In what has become commonplace following tractor-trailer crashes on Virginia’s highways involving heavy-duty towing and recovery services performed at the behest of the police, soon after the incident the trucking company receives an invoice from the towing company accompanied by a copy of the Virginia Bureau of Insurance’s (the “Bureau”) August 19, 2020 Administrative Letter number 202005 (the “Letter). As discussed in more detail below, the Letter purports to instruct insurance companies on what the insurance provided under their policies covers, and without making any reference to specific policy language or to Virginia’s principles of insurance policy interpretation it admonishes insurers to pay towing companies’ charges. Just what legal authority or weight the Letter carries has become a topic of debate within the trucking industry and, indeed, among insurers of trucking companies presented with claims for payment of towing invoices – invoices which frequently include grossly inflated or highly suspect charges in connection with the services rendered by the towing company. Just what the Letter may or may not mean for insurers is therefore worth considering.
The Letter is set out in the form of a memorandum, and it is addressed to “All Property & Casualty Insurers Licensed to Write Motor Vehicle Insurance on Motor Vehicles.” Its subject is stated as “Property Damage Liability Claims Involving Clean-Up, Removal of Vehicles and Debris from Roadways and Property Adjacent to Roadways.” And from the Letter’s statement of its purpose set forth in its very first sentence, it is easy to see why this bureaucratic missive has become a fan favorite of towing companies.
The Letter begins by asserting that its “purpose . . . is to remind insurers licensed to write motor vehicle policies on vehicles principally garaged or used or [policies that] are issued or delivered in the Commonwealth of their duties with respect to at-fault accidents.” (Admin. Ltr. at 1.) The Letter makes no reference to any ISO forms or other policy forms, or any particular policy language, but instead speaks in sweeping, generic terms of unspecified “motor vehicle policies,” admonishing insurers that an “at-fault insurer [sic] is responsible for payment of the reasonable costs of clean-up, recovery, and certain towing expenses under the terms of the property damage liability coverage of the motor vehicle policy that requires coverage for ‘all damages the insured is legally obligated to pay.’” (Id.) The Letter does not mention the specific definitions for “property damage” that are an invariable component to such insurance policies, nor does it quote the entire insuring agreement from which it plucks the excerpt that it quotes.
The Letter goes on to state that if “the investigation of the claim indicates that the insured is responsible for the accident, then the insurer of the at-fault vehicle is required to pay under the vehicle’s property damage liability coverage the reasonable costs of: (1) removing debris from the roadway, including liquids and other material, (2) removing the at-fault and not at-fault vehicles from a roadway or from property adjacent to a roadway, and (3) towing not-at-fault vehicles away from the scene of the accident.” (Id.) “The cost of removing vehicle accident debris and the cost of removing the at-fault or not-at-fault vehicles from a roadway or from property adjacent to a roadway after an accident are sometimes referred to as ‘clean-up and repair costs.’ The at-fault driver is responsible for the clean-up of the roadway and the recovery of vehicles involved in the accident on the roadway and adjacent to the roadway.” (Id.) The Letter avers that “[t]hese clean-up and recovery costs must also be paid in any claim involving a single-vehicle accident if the driver of the vehicle is at-fault for the accident.” (Id.) Here again, the Letter makes no reference to any specific policy language (at least not in context) or to any specific ISO forms.
The Letter also reveals its impetus: the “Bureau . . . has received complaints from towing companies that have made claims with the at-fault insurers seeking payment for clean-up and recovery costs. Insurers have denied these third-party claims. . . . [f]or example . . . because (i) the insured’s policy does not have towing coverage; (ii) the towing and recovery company does not have a contract with the state or local government; and (iii) they [insurers] does not have to pay claims from towing and recovery operators. None of these reasons are [sic] adequate justification for denial of these claims.” (Id.) Once again, the Letter does not quote specific policy language or reference particular ISO forms. It does state, however, that it does purport to “require an insurer to pay for the cost of towing the at-fault vehicle away from the scene of the accident unless the vehicle’s policy includes the relevant physical damage coverage.” (Id. at 2.)
