                            UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT


                            No. 04-2285



CAROLINA CASUALTY INSURANCE COMPANY,

                                            Plaintiff - Appellant,

          versus


DRAPER & GOLDBERG, P.L.L.C.,

                                             Defendant - Appellee.


Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. James C. Cacheris, Senior
District Judge. (CA-03-1346-1)


Argued:   May 26, 2005                      Decided:   July 8, 2005


Before WILLIAMS and SHEDD, Circuit Judges, and HAMILTON, Senior
Circuit Judge.


Reversed and remanded by unpublished opinion. Judge Shedd wrote
the majority opinion, in which Judge Williams joined. Senior Judge
Hamilton wrote a dissenting opinion.


ARGUED:    Richard Albert Simpson, ROSS, DIXON & BELL, L.L.P.,
Washington, D.C., for Appellant. John Henry Zink, III, VENABLE,
L.L.P., Towson, Maryland, for Appellee.     ON BRIEF: Lynda Guild
Simpson, Kelly V. Overman, ROSS, DIXON & BELL, L.L.P., Washington,
D.C.; Dennis J. Quinn, CARR MALONEY, P.C., Washington, D.C., for
Appellant.     Kathleen E. Wherthey, VENABLE, L.L.P., Towson,
Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).




                               2
SHEDD, Circuit Judge:

     Carolina Casualty Insurance Company (“Carolina Casualty”) filed

this diversity action seeking to rescind the professional liability

insurance policy it issued to Draper & Goldberg, PLLC (“D&G”), a

Virginia law firm also practicing in Maryland, Delaware, and the

District of Columbia.        Carolina Casualty claims that D&G made

material    misrepresentations   in       its   application    for    “Lawyers’

Professional     Liability    Insurance”        by   failing     to     divulge

approximately 500 lawsuits filed against it.            After both parties

filed motions for summary judgment, the district court granted

judgment in favor of D&G. Carolina Casualty appeals, and we reverse

and remand.



                                   I.

     We review de novo the district court’s grant of summary

judgment.     Williams v. Staples, Inc., 372 F.3d 662, 667 (4th Cir.

2004).     Summary judgment is appropriate when there is no genuine

issue of material fact and the moving party is entitled to judgment

as a matter of law.    Fed. R. Civ. P. 56(c); Edell & Assocs. v. Law

Offices of Peter G. Angelos, 264 F.3d 424, 436 (4th Cir. 2001).

Moreover, when the language of a contract is plain and unambiguous,

its interpretation is a question of law that may be determined by

the court on a motion for summary judgment.          World-Wide Rights Ltd.

P’ship v. Combe Inc., 955 F.2d 242, 245 (4th Cir. 1992).               Although

                                      3
the material facts in this case are not in dispute, we conclude that

the district court erred in granting summary judgment in favor of

D&G by misinterpreting the meaning of the phrase “professional

liability claim” in the Carolina Casualty insurance application.



                                  II.

     D&G specializes in mortgage foreclosures, and its clients are

typically mortgage servicing companies or mortgage lenders.              In

representing its clients in foreclosure actions against debtors, D&G

is routinely named as the successor trustee.      Quite often,       debtors

will attempt to block the foreclosure actions against their property

and will sue D&G as a party defendant in its capacity as successor

trustee.    In the five years before applying for professional

liability insurance from Carolina Casualty, D&G was named as a party

defendant   in   approximately   500    foreclosure    or    other   similar

lawsuits.   Moreover, D&G received “[c]ountless” claim letters that

ultimately did not result in lawsuits.      J.A. 186.       In reviewing the

suits filed and claims made against it, D&G would first determine

whether it had made a mistake and, if so, whether the suit or claim

posed a significant risk of liability.      Because D&G deemed the vast

majority of these suits and claims to be frivolous, the firm

routinely represented itself in those cases.          D&G considered some

claims to be somewhat problematic, but the firm nevertheless decided

to represent itself also in those matters.        Of these problematic


                                   4
cases, D&G ultimately paid settlements ranging from $1,000 to

$20,000.   The largest settlement -- $20,000 -- involved a suit by

a nonclient debtor who alleged that D&G violated the Fair Debt

Collection Practices Act in the course of a foreclosure action. D&G

eventually retained counsel in that action after the judge presiding

over the case disqualified the firm from representing itself.

