PUBLISHED UNITED STATES COURT OF APPEALS FOR THE

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 14-2254

LIBERTY UNIVERSITY, INC.,

Plaintiff – Appellee,

CITIZENS INSURANCE COMPANY OF AMERICA; HANOVER AMERICAN

INSURANCE COMPANY; HANOVER INSURANCE COMPANY,

Defendants – Appellants.

Appeal from the United States District Court for the Western

District of Virginia, at Lynchburg. Norman K. Moon, Senior

District Judge. (6:13-cv-00033-NKM-RSB)

Argued: May 13, 2015 Decided: July 10, 2015

Before NIEMEYER, DUNCAN, and THACKER, Circuit Judges.

Vacated and remanded by published opinion. Judge Thacker wrote

the opinion, in which Judge Niemeyer and Judge Duncan joined.

ARGUED: John Peter Malloy, ROBINSON & COLE LLP, Hartford,

Connecticut, for Appellants. Harold Edward Johnson, WILLIAMS

MULLEN, Richmond, Virginia, for Appellee. ON BRIEF: Thomas S.

Garrett, HARMAN CLAYTOR CORRIGAN & WELLMAN, Richmond, Virginia;

Wystan M. Ackerman, ROBINSON & COLE LLP, Hartford, Connecticut,

for Appellants. Calvin W. Fowler, Jr., WILLIAMS MULLEN,

Richmond, Virginia, for Appellee.

THACKER, Circuit Judge:

In November 2012, Janet Jenkins sued Liberty

University, Inc. (“Appellee”), alleging that the school

participated -- both directly and vicariously -- in a scheme to

kidnap Jenkins’s daughter in order to disrupt the parent-child

relationship. In her complaint (“Jenkins Complaint”), Jenkins

alleged that Appellee and its agents helped Lisa Miller, the

child’s biological mother and Jenkins’ former partner in a same-

sex civil union, to defy state court visitation orders and to

abscond with the child to Nicaragua.

The district court ruled that Citizens Insurance

Company of America (“Appellant”), Appellee’s liability insurance

carrier, has a duty to defend Appellee. Under the insurance

policy at issue, Appellant must defend Appellee against suits

alleging certain harms that arise from an “occurrence” -- an

unexpected accident, which does not fall under any of the

coverage exclusions. The policy also contains a “Separation of

Insureds” provision, which requires the court to evaluate a

claim by each named insured individually.

Concluding that this

In addition to Appellee, the Jenkins Complaint names

Victoria Hyden, who was a “student worker” at Liberty University

School of Law, as a defendant. J.A. 44. The Jenkins Complaint

alleges that Hyden acted as Appellee’s agent when she “aided and

abetted” the kidnapping. Id. at 49 (internal quotation marks

omitted). Although the Jenkins Complaint names many other

(Continued)

Separation of Insureds provision is ambiguous and should be

interpreted in Appellee’s favor, the district court refused to

consider the intent of Appellee’s agents when determining if the

complaint alleged an accidental “occurrence” and whether the

policy’s exclusions applied. The district court also decided

that, even if the Separation of Insureds provision would not

prevent imputing the intent of Appellee’s agents to Appellee,

the Jenkins Complaint failed to “sufficiently allege” Appellee’s

vicarious liability. Thus, the district court granted summary

judgment and awarded defense costs to Appellee.

We conclude otherwise. Because the Jenkins Complaint

does not allege an “occurrence,” and because it triggers the

policy’s coverage exclusions, Appellant has no duty to defend.

We review a grant of summary judgment de novo. See

CACI Int’l, Inc. v. St. Paul Fire & Marine Ins. Co., 566 F.3d

150, 155 (4th Cir. 2009).

defendants, they are not named insureds under the policy and are

not essential to resolving this appeal.

Citations to the “J.A.” refer to the Joint Appendix

filed by the parties in this appeal.

II.

The Jenkins Complaint

The child at the core of this dispute was born to Lisa

Miller and Janet Jenkins in 2002 while the two women were joined

in a Vermont same-sex civil union. Miller is the biological

mother and a legal parent to the child. Jenkins is also the

child’s legal parent, pursuant to a 2004 Vermont state court

ruling. Miller subsequently converted to Christianity; moved to

Virginia; and believing that homosexuality was sinful, sought to

prevent Jenkins from having contact with her daughter. For

several years, Miller defied visitation orders issued by Vermont

and Virginia courts. In 2009, facing the possibility that

Vermont or Virginia would transfer custody to Jenkins, Miller

absconded to Nicaragua with the child. Jenkins has not seen her

daughter since.

Jenkins brought a lawsuit in Vermont district court on

her own behalf and on behalf of her daughter in November 2012.

