Appalachian Regional Healthcare v. Cunningham

PRESENT: All the Justices
APPALACHIAN REGIONAL HEALTHCARE, ET AL.
OPINION BY
v. Record No. 161767 	JUSTICE D. ARTHUR KELSEY
NOVEMBER 22, 2017
JACQUELINE K. CUNNINGHAM,
COMMISSIONER OF INSURANCE, ET AL.
FROM THE STATE CORPORATION COMMISSION
The State Corporation Commission (“SCC”) denied claims filed by a group of Kentucky
hospitals (the “Hospitals”) requesting reimbursement for $439,375.20 in legal fees and costs
from Reciprocal of America (“ROA”), an insolvent insurer. The Hospitals appeal, arguing that
certain agreements constituting an assumption reinsurance transaction provided a contractual
basis for the claims and that the SCC erred in concluding otherwise. We disagree and affirm.
I.
In the late 1970s and early 1980s, a group of Kentucky hospitals created two self-insured
Trusts — the Compensation Hospital Association Trust (“CHAT”) and the Kentucky Hospital
Association Trust (“KHAT”) (collectively, the “Trusts”).1 See 1 J.A. at 422. CHAT provided
workers’ compensation and employers’ liability coverage to the Hospitals and other healthcare
providers. KHAT provided professional liability and general liability coverage to the Hospitals
and other healthcare providers. The Hospitals were member insureds of CHAT and KHAT.
1 The 24 Hospitals that participated in this SCC case are listed in footnote 1 of the SCC’s
final order. See In re Appalachian Reg’l Healthcare, Case No. INS-2014-00244 (State Corp.
Comm’n Aug. 15, 2016) (“Final Order”), http://www.scc.virginia.gov/docketsearch/DOCS/
3%40%23g01!.PDF.

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A. THE M ERGER
In 1997, CHAT and KHAT each entered into “Master Agreements” with ROA that
merged both Trusts into ROA as the surviving entity. See id. at 66-105, 112-50. The parties2
executed the Master Agreements and related agreements as part of a holistic transaction and,
thus, accepted that the agreements should be construed together. See id. at 101, 146
(incorporating exhibits into the Master Agreements).3 The Master Agreements also stipulated
that the “provisions of this Agreement were negotiated by the parties hereto and such Agreement
shall be deemed to have been drafted by all of the parties hereto,” id., thereby seeking to avoid
the application of the contra proferentem canon of construction.4
Accompanying each of the Master Agreements was an “Indemnification Agreement” in
which ROA agreed to indemnify the Trusts for certain kinds of liabilities and expenses. See id.
at 334-40, 342-48. In the Indemnification Agreements, ROA agreed
2 CHAT, KHAT, and ROA’s predecessor, The Virginia Insurance Reciprocal (“TVIR”),
were the original parties to the Master Agreements and accompanying Indemnification
Agreements. TVIR was a licensed Virginia insurance reciprocal that was “authorized to
underwrite” professional, general, workers’ compensation, and employers’ liability coverage in
Kentucky and other states. 1 J.A. 67-68, 113. For ease of reference, we will refer to ROA
instead of TVIR.
3 See generally Bailey v. Town of Saltville, 279 Va. 627, 633, 691 S.E.2d 491, 493 (2010)
(stating that “where two papers are executed at the same time or contemporaneously between the
same parties, in reference to the same subject matter, they must be regarded as parts of one
transaction, and receive the same construction as if their several provisions were in one and the
same instrument” (alteration omitted) (quoting Oliver Ref. Co. v. Portsmouth Cotton Oil Ref.
Corp., 109 Va. 513, 520, 64 S.E. 56, 59 (1909))); Musselman v. Glass Works, L.L.C., 260 Va.
342, 346, 533 S.E.2d 919, 921 (2000) (collecting cases and stating that “[w]hen a business
transaction is based on more than one document executed by the parties, we will construe the
documents together to determine the intent of the parties”).
4 See generally Doctors Co. v. Women’s Healthcare Assocs., 285 Va. 566, 573, 740
S.E.2d 523, 526 (2013) (collecting cases and stating that “[w]e have consistently held that ‘in the
event of an ambiguity in the written contract, such ambiguity must be construed against the
drafter of the agreement’” (alteration omitted) (quoting Cappo Mgmt. V, Inc. v. Britt, 282 Va. 33,
37, 711 S.E.2d 209, 211 (2011))).