     Of the approximately 500 lawsuits filed and numerous claims

made against it, D&G considered five claims or suits to pose such

a serious risk of liability that it sought defense and indemnity

from its previous professional liability insurance carriers.     All

five suits or claims were brought by nonclients of the firm.   Three

suits were filed by debtors seeking liability against D&G for its

participation in foreclosure actions.   One of these three suits was

very similar to the Fair Debt Collection Practices Act case that D&G

settled for $20,000.

     In the summer of 2002, David Draper, one of the principals of

D&G, began seeking a new professional liability policy for the firm

because D&G’s existing carrier had notified the firm that it was

discontinuing its professional liability insurance line. Draper was

having difficulty obtaining reasonable price quotes from other

carriers, so he attended a state bar meeting primarily to contact

insurance providers.   At the meeting Draper met an insurance broker

and explained that his firm had been sued many times in foreclosure

actions.   The broker inquired how many claims D&G had reported to


                                 5
its insurance carriers seeking defense and indemnification.                    When

Draper informed the broker that D&G had submitted only a few of the

numerous suits and claims to its carriers for coverage, the broker

said that she could probably obtain a professional liability policy

for the firm.

      The broker initially sought insurance for D&G from CNA.                  CNA,

however, rejected D&G’s application because of its policy of not

insuring law firms with prior claims.              The broker then sent D&G an

application form from Carolina Casualty.                    Question 16 of the

Carolina Casualty application asked, “Has any professional liability

claim been made against the Applicant Firm . . . during the past 5

years?” J.A. 17 (emphasis added). If the applicant answered “yes,”

the   form   directed    the   applicant      to     “provide   details   on    the

Claim/Incident Supplemental Form.”                 Id.   The supplemental form

directed the applicant to “complete one form for each claim, suit,

or circumstance during the last 5 years.”                J.A. 22.   Question 6 of

the   supplemental      form   asked,       “Has     this   [claim],   suit,     or

circumstance been reported to any insurance carrier?” Id. (emphasis

added).

      Rather than report the approximately 500 suits filed and the

countless claims made against it, D&G instead provided details on

the supplemental forms regarding only the five nonclient lawsuits

and claims that it had previously submitted to its prior insurance

carriers for coverage. Draper interpreted Question 16 as requesting


                                        6
information relating only to suits and claims previously reported

to its insurance carrier -- whether by clients or nonclients.     His

interpretation was influenced by the broker’s comments to him at the

bar meeting, suggesting that the insurance company would decide

whether to issue a policy based on reported suits and claims only.

Draper and the broker never specifically discussed Question 16 on

the Carolina Casualty application.     On each of the supplemental

forms, D&G answered “yes” to Question 6 -- that it had reported the

claim or suit to its prior professional liability insurance carrier.

D&G verified that all the answers it provided in its application

were true.

     A   Carolina   Casualty   underwriter1   reviewed   the   firm’s

application and determined that only four of the five previous

incidents reported by D&G were responsive to Question 16.      One of

the reported incidents was deemed nonresponsive to the question

because it occurred more than five years before D&G applied for the

Carolina Casualty policy.   Based on the four responsive incidents,

the underwriter determined that D&G presented a slightly higher

probability of future claim activity. The underwriter nevertheless

recommended that the risk was acceptable provided that D&G pay a

higher deductible and premium.   D&G accepted the Carolina Casualty


     1
      The underwriter was employed by Monitor Liability Managers,
Inc., a sister company of Carolina Casualty that handled all
underwriting and claims processing for Carolina Casualty.     For
purpose of simplicity, we refer to the underwriting and claims
officials as Carolina Casualty employees.

