- Applying West Virginia public policy and rules of contract construction, do the unambiguous exclusions in American National’s policy for bodily injury or property damage “which is expected or intended by any insured even if the actual injury is different than expected or intended” and “arising out of any criminal act committed by the unambiguous exclusion in Erie’s policy for “[b]odily injury, property damage, or personal injury expected or intended by ‘anyone we protect’ . . .,” preclude liability coverage for insureds who did not commit any intentional or criminal act?
- If so, do the unambiguous severability clauses in the insurance policies, which state that the insurance applies separately to each insured, prevail over the exclusions and require the insurers to apply the exclusions separately to each insured, despite the intentional and criminal actions of co-insureds?
This case arises from the 2012 murder of sixteen-year-old Skyler Neese at the hands of her close friends, Sheila Eddy and Rachel Shoaf. Skyler Neese’s body was not discovered for more than six months after her death. Eventually, Sheila Eddy pleaded guilty to first degree murder and was sentenced to life in prison with mercy. Rachel Shoaf pleaded guilty to second degree murder and was sentenced to thirty years in prison. In June 2014, Skyler Neese’s parents filed suit in the Circuit Court of Monongalia County, West Virginia against Sheila Eddy, Tara Clendenen (Sheila Eddy’s mother), Rachel Shoaf, and Patricia Shoaf (Rachel Shoaf’s mother) seeking damages for Skyler’s death.
The Complaint sought damages from the mothers, each of whom had custody of their respective daughter, for negligent supervision/entrustment. At the time of Skyler Neese’s murder, Tara Clendenen and Sheila Eddy were insured under a homeowners policy issued by American National Property and Casualty Company [hereinafter “ANPAC”] and Patricia Shoaf and Rachel Shoaf were insured under a homeowners’ policy issued by Erie Insurance Property & Casualty [hereinafter “Erie”]. Both insurers agreed to defend the mothers under reservations of rights. Both insurers also instituted declaratory judgment actions in the United States District Court for the Northern District of West Virginia which were later consolidated. Both actions sought an order finding that coverage did not exist under the insurers’ respective policies for the claims asserted and finding that the insurers have no duty to defend or indemnify their respective insureds in the state court action.
In ruling upon the parties’ respective motions for summary judgment, the district court held that the question of whether there was an “occurrence” triggering coverage under the policies must be viewed from the perspective of the insured seeking coverage. When Skyler Neese’s death is viewed from the perspective of Tara Clendenen and Patricia Shoaf, it constitutes an “occurrence” within the meaning of the policies and triggers coverage under both policies for the claims asserted against the mothers. However, the analysis does not end simply because coverage is triggered. The district court noted that a determination must also be made as to whether a policy exclusion applies to bar coverage.
The district court found that both policies contained intentional act and criminal act exclusions and that it was undisputed that Skyler Nease’s death was an intentional, criminal act on the part of Sheila Eddy and Rachel Shoaf. The terms of the intentional and criminal act exclusions purport to exclude coverage not only for the insured who committed a criminal or intentional act, but also for any other insured against whom a claim is brought arising out of the criminal or intentional act. However, the policies also contain severability clauses which provide that the insurance applies separately to each insured in the ANPAC policy or anyone we protect in the Erie policy. The district court found the exclusionary clauses and the severability clauses to be unambiguous. However, the district court also found that the exclusionary clauses and the severability clause appear to conflict because if the severability clauses are applied, the clear and unambiguous language in the exclusionary clauses which seek to preclude coverage if any insured commits an intentional or criminal act could not operate to preclude coverage for Tara Clendenen and Patricia Shoaf. Finding West Virginia law unclear as to how the exclusionary and severability clauses should be prioritized, the district court certified two questions to the West Virginia Supreme Court: 1) whether the exclusionary clauses preclude liability coverage if the insured seeking coverage did not commit the intentional or criminal act; and 2) if so, whether the severability clauses which state that the insurance applies separately to each insured prevail and require the exclusions to be applied separately to each insured despite the intentional and criminal acts of co-insureds?
ANPAC argues that the plain and unambiguous terms of the exclusionary clauses should be applied as written to preclude coverage for the claims asserted against the mothers. According to ANPAC, when the focus is on the injury and not the act, it is clear that the exclusions apply to preclude coverage for all insureds where an injury is caused by the intentional or criminal act of any insured. ANPAC maintains that the public policy of West Virginia favors applying the clear and unambiguous language of the intentional and criminal act exclusions to preclude coverage to any insured for an injury caused by the intentional or criminal act of an insured. ANPAC argues that to answer the first certified question in the affirmative and find that the exclusions did not apply to preclude coverage for the mothers would violate both West Virginia law and public policy.
ANPAC also maintains that the second certified question should be answered in the negative because the severability clause in its policy does not conflict with application of the intentional and criminal act exclusions as written. According to ANPAC, even if its severability clause requires ANPAC to apply policy provisions separately to each insured, the net effect of the intentional injury and criminal act exclusions is still the negation of coverage because the focus of the exclusions is on the type of damages caused, not the person committing the act. ANPAC also argues that to hold the severability clause operates to negate the exclusionary clauses would violate the plain terms of its policy. According to ANPAC, the severability clause applies only to those clauses referencing “the insured” as opposed to “any insured” as used in the intentional and criminal act exclusions. ANPAC argues that reading the severability clause as having no effect on “any insured” exclusions is the only reasonable way to read the policy consistent with prevailing law.
