: 2005 Flow Plan controls; uses SunTrust guidelines in use by January 2005. | UG: Master Policy 1.37 and Reporting Program Guidelines control via UG amendment. | 2005 Flow Plan designates SunTrust guidelines; patent ambiguity prevents deviation by parol evidence. |
Key Cases Cited
- S.F. v. Western American Insurance Co., 250 Va. 461, 463 S.E.2d 450 (Va. 1995) (ambiguity rules; liberal construction in insurance disputes)
- Williams, 263 Va. 565, 561 S.E.2d 730 (Va. 2002) (latent ambiguity; parol evidence admissible to explain ambiguity)
- Nusbaum & Co., 316 S.E.2d 736 (Va. 1984) (ambiguities construed in insured’s favor)
- Justis, 190 S.E.2d 163 (Va. 1937) (parol evidence limited in insurance contract context)
- Gwathmey, 1 S.E. 209 (Va. 1887) (early insurance policy interpretation; ambiguity considerations)