3
to indemnify and hold harmless [each Trust] and its member-
insureds from any and all Damages arising out of or in
connection with the Business, the Assumed Liabilities, the
conveyance and delivery of the Transferred Assets, or any
related transactions, provided no such indemnification shall be
provided for any and all Damages of such member-insureds
relating to their obligations under their respective policies of
insurance issued by [ROA]. The indemnification by [ROA] . . .
shall include reasonable costs and expenses (including fees and
expenses of [each Trust’s] or any of its member-insured’s
counsel) in defending itself against any claim Damages arising
from or in connection with the Damages.
Id. at 336, 344 (quoted verbatim in pertinent part). Several of the terms in these Indemnification
Agreements had contractually defined meanings:
 	“Damages” meant “any liability, expense, cost or obligation, however
incurred or characterized, assumed by [ROA] as provided for in this
Agreement.” Id. (emphasis added).
 	“Assumed Liabilities” included “all obligations” of the Trusts “in
connection with [their] Business except for the Excluded Liabilities.”
Id. The Master Agreements clarified that ROA agreed “to assume and
become responsible for all of the Assumed Liabilities at the Closing
Date.” Id. at 72, 118; see also id. at 176-81 (“Agreement of
Assumption”).
 	“Business” was defined according to “the meaning set forth in the
Recitals,” which described the Trusts’ pre-merger self-insurance
business. Id. at 335-36, 343-44.
Because both Trusts were wholly merged into ROA, they had no separate legal existence
after the merger. Neither Trust continued to conduct its pre-merger self-insurance business. The
liabilities that ROA assumed included the business liabilities of the Trusts prior to the merger. In
that context, the Indemnification Agreements expressly addressed legal fees. ROA agreed to
indemnify the Trusts for fees and associated costs that the Trusts or any of their member insureds
incurred “in defending [themselves] against any claim Damages arising from or in connection
with the Damages.” Id. at 336, 344.

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B. ROA IN R ECEIVERSHIP
In 2003, the Circuit Court of the City of Richmond placed the financially troubled ROA
into receivership and appointed the SCC as the Receiver, the Commissioner of Insurance as the
Deputy Receiver, and a Special Deputy Receiver. The SCC later found ROA to be insolvent and
ordered its liquidation. During the liquidation process, the Hospitals became involved in two
separate judicial proceedings.
The Deputy Receiver initiated the first case (“the Virginia litigation”) by filing an
application with the SCC requesting authorization for ROA to continue paying workers’
compensation claims that ROA had assumed from various self-insured trusts and group self-
insurance associations, including CHAT and KHAT. See id. at 579. He filed the application
because various state guaranty associations, including the Kentucky Insurance Guaranty
Association (“KIGA”), had denied or were likely to deny guaranty fund coverage for these
claims. See id.
The Hospitals joined the Virginia litigation in support of the Deputy Receiver, appearing
as the “Kentucky Claimants” or the “Claimants” throughout this litigation and the receivership
proceeding. See id. at 2-22, 380 & n.25, 382, 384, 586 & n.25, 588, 590; 2 id. at 667-68, 700-20,
768-69 nn.30-31, 938 n.25. After the Hearing Examiner issued his report in the Virginia
litigation, the SCC adopted most of his findings, including his conclusion that “[t]he Assumed
Claims constitute ‘claims of other policyholders arising out of insurance contracts’ pursuant to
[Code § 38.2-1509(B)(1)(ii)]” and that the claims were therefore entitled to second priority in the
asset distribution scheme for insolvent insurers under Code § 38.2-1509(B)(1)(ii). See 1 J.A. at
527-45.

