Docket – February 28, 2019

4th U.S. Circuit Court of Appeals

Gateway Residences at Exchange LLC v. Ill. Union Ins. Co. (P), 4th Cir. (Diaz) from EDVA at Alexandria (O’Grady).

Having been awarded more than $900,000 for a contractor’s faulty workmanship, a building owner sued to collect that judgment from the contractor’s liability insurer. But the relevant policy covered only claims reported to the insurer during the policy period, and that policy expired 19 months before the insurer learned about the building owner’s claim. The district court properly denied the building owner’s claim that it may nonetheless recover on the policy because, pursuant to Code § 38.2-2226, the insurer waived certain defenses by failing to promptly provide notice of its coverage denial.

The building owner’s effort to shoehorn this dispute into § 38.2-2226 misconstrues the insurance contract at issue. Under the insurer’s claims-made-and-reported policy, the act triggering coverage was not the owner’s 2014 demand for the judgment, but rather the communication of that claim to the insurer, which didn’t happen until well after the policy expired.

This case might come out quite differently had the insured contractor reported the owner’s demand in 2014 or bought an occurrence policy. But here, the insured bought a claims-made-and-reported policy and reported no claim during the policy period. It didn’t “breach” the policy by not reporting the 2014 demand any more than one breaches a fire insurance policy by incurring damage from a flood.

Accordingly, § 38.2-2226 does not apply to the insurer’s denial of coverage, and summary judgment was therefore proper.


Sharp Farms v. Speaks (P), 4th Cir. (Gregory) from EDNC at Raleigh (Dever).

Since its inception in 1946, a tobacco cooperative administered a federal price-support program designed to stabilize tobacco prices for member growers. That program ended in 2004, when Congress enacted the Fair and Equitable Tobacco Reform Act. By this point, the cooperative had accumulated a capital reserve fund of hundreds of millions of dollars generated from the members’ tobacco and/or participation fees. After a class of members sued for distribution of the reserve funds, the district court approved a $24 million settlement as fair, reasonable, and adequate for the class members. However, a parallel class action was already pending against the cooperative in state court, and its plaintiffs arguably had much stronger claims. The earlier class members claim, at bottom, that they got a raw deal.

This court cannot agree that the earlier class members’ interests were adequately protected or that a $24 million settlement is fair, reasonable, and adequate for the class.

Affirmed in part; reversed in part and remanded. Judge Quattlebaum wrote a concurring opinion.

Supreme Court of Virginia

Gadams v. The Nolde Bakery Condo. Ass’n (U), SCV (per curiam) from City of Richmond.

In this action for breach of fiduciary duties, the circuit court properly granted the defendants’ plea in bar but erred in not awarding attorneys’ fees and costs.

The claims at issue were filed outside the two-year statute of limitations, which is not tolled by obstruction, by extraordinary circumstances, or by the defendants’ control of the condominium association board. This court also declines to extend the continuous undertaking rule to assess when the claims accrued. Accordingly, dismissal of the amended complaint was proper.

However, the circuit court erred when it denied the defendants an award of attorneys’ fees and costs, seemingly based upon the determination that Gadams and Nolde Bakery acted in bad faith. The former directors of the association were named defendants in this action because of their role. They “entirely prevailed” in their defense when the amended complaint was dismissed. Thus, under the association’s bylaws, they are entitled to reasonable expenses incurred in connection with this case.

Affirmed in part; reversed, vacated, and remanded in part.

Categories: Daily Dockets

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