BOARD OF VOCATIONAL EDUCATION,
DIVISION OF VOCATIONAL REHABILITATION,
CNA INSURANCE COMPANIES, and
CONTINENTAL CASUALTY COMPANY,
Plaintiffs Below, Appellants,
P.I.E. MUTUAL INSURANCE COMPANY,
Defendants Below, Appellees
Honorable Paul Zakaib, Jr., Judge
Civil Action No. 89-C-1365
Sprague W. Hazard
Steptoe & Johnson
Charleston, West Virginia
Richard A. Simpson
Charles I. Hadden
Ross, Dixon & Masback
Washington D. C.
Counsel for Appellants
Matthew P. Moriarty
Richard W. Stuhr
Jacobson, Maynard, Tuschman
Charleston, West Virginia
Counsel for Appellees
This Opinion was delivered Per Curiam.
1. "Whenever the language of an insurance policy provision is
reasonably susceptible of two different meanings or is of such
doubtful meaning that reasonable minds might be uncertain or
disagree as to its meaning, it is ambiguous." Syl. Pt. 1, Prete v.
Merchants Property Ins. Co., 159 W. Va. 508, 223 S.E.2d 441 (1976).
2. "It is well[-]settled law in West Virginia that ambiguous
terms in insurance contracts are to be strictly construed against
the insurance company and in favor of the insured." Syl. Pt. 4,
National Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W. Va. 734, 356
S.E.2d 488 (1987).
3. "With respect to insurance contracts, the doctrine of
reasonable expectations is that the objectively reasonable
expectations of applicants and intended beneficiaries regarding the
terms of insurance contracts will be honored even though
painstaking study of the policy provisions would have negated those
expectations." Syl. Pt. 8, National Mut. Ins. Co. v. McMahon &
Sons, Inc., 177 W. Va. 734, 356 S.E.2d 488 (1987).
4. "When a contract is ambiguous and of doubtful and
uncertain meaning, and the parties have by their contemporaneous or
subsequent conduct placed a construction upon it which is
reasonable, that construction will be adopted by the court." Syl.
Pt. 1, Fredeking v. Grimmett, 140 W. Va. 745, 86 S.E.2d 554 (1955).
This case involves a dispute between two insurance companies,
appellant Continental Casualty Company ("Continental") and appellee
P.I.E. Mutual Insurance Company ("P.I.E."), regarding which carrier
is required to provide liability coverage for a malpractice action
against their mutual insured, appellee Thomas Janicki, M.D. The
Circuit Court of Kanawha County ruled that Continental was the
liable carrier and we affirm that ruling.
As a preface to the issue of coverage, it is helpful to review
the following factual summary of the underlying medical malpractice
suit. On July 12, 1987, Michelle Richmond came to the West
Virginia Rehabilitation Center ("Center") for evaluation. Ms.
Richmond was twenty-one years old and had a history of adult onset
asthma. During the next three weeks, Ms. Richmond received
maintenance therapy and allergy shots for her asthmatic condition
from Dr. A. Rafael Gomez and Dr. Janicki, both of whom were staff
members of the Center's medical clinic. Ms. Richmond's last
examination at the Center occurred on the afternoon of August 3,
1987, when she was seen by Dr. Janicki. On August 4, 1987, Ms.
Richmond suffered an acute asthma attack, went into
cardiorespiratory arrest, and died.
On November 18, 1988, the executrix of Ms. Richmond's estate
filed a wrongful death action against the State of West Virginia,
Board of Vocational Rehabilitation (the "State"), and Doctors Gomez
and Janicki predicated on allegations of negligent care and
treatment of Ms. Richmond.
As a full-time state employee for the Center, Dr. Janicki is
covered by an insurance policy issued to the State by Continental.
The Continental policy provides coverage for Dr. Janicki for
liability arising from acts occurring "within the scope of his
duties" as a state employee. In addition to his employment with
the Center, Dr. Janicki also has a part-time private medical
practice. To provide coverage for his private medical practice,
Dr. Janicki personally obtained a separate policy from P.I.E.
While the parties have never disputed that the alleged acts of
negligence occurred during the course and scope of Dr. Janicki's
employment with the State, Continental denied coverage to Dr.