5
While the Virginia litigation was pending, the Hospitals initiated the second case by
filing a suit for declaratory and injunctive relief in a Kentucky trial court (the “Kentucky
litigation”). See id. at 549-58. They claimed that because of ROA’s insolvency, KIGA was
responsible for the claims that ROA had assumed. The court ultimately held in favor of the
Hospitals. See id. at 610-31. The court reasoned that, under Kentucky law, the agreements
operated as a novation that extinguished all coverage liabilities of the Trusts and their member
insureds and placed ROA in the Trusts’ shoes as the sole source of coverage for these claims.
See id. at 620-21.
After their victories in the Virginia and Kentucky proceedings, the Hospitals filed claims
with the Special Deputy Receiver requesting payment of $439,375.20 for legal fees and costs
that they had incurred in those cases. They claimed that the 1997 agreements obligated ROA to
pay their fees and costs. The Special Deputy Receiver, in his initial claim determination, denied
the claims, and the Deputy Receiver affirmed. The Hospitals thereafter appealed to the SCC.
The SCC appointed a Hearing Examiner, who granted summary judgment to the Deputy
Receiver, finding that the Indemnification Agreements did not require ROA to indemnify the
Hospitals. In its final order, the SCC agreed with the Hearing Examiner and held that the
Hospitals had no contractual right to reimbursement for their legal fees and costs.
II.
On appeal, the Hospitals contend that the SCC misconstrued the applicable contract
provisions and that, properly construed, the provisions required ROA to indemnify them for all
legal fees and costs incurred in the Virginia and Kentucky cases.5 We disagree.
5 The Hospitals support their argument with seven assignments of error. Assignment of
Error 7 states:

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A.
The Indemnification Agreements specifically addressed the question of indemnity for
legal fees and costs:
The indemnification by [ROA] . . . shall include reasonable
costs and expenses (including fees and expenses of [each
Trust’s] or any of its member-insured’s counsel) in defending
itself against any claim Damages arising from or in connection
with the Damages.
Id. at 336, 344 (quoted verbatim in pertinent part). Thus, to trigger this indemnity, the Hospitals
must have incurred their legal fees and costs while “defending” themselves “against any claim”
for contractually defined “Damages.” Id.6
The Commission erred in its Final Order by concluding that
because the transfer of the Assumed Claims (Liabilities) did not
include an obligation to seek the establishment of guaranty fund
coverage in the event of insolvency of ROA, the Indemnification
Agreements are not valid and therefore not enforceable by the
Hospitals to obtain indemnification of legal fees and expenses.
Appellants’ Br. at 15 (emphasis added). The SCC, however, never held that the Indemnification
Agreements were invalid or unenforceable. Instead, the SCC found that “the plain language of
the Indemnification Agreements does not require ROA to provide indemnification for the
requested legal fees.” 1 J.A. at 1022. We thus do not address Assignment of Error 7 but instead
address only the actual holding of the SCC. See Rule 5:21(a)(7) (requiring the assignments of
error to “identify the specific errors in the rulings below”).
Similarly, Assignment of Error 4 alleges that the SCC “erred in its Final Order by ruling
that the Appellants were not afforded Class II priority pursuant to [Code § 38.2-1509(B)(1)(ii)],
as they are not claims of policyholders arising out of insurance contracts.” Appellants’ Br. at 14.
However, the SCC’s Final Order does not contain any ruling regarding whether these indemnity
claims arise out of insurance contracts or are entitled to second priority status under Code § 38.2-
1509(B)(1)(ii), and thus we will also not consider this Assignment of Error. In any event, our
holding moots the need to address this Assignment of Error.
6 The Hospitals do not address the point, but the record reflects that the KHAT Master
Agreement included a Kentucky choice-of-law provision, see 1 J.A. at 100, while the CHAT
Master Agreement included a Virginia choice-of-law provision, see id. at 145. Moreover, both
Indemnification Agreements also contain a Kentucky choice-of-law provision. See id. at 337,
345. In the absence of a showing to the contrary, we presume that foreign law — whether
applicable because of a choice-of-law clause or because of nonconsensual choice-of-law
principles — is the same as the law of the forum, which is Virginia in this case. See Babcock &