Appellee and Victoria Hyden, a student worker at Liberty

University, were among the named defendants. The Jenkins

Complaint alleges that Appellee assisted Miller by withholding

the child from Jenkins and by taking the child out of the

country. As a result, Jenkins claims Appellee was directly

liable for conspiring to “commit the intentional tort of

kidnapping,” which is “chargeable as a criminal offense under

Vermont law,” and conspiring “through [a] pattern of

racketeering” to kidnap the child and to “assure her continued

detention” in Nicaragua in violation of the Racketeer Influence

and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(d).

J.A.

49, 51. The Jenkins Complaint also asserts that Appellee was

vicariously liable for the role Hyden played in the kidnapping,

for its agents’ racketeering, and for its agents’ participation

in a conspiracy to violate Jenkins’s and the child’s “rights to

a parent-child relationship.” Id. at 46, 49.

In particular, the Jenkins Complaint charges that

Miller retained the dean of Liberty University School of Law,

Mathew Staver, and one of the school’s professors, Rena

Lindevaldsen, as her attorneys. As alleged, Staver and

Lindevaldsen encouraged and assisted Miller in violating state

court orders, established social media forums soliciting

Pursuant to 18 U.S.C. § 1962,

It shall be unlawful for any person employed

by or associated with any enterprise engaged

in, or the activities of which affect,

interstate or foreign commerce, to conduct

or participate, directly or indirectly, in

the conduct of such enterprise’s affairs

through a pattern of racketeering

activity . . . .

18 U.S.C. § 1962(c). Section 1962(d) criminalizes conspiring to

violate § 1962(c).

donations to groups that aimed to “prevent court ordered

contact” between Jenkins and her daughter, and planned with

other co-conspirators to kidnap the child. J.A. 42. The

Jenkins Complaint further accuses Victoria Hyden, an employee of

the law school, of calling Miller’s father to help transport

Miller and the child to a parking lot in Lynchburg, Virginia,

where Philip Zodhiates -- who is Hyden’s father and was one of

Staver’s acquaintances -- picked them up and drove them to the

Canadian border. Staver allegedly aided the kidnapping by using

telephone lines registered to Liberty University to speak to

Zodhiates as he drove back from the Canadian border. Therefore,

“[w]ith the assistance of . . . Philip Zodhiates and Victoria

[Hyden] . . . as agents of . . . Liberty University . . . Miller

was able to leave the United States” with the child. Id. at 46.

The Jenkins Complaint also alleges that Appellee and

its agents “enable[d] [Miller] to remain outside the country.”

J.A. 44. For example, Lindevaldsen allegedly founded a Facebook

group to solicit donations for Miller while Miller was hiding

with the child in Nicaragua. The Jenkins Complaint also asserts

that Hyden emailed “her co-workers at the law school requesting

donations for supplies to send to . . . Miller to enable her to

remain outside the country.” Id. at 44. The Jenkins Complaint

further alleges that Staver and Lindevaldsen “routinely

instructed their Law School students that the correct course of

action for a person in . . . Miller’s situation would be to

engage in ‘civil disobedience’ and defy court orders.” Id. at

45. As such, “Liberty University encouraged its agents to

disregard state laws governing parental rights . . . of same-sex

families.” Id. at 45-46.

Based on these facts, the Jenkins Complaint alleges

that Appellee was directly liable for its involvement in the

kidnapping scheme and, at the same time, vicariously liable

because it “promoted, condoned and explicitly ratified its

agent[s’] tortious, racketeering activity.” J.A. 46. The

Jenkins Complaint sought damages for these injuries.

The Policy

The policy at issue was effective from February 2009

to February 2010 and contains two coverage forms: (1) Commercial

General Liability coverage (“CGL”) and (2) School and Educators

Legal Liability coverage (“SELL”).

Technically, there are four insurance policies at issue.

But two of these are umbrella policies that the parties agree

have essentially the same terms as the CGL and the SELL.

CGL Coverage

The CGL itself provides two subsidiary coverage forms:

Coverage A and Coverage B.

Coverage A

Under Coverage A, Appellant must defend suits seeking

damages for “bodily injury” and “property damage” arising from

an “occurrence.” J.A. 68. Consistent with Virginia law, the

policy defines the terms “occurrence and accident . . .

synonymous[ly] [as] refer[ing] to an incident that was

unexpected from the viewpoint of the insured.” AES Corp. v.

Steadfast Ins. Co., 725 S.E.2d 532, 536 (Va. 2012) (internal

quotation marks omitted); J.A. 81. According to the Supreme

Court of Virginia:

For coverage to be precluded under a CGL

policy because there was no occurrence, it

must be alleged that the result of an

insured’s intentional act was more than a

possibility; it must be alleged that the

insured subjectively intended or anticipated

the result of its intentional act or that

objectively, the result was a natural or

probable consequence of the intentional act.

. . . .

. . . Where the harmful consequences of an

act are alleged to have been not just

possible, but the natural and probable

consequences of an intentional act, choosing

to perform the act deliberately, even if in

ignorance of that fact, does not make the

resulting injury an ‘accident’ . . . .

AES, 725 S.E.2d at 536, 538 (internal quotation marks omitted).