According to its terms, there is much in the Letter that appears inconsistent with Virginia’s jurisprudence on insurance contracts – i.e., policies. Virginia “courts interpret insurance policies, like other contracts, in accordance with the intention of the parties gleaned from the words they have used in the document.” Transcontinental Ins. Co. v. RBMW, Inc., 551 S.E.2d 313, 318 (Va. 2001). Virginia’s courts accord terms not defined in an insurance contract their “ordinary and accepted meaning.” Lower Chesapeake Assocs. v. Valley Forge Ins. Co., 532 S.E.2d 325, 330 (Va. 2000). Under Virginia law, an insurance
contract is to be construed as a whole, and effect given to every provision thereof if possible. No word or paragraph can be omitted in construing the contract if it can be retained and a sensible construction given to the contract as a whole. No word or clause is to be treated as meaningless if any reasonable meaning consistent with the other parts of the contract can be given to it; and no word or clause should be discarded unless the other words used are so specific and clear in contrary meaning as to convincingly show it to be a false demonstration. The presumption always is that the parties have not used words aimlessly and that no provision is merely a superfluity unless it is plainly a repetition. Words used by the parties are to be given their usual, ordinary and popular meaning, unless it can be clearly shown in some legitimate way that they were used in some other sense, and the burden of showing this is always upon the party alleging it. American Health Ins. Corp. v. Newcomb, 91 S.E.2d 447, 451 (Va. 1956) (cit. omitted).
“Virginia strictly adheres to the ‘plain meaning’ rule, entitling the parties to rely on the express terms of the written agreement.” Pacific Ins. Co. v. Am. Nat’l Fire Ins. Co., 143 F.3d 396, 405 (4th Cir. 1998), cert. den’d, 525 U.S. 1104 (1999), citing Lerner v. Gudelsky Co., 334 S.E.2d 579, 584 (Va. 1985). “[T]his rule means that a judicial interpretation should conform to the plain meaning that reasonable insurers and insureds likely would have attributed to the words.” Erie Ins. Exch. v. EPC MD, 822 S.E.2d 351, 355 (Va. 2019).
Under these well-established principles of Virginia law, the Letter’s sweeping statements regarding what motor-vehicle insurance policies do or do not insure – statements untethered to specific policy language or, at best, taking excerpts of policy language out of context and divorcing them from the rest of the policy – appear facially suspect. Thus, the Letter might well be subject to attack in a court of law, through a declaratory judgment action or other litigation.
Furthermore, the Letter acknowledges that it applies only to insurance companies that have issued policies to insureds whose vehicles are principally garaged or used in Virginia, and/or to insurance companies that have issued policies to insureds in Virginia. These limitations hardly required the Bureau to mention them: as an agency of Virginia’s government, the Bureau could have no authority over insurers that do not issue insurance policies in Virginia, or that do not insure vehicles principally garaged in Virginia. Thus, for an insurer that has not issued a policy to an insured principally garaging or using its vehicles in Virginia, or to an insured located outside Virginia, the Letter is essentially a nullity. Yet that reality, plainly expressed in the Letter, has not stopped Virginia towing companies from routinely transmitting a copy of the Letter along with the towing company’s invoice to trucking companies and insurers located outside the Commonwealth as a means of coercing insurers into paying charges that frequently do not fall within the scope of insurance coverage.
For insurers that have issued policies to Virginia trucking companies, or to trucking companies principally garaging or using their vehicles in Virginia, the Letter presents a more substantial question with which they must grapple. Even considering the regulatory authority afforded the Bureau by the General Assembly, the Bureau cannot simply rewrite insurance policies by administrative fiat. Under certain circumstances the Bureau can, of course, require insurers to amend their policies to add, modify, or change certain coverages – yet the Letter does not purport to exercise that authority. Rather, the Letter appears to engage in an interpretive exercise without setting forth all relevant policy language that the Bureau purports to interpret. While the extent to which the Bureau can do that – or, indeed, whether the Bureau can do that – is largely untested in Virginia, the Letter’s extraordinarily broad scope and lack of any anchor in specific policy language suggests that it could be challenged in court through a declaratory judgment lawsuit, in an appropriate case. In any event, a close reading of the Letter reveals that it is not the final-word on insurance coverage for towing operations that Virginia’s towing operators pretend.