7
We begin by asking whether this contractual text has a “usual, ordinary, and popular
meaning.” Babcock & Wilcox Co. v. Areva NP, Inc., 292 Va. 165, 179, 788 S.E.2d 237, 244
(2016) (citation omitted). If so, the interpretative task is over. “When courts search for the
parties’ intent in an unambiguous contract provision, the search ends where it begins — with the
plain, usual, and ordinary meaning of the words themselves.” Id. at 188, 788 S.E.2d at 249.
“Each party to a contract,” Justice Holmes reminds us, “has notice that the other will understand
his words according to the usage of the normal speaker of English under the circumstances, and
therefore cannot complain if his words are taken in that sense.” Id. (alteration omitted) (quoting
Oliver Wendell Holmes, The Theory of Legal Interpretation, 12 Harv. L. Rev. 417, 419 (1899)).7
In our opinion, the plain meaning of the phrase “defending . . . against any claim,” 1 J.A.
at 336, 344, is that the Hospitals can seek legal fees and costs for defending a claim filed by
someone else — not for asserting a claim against someone else. Neither the Virginia litigation
Wilcox Co. v. Areva NP, Inc., 292 Va. 165, 172 n.2, 788 S.E.2d 237, 240 n.2 (2016); Norfolk &
W. Ry. v. Denny’s Adm’r, 106 Va. 383, 400, 56 S.E. 321, 327 (1907); cf. Mountain Lake Land
Co. v. Blair, 109 Va. 147, 151, 63 S.E. 751, 752 (1909); Restatement (Second) of Conflict of
Laws § 136 cmt. h (1971).
7 Though the Hospitals and the SCC offer different interpretations of the governing
contractual terms, they agree that the text is unambiguous. See, e.g., Appellants’ Br. at 1, 29-34;
Appellees’ Br. at 5-6, 13-15, 19, 21, 25; Reply Br. at 8-10.
As we have often said, “a contract is not ambiguous simply
because the parties to the contract disagree about the meaning of
its language.” We concede the possibility that the parties’
interpretative deadlock implies the possibility that the correct
meaning may be somewhere between the two. Even so, we neither
presume this to be the case nor discount the possibility that it might
be so.
Babcock & Wilcox Co., 292 Va. at 179, 788 S.E.2d at 244 (alteration and citation omitted).
Based upon our de novo review of the contractual provisions, we agree with the parties that the
provisions are unambiguous, and thus, we need not resort to extrinsic evidence or to the canons
of construction that are applicable to ambiguous contracts. See TravCo Ins. v. Ward, 284 Va.
547, 558, 736 S.E.2d 321, 328 (2012), acq., 504 Fed. Appx. 251, judgment entered, No. 10-
1710, 2013 U.S. App. LEXIS 1237 (4th Cir. Jan. 15, 2013).