Accordingly, a suit alleging only intentional torts does not

state an “occurrence.” See Travelers Indem. Co. v. Obenshain,

245 S.E.2d 247, 249 (Va. 1978). Even if the insured

demonstrates that the suit alleges “bodily injury” or “property

damage” arising from an “occurrence,” Coverage A’s “Expected

Injury Exclusion” excludes “‘[b]odily injury’ or ‘property

damage’ expected or intended from the standpoint of the

insured.” J.A. 69.

Coverage B

Coverage B insures against suits alleging “personal

and advertising injury,” the definition of which includes

“[f]alse arrest, detention or imprisonment.” J.A. 81. The

policy defines “wrongful act” as:

any breach of duty . . . committed by an

insured:

a. In the lawful discharge of the

duties that are characteristic of,

distinctive or inherent to the

operation and functioning of an

educational institution; and

b. While acting within the course and

scope of their duties for the named

insured.

Id. at 130. But Coverage B’s “Criminal Acts Exclusion” excludes

any “‘[p]ersonal and advertising injury’ arising out of a

criminal act committed by or at the direction of the insured.”

Id. at 73. And Coverage B’s “Knowing Violation Exclusion”

excludes any “‘[p]ersonal and advertising injury’ caused by or

at the direction of the insured with the knowledge that the act

would violate the rights of another and would inflict ‘personal

and advertising injury’” (“Knowing Violation Exclusion”). Id.

SELL Coverage

Under the SELL, Appellant has the duty to defend

against any claim “[a]lleging injury arising out of a wrongful

act . . . and seeking loss because of such injury.” J.A. 116

(internal quotation marks omitted). The SELL policy contains an

“Intentional and Criminal Acts Exclusion,” which excludes

coverage for:

[a]ny “claim” arising out of any

intentional, dishonest, fraudulent,

criminal, or malicious act or omission or

any willful violation of law by the insured

. . . .

This exclusion precludes coverage for

all insured persons under the policy

regardless whether the person seeking

coverage participated in any way in the

intentional or criminal acts or omissions.

Id. at 116.

Separation of Insureds

The insurance policy includes a Separation of Insureds

provision, which states:

Except with respect to the Limits of

Insurance, and any rights or duties

specifically assigned in this Coverage part

to the first Named Insured, this insurance

applies:

a. As if each Named Insured were the

only Named Insured; and

b. Separately to each insured against

whom claim is made or “suit” is

brought.

J.A. 159.

When multiple named insureds claim the right to a

defense against the same suit, a separation of insureds clause

requires the insurer to evaluate the claims against each named

insured individually. The insurer treats each insured as if he

or she has separate insurance coverage, so that excluded conduct

by one insured does not preclude claims brought by other

insureds. See W. Am. Ins. Co. v. AV&S, 145 F.3d 1224, 1227-29

(10th Cir. 1998); see, e.g., Commercial Standard Ins. Co. v. Am.

Gen. Ins. Co., 455 S.W.2d 714, 721 (Tex. 1970) (construing a

severability of interests clause, which “refer[s] to each

insured as a separate and distinct individual apart from any and

every other person who may be entitled to coverage thereunder”

(internal quotation marks omitted)). The policy designates

Appellee’s “employees,” “volunteer workers,” “student groups,”

and “executive officers” as additional named insureds. J.A. 62,

75-76 (internal quotation marks omitted).

Underlying Litigation

Faced with the Jenkins Complaint, Appellee turned to

Appellant, seeking to have Appellant defend the lawsuit on its

behalf. When Appellant refused, Appellee filed a complaint in

district court, requesting a declaration of its right to a

defense and an award of damages for costs and fees it had

already incurred defending against the Jenkins Complaint. The

parties filed cross-motions for summary judgment. The district

court granted summary judgment in favor of Appellee, holding

Appellant had a duty to defend and awarding defense costs.

The district court began its analysis with the CGL.

Regarding Coverage A, the court determined that the Jenkins

Complaint did not allege “bodily injury” but that it sought

damages for “property damage” allegedly caused by Appellee and

its agents. It determined that, under Virginia law, Appellee

could become liable for physical injury to the plaintiffs’

tangible property because the Jenkins Complaint alleged that the

“[p]laintiffs suffered injury to their . . . property, including

. . . deprivation of personal property.” J.A. 51; see Liberty

Univ., Inc. v. Citizens Ins. Co. of Am., 16 F. Supp. 3d 636,

653-54 (W.D. Va. 2014).

The district court then turned to whether the alleged

“property damage” arose from an “occurrence,” as defined by the

policy. It recognized that the “Jenkins Complaint made claims

for only intentional torts” and that, if the intent of

Appellee’s agents was imputed to Appellee, Appellee “should have

reasonably anticipated or foreseen the incident of [the child]’s

abduction.” Liberty, 16 F. Supp. 3d at 655, 659-60. But the

district court nonetheless concluded that the Jenkins Complaint

alleges an “occurrence” for two reasons.