Erie makes arguments similar to those presented by ANPAC. Erie argues that West Virginia public policy and rules of construction allow courts to apply exclusions which preclude coverage for an innocent insured based upon the acts of a co-insured and also require courts to apply intentional act exclusions even where the claims are based on intentional acts but couched in terms of negligence. Relying on West Virginia cases which stand for the proposition that an insured injured by a co-insured is not entitled to coverage under a homeowners’ policy, Erie argues that excluding coverage for an insured based upon the acts of a co-insured is not against West Virginia public policy. As a result, Erie urges the Supreme Court to answer the first certified question in the affirmative and find that coverage does not exist under Erie’s policy for the claims asserted against Patricia Shoaf.
Conversely, Erie maintains that the Supreme Court should answer the second certified question in the negative and find that its severability clause does not take priority over the unambiguous intentional act exclusion set forth in the Erie policy. According to Erie, the majority view is that severability provisions do not apply to negate unambiguous exclusions and that a severability provision has meaning independent of any exclusionary clause.
Respondents (David Neese and Mary Neese):
Respondents David and Mary Neese rely heavily on the West Virginia Supreme Court’s decision in Columbia Casualty Co. v. Westfield Ins. Co., a case which held that coverage issues must be viewed from the perspective of the insured seeking coverage, and urge the Court to follow its long-standing precedent—, precedent which ANPAC and Erie seek to alter. The Neeses argue that when viewed from the perspective of the insureds seeking coverage, Tara Clendenen under the ANPAC policy and Patricia Shoaf under the Erie policy, coverage would exist because it is not alleged that either Tara Clendenen or Patricia Shoaf acted in an intentional or criminal manner in causing the death of Skyler Neese. However, the intentional act and criminal act exclusions in the ANPAC and Erie policies violate this principle because under the exclusionary language, coverage may be determined from the standpoint of a co-insured, not the insured seeking coverage.
The Neeses also argue that the severability clauses in the ANPAC and Erie policies conflict with the exclusionary language the insurers rely upon when seeking to deny coverage to Tara Clendenen and Patricia Shoaf because the severability clauses, like West Virginia law, direct that the policy is to apply separately to each insured. These internal policy conflicts, thus, create an ambiguity which must be resolved against the insurers and in favor of finding coverage for the claims asserted against the insureds. The Neeses argue that Tara Clendenen and Patricia Shoaf are seeking only what West Virginia recognizes as the purpose of a liability policy—to provide them with a defense and indemnification for claims arising from their own negligent acts.
Respondent (Tara Clendenen):
In her summary response, Respondent Tara Clendenen urges the Court to reformulate the questions certified by the district court to reflect that the severability clause and the intentional act/criminal act exclusions in the ANPAC policy are irreconcilable, are reasonably susceptible of two different meanings and are, therefore, ambiguous. Arguing that she is an innocent co-insured, Tara Clendenen urges the Court to construe the ambiguities against ANPAC and in favor of coverage. Recognizing a split of authority in foreign jurisdictions, Tara Clendenen urges the Court to adopt and apply the reasoning set forth in Minkler v. Safeco Ins. Co. of Am., a California Supreme Court case which found a mother would have no reason to expect that her son’s residence in her home would operate to narrow her own coverage for claims arising from his intentional acts.
Respondent (James R. Clendenen):
In his summary response, Respondent James R. Clendenen notes that he is the only named insured in the ANPAC policy at issue and, as such, raises the question as to whether Sheila Eddy may even be considered an insured under the ANPAC policy’s definition of “insured”. According to Mr. Clenenden, Sheila Eddy is not his “relative” as he is her step-father and she is not related to him by blood. He also argues that case law exists which stands for the proposition that she could not be considered to be “in his care” for coverage purposes. If Sheila Eddy may not be considered a “relative” or person “in the care of” of James R. Clendenen, the named insured, then Sheila Eddy may not be considered an “insured” under the policy and ANPAC cannot rely on Sheila Eddy’s intentional and criminal acts to attempt to deny coverage for his wife, Tara Clendenen.
Respondent (Patricia Shoaf):
Respondent Patricia Shoaf argues that the Erie policy does not preclude liability coverage for the allegations asserted against her because she did not commit any intentional act. According to Ms. Shoaf, under Erie’s unique definition of the phrase “anyone we protect,” which is defined as the named insured “and the following residents of your household”, Erie’s intentional act exclusion does not apply unless the injury was expected or intended by both Patricia Shoaf and Rachel Shoaf. Moreover, the Erie policy contains a severability clause which, in effect, creates separate policies of insurance for each insured with a single, combined policy limit. To give the severability clause effect, Erie is required to evaluate the intentional acts exclusion solely from the perspective of Patricia Shoaf and, when so doing, confirm that coverage exists for the claims asserted against her.