                                 7
policy, and the parties agree that the application form completed

by D&G is part of the contract of insurance.2

     In May 2003, less than four months after obtaining the Carolina

Casualty policy, D&G was sued by a nonclient debtor in an adversary

proceeding in bankruptcy court arising out of a foreclosure action

in Maryland.   D&G concedes that the nonclient debtor’s complaint

alleges “errors or omissions by D&G arising out of its professional

services.”   Response Brief, p. 4.   The debtor also sued Option One

Mortgage Corporation, the lender that D&G was representing in the

underlying foreclosure action. The debtor claims that D&G, as legal

counsel for the lender and as substitute trustee in the foreclosure

action, submitted sham fees for services that were never performed

and other fees that were well in excess of the reasonable and

customary charges.   Among several other claims, the debtor alleges

that D&G breached its fiduciary duty to her by claiming bogus and

excessive fees in the foreclosure action and that D&G’s conduct

constituted a violation of the Fair Debt Collection Practices Act.

The debtor seeks class certification, alleging that D&G has charged

sham and excessive fees in hundreds of similar foreclosure actions.




     2
      Under Virginia law, an insurance application is not typically
considered part of the insurance policy but is instead an offer to
enter into a contract. Smith v. Colonial Ins. Co., 515 S.E.2d 775,
777 (Va. 1999). Carolina Casualty, nevertheless, admits that the
application in this case is part of the policy, so we deem it as
such.

                                 8
The debtor also seeks both compensatory and punitive damages in

excess of $1 million.

     Even though the proposed class action was filed by a nonclient

of the firm, D&G reported the lawsuit to Carolina Casualty, seeking

defense   and   indemnification      under     its   “lawyer’s   professional

liability insurance policy.”        J.A. 75.    Carolina Casualty agreed to

provide a defense to D&G under a reservation of rights.              Soon after

the debtor’s suit was filed, Option One, D&G’s client in the

debtor’s foreclosure, demanded defense costs and indemnification

from D&G relating to the proposed class action, claiming that the

debtor’s claim against Option One arose out of the alleged improper

fees charged by D&G.        D&G also notified Carolina Casualty about

Option One’s claim against it.

     Two weeks later, D&G was sued in a similar proposed class

action lawsuit in Maryland state court.              The plaintiffs -- all

nonclient debtors -- alleged that D&G charged excessive and sham

fees in foreclosure actions.          Like the adversary proceeding in

bankruptcy   court,   the   state    court     complaint   alleges    that    D&G

breached its fiduciary duty to the nonclient debtors and that D&G

violated the Fair Debt Collections Practice Act.            In addition, the

state court complaint alleges a negligence claim against D&G.                This

complaint, like the bankruptcy adversary proceeding, seeks damages

in excess of $1 million.




                                      9
     D&G promptly notified Carolina Casualty of the Maryland state

court lawsuit, seeking defense and indemnity under its “Lawyers’

Professional Liability Policy.”     J.A. 82.    Carolina Casualty agreed

to defend and indemnify D&G, but again reserved its rights not to

pay punitive damages. Carolina Casualty further reserved its rights

to continue to investigate other grounds it might have to avoid

providing coverage in both the bankruptcy and Maryland state court

lawsuits.

     Soon after receiving notice of the two proposed class action

suits     against   D&G,   representatives     of   Carolina   Casualty’s

underwriting and claims departments met to discuss the D&G account.

During that meeting, one of the representatives did a computer

search to see if other lawsuits had been filed against D&G.          That

search revealed eight other lawsuits that D&G had not reported on

its insurance application. Based on this new information, the group

determined that it should hire a separate law firm to pursue

rescinding the policy issued to D&G.         That law firm discovered a

total of twenty-four lawsuits filed against D&G that D&G had failed

to report on its insurance application.             Counsel for Carolina

Casualty informed D&G of these newly discovered suits and stated

that they could possibly constitute grounds for rescission of the

policy.    Counsel also stated that Carolina Casualty “is well aware

that the potential for a rescission of a policy is a serious matter,

and therefore, prior to taking any action, wanted to raise this


                                   10
issue with [D&G] to obtain as much information as possible . . . .