First, the district court opined that, although no

Virginia court had interpreted a separation of insureds clause,

relevant case law forbade the court from imputing to Appellee

the intent of its agents -- even though the Jenkins Complaint

unequivocally alleged Appellee’s liability in respondeat

superior for its agents’ acts. See Liberty, 16 F. Supp. 3d at

655-60. Noting that separation of insureds clauses generally

direct “courts [to] consider each insured separately under the

contract in determining whether provisions excluding the insured

from coverage apply to that particular insured,” the district

court believed the Separation of Insureds provision in this case

required it to “separate the intent [and expectations] of

Liberty’s agents and employees from Liberty’s own.” Liberty, 16

F. Supp. 3d at 659, 660 (internal quotation marks omitted).

Therefore, the district court reasoned that, although Appellee

was allegedly responsible for the kidnapping through its

employee Hyden -- who was also a named insured -- Appellee could

not become liable for causing damage that arose from an

“occurrence” because the Jenkins Complaint does not allege that

Appellee individually expected or intended the alleged

kidnapping. The district court held in the alternative that,

even if the Separation of Insureds provision did not

unambiguously require it to separate the intent of Appellee’s

agents, the provision at least “create[d] an ambiguity in the

contract” as to “whether the expectations of Liberty’s

agents . . . would be imputed to Liberty” -- an ambiguity that

“must [be] construe[d] in favor of . . . the insured.” Id. at

659.

Second, the district court concluded that Appellee

could not be held liable for damages arising from an

“occurrence” because the Jenkins Complaint did not “sufficiently

allege” Appellee’s vicarious liability. The district court

opined that, because the complaint supplied “only conclusory

allegations that tie Liberty to the actions of its alleged

agents and employees” and “provide[d] no facts to support

allegations of vicarious liability,” there could be no

“imputation of [its] tortfeasor employees’ expectations.”

Liberty, 16 F. Supp. 3d at 660-61.

Turning to CGL Coverage B, the district court

determined that the Jenkins Complaint alleged “personal and

advertising injury,” but, based on essentially the same

reasoning for its decision that the complaint did not plead an

“occurrence” under Coverage A, the court concluded that neither

the Knowing Violation Exclusion nor the Criminal Acts Exclusion

applied.

The district court’s analysis of the SELL coverage was

similar. That is, the court concluded that the Jenkins

Complaint pled an injury arising from a “wrongful act,” because

its “factual allegations [supported an inference] that Liberty

was essentially negligent in urging civil disobedience of court

orders” without implicating the Intentional and Criminal Acts

Exclusion. Liberty, 16 F. Supp. 3d at 672.

III.

Virginia Insurance Law

Because our jurisdiction rests in diversity, we apply

the law of Virginia and its choice of law rules. See Erie R.R.

Co. v. Tompkins, 304 U.S. 64, 78 (1938); see also Klaxon Co. v.

Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941); Res.

Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 635

(4th Cir. 2005). Virginia substantive insurance law applies to

policies that are delivered to insureds in Virginia. See CACI

Int’l, Inc. v. St. Paul Fire & Marine Ins. Co., 566 F.3d 150,

154 (4th Cir. 2009); Res. Bankshares Corp., 407 F.3d at 635-36.

It is undisputed that the policy was delivered to Appellee, a

Virginia-based university. If we are presented with an issue

that Virginia’s highest court has not directly or indirectly

addressed, we must anticipate how it would rule. See Ellis v.

Grant Thornton LLP, 530 F.3d 280, 287 (4th Cir. 2008).

Virginia applies the “Eight Corners Rule” to determine

if an insurer has a duty to defend a lawsuit against the

insured. See AES Corp. v. Steadfast Ins. Co., 725 S.E.2d 532,

535 (Va. 2012). Under the Eight Corners Rule, we “compar[e] the

‘four corners’ of the underlying complaint with the ‘four

corners’ of the policy[] to determine whether the allegations in

the underlying complaint come within the coverage provided by

the policy.” Id.

The insured has the initial burden to establish a duty

to defend, but this burden is not onerous because “[p]rinciples

of insurance law in Virginia . . . are solicitous of insureds.”

CACI, 566 F.3d at 155. The duty to defend is much broader than

the duty to indemnify because, “while . . . the duty to

indemnify relies on litigated facts,” id. at 154, the duty to

defend arises “whenever the [underlying] complaint alleges facts

and circumstances, some of which would, if proved, fall within

the risk covered by the policy,” AES, 725 S.E.2d at 535

(internal quotation marks omitted).

Indeed, when a complaint’s allegations could support

alternative theories of liability (e.g., claims for both

intentional torts and negligence) and one theory falls within

the coverage agreement, the insurer has a duty to defend the

insured against all claims. Parker v. Hartford Fire Ins. Co.,

278 S.E.2d 803, 804 (Va. 1981) (holding that an exclusion for

intentional injury did not preclude coverage, even though

complaint alleged intentional trespass, because under Virginia

law a claim for intentional trespass could also “support[] a

judgment of unintentional trespass” without amendment (internal

quotation marks omitted)).