The State and Continental filed a declaratory judgment action
in the Kanawha County Circuit Court on April 18, 1989, to determine
which carrier owed coverage to Dr. Janicki. Continental's position
is essentially that the P.I.E. policy obtained by Dr. Janicki is a
primary insurance policy and further that Exclusion C of the
Continental policy precludes coverage. Exclusion C provides that:
"INSURANCE DOES NOT APPLY: TO LIABILITY OF AN INSURED, IF AN
INDIVIDUAL, FOR HIS PERSONAL ACTS OR OMISSIONS OF A PROFESSIONAL
NATURE WHICH IS INSURED ON A PRIMARY BASIS BY ANOTHER VALID POLICY
OR POLICIES." Because the wrongful death complaint contained
averments that Dr. Janicki personally acted negligently,
Continental maintains that the "personal acts" language of
Exclusion C permits it to deny coverage. Continental further
relies on Endorsement No. 5, commonly referred to as the "other
insurance" endorsement, which provides that:
IF AN INSURED HAS OTHER PRIMARY INSURANCE FOR
THE HAZARDS COVERED BY THIS POLICY, THIS
POLICY DOES NOT APPLY TO LOSSES OCCURRING
BEFORE THE EXPIRATION OR TERMINATION DATE OF
THE OTHER INSURANCE EXCEPT TO THE EXTENT THAT
THE AMOUNT OF LOSS EXCEEDS THE LIMIT OF
LIABILITY OF THE INSURANCE, BUT THEN ONLY FOR
AN AMOUNT NOT EXCEEDING THE DIFFERENCE BETWEEN
ANY HIGHER APPLICABLE LIMIT OF LIABILITY
STATED IN THE SCHEDULE OF THIS POLICY AND THE
LIMIT OF LIABILITY OF THE OTHER INSURANCE.
Based on the inclusion of this "other insurance" clause in the Continental policy, Continental argues that the P.I.E. policy was the primary insurance policy and that Continental is only obligated to provide excess coverage.
P.I.E. argues that its policy cannot be construed as the
primary policy based on its position that the two insurance
policies do not insure the same risk. P.I.E. contends additionally
that Exclusion C is ambiguous with reference to the phrase
"personal acts or omissions of a professional nature." Arguing
that such language must be interpreted to refer to those acts or
omissions which fall outside the scope of State employment, P.I.E.
interprets this exclusionary language to provide that the
Continental policy only excludes the doctor's private practice from
In ruling in favor of P.I.E., the circuit court concluded that
Exclusion C of the Continental policy "is ambiguous and susceptible
to at least two interpretations." The court found that the
exclusion "excludes only claims arising from Dr. Janicki's private
practice, and not claims arising as a result of any acts or
omissions that fall within the course and scope of his employment
with the State of West Virginia." The court further found that the
intent of the Continental policy "is to provide liability coverage
to Dr. Janicki for any acts or omissions arising as a result of his
employment with the State of West Virginia." The lower court did
not address the effect of Endorsement No. 5 to the Continental
The initial question facing this Court is whether both
policies insure the same risk. PIE argues that the risks insured
differ while Continental argues they are identical. In support of
its position, Continental points out that both policies provide:
"The Company will pay on behalf of the Insured all sums which the
Insured shall become legally obligated to pay as damages because of
. . . injury . . . arising out of the rendering of or failure to
render . . . professional services." Claiming that this similarity
in policy language makes the risks insured by both policies the
same, Continental argues that the circuit court was required to
examine the "other insurance" clauses of the two policies to
resolve which carrier is responsible.
The unmistakable and valid objective of "other insurance"
clauses is to limit or avoid a carrier's liability when risk
coverage is identical. But as one court has recognized:
"[I]t is first necessary to show that both policies cover the same risk. . . . Then the 'other insurance' clauses of each policy come into the play and the game of policy semantics begins." National Union Fire Ins. Co. v. St. Paul Fire and Marine Ins. Co., 447 F.2d 75, 77 (9th Cir. 1971) (emphasis supplied). The United States District Court for the Southern District of West Virginia explained in St. Louis Fire & Marine Insurance Co. v. Aetna Insurance Co., 283 F. Supp. 40 (S.D. W. Va. 1968) that:
excess and other insurance clauses are
applicable only where there is overlapping or
double insurance and this occurs only where
two or more policies insure the same party
upon the same subject matter and assume the
same risks. 8 Appleman, Insurance Law and
Practice, Section 4911 (1962).