8
nor the Kentucky litigation fits within this contractual paradigm. The Hospitals voluntarily
intervened in the Virginia litigation as “Claimants.” See supra at 4. Their goal was to support
the Deputy Receiver’s attempt to place the liabilities that ROA had assumed from the Trusts in
line for priority status upon ROA’s liquidation. In this respect, the Hospitals were not defending
themselves; they were trying to moot the need to ever do so.
The same can be said of the Kentucky litigation. The Hospitals filed a declaratory
judgment action against KIGA, seeking to ensure that the state guaranty association would pay
the underlying workers’ compensation and liability claims so that the Hospitals would not have
to do so themselves. In neither case were the Hospitals defending themselves against claims
asserted against them. See Oral Argument Audio at 6:31 to 6:43 (conceding the point in the
context of workers’ compensation claims).
The contractual definition of “Damages” reinforces our conclusion. The Indemnification
Agreements defined “Damages” as “any liability, expense, cost or obligation, however incurred
or characterized, assumed by [ROA] as provided for in this Agreement.” 1 J.A. at 336, 344
(emphasis added). “Assumed Liabilities” included “all obligations” of the Trusts “in connection
with [their] Business except for the Excluded Liabilities.” Id. The Master Agreements clarified
that ROA agreed “to assume and become responsible for all of the Assumed Liabilities at the
Closing Date.” Id. at 72, 118; see also id. at 176-81 (“Agreement of Assumption”). The
Indemnification Agreements also defined “Business” according to “the meaning set forth in the
Recitals,” which described the Trusts’ pre-merger self-insurance business. Id. at 335-36, 343-44.
The plain meaning of “defending . . . against any claim,” id. at 336, 344, and the specific
contractual definition of “Damages,” among other terms, together support the SCC’s
characterization of the agreements as an assumption reinsurance transaction that effected a

9
complete novation substituting ROA for the Trusts. In an assumption reinsurance contract, the
assuming reinsurer “steps into the shoes of the ceding company with respect to the reinsured
policy, assuming all its liabilities and its responsibility to maintain required reserves against
potential claims. The assumption reinsurer thereafter receives all premiums directly and
becomes directly liable to the holders of the policies . . . .” Colonial Am. Life Ins. v.
Commissioner, 491 U.S. 244, 247 (1989), superseded on other grounds by statute, Omnibus
Budget Reconciliation Act of 1990, Pub. L. No. 101-508, § 11301(a), 104 Stat. 1388, 1388-448
(codified as amended at I.R.C. § 848(g) (2011)); see also Hartford Fire Ins. v. California, 509
U.S. 764, 806-07 (1993); Jurupa Valley Spectrum, LLC v. National Indem. Co., 555 F.3d 87, 90
(2d Cir. 2009); Merit Life Ins. v. Commissioner, 853 F.2d 1435, 1436 (2d Cir. 1988), vacated on
other grounds, 492 U.S. 902 (1989).8
Both textually and contextually, the indemnity provision applies only to liabilities that
CHAT and KHAT had to their insureds prior to the ROA merger. ROA’s duty to indemnify
8 Many commentators differentiate between an “assumption” agreement and a traditional
“reinsurance” agreement. See, e.g., 7 Daniel W. Gerber et al., New Appleman on Insurance Law
Library Edition § 71.02[5][d], at 71-19 (Jeffrey E. Thomas et al. eds., 2016); 1 Joseph A. Joyce,
A Treatise on the Law of Insurance of Every Kind § 117, at 353-54 (2d ed. 1917); 1A Steven
Plitt et al., Couch on Insurance 3d § 9:4, at 9-19 to -21 (rev. ed. 2010); William R. Vance,
Handbook on the Law of Insurance § 207, at 1067, 1073 (3d ed. 1951).
We acknowledge the distinction that these authors make between pure reinsurance
agreements and assumption agreements. However, because the definitions of “assumption
reinsurance” provided by the federal courts describe the nature of the agreements at issue in this
case, we choose to employ the term “assumption reinsurance” with the understanding that these
agreements do not amount to pure reinsurance agreements. See 9 Patrick H. Cantilo et al., New
Appleman on Insurance Law Library Edition § 104.04[5], at 104-110 (Jeffrey E. Thomas &
Susan Lyons eds., 2016) (describing the ROA receivership and labeling the very agreements at
issue here as “assumption reinsurance” transactions); see also Wheeler v. Metteauer, 283 S.W.2d
95, 99-100 (Tex. Civ. App. 1955) (observing that, in some contexts, “‘[r]einsurance’ is also used
to denote a contract between two insurers by which one assumes the risks of the other and
becomes substituted to its contracts so that on the assent of the original policyholders the liability
of the first insurer ceases and that of the second is substituted,” and finding that the bordereaux at
issue accomplished such a substitution of liability).