Specifically an explanation of why [D&G] did not identify these

numerous other matters on its application for insurance is needed.”

J.A. 108.

     In response, D&G asserted that it answered Question 16 on the

application correctly.     It interpreted Question 16 to mean that “it

was only required to advise Carolina Casualty of professional

liability claims for damages which D&G had determined needed to be

submitted to the E&O carrier for indemnification and/or defense. .

. . The [five] cases previously listed by D&G were cases which it

felt needed to be reported to the carrier(s) for the carrier(s) to

handle.”     J.A. 115 (emphasis added).



                                  III.

     Based     on   its   determination   that   D&G   had   materially

misrepresented its claims history by failing to report the twenty-

four other lawsuits discovered during its investigation, Carolina

Casualty brought this action seeking to rescind D&G’s professional

liability policy.    Carolina Casualty alleges that it would not have

issued the policy to D&G had it known of the twenty-four other

lawsuits.

     After the close of discovery, the parties filed cross-motions

for summary judgment in which each party advanced a different

interpretation of the phrase “professional liability claim” in


                                   11
Question 16 of the insurance application.        The district court ruled

in favor of D&G deciding, as a matter of law, that the phrase

“‘professional     liability   claim’    unambiguously   means   negligence

claims alleged against an attorney by his clients.”         J.A. 458.    To

reach this result, the district court engrafted a limitation under

Virginia legal malpractice law providing that Virginia attorneys owe

a duty to their clients only.           Based on its interpretation that

“professional liability claims” are necessarily claims by clients

only, the district court determined that D&G was not required to

divulge any information on the insurance application about the

approximately 500 lawsuits against D&G filed by nonclients.          Thus,

the district court ruled that D&G had truthfully answered Question

16. The district court further determined that D&G’s listing of the

five claims by nonclients on the insurance application was merely

gratuitous since D&G had no duty to disclose any of the nonclient

claims.



                                   IV.

       Carolina Casualty argues that the district court erred in

granting summary judgment in favor of D&G because it answered

Question 16 untruthfully by failing to fully report its claims

history and that this omission was material to the risk of insuring

D&G.   We agree.




                                    12
     Under Virginia law, an insured is obligated to answer an

application truthfully and fully to give the insurer the opportunity

to make its own inquiry and determine whether to undertake the risk.

Mutual of Omaha Ins. Co. v. Echols, 154 S.E.2d 169, 172 (Va. 1967).

An insurance company is entitled to rescind a policy of insurance

based on a representation in the application only if it clearly

proves that (1) the insured’s representation in the application was

untrue; and (2) the insurance company’s reliance on the false

statement was material to its decision to assume the risk and issue

the policy.    Va. Code Ann. § 38.2-309; Commercial Underwriters Ins.

Co. v. Hunt & Calderone, P.C., 540 S.E.2d 491, 493 (Va. 2001).           The

insurance company is not required to show that the insured’s

misrepresentation was willfully false. Chitwood v. Prudential Ins.

Co., 143 S.E.2d 915, 919 (Va. 1965); Inter-Ocean Ins. Co. v.

Harkrader, 67 S.E.2d 894, 897-98 (Va. 1951).



                                    A.

     To be entitled to rescind the policy, Carolina Casualty must

first   clearly   prove    that    D&G   misrepresented   facts   on     the

application.      To   determine   whether   D&G   answered   Question    16

truthfully, we must first determine the meaning of “professional

liability claim.”

     Under Virginia law, an insurance policy is a contract and, like

any other contract, the words used must be given their ordinary and


                                    13
customary meaning if they are susceptible to such a construction.

Graphic Arts Mut. Ins. Co. v. C.W. Warthen Co., 397 S.E.2d 876, 877

(Va. 1990).   An insurance provision is ambiguous only if it may

reasonably be understood in more than one way or when such language

refers to two or more things at the same time.    Salzi v. Virginia

Farm Bureau Mut. Ins. Co., 556 S.E.2d 758, 760 (Va. 2002).       “A

well-settled principle of contract law dictates that ‘where an

agreement is complete on its face, is plain and unambiguous in its

terms, the court is not at liberty to search for its meaning beyond

the instrument itself.’”   Ross v. Craw, 343 S.E.2d 312, 316 (Va.