“On the other hand, if it appears

clearly that the insurer would not be liable under its contract

for any judgment based upon the allegations, it has no duty even

to defend.” AES, 725 S.E.2d at 536-38; see, e.g., Premier Pet

Prods., LLC v. Travelers Prop. Cas. Co. of Am., 678 F. Supp. 2d

409, 418-19 (E.D. Va. 2010).

See also Minn. Lawyers Mut. Ins. Co. v. Antonelli, Terry,

Stout & Kraus, LLP, 472 F. App’x 219, 225 (4th Cir. 2012)

(unpublished) (noting that Parker v. Hartford Fire Insurance Co.

does not hold that a duty to defend lies when a complaint would

support “any conceivable cause of action” and still requires

“that the complaint actually asserts the claim” (emphasis

omitted)).

If the insured demonstrates that the complaint alleges

a covered injury, the burden shifts to the insurer to show that

the policy’s “exclusionary language . . . clearly and

unambiguously bring[s] the particular [alleged] act or omission

within its scope.” Floyd v. N. Neck Ins. Co., 427 S.E.2d 193,

196 (Va. 1993); see also Fuisz v. Selective Ins. Co. of Am., 61

F.3d 238, 244-45 (4th Cir. 1995). However, ambiguities in an

insurance policy are construed against the insurer, who

presumably drafted the contract and “could have written it more

clearly.” CACI, 566 F.3d at 155.

Analysis

We conclude that the district court erroneously

interpreted the Jenkins Complaint, the Separation of Insureds

provision, and Virginia law.

CGL Coverage A

“Occurrence” and Respondeat Superior Liability

As to CGL Coverage A, we hold that the Jenkins

Complaint, which only alleges Appellee’s liability for

intentional conduct, does not plead an “occurrence,”

notwithstanding the Separation of Insureds provision.

In the first place, we conclude that Virginia’s

highest court would hold that an allegation of a principal’s

liability under the theory of respondeat superior for the

intentional acts of an agent does not state an “occurrence.” In

Rockingham Mutual Insurance Co. v. Davis, an employee sued her

employer claiming it was vicariously liable for the intentional

tort of another employee. See 58 Va. Cir. 466, 467 (2002). The

employer’s insurer sought a declaration that it had no duty to

defend because the underlying complaint did not state an

“occurrence.” The Circuit Court of Rockingham County, Virginia

agreed, concluding that an intentional tort “cannot be

considered unexpected, even when viewed from the standpoint of

the employer, and does not become an ‘occurrence’ . . . simply

by operation of respondeat superior.” Id. at 473-74 (emphasis

supplied). This is because Virginia holds that an agent’s state

of mind is ordinarily imputed to the principal. See Fulwiler v.

Peters, 20 S.E.2d 500, 503 (Va. 1942) (“The general rule is that

knowledge of the agent is imputed to the principal . . . .”);

Atl. Envtl. Constr. Co. v. Malveaux, 762 S.E.2d 409, 412 (Va.

Ct. App. 2014); Magco of Md., Inc. v. Barr, 531 S.E.2d 614, 617

(Va. Ct. App. 2000) (“Indeed, it is a longstanding principle in

the Commonwealth that a foreman’s knowledge of facts or events

on a worksite is imputed to his employer.”); Rockingham, 58 Va.

Cir. at 473 (“The doctrine of respondeat superior attributes the

bad intentions of the employee to the employer . . . .”).

Federal district courts sitting in Virginia --

including the district court below -- have also applied this

rule. See, e.g., Liberty Univ., Inc. v. Citizens Ins. Co. of

Am., 16 F. Supp. 3d 636, 656 (W.D. Va. 2014) (“[A]n insurance

company would have no duty to defend an employer for claims

based on the intentional torts of its employees.”); State Farm

Fire & Cas. Co. v. Frank, No. 4:10-cv-99, 2011 WL 1883987, at

*10 (E.D. Va. Apr. 20, 2011); Am. & Foreign Ins. Co. v. Church

Sch. in Diocese of Va., 645 F. Supp. 628, 633 (E.D. Va. 1986)

(concluding that under an occurrence-based insurance policy,

allegations of respondeat superior liability for agents’

intentional torts “are not covered and impose no duty to

defend”).

Therefore, in this case the pivotal issue is whether

the Separation of Insureds provision alters Virginia’s rule that

the expectations and bad intentions of Appellee’s agents are

Likewise, in an unpublished disposition we observed that

under Virginia law “claims of agency liability [and] respondeat

superior . . . for the intentional acts of an agent do not

impose a duty to defend,” even if viewed from the perspective of

the insured. Nat’l Fruit Prod. Co. v. Fireman’s Fund Ins. Co.,

No. 98-1471, 1999 WL 270033, at *3 (4th Cir. May 4, 1999)

(unpublished).

imputed to Appellee. The district court concluded the provision

alters Virginia’s rule. We disagree.