Id. at 46 (emphasis supplied).
By applying well-established principles of insurance law, we
conclude that the PIE and Continental policies do not insure the
same risk. The first of these principles concerns ambiguity. As
this Court has previously ruled, "[w]henever the language of an
insurance policy provision is reasonably susceptible of two
different meanings or is of such doubtful meaning that reasonable
minds might be uncertain or disagree as to its meaning, it is
ambiguous." Syl. Pt. 1, Prete v. Merchants Property Ins. Co., 159
W. Va. 508, 223 S.E.2d 441 (1976). After examining the language
found in Exclusion C of the Continental policy, we concur with the
circuit court's conclusion that the exclusionary phrase "personal
acts or omissions of a professional nature which is insured on a
primary basis by another valid policy or policies" is ambiguous
because it is susceptible to at least two interpretations. To
illustrate, the language at issue could be read to exclude (1)
personal acts and (2) professional negligence only if those risks
are covered on a primary basis by another policy. Under this
reading, the Continental policy would provide coverage for personal
acts when no other coverage for such acts had been secured. A
second plausible interpretation is that found by the trial court--that the exclusionary language refers to claims arising from Dr.
Janicki's private practice. Finally, Exclusion C could be
interpreted to exclude all personal acts and only those acts of
professional negligence which are covered on a primary basis by
The existence of an ambiguity in the Continental policy
requires the application of another insurance law tenet. "It is
well[-]settled law in West Virginia that ambiguous terms in
insurance contracts are to be strictly construed against the
insurance company and in favor of the insured." Syl. Pt. 4,
National Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W. Va. 734, 356
S.E.2d 488 (W. Va. 1987). Since the coverage issue at hand deals
with two insurers rather than an insurer and an insured, it is
necessary to invoke yet another principle--the doctrine of
reasonable expectations--to gain understanding of why the
Continental policy should be construed in favor of its insured, Dr.
The doctrine of reasonable expectations, as we explained in
McMahon & Sons, "is that the objectively reasonable expectations of
applicants and intended beneficiaries regarding the terms of
insurance contracts will be honored even though painstaking study
of the policy provisions would have negated those expectations."
177 W. Va. at 736, 356 S.E.2d at 490, Syl. Pt. 8, in part. The
following paragraphs from Dr. Janicki's affidavit articulate his
expectations with regard to the Continental and PIE policies:
4. It was my understanding in July and
August, 1987, that I was insured for
professional liability by the State of West
Virginia for any professional activity related
to my work for the State of West Virginia at
the Rehabilitation Center.
5. It was also my understanding in July and
August of 1987, that I was required to carry
separate professional liability insurance for
my part-time, private practice. It was with
that understanding that I had personally
purchased professional liability insurance for
a number of years with various companies. In
1987 I had coverage for my private practice
with the PIE Mutual Insurance Company.
6. It always has been, and still remains, my
expectation that any legal action arising out
of my medical work for the State of West
Virginia is covered by the State's insurance
carrier. On the other hand, it always has
been, and still remains, my expectation that
any legal activity arising out of my private
medical practice will be covered by my private
Application of the reasonable expectations doctrine requires
this Court to construe the insurance contract at issue just as a "a
reasonable person standing in the shoes of the insured
would. . . . " Soliva v. Shand, Morahan & Co., Inc., 176 W. Va.
430, 433, 345 S.E.2d 33, 35-36 (1986). Dr. Janicki expected that
the Continental policy would provide coverage for "any legal action
arising out of . . . [his] medical work for the State." The State
confirmed Dr. Janicki's expectations when it issued letter 87-47
from the Director of the Division of Vocational Rehabilitation on
June 1, 1987, to State employees. Included in that letter, which
was issued just over two months before Ms. Richmond's death, is the
2. Insurance Liability Coverage for Agency
Employees. According to the State Board of
Risk and Insurance Management and provisions
of the West Virginia Code, state government
employees are covered by liability insurance
as long as they are acting within the course
or scope of employment or official
responsibility. (emphasis supplied)
Continental argues that the director's letter merely "discusses the scope of the coverage that the Continental policy . . . provide[s] for State employees' acts. . ." and does not resolve the issue of whether the Continental policy is excess with respect to the PIE policy.
