No UIM Coverage for Wife Under Business Policy

A woman injured in an automobile accident who collected $300,000 of a $738,000 judgment from the other driver could not collect the balance in UM/UIM coverage from a commercial insurance policy issued to her husband’s Richmond restaurant because she is not a “family member” of the named insured, which is the restaurant; a Richmond U.S. District Court magistrate judge follows the reasoning of a Virginia circuit court decision that the Virginia Supreme Court refused to hear.

Plaintiff Tawny Grossberg won a jury award of $615,000 and interest of $123,000 in Richmond Circuit Court. The other driver’s coverage paid its $300,000 limits to Grossberg. She sought to collect the remaining amount, plus interest, from defendant Travelers pursuant to a commercial insurance policy issued to U.S. Vittles Inc. t/a Buz and Ned’s Real Barbeque, but Travelers denied coverage. Grossberg is a full-time employee of the restaurant and was traveling to work at the time of the accident.

The Travelers policy provides uninsured/underinsured motorist coverage by an endorsement covering “You” or any “family member,” as well as anyone else “occupying” a “covered auto.” The policy defines “you” as “the person or organization shown as the named insured,” which is the corporate entity comprising Buzz and Ned’s. The policy defines “family member” to mean “a person” related to “you” by blood, marriage or adoption.

Grossberg was not driving a covered auto at the time of the accident. However, her husband is the sole shareholder of the restaurant, thus rendering her a member of his family. She seeks UIM coverage based on her status as a “family member” of the insured.

The sole dispositive issue here is the construction of the policy term “family member” where, as here, the named insured is a corporate entity. Relying principally on Ceci v. Nat’l Indem. Co., 622 A.2d 545 (Conn. 1993), Grossberg sets forth a well-reasoned, persuasive argument in favor of coverage. However, as a federal court sitting in diversity, it is not this court’s role to develop a state’s common law, no matter how convincing the argument.

The Supreme Court of Virginia has yet to directly address the policy language at issue here, but the issue is not entirely novel among Virginia courts. In Elkins v. Erie Ins. Exchange, [VLW 009-8-011], a Virginia trial court construed identical policy language and found there was no ambiguity. The court said because a corporation cannot have “family members” as defined in the policy, no coverage existed for the family members in a similar case. The circuit court said that was the majority view. The minority view is that a latent ambiguity results from the inclusion of “family member” language when the named insured is a corporate entity unable to have “family members” as defined in the policy.

Regardless of which position represents the majority view, the court must give due consideration to Elkins as a decision of a lower court in Virginia. Such weight is entitled to additional deference because the Supreme Court of Virginia refused to grant a petition for appeal in Elkins, noting that it found “no reversible error in the judgment.” Although this does not constitute “precedent,” such a refusal to hear the appeal lends considerable weight to its persuasive value in this context. In Elkins, a Virginia circuit court applying Virginia law to policy language indistinguishable from that now before the court found there was no ambiguity in the first place. Under Virginia law, therefore, this court is persuaded the inquiry ends there.

Plaintiff is not a “family member” of the named insured, Buzz and Ned’s, so the policy does not encompass her as a “covered” person.

Summary judgment for defendant carrier.

Grossberg v. The Travelers Indemnity Co. (Dohnal) No. 3:11cv223, Nov. 14, 2011; USDC at Richmond, Va. VLW 011-3-627, 13 pp.