Although the Separation of Insureds provision requires

the coverage claims of each named insured to be evaluated

“[s]eparately to each insured against whom claim is made or

‘suit’ is brought,” J.A. 159, it does not displace Virginia’s

rule that an agent’s intentionally tortious act cannot be

“unexpected” by the principal who is vicariously liable for the

act. See State Farm, 2011 WL 1883987, at *10; Church Sch., 645

F. Supp. at 633; Rockingham, 58 Va. Cir. at 467. Because she

was either an “employee” or a “volunteer worker” under the terms

of the policy, Hyden would qualify as a named insured. J.A. 76.

The Jenkins Complaint names Hyden as a defendant, so we must

analyze Appellee’s coverage claim separately.

But even if we

imagine that Appellee was the only party sued in this case and

the only insured requesting a defense under the policy, the

Jenkins Complaint still frames Appellee’s liability in terms of

respondeat superior. Therefore, we have ample reason to

anticipate that Virginia courts would impute the intent of

Appellee’s agents accordingly.

Although Staver and Lindevaldsen are named insureds, the

Jenkins Complaint does not name them as defendants.

Our decision in IFCO Systems of North America, Inc. v.

American Home Assurance Co., 502 F. App’x 342 (4th Cir. 2013)

(unpublished), and other cases cited by the district court, are

inapposite. The district court below viewed the issue in IFCO

Systems as “whether an insurance company had a duty to defend an

employer for intentional tort claims against its employees.”

Liberty, 16 F. Supp. 3d at 659. This is an incorrect view

because, in IFCO Systems, the underlying complaint asserted

claims against the insured for, inter alia, negligent

supervision and hiring and conversion under a theory of

vicarious liability -- all arising from thefts committed by the

insured’s employees. See IFCO, 502 F. App’x at 343-44. The

policy provided occurrence-based coverage and contained a

separation of insureds provision. Analyzing whether there was a

duty to defend, we distinguished allegations of a principal’s

vicarious liability for its agent’s intentional torts -- which

would not constitute an “occurrence,” despite the separation of

insureds provision -- from assertions that the principal was

liable for the agent’s intentional act due to its negligent

failure to supervise. See id. at 345, 347 (observing that “none

of the . . . cases cited by the district court [were] directly

on point” because “none of the cases involved a situation where

the court was asked to determine whether an employee’s

intentional conduct could be treated as an ‘accident’ in a

subsequent negligence action against the employer” (emphasis in

original)). Because negligent hiring or supervision actions

depend on whether the alleged harm was reasonably foreseeable,

we concluded the separation of insureds clause may have

“require[d] us to approach the question of coverage solely from

IFCO’s perspective.” Id. at 347. Therefore, we certified the

question of whether, “[i]n a negligent hiring and supervision

action against an insured-employer, . . . the intentional

conduct of an employee of the insured constitute[d] a covered

‘occurrence.’” Id. at 343. Notably, we did not certify a

similar question regarding the complaint’s allegation that the

insured was vicariously liable for its employees’ conversion.

When a complaint alleges the liability of a principal

for the intentional acts of an agent under a negligent

supervision theory, a separation of insureds clause may

implicate the duty to defend. There are several reasons why

this result may occur. First, a negligent supervision action is

not particularly concerned with the agent’s intent or

expectations -- the claim is predicated on whether the harm was

foreseeable. See Interim Pers. of Cent. Va., Inc. v. Messer,

559 S.E.2d 704, 707 (Va. 2002). Second, because a negligent

supervision claim alleges the principal’s direct liability, a

separation of insureds clause may require the court to look at

whether the harm was foreseeable solely from the principal’s

perspective. See IFCO, 502 F. App’x at 347. And, in the

context of an occurrence-based policy, Virginia’s potentiality

rule holds that insurers must defend an entire suit if any of

the complaint’s allegations could support a judgment that the

principal did not expect, intend, or foresee the agent’s

intentional tort. See Travelers Indem. Co. v. Obenshain, 245

S.E.2d 247, 249 (Va. 1978) (“If the allegations state a case

which may be covered by the policy, Travelers has a duty to

defend . . . .”).

The cases the district court cited merely demonstrate

these propositions. See Pac. Ins. Co. v. Catholic Bishop of

Spokane, 450 F. Supp. 2d 1186, 1202 (E.D. Wash. 2006) (rejecting

insurer’s argument that the alleged sexual abuse was not a

covered “accident” because insurer “disregard[ed] the fact that

the claims against the diocese [were] based upon alleged

negligent hiring, supervision, and retention, not an intentional

wrong of direct sexual abuse”); King, 85 S.W.3d at 185, 188-92

(finding duty to defend because insured was sued for intentional

torts under a theory of respondeat superior and for negligence

and the policy contained a separation of insureds provision and

because the “employer’s alleged negligent hiring, training, and

supervision constitute[d] an ‘occurrence’ under the terms of the

insurance policy although the injury was directly caused by the

employee’s intentional conduct’”); Unigard Mut. Ins. Co. v.

