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Monticello Insurance Co. v. Baecher11/1/1996
OPINION BY JUSTICE LEROY R. HASSELL, SR.
In this insurance coverage dispute, the dispositive issue is whether an insurer may enforce an exclusion clause described as a "health hazard exclusion."
Monticello Insurance Company had issued an "Owners', Landlords', and Tenants' Liability Insurance" policy to John Joseph Baecher on property he owned at 1821 LaSalle Avenue in the City of Norfolk. Upon his death, Monticello issued subsequent policies to his estate. The insured premises had been occupied by Louise Conyer and her young grandchild, Shanay Hunter.
Shanay, an infant who sued by Conyer, her next friend, and Conyer, individually, (collectively, Conyer), filed an action in the trial court against the co-executors of the estate of John Joseph Baecher. Conyer alleged that Shanay was injured when she ingested lead-based paint and that the estate "was negligent and/or negligent per se for allowing lead-based paint to be upon its premises."
Monticello's policy of insurance contained numerous exclusions, including the following health hazard exclusion:
"No coverage is granted by this policy for any claim or expense (including but not limited to defense costs) for personal injury (as defined) made by or on behalf of any person or persons directly or indirectly on account of continuous, intermittent or repeated . . . ingestion . . . of, any substance . . . where the Insured is or may be liable as a result of the manufacture, production, extraction, sale, handling, utilization, distribution, disposal or creation by or on behalf of the Insured of such substance. . . ."
Monticello initiated this action by filing a motion for declaratory judgment against Michael Baecher and John J. Baecher, Jr., co-executors of the estate of John Joseph Baecher, deceased, and Conyer. Monticello sought a declaration that it has no obligation to defend or indemnify the estate for any claims made by Conyer in the underlying litigation. The estate and Conyer asserted, among other things, that the health hazard exclusion is unenforceable because the lead-based paint was not utilized within the intendment of the exclusion. The trial court held that the health hazard exclusion is unenforceable, ruling the estate did not "utilize" lead-based paint because it was beneath several layers of paint that did not contain lead. The trial court entered a decree declaring that Monticello has an obligation to defend and indemnify the estate. Monticello appeals.
Monticello argues that the trial court erred by failing to enforce the health hazard exclusion. Monticello contends that the exclusion is enforceable because Shanay ingested lead-based paint that the estate had utilized. Monticello observes that in the underlying litigation, Conyer asserts that the estate is liable to her because it used lead-based paint in the leased premises. The estate responds that neither it nor John Baecher applied lead-based paint to the walls of the leased premises and, therefore, the lead-based paint was not utilized within the meaning of the exclusion. Furthermore, the estate and Conyer contend that the exclusion is ambiguous and, therefore, must be construed against Monticello.
Familiar principles of contract interpretation guide our resolution of this dispute. "Reasonable policy exclusions not in conflict with statutes will be enforced; to be effective, the exclusionary language must clearly and unambiguously bring the particular act or omission within its scope." Floyd v. Northern Neck Insurance Co., 245 Va. 153, 158, 427 S.E.2d 193, 196 (1993). Further, "an insurance policy is a contract, and, as in the case of any other contract, the words used are given their ordinar
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