ANALYSIS OF JANUARY 17, 2019 SUPREME COURT OPINION

(Posted January 17, 2019) The legal issue in today’s lone SCV decision, Erie Ins. Exch. V. EPC MD 15, LLC, is fairly straightforward. Does an insurance policy covering property owned by a company also cover property owned by a wholly owned subsidiary?

The parent is a Maryland company that held a policy from Erie. That policy covered losses from fire damage to property owned by the parent. The parent later bought a Virginia LLC that owned commercial property in Winchester. When that property sustained fire damage, the parent submitted a claim.

Erie denied coverage, saying in essence, “We insure you; not your subsidiary.” When the parent sued to establish coverage, a trial court looked to policy language providing coverage for “newly acquired buildings.” The court ruled that when the parent bought the LLC, it “newly acquired” the building in Winchester. At worst, the court reasoned, this is an ambiguity, and the court construed the ambiguity against the insurer, who drafted the policy language.

The justices today unanimously reverse. Because companies, including LLCs, are separate entities from their owners, the parent didn’t “acquire” the building; it still belonged to the subsidiary. And the policy covered property owned by the named insured, which is the parent. The court accordingly enters final judgment in favor of the insurer.

There’s an interesting preservation issue in a footnote on pages 3-4 of today’s slip opinion. When the trial judge issued an interlocutory order interpreting the policy language, he added that the parties had ten days to file exceptions to that ruling. Neither party filed anything. On appeal, the parent asserted that this waived Erie’s right to appeal.

No dice, Justice Kelsey explains today. By statute, exceptions aren’t required in Virginia (unless you’re in an eminent-domain proceeding; but that’s another story). All you have to do is explain on the record, orally or in writing, your position and what it is that you want the court to do, and then get a ruling on that issue. Trial judges aren’t free to create additional preservation requirements on a case-by-case basis. Because Erie had fully briefed its argument, the justices have no reluctance about reaching the merits.