The unequivocal objective of the State's procurement of the
Continental policy was to obtain insurance for the acts of its
employees which occurred "within the course or scope of employment
or official responsibility." The PIE policy carries no similar
limitation on its coverage. This is because, unlike the
Continental policy, the PIE policy does not assume the risk of
insuring Dr. Janicki as a state employee. Under both the facts and
policies at issue, we determine that a reasonable person can make
but one conclusion--that the risks covered by the two policies are
Continental places much weight on the fact that the PIE policy
does not specifically include the acts of Dr. Janicki as a state
employee within its express exclusions. While specific
exclusionary language to this effect would certainly have
eliminated the need for this Court to resolve the issue at hand,
nonetheless its absence is not fatal with respect to this case. As
we emphasized in Soliva, "[a] policy should never be interpreted so
as to create an absurd result. . . ." 176 W. Va. at 432, 345
S.E.2d at 35. Were we to find PIE responsible for alleged acts
that the parties do not dispute were committed within the course
and scope of Dr. Janicki's state employment, we would certainly be
"creat[ing] an absurd result." Id.
The simple truth of the matter is that Dr. Janicki was advised
and understood, as evidenced by his acts, his affidavit, and
Director's Letter 87-47, that he had insurance coverage for alleged
acts of negligence which occurred during the course and scope of
his employment at the Center. Dr. Janicki further understood that
he needed a separate policy to cover any alleged acts of negligence
pertaining to his private practice. To insure his part-time
private practice, as he avers in his affidavit, Dr. Janicki
personally obtained various policies over the years. We see no
reason to take issue with Dr. Janicki's averments regarding his
objective in obtaining the PIE policy, the policy in effect during
the time period of Ms. Richmond's treatment and death. We concur
with PIE's statement that "[i]t would be absurd to assert that Dr.
Janicki intended to pay any money for insurance to cover a practice
already insured." To this point, Continental responds that excess
coverage is quite common and certainly not absurd. Under different
facts, we might find Continental's position more plausible. For
example, if Dr. Janicki did not have a part-time practice and
nonetheless purchased additional insurance from PIE, we might find
that the additional coverage was indeed intended as excess
coverage. Here, however, the record clearly indicates the reason
for Dr. Janicki's purchase of the separate PIE policy and it was
not to provide excess coverage for his acts committed as a State
employee. The PIE policy was obtained to provide coverage for his
Both the securement of the PIE policy by Dr. Janicki for his
private practice and the director's letter demonstrate that Dr. Janicki, as an intended third-party beneficiary of the Continental
policy, and the State, as one of the contracting parties, both
placed the same interpretation on the Continental policy. As we
have previously determined, "[w]hen a contract is ambiguous and of
doubtful and uncertain meaning, and the parties have by their
contemporaneous or subsequent conduct placed a construction upon it
which is reasonable, that construction will be adopted by the
court." Syl. Pt. 1, Fredeking v. Grimmett, 140 W. Va. 745, 86
S.E.2d 554 (1955); accord West Virginia Pub. Employees Ins. Bd. v.
Blue Cross Hosp. Serv., Inc., 174 W. Va. 605, 607, 328 S.E.2d 356,
358 (1985). To hold Continental liable for Dr. Janicki's defense
costs,See footnote 1 is certainly reasonable when as here there is no dispute
that the alleged acts occurred during the course and scope of Dr.
Janicki's state employment and further that the Continental policy
was obtained by the State for this very purpose. In so ruling, we
certainly avoid the absurd result that would occur if we determined
Continental did not owe coverage to Dr. Janicki. The taxpayers of
the State would have paid premiums to Continental for a specified
risk and yet Continental would not be liable for any claims arising
from that insured risk.
For the reasons set forth in this opinion, the ruling of the
Circuit Court of Kanawha County is hereby affirmed.
Footnote: 1Because Dr. Janicki was found to have no liability with regard to Ms. Richmond's death, the only sums at issue are those costs incurred in connection with his defense.