1986) (quoting Globe Iron Constr. Co. v. First Nat’l Bank of Boston,

140 S.E.2d 629, 633 (Va. 1965)).

     Thus, we begin our review of the meaning of Question 16 by

giving the words their ordinary and customary meaning.   Question 16

asks, “Has any professional liability claim been made against the

Applicant Firm . . . during the past 5 years?”    J.A. 17 (emphasis

added).   The plain and ordinary meaning of the words “professional

liability claim”    encompasses any type of claim3 attempting to

assert liability against the applicant law firm arising out of its




     3
      The supplemental form clarifies that “claim” includes at
least any “[claim], suit, or circumstance.” J.A. 22. It is clear
that D&G understood “claim” to encompass both demand letters and
lawsuits. On the five supplemental forms it completed, it reported
both demand letters and lawsuits.

                                 14
rendering of legal services.4     Because Question 16 on its face is

susceptible to only one reasonable interpretation, we find it

unambiguous.

     D&G disagrees, arguing instead that “professional liability

claim” is necessarily limited to only negligence claims against an

attorney by his client, i.e, legal malpractice claims.              The primary

shortcoming of this interpretation is that it is not based on the

actual words used in Question 16.            Question 16 does not ask the

applicant to provide information about negligence claims only, and

neither does it limit claims to those made by clients only.                   These

limitations are not found on the face of Question 16. To find them,

D&G must import them from the Virginia law of legal malpractice,

which the unambiguous words of Question 16 do not require or

suggest.    D&G has not cited, nor can we find, Virginia case law

suggesting that “professional liability” is coterminous with “legal

malpractice.”    Because no ambiguity exists on the face of Question

16, we interpret it according to its plain, ordinary meaning without

importing other meanings from outside the text.

     In    the   alternative,   D&G        argues   that    the     meaning     of

“professional    liability   claim”    is    ambiguous     and    that   we   must



     4
      D&G complains that this definition is so broad that it would
include a claim by a court reporter for D&G’s failure to pay for a
deposition transcript. We disagree. Such a claim would not arise
out of the firm’s practice of law. Instead, it would arise out of
D&G’s breach of its contractual obligation to pay the court
reporter for the deposition.

                                      15
construe any ambiguity against Carolina Casualty and in favor of

coverage.     Because we have already concluded that no ambiguity

exists, this argument fails.          However, even if we were to conclude

that the phrase “professional liability claim” is ambiguous, we

would not affirm the district court’s grant of summary judgment

under the unique facts and circumstances of this case.

     Although Virginia follows the general rule that ambiguities in

an insurance contract -- and insurance applications -- will be

construed    in   favor    of   the    insured,5   this   rule   of   contract

construction applies when there is evidence that the ambiguity in

the insurance application could have misled the applicant into

providing false information.          See Andrews v. American Health and

Life Ins. Co., 372 S.E.2d 399, 401 (Va. 1988). For instance, in

Andrews,    the   life    insurance    application   inquired    whether   the

applicant had been treated for “epilepsy or nervous disorder.”             Id.

The applicant did not divulge that he had previously been treated

for depression, and the life insurance company issued the policy

based on the representations in the application.            The insured died

soon after obtaining the policy, and his estate made claim for the



     5
      This general principle of contract construction should not be
applied indiscriminately. It has limits. One implicit limit is
Virginia Code § 38.2-309, which allows an insurer to rescind a
policy if it can clearly show, among other things, that the insured
answered the insurance application untruthfully. It is clear in
this case that D&G answered Question 16 untruthfully – even
according to its own interpretation of the words used -- when it
completed the application.

                                       16
life insurance benefits.      The insurance company sought to rescind

the policy based on the insured’s failure to supply information on

the insurance application about his prior treatment for depression.