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could rise no higher than the pre-merger obligations of the two Trusts — for those were the only
liabilities that ROA assumed, and thus the only “Damages” for which it was responsible to
indemnify the Trusts, see 1 J.A. at 336, 344. This contractual definition of “Damages”
necessarily excludes any obligation for ROA to indemnify the Trusts and their member insureds
for the legal fees and costs incurred in the Virginia and Kentucky cases.9
With respect to the Virginia litigation, neither Trust had any pre-merger obligation to pay
legal fees and costs incurred by its member insureds in the event that the member insureds joined
a receivership proceeding involving either Trust. Consequently, if there had been no merger and
the Trusts had themselves become insolvent, the Hospitals would have had no contractual right
to recover the legal fees and costs incurred in filing claims in the receivership proceeding and in
seeking to establish the proper priority of their claims in the distribution plan. ROA, therefore,
did not assume these liabilities from the Trusts because they never existed.
The same logic applies to the Kentucky litigation. Neither Trust had any pre-merger
obligation to pay legal fees and costs incurred by its member insureds in the event that the
member insureds, upon the liquidation of either trust, filed suit against the state insurance
9 When two provisions of a contract conflict with one another, and one provision
specifically addresses the dispute at hand while the other remains general, we have consistently
held that the specific provision will govern over the general. See, e.g., Condominium Servs., Inc.
v. First Owners’ Ass’n of Forty Six Hundred Condo., Inc., 281 Va. 561, 573, 709 S.E.2d 163,
170 (2011). See generally 2 E. Allan Farnsworth, Farnsworth on Contracts § 7.11, at 297-98 (3d
ed. 2004); Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts
183-88 (2012). The broad and general language of the first portion of the indemnity clause does
not conflict with the more specific provision limiting recovery of fees and costs to assumed
liabilities because both provisions use the contractually defined term “Damages,” meaning “any
liability, expense, cost or obligation, however incurred or characterized, assumed by [ROA].” 1
J.A. at 336, 344. But even if these two provisions were in conflict with one another, the specific
provision pertaining to the recovery of fees and costs would govern, limiting Appellants’
recovery to fees and costs incurred “in defending [themselves] against any claim Damages
arising from or in connection with” the liabilities “assumed by [ROA].” Id. (emphasis added).

11
guaranty association seeking coverage for unpaid claims. Without the merger, the Hospitals
never could have initiated such litigation against KIGA because CHAT and KHAT were never
members of KIGA. ROA, therefore, did not assume such liabilities because they never existed.
B.
We acknowledge but find unpersuasive the thematic counterarguments of the Hospitals.
They contend that in the Virginia and Kentucky proceedings they were “defending [their] status
as policyholders of ROA and their legal rights in the receivership.” Appellants’ Br. at 1. From
this premise, they argue that the indemnity provision required ROA to pay their legal fees and
costs associated with the Virginia and Kentucky cases. By “limit[ing] the definition of
‘Damages’ a priori and in isolation,” the Hospitals assert, the SCC and the Deputy Receiver
“simply divorce a few words from the entirety of the Agreements to support their own flawed
position.” Reply Br. at 4.
The thrust of the Hospitals’ argument is that their participation in the Virginia and
Kentucky cases was simply an effort to defend themselves against liability for unpaid claims and
to protect their rights to payments from the receivership estate and to guaranty fund coverage.
We see the point, which, colloquially speaking, is merely an application of the useful axiom that
the best defense is a good offense. And we have no doubt that this stratagem, popular in war and
game theory, may have a favored place in litigation as well.
But acknowledging the utility of the concept does not mean that we must interpret the
phrase “defending . . . against any claim” by someone, 1 J.A. at 336, 344, to mean “asserting a
claim” against anyone. Nor can we overlook the contractual definition of “Damages,” which is
limited to liabilities, costs, expenses, or obligations “assumed by [ROA]” from the Trusts at the
time of the merger. Id. We thus do not believe that the SCC or the Deputy Receiver “simply