Argonaut Ins. Co., 579 P.2d 1015, 1018 (Wash. Ct. App. 1978)

(separating claims against a child for his intentional act of

burning a school, which precluded the duty to defend, from

claims against the child’s parents for negligent supervision,

which was not an excluded intentional act).

Critically, unlike the underlying complaints

considered in the cases cited by the district court, the Jenkins

Complaint does not allege that Appellee was responsible for its

agents’ intentional acts because it was negligent. Rather, the

Jenkins Complaint alleges that Appellee is directly liable for

harm arising from its intentional participation in conspiracies

and vicariously liable for the intentional acts of its agents.

For these reasons, the Separation of Insureds provision

unambiguously would not displace the ordinary rule in Virginia

that a complaint alleging a principal’s liability solely in

respondeat superior for the acts of its agent does not state an

“occurrence.”

Furthermore, even if the Separation of Insureds

provision was ambiguous, the district court’s interpretation

contradicts the clearly-stated intent of the parties. Under

Virginia law, courts must interpret insurance policies

consistent with the parties’ intent. See Transit Cas. Co. v.

Hartman’s, Inc., 239 S.E.2d 894, 897 (Va. 1978); see also Safeco

Ins. Co. of Am. v. Merrimack Mut. Fire Ins. Co., 785 F.2d 480,

482 (4th Cir. 1986). Ambiguities in the instrument must be

construed in favor of the insured. But we do not entertain an

absurd result -- one that would “enlarge the obligations

undertaken originally by the insurer, and would permit a

windfall to [the insured].” Transit Cas. Co., 239 S.E.2d at

897.

While Virginia law provides that an agent’s intent is

imputed to the principal for the purpose of determining whether

an injury was an “occurrence” (i.e., expected from the

principal’s perspective) the district court would impose a duty

to defend even though the policy clearly states that any harm

that was “expected or intended from the standpoint of the

insured” is excluded from coverage. J.A. 69; see also Nw. G.F.

Mut. Ins. Co. v. Norgard, 518 N.W.2d 179, 184 (N.D. 1994)

(stating that “the purpose of severability clauses is to spread

protection, to the limits of coverage, among all of

the . . . insureds. The purpose is not to negate bargained-for

exclusions which are plainly worded” (alteration in original)

(internal quotation marks omitted)).

The district court’s interpretation enlarges

Appellant’s obligation beyond what it anticipated. And because

Virginia recognizes that a corporation, like Appellee, “can act

only through its officers and agents,” Pulliam v. Coastal

Emergency Servs. of Richmond, Inc., 509 S.E.2d 307, 320 (Va.

1999), the district court’s construction of the Separation of

Insureds provision would nullify the Expected Injury Exclusion

for allegations of vicarious liability against organizational or

corporate insureds, creating a windfall to Appellee. Cf.

Minkler v. Safeco Ins. Co. of Am., 232 P.3d 612, 621 (Cal. 2010)

(holding that to permit a severability of insurance clause to

prevail over a plainly worded exclusion for intentional acts

“would effectively nullify a policy exclusion in the case of

married coinsureds, since one coinsured spouse could always

demand coverage for the excluded tortious act of the other on

the mere basis of derivative community property liability”).

For the foregoing reasons, we conclude the Separation

of Insureds provision does not displace Virginia’s rule that an

insurer has no duty to defend against a suit alleging the

insured is liable for the intentional acts of its agents under a

theory of respondeat superior. Because the Jenkins Complaint

alleges only intentional acts, we hold that it does not allege

Appellee’s liability for damage arising from an “occurrence.”

“Sufficient” Allegations of Respondeat Superior

We now turn to the district court’s alternative basis

for holding that the Jenkins Complaint does not state an

“occurrence.” In this section of its opinion, the district

court reasoned that, even if the Separation of Insureds

provision did not preclude ascribing to Appellee its agents’

expectations, the Jenkins Complaint “did not state a plausible

claim that Liberty is liable for intentional torts,” offered

“only conclusory allegations that tie Liberty to the actions of

its alleged agents and employees,” and “provide[d] no facts to

support allegations of vicarious liability.” Liberty, 16 F.

Supp. 3d at 660, 661, 663. Significantly, when determining

whether insurance coverage exists, Virginia courts do not ask if

a complaint “sufficiently” alleges facts in support of a claim

such that it would survive a motion to dismiss. Instead, they

determine whether the complaint alleges facts and circumstances

that fall within the four corners of the policy. The claim’s

probability of success is inconsequential. See Fuisz, 61 F.3d

at 244-45; Church Sch., 645 F. Supp. at 633; AES, 725 S.E.2d at

535 (“[I]t is a well-established principle, consistently applied

in this Commonwealth, that only the allegations in the complaint

and the provisions of the insurance policy are to be considered

in deciding whether there is a duty on the part of the insurer

to defend and indemnify the insured.”); cf. CACI Int’l, Inc. v.