Id.   The Virginia Supreme Court determined that “nervous disorder”

was ambiguous, and the insured could have reasonably read “nervous

disorder” not to include the emotional problems for which he had

previously received treatment.      Construing this ambiguity in favor

of coverage, the Virginia Supreme Court ruled that the insurance

company failed to clearly prove that the insured answered the

insurance application untruthfully.       Id. at 402.

      Unlike Andrews where there was no evidence of how the insured

actually interpreted “nervous disorder,” we have in this case

uncontradicted evidence that D&G construed “professional liability

claim” to include claims by nonclients.        In fact, the only claims

that D&G divulged in its application were nonclient claims.            It

cannot now claim, based on its post-litigation construction of

Question 16, that an ambiguity misled it into failing to make a full

and truthful response.      D&G believed that Question 16 encompassed

claims by nonclients, yet it failed to report more than 500

nonclient claims -- some of which were similar to the five claims

that it reported on its application and the two claims for which it

now   seeks   a   defense   and   indemnity   from   Carolina   Casualty.6


      6
      Draper testified that he was influenced by the insurance
broker’s questions about how many claims D&G had reported to its
prior carriers. Based on the broker’s comments, Draper concluded

                                    17
Accordingly, D&G is not entitled to the benefit of Virginia’s rule

of construction in favor of insureds, because it failed to answer

Question 16 fully and truthfully under its literal understanding of

the question when it completed the application.7

     In sum, we conclude that the phrase “professional liability

claim” unambiguously includes all claims seeking to assert liability

against D&G arising out of its practice of law. We also decide that

the approximately 500 lawsuits that were filed against D&G in its

capacity as foreclosure trustee are “professional liability claims.”

Because   D&G   failed   to   report    these   claims   on   its   insurance

application, we conclude, as a matter of law, that D&G failed to

answer Question 16 fully and truthfully.



that the insurance company would be interested only in reported
claims – claims that it had sought a defense and indemnity for from
its prior professional liability carriers.      This conclusion is
soundly contradicted by the record.      First, as Draper readily
acknowledged in his deposition, there is no language in Question 16
that limits the inquiry to reported claims only. Second, Draper’s
conversation with the broker occurred several months before the
broker provided the Carolina Casualty application to D&G, and the
broker did not provide any guidance to D&G relating to Question 16.
Third, the supplemental form -- which is part of the contract --
asks, “Has this [claim or suit that you are divulging to Carolina
Casualty] been reported to any insurance carrier?” J.A. 22. D&G
checked “yes” rather than “no” on all five supplemental forms.
Accordingly, it is clear that Carolina Casualty wanted to know
about reported and nonreported claims and that D&G had no
legitimate basis to believe that Question 16 was literally asking
about reported claims only.
     7
      Although the district court determined that D&G merely
volunteered information regarding nonclient claims, there is no
evidence that D&G reported the nonclient claims thinking it was
providing nonresponsive information.

                                       18
                                B.

     In addition to showing that the insured misrepresented or

omitted facts on an insurance application, to be entitled to rescind

a policy the insurance company must also clearly prove that the

misrepresentation or omission was material to the risk when assumed.

Montgomery Mut. Ins. Co. v. Riddle, 587 S.E.2d 513, 515 (Va. 2003).

A false representation is material if a truthful answer would have

reasonably influenced the insurance company's decision to issue the

policy. Id.; Echols, 154 S.E.2d at 172. When an insurer has proved

that the insured misrepresented a fact in the application, the

materiality of that misrepresentation is a question of law for the

court. United States Fid. and Guar. Co. v. Haywood, 177 S.E.2d 530,

532 (Va. 1970).

         Two Carolina Casualty representatives testified that the

company would not have issued the professional liability policy to

D&G had it known of even a small fraction of the hundreds of

foreclosure lawsuits that D&G failed to report on its application.

