Court, Not Jury, Should Decide whether Exclusion was Ambiguous and Had Been Brought to Insured’s Attention, West Virginia’s Top Court Decides

The Supreme Court of Appeals of West Virginia has ruled that a court – not a jury – had to decide whether a policy exclusion was ambiguous and had been brought to the attention of the insured.

The Case

Gerald Kirchner was accidentally shot and killed by Robbie Bragg while both were working at Grimmett Enterprises, a sporting goods store in Rainelle, West Virginia, and Bragg was showing a customer how to load a handgun that was for sale in the store. Kirchner’s mother, Barbara Surbaugh, sued Bragg and the store, which agreed to a judgment against them for $1.5 million. Surbaugh agreed not to execute the judgment in exchange for their assigning all claims they might have against their respective insurers for refusing to provide a defense and coverage.

Surbaugh filed a declaratory judgment action against the store’s insurer, American States Insurance Company, seeking coverage of the judgment. She argued that an employee exclusion in the policy was ambiguous, was not conspicuous, and had not been brought to the attention of the store’s owner and thus was unenforceable.  American States countered that the policy was unambiguous and conspicuous.

The trial court held that as a matter of law the exclusionary language was not ambiguous. It also ruled that the issue of whether the exclusion had been disclosed to the store’s owners had to be resolved by a jury.

The jury found that the exclusion had not been brought to the attention of the store and, based on the jury’s decision, the trial court ruled that the employee policy exclusion was unenforceable. American States appealed to the Supreme Court of Appeals of West Virginia.

The West Virginia Supreme Court Decision

The court reversed.

The court first ruled that, as a general rule, the issue of whether an insurer had brought a policy exclusion to the attention of its insured had to be resolved by the trial court. Accordingly, the court held, the trial court had committed error in having the jury decide whether the insurance policy’s exclusionary language adequately had been brought to the attention of the store.

Next, the court found that the exclusion was not ambiguous. It pointed out that the same policy language had been found to be unambiguous by other courts and concluded that, as a matter of law, it was not ambiguous. Under the policy, the court held, an injury to an employee arising out of and in the course of employment was excluded from coverage.

The court also ruled that the exclusion was conspicuous, rejecting Surbaugh’s argument that the exclusion was not conspicuous because the policy did not contain a table of contents. Indeed, the court pointed out, it had never held that insurance policies must have a table of contents for exclusions to be found to be conspicuous.

Finally, the court decided that the exclusion had been disclosed to the store when the insurer sent it to the store’s owner with a cover letter that indicated that he should read the policy and its exclusions and contact the insurer if he had concerns. If the store’s owner had read the policy, “as he was told to do in a letter and on the policy itself,” he would have learned of the exclusions and could have contacted American States with any questions he had regarding the exclusions, the court declared. In other words, the court concluded, American States had fulfilled its obligation to bring the exclusion to the attention of the store’s owner, but he had failed to carry out his duty to read the policy.

Consequently, the court held, the trial court should have entered summary judgment in favor of American States and declared the exclusion enforceable.

The case is American States Ins. Co. v. Surbaugh, No. 11-1186 (W. Va. Feb. 6, 2013).