St. Paul Fire & Marine Ins. Co., 566 F.3d 150, 155-56 (4th Cir.

2009) (acknowledging differences between a Rule 12(b)(6)

analysis and a duty-to-defend analysis). The Jenkins Complaint

clearly alleges facts and circumstances demonstrating that

Appellee is liable in respondeat superior for kidnapping and

racketeering through its agent Hyden.

Therefore, we conclude Appellant has no duty to defend

Appellee under CGL Coverage A.

CGL Coverage B

We also hold that Appellant has no duty to defend

pursuant to CGL Coverage B because, assuming the Jenkins

Complaint alleged “personal and advertising injury,” the

Criminal Acts Exclusion clearly applies.

The district court concluded that CGL Coverage B’s

exclusion for criminal acts did not apply because the Jenkins

Complaint’s “allegations insufficiently tie Liberty to any

criminal acts either directly or vicariously.” Liberty, 16 F.

Supp. 2d at 669. But the Criminal Acts Exclusion applies to

injuries “arising out of a criminal act committed by or at the

direction of the insured.” J.A. 73.

In the context of homeowner’s insurance, the Circuit

Court of Warren County, Virginia has observed that an injury

arises out of an event “when there is apparent to the rational

mind upon consideration of all of the circumstances, a causal

connection between” the event and the injury. Erie Ins. Exch.

v. Young, 69 Va. Cir. 34, 41 (2005) (internal quotation marks

omitted). Notably, The Supreme Court of Virginia has quoted

this definition of “arising out of” “many times with approval”

Lucas v. Lucas, 186 S.E.2d 63, 64 (Va. 1972) (internal quotation

marks omitted). Against this backdrop, we conclude that the

criminal acts exclusion applies for two reasons. First, the

Jenkins Complaint clearly and unambiguously alleges that

Appellee and its agents committed criminal acts – namely,

kidnapping and conspiracy to commit racketeering, which is a

federal crime pursuant to 18 U.S.C. § 1962(d). The Jenkins

Complaint also specifically alleges Appellee’s role in these

crimes. For example, the Jenkins Complaint contends that Staver

used Liberty University’s phone lines to speak with Philip

Zodhiates after Zodhiates deposited Miller and the child near

the Canadian border and that other Liberty University employees

assisted Miller while she was in Nicaragua. Second, the Jenkins

Complaint unambiguously claims that Appellee is liable for

injuries arising from those criminal acts. With respect to the

kidnapping claim, the Jenkins Complaint asserts that Jenkins and

the child suffered injuries as a result of the kidnapping. J.A.

52. The Jenkins Complaint also alleges injuries as a “direct

and proximate result of Defendants’ [RICO] violation.” Id. at

51. These statements allege a causal connection between

Appellee’s alleged criminal acts and the claimed injuries.

Therefore, Appellant has no duty to defend pursuant to

CGL Coverage B.

SELL Coverage

The district court concluded that the SELL’s Intentional and

Criminal Acts Exclusion did not apply because “the Jenkins

Complaint insufficiently implicated Liberty in . . . excluded

conduct because it insufficiently alleged direct or vicarious

liability and facts to support those links.” Liberty, 16 F.

Supp. 3d at 673. However, the Intentional and Criminal Acts

Exclusion embraces claims “arising out of any intentional,

dishonest, fraudulent, criminal, or malicious act or omission or

any willful violation of law by the insured” and “precludes

coverage for all insured persons under the policy regardless

whether the person seeking coverage participated in any way in

the intentional or criminal acts or omissions.” J.A. 116. As

we have emphasized, the Jenkins Complaint alleges Appellee’s

liability for injuries arising from its direct involvement in

conspiracies to commit kidnapping and racketeering, which carry

criminal penalties. We conclude these claims clearly and

unambiguously trigger the Intentional and Criminal Acts

Exclusion.

Appellee argues that the Criminal Acts Exclusion and the

definition of “personal and advertising injury” are in conflict,

which is impermissible under Virginia law because an insurer

cannot “‘give coverage with the right hand and then take away

with the left.’” Appellee’s Resp. Br. 40 (alteration omitted)

(Continued)

IV.

For the foregoing reasons, we hold that Appellant had

no duty to defend Appellee against the Jenkins Complaint. We

therefore reverse the district court’s grant of summary

judgment, vacate its award of fees and costs, and remand for

further proceedings.

VACATED AND REMANDED

(quoting Fuisz, 61 F.3d at 243). Appellee’s argument relies on

the definition a “personal and advertising injury” as one

arising out of seven enumerated “offenses.” J.A. 81 (emphasis

supplied). Appellee equates “offenses” with “crimes.” But that

reading of “offense” is not supported by the policy. The

examples of “offenses” it provides are noncriminal acts -- torts

and copyright offenses. Therefore, read together, there is no

conflict between the policy’s definition of “personal and

advertising injury” and the Criminal Acts Exclusion.