These representatives stated that the mere fact that D&G had been

named in so many suits rendered D&G an unacceptable risk to Carolina

Casualty.8 Accordingly, we conclude that D&G’s omission of its full

claim history was material because Carolina Casualty would have been

reasonably influenced to reject D&G’s application for professional



     8
      This testimony is not surprising especially in light of CNA’s
rejection of D&G’s application for having previous claims.

                                19
liability insurance had it known of D&G’s claim history when it

issued the policy.    See Inter-Ocean Ins., 67 S.E.2d at 896-98

(ruling that insured’s failure to disclose on the application that

he had previously been refused insurance was material based on the

insurer’s uncontradicted testimony that the application would have

been denied had the insured provided a truthful answer).



                                V.

     Because we conclude as a matter of law that D&G made a material

misrepresentation on its application for insurance, we reverse the

district court’s grant of summary judgment in favor of D&G and

remand for further proceedings consistent with this opinion.9



                                              REVERSED AND REMANDED




     9
      D&G argues on appeal alternative equitable bases to sustain
the district court’s grant of summary judgment in its favor. The
district court did not reach these alternative bases. We have
reviewed D&G’s alternative arguments and conclude that they do not
entitle D&G to summary judgment.

                                20
HAMILTON, Senior Circuit Judge, dissenting:

         The majority opinion tells us that the meaning of “professional

liability claim” is clear and unambiguous.         In my view, the meaning

of “professional liability claim” is not so cut-and-dry.             Because

the term is ambiguous, it must be construed in favor of the insured,

Draper & Goldberg (D&G).         Construing the term in D&G’s favor,

Carolina Casualty Insurance Company (Carolina) is not entitled to

rescind the policy.          Accordingly, I dissent from the court’s

decision to reverse.

         Question 16 asks, “Has any professional liability claim been

made against the Applicant Firm, or any predecessor in business, or

any of the past or present lawyers in the firm, during the past 5

years?”      (J.A. 17).   The parties concede that the application does

not define the term “professional liability claim.”

         The standard to be applied here is not in dispute.            Under

Virginia law, we must give the words used in an insurance contract

their ordinary and customary meaning.           Graphic Arts Mut. Ins. Co.

v. C.W. Warthen Co., 397 S.E.2d 876, 877 (Va. 1990).

         The term “professional” is defined as “following an occupation

as   a    means   of   livelihood.”    Random    House   Webster’s   College

Dictionary 1056 (2000).        There appears to be no dispute that the

profession referred to in Question 16 is the practice of law by the

lawyers of D&G. A “lawyer” is defined as a “person whose profession

is to represent clients in a court of law or to advise or act for


                                      21
them in other legal matters.”      Id. at 752.    “Liability” is defined

as the state of being “legally responsible.”        Id. at 765.

     Because the term “lawyer” has traditionally been associated

with the representation of clients, it certainly is reasonable to

conclude that “profession,” in the legal context, relates to the

representation of clients, not nonclients.         Thus, it follows that

a reasonable construction of the term “professional liability claim”

is a claim made by a client against the attorney who represented the

client for damages or other relief arising from the representation.

Cf. Ayyildiz v. Kidd, 266 S.E.2d 108, 112 (Va. 1980) (noting that

an “attorney’s liability for damages generally is only to his client

following some dereliction of duty to the client”).             Under this

interpretation of “professional liability claim,” D&G was not

required to disclose the 500 lawsuits at issue.          This is so because

it is undisputed by all parties, including the majority, see ante

at 4, that the 500 lawsuits at issue do not involve claims made by

past or present clients of D&G.

     That is not to say that the above interpretation, which was

adopted by the district court, is the only reasonable interpretation

of the term “professional liability claim.”          The majority itself

provides such an interpretation.           They conclude the “plain and

ordinary   meaning   of   the   words    ‘professional   liability   claim’

encompasses any type of claim attempting to assert liability against

the applicant law firm arising out of its rendering of legal


                                    22
services.”     Ante at 14-15.    According to this definition, if the

claim arose from the rendering of legal services, then the claim was

required to be disclosed.

     It is arguable that performing the duties of a successor

trustee does not involve the rendering of legal services, as

nonlawyers may be appointed successor trustees.             Cf. Cohen v.

