Wells Fargo Equipment Finance, Incorporated v. State Farm Fire and Casualty Company; State Farm Mutual Automobile Insurance Company

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1635
WELLS FARGO EQUIPMENT FINANCE, INCORPORATED,
Plaintiff - Appellee,
v.
STATE FARM FIRE AND CASUALTY COMPANY; STATE FARM MUTUAL
AUTOMOBILE INSURANCE COMPANY,
Defendants - Appellants,
and
MIRIAM TRUCKING, INCORPORATED; RODOLFO TEKLE; RODO,
INCORPORATED,
Defendants.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Liam O’Grady, District
Judge. (1:10-cv-01246-LO-IDD)
Argued: September 19, 2012 Decided: October 4, 2012
Before MOTZ, KING, and WYNN, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Dawn Boyce, BANCROFT, MCGAVIN, HORVATH & JUDKINS, PC,
Fairfax, Virginia, for Appellants. Timothy Stephen Baird, KUTAK
ROCK LLP, Richmond, Virginia for Appellee. ON BRIEF: Loc

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Pfeiffer, Alison W. Feehan, KUTAK ROCK LLP, Richmond, Virginia
for Appellee.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:
This diversity case arises from a dispute as to whether
certain insurance policies exclude coverage to a loss payee when
the primary insured caused the loss by intentionally burning
insured trucks. Applying Virginia law, the district court
concluded that the exclusion did not bar coverage and granted
the insured’s loss payee judgment on the pleadings. We affirm.
I.
The parties do not contest the relevant facts. In April
and May 2008, Wells Fargo Equipment Finance, Inc. (“Wells
Fargo”) loaned RODO, Inc. (“RODO”) funds for the purchase of
three trucks. The loan contracts granted Wells Fargo a security
interest in the trucks. In July 2008, RODO assigned the loan
contracts and trucks to Miriam Trucking (“Miriam Trucking”).
In August 2008, State Farm Fire and Casualty Company
(“State Farm Fire”) issued an insurance policy to Miriam
Trucking covering two of the trucks, and State Farm Mutual
Automobile Insurance Company (“State Farm Auto”) issued an
insurance policy covering the third truck. Both policies named
Wells Fargo as the loss payee with respect to the trucks.
On December 13, 2008, a fire destroyed two of the trucks.
As the parties confirmed at oral argument, they have stipulated

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for the purposes of this case that Miriam Trucking intentionally
destroyed the trucks.
Wells Fargo filed claims with State Farm Fire and State
Farm Auto (collectively “State Farm”), which State Farm refused
to pay. Wells Fargo then brought suit against State Farm
claiming, inter alia, breach of contract. Wells Fargo moved for
judgment on the pleadings as to these claims, which the district
court granted. State Farm now appeals.∗
II.
We review de novo the district court’s grant of a Rule
12(c) motion for judgment on the pleadings, applying the same
standard as would apply to a Rule 12(b)(6) motion to dismiss for
failure to state a claim. Independence News, Inc. v. City of
Charlotte, 568 F.3d 148, 154 (4th Cir. 2009). Thus, to uphold a
grant of judgment on the pleadings, we must find that the non-
moving party can prove no set of facts in support of its claim
that would entitle it to relief. See Bruce v. Riddle, 631 F.2d
272, 273-74 (4th Cir.1980).
∗ State Farm’s notice of appeal states its intention to
appeal the district court’s entry of final judgment and award of
prejudgment interest in addition to its grant of judgment on the
pleadings. State Farm, however, did not address those claims in
its brief and has therefore waived them. See Canady v. Crestar
Mortg. Corp., 109 F.3d 969, 973 (4th Cir. 1997).

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The dispute in this case centers on the interpretation of
the “Loss Payable Endorsement” in both policies. This
endorsement provides, in relevant part:
With respect to coverage provided by this endorsement,
the provisions of the coverage form apply unless
modified by the endorsement.
(a) We will pay, as interest may appear, you and the
loss payee named in the policy for “loss” to a covered
“auto.”
(b) The insurance covers the interest of the loss
payee unless the “loss” results from conversion,
secretion or embezzlement on your part.
Under Virginia law, when terms of an insurance policy are
“clear and unambiguous” courts “give the language its plain and
ordinary meaning.” P’ship Umbrella, Inc. v. Fed. Ins. Co., 260
Va. 123, 133, 530 S.E.2d 154, 160 (2000). When, however,
language in an insurance policy is ambiguous, courts construe it
in favor of the insured, i.e. to provide coverage. See, e.g.,
Virginia Farm Bureau Mut. Ins. Co. v. Williams, 278 Va. 75, 81,
677 S.E. 2d 299, 302 (2009).
In this case, the district court held that the insurance
policies created an obligation to the loss payee, Wells Fargo,
even if the primary insured, Miriam Trucking, was barred from
recovery by its asserted arson. See Wells Fargo Equip. Fin.,
Inc. v. State Farm Fire & Cas. Co., 805 F. Supp. 2d 213, 220-23
(E.D. Va. 2011). The court reasoned that the alleged arson of

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the primary insured did not unambiguously qualify as
“conversion” under the conversion exclusion clause.
This conclusion accords with that reached by nearly every
court to consider a comparable question. See Gibralter Fin.
Corp. v. Lumbermens Mut. Cas. Co., 400 Mass. 870, 872, 513
N.E.2d 681, 683 (1987); Foremost Ins. Co. v. Allstate Ins. Co.,
439 Mich. 378, 391, 486 N.W.2d 600, 606 (1992); Bennett Motor
Co. v. Lyon, 14 Utah 2d 161, 164, 380 P.2d 69, 71 (1963); Nat’l
Cas. Co. v. Gen. Motors Acceptance Corp., 161 So. 2d 848, 852
(Fla. Dist. Ct. App. 1964); Nationwide Mut. Ins. v. Dempsey, 128
N.C. App. 641, 644-45, 495 S.E.2d 914, 916 (1998); Pittsburgh
Nat’l Bank v. Motorists Mut. Ins. Co., 87 Ohio App. 3d 82, 88,
621 N.E.2d 875, 879 (1993). Indeed, State Farm has only cited
one case to the contrary. See Commerce Union Bank v. Midland
Nat’l Ins. Co., 43 Ill. App. 2d 332, 193 N.E.2d 230 (1963).
We agree with the district court and most of the other
courts to consider similar policy language that the conversion
exclusion does not unambiguously apply to bar coverage by the
loss payee. Accordingly, the district court properly granted
judgment to Wells Fargo.

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III.
For the foregoing reasons, the judgment of the district
court is
AFFIRMED.

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