12
divorce[d] a few words” from the larger context of the merger transaction. Reply Br. at 4. They
instead took the ordinary and plain meaning of the phrase “defending itself against any claim,” 1
J.A. at 336, 344, and applied that plain meaning in light of the specific contractual definition of
the word “Damages.”
With their broader interpretation, the Hospitals seek to establish a contractual framework
for a contingency unaddressed by any of the voluminous provisions of the various integrated
agreements — indemnification for litigation in the event that ROA became insolvent. We offer
no criticism of the Hospitals’ proactive approach in either the Virginia or the Kentucky
proceedings. Nor do we suggest that a properly drafted indemnity provision could not have
shifted the responsibility for legal fees and costs in engaging in such litigation to ROA in the
event of its insolvency.
That said, “[w]e have neither the duty nor the inclination to creatively construe an
unambiguous contractual phrase ‘so as to conform it to the court’s notion of the contract the
parties should have made’ under the circumstances.” Babcock & Wilcox Co., 292 Va. at 189,
788 S.E.2d at 249 (alteration and citation omitted). Instead, our duty is “to declare what the
instrument itself says it says. What the parties claim they might have said, or should have said,
cannot alter what they actually said.” Id. at 189, 788 S.E.2d at 249-50 (alteration and citations
omitted).10
10 On brief, the Hospitals rely upon the principle that insurance policies should be
interpreted in favor of insureds. See Appellants’ Br. at 38-41. That canon of construction,
however, exists in part because “[i]nsurance policies are contracts whose language is ordinarily
selected by insurers rather than by policyholders” and applies only “where there is doubt as to
[the] meaning” of the provisions and “two [contrary] constructions are equally possible.”
Government Emps. Ins. v. Moore, 266 Va. 155, 165, 580 S.E.2d 823, 828 (2003) (emphasis in
original); see also PBM Nutritionals, LLC v. Lexington Ins., 283 Va. 624, 634, 724 S.E.2d 707,
713 (2012) (“‘When an insurer drafts policy language setting forth exclusions that limit
coverage under a policy, the insurer is required to use language that clearly and unambiguously

13
III.
The SCC correctly held that the governing contractual provisions did not obligate ROA
to reimburse the Hospitals for legal fees and costs that they incurred in the Virginia and
Kentucky proceedings. We thus affirm.
Affirmed.
defines the scope of the exclusions.’ Exclusionary language in an insurance policy will be
construed most strongly against the insurer . . . . [But] ‘where the exclusion is not ambiguous,
there is no reason for applying the rules of contra proferentem or liberal construction for the
insured.’” (emphasis added) (citation omitted) (quoting 2 Eric Mills Holmes & Mark S. Rhodes,
Holmes’s Appleman on Insurance, 2d § 7.2, at 280 (1996 & Supp. 2009))). In this case, the
parties contractually stipulated that “[t]he provisions of this Agreement were negotiated by the
parties hereto and such Agreement shall be deemed to have been drafted by all of the parties
hereto.” 1 J.A. at 101, 146. They also contend, and we agree, that the disputed provisions are
not ambiguous. See supra note 7. The interpretative presumption favoring insureds, therefore,
plays no role in our analysis.
In a related vein, Assignment of Error 2 alleges that the SCC “erred in its Final Order by
ruling that the Indemnification Agreements . . . were not contracts of insurance, but contracts of
indemnity.” Appellants’ Br. at 14. However, the SCC never made such a finding. The Hearing
Examiner found that “[t]he Indemnification Agreements are not contracts of insurance, they are
contracts of indemnity.” 2 J.A. at 928. The SCC merely acknowledged, but never adopted, this
finding in its Final Order. See id. at 1014-22. We thus decline to address this Assignment of
Error. See supra note 5. In any event, our conclusion that the contra proferentem canon does not
apply to these agreements renders this Assignment of Error moot.