Employers Reinsurance Corp., 503 N.Y.S.2d 33, 34-35 (1st Dep’t 1986)

(holding that, unless the policy specifically insures the attorney

for liability arising out of an act or omission while serving as a

trustee, such activities are not covered by a policy which limited

coverage to claims arising out of the performance of professional

services in the insured’s capacity as a lawyer).           However, it is

plausible to interpret “professional liability claim” to include

claims arising out of a lawyer’s performance of successor trustee

duties.    Given such an interpretation, D&G would have been required

to disclose the 500 lawsuits at issue in this dispute.

     With two reasonable and logical interpretations of the term

“professional liability claim,” one in favor of coverage and one

against, the term unquestionably is ambiguous. Indeed, the majority

has not identified a single case which provides a definitive

definition one way or the other.          But, more importantly, even

Carolina conceded below that the term was ambiguous.               As the

district     court   noted,   Carolina   conceded   that   the   term   was

susceptible to more than one interpretation when it stated that the


                                    23
“‘five claims reported by D&G in response to Question 16 are not all

classic   “professional   liability”   claims   as   the   term   may   be

conservatively interpreted.’”    (J.A. 461) (citation omitted); cf.

Home Ins. Co. v. Law Offices of Jonathan DeYoung, P.C., 32 F. Supp.

2d 219, 230 (E.D. Pa. 1998) (noting that “Pennsylvania courts have

found that where a professional liability insurance policy fails to

define ‘professional services,’ as is the case here, the phrase

standing alone can be deemed ambiguous, and therefore, must be

construed against the insurer”).

     Under Virginia law, if a term in an insurance contract is

ambiguous, “it will be construed against the insurance company and

in favor of coverage.”    Andrews v. American Health and Life Ins.

Co., 372 S.E.2d 399, 401 (Va. 1988).     Applying this long-standing

principle, it is evident that Carolina is not entitled to recission.

Question 16 can be read to ask the law-firm applicant to disclose

if any of their attorneys had claims made against them by a client

for damages or other relief arising from the attorneys’ or the

firm’s representation.    As the record discloses no such claims, it

cannot be said that D&G provided materially false information.          Cf.

id. at 402 (“Because we conclude that the phrase ‘nervous disorder,’

as used in this application, is ambiguous and could be read to refer

to only physical disorders, we find that Ballenger did not answer

question four untruthfully when he failed to disclose his periods

of depression for which he sought medical attention.”).


                                 24
       Citing Andrews, the majority states that Virginia’s ambiguity

rule of insurance contract construction applies only “when there is

evidence that the ambiguity in the insurance application could have

misled the applicant into providing false information.” Ante at 16.

From this premise, the majority concludes that Virginia’s ambiguity

rule    does     not   apply   here   because   D&G    construed    the   term

“professional liability claim” to include claims by nonclients. One

searches in vain in Andrews and Virginia’s ambiguity case law for

the subjective intent limitation formulated by the majority.               In

fact, there is nothing extraordinary about Virginia’s ambiguity

rule.      As noted above, under Virginia law, “[i]f the term is

ambiguous, it will be construed against the insurance company and

in favor of coverage.”         Andrews, 372 S.E.2d at 401.     Moreover, we

examine the language of an insurance contract from an objective,

rather than a subjective, standpoint.            Cf. Dan River, Inc. v.

Commercial Union Ins. Co., 317 S.E.2d 485, 487 (Va. 1984) (holding

“[t]he interpretation of policy language” authorizing notice when

considered appropriate “in the opinion of the insured” nevertheless

“demands    an    objective    determination”   made   “from   an   objective

standpoint”).      Thus, what D&G’s principals allegedly understood or

did not is of no moment.          Rather, what is of consequence is the

meaning of “professional liability claim” in the objective sense.

Under Virginia law, the term is ambiguous and must be construed

against Carolina and in favor of coverage.


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     It follows that I would affirm the well-reasoned opinion of the

district court.




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