West Virginia Investment Management Board v. Variable Annuity Life Insurance

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

September 2014 Term

FILED

November 14, 2014

released at 3:00 p.m.

RORY L. PERRY II, CLERK

No. 13-1193 SUPREME COURT OF APPEALS

OF WEST VIRGINIA

THE WEST VIRGINIA INVESTMENT MANAGEMENT BOARD,

a public body corporate, and THE WEST VIRGINIA CONSOLIDATED

PUBLIC RETIREMENT BOARD, a public agency,

Plaintiffs Below, Petitioners

v.

THE VARIABLE ANNUITY LIFE INSURANCE

COMPANY, a Texas corporation,

Defendant Below, Respondent

Appeal from the Circuit Court of Kanawha County

Honorable James C. Stucky

Civil Action No. 09-C-2104

REVERSED WITH DIRECTIONS

Submitted: September 30, 2014

Filed: November 14, 2014

Gerard R. Stowers, Esq. Thomas J. Hurney, Jr., Esq.

Special Assistant Attorney General Michael M. Fisher, Esq.

J. Mark Adkins, Esq. Erin R. Stankewicz, Esq.

Lenna R. Chambers, Esq. Patricia M. Bello, Esq.

Bowles Rice LLP Jackson Kelly PLLC

Charleston, West Virginia Charleston, West Virginia

Anthony J. Majestro, Esq.

Daniel McNeel Lane, Jr., Pro Hac Vice

Powell & Majestro, PLLC

Akin Gump Strauss Hauer & Feld LLP

Charleston, West Virginia

San Antonio, Texas

Counsel for Petitioners

Ashley B. Vinson, Pro Hac Vice

Danielle Crockett, Pro Hac Vice

Jeffrey G. Blaydes, Esq.

Akin Gump Strauss Hauer & Feld LLP

Carbone & Blaydes P.L.L.C.

San Francisco, California

Charleston, West Virginia

Counsel for Respondent

Amicus Curiae–American

Federation of Teachers–West Virginia,

AFL-CIO

John Everett Roush, Esq.

Charleston, West Virginia

Amicus Curiae–The West Virginia

School Service Personnel Association

James M. Haviland, Esq.

Charleston, West Virginia

Amicus Curiae–West Virginia

Education Association

JUSTICE LOUGHRY delivered the Opinion of the Court.

SYLLABUS BY THE COURT

1. “The circuit court’s function at the summary judgment stage is not to weigh

the evidence and determine the truth of the matter, but is to determine whether there is a

genuine issue for trial.” Syl. Pt. 3, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).

2. “In deciding whether a justiciable controversy exists sufficient to confer

jurisdiction for purposes of the Uniform Declaratory Judgment[s] Act, West Virginia Code

§§ 55-13-1 to -16 (1994), a circuit court should consider the following four factors in

ascertaining whether a declaratory judgment action should be heard: (1) whether the claim

involves uncertain and contingent events that may not occur at all; (2) whether the claim is

dependent upon the facts; (3) whether there is adverseness among the parties; and (4)

whether the sought after declaration would be of practical assistance in setting the underlying

controversy to rest.” Syl. Pt. 4, Hustead v. Ashland Oil Co., 197 W.Va 55, 475 S.E.2d 55

(1996).

3. “The fiduciary duty of the Consolidated Public Retirement Board

established by W.Va. Code, 5-10D-1 [1998] and its members, with respect to the public

employee pension funds and assets entrusted to the Board, includes the affirmative duty to

monitor and evaluate the effect of legislative actions that may affect such funds and assets,

and to take all necessary actions including initiating court proceedings if necessary to protect

i

the fiscal and actuarial solvency of such funds and assets.” Syl. Pt. 2, State ex rel. Deputy

Sheriff’s Ass’n v. Sims, 204 W.Va. 442, 513 S.E.2d 669 (1998).

4. As a statutory trustee of this state’s public retirement funds, the

Consolidated Public Retirement Board has standing to bring an action under the Uniform

Declaratory Judgments Act, West Virginia Code §§ 55-13-1 to -16 (2008), to resolve

disputes arising from investment-related contracts that involve public retirement funds,

irrespective of whether it is a party to such contracts.

5. “Whenever the language of an insurance policy provision is reasonably

susceptible of two different meanings or is of such doubtful meaning that reasonable minds

might be uncertain or disagree as to its meaning, it is ambiguous.” Syl. Pt. 1, Prete v.

Merchants Prop. Ins. Co., 159 W.Va. 508, 223 S.E.2d 441 (1976).

ii

LOUGHRY, Justice:

The petitioners, the West Virginia Investment Management Board (“IMB”) and

the West Virginia Consolidated Public Retirement Board (“Board”), appeal from two orders1

entered by the Circuit Court of Kanawha County that separately grant summary judgment to

the respondent, The Variable Annuity Life Insurance Company (“VALIC”), against the IMB

and the Board. The petitioners initiated the underlying action to obtain a declaratory

judgment regarding their entitlement to a full surrender of two annuity contracts without

delays in payment or surrender charges. Bifurcating the relief awarded based on the

signatories to the annuity contracts, the trial court resolved the petitioners’ claims on grounds

of standing, the absence of a justiciable controversy, or the lack of ambiguity concerning the

language of the policy endorsement in dispute. On appeal, the petitioners assert multiple

assignments of error including the trial court’s reliance on disputed issues of material fact.

Upon a thorough review of the submitted record in conjunction with the issues raised, we

find that the trial court committed error in its grant of summary judgment to VALIC and,

accordingly, we reverse.

I. Factual and Procedural Background

Like the trial court, we find it necessary to briefly review the history of the

teachers’ retirement plans and the underlying legislation relating to these plans that are at the

1

The orders were both entered on October 21, 2013.

1

center of this dispute. The State Teachers Retirement System (“TRS”) was created in 1941

to provide retirement benefits for public school teachers and other school service personnel.2

From 1941 to 1970, teachers and other professional and school service personnel were

required to participate in TRS. While originally a defined contribution plan, TRS became

a defined benefit plan in 1970.3 Due to funding problems affecting the solvency of TRS, the

Legislature enacted the “Teacher’s Retirement Reform Act” (“Reform Act”) in 1990,

pursuant to which a defined contribution plan (“DCP”) was created. See W.Va. Code §§ 18­

7B-1 to -21 (2012 & Supp. 2014). Subject to the provisions of the Reform Act, participants

were permitted to allocate their retirement funds among various investment options in the

DCP.4

2

See W.Va. Code §§ 18-7A-1 to -40 (2012 & Supp. 2014).

3

We explained the distinction between a defined benefit and a defined contribution

plan in Nesselroad v. Consolidated Public Retirement Board, 225 W.Va. 397, 693 S.E.2d

471 (2010):

Under its initial structure as a defined contribution plan, a

retiring TRS member would receive a lump sum amount

reflecting his or her total contributions; the employer’s total

contributions; and accrued interest. With the restructuring of

TRS into a defined benefit plan that occurred in 1970, a retiring

member receives a monthly annuity payment based on various

actuarial assumptions such as percentage of contributions;

salary; and service years.

Id. at 400, 693 S.E.2d at 474.

4

Under the Reform Act, TRS was closed to new participants effective July 1, 1991;

new teachers were automatically enrolled in the DCP. See W.Va. Code § 18-7B-7. Due to

subsequent legislation, teachers hired for full time service after June 30, 2005, were

2

Pertinent to this matter are two fixed annuity contracts issued by VALIC, the

first on October 8, 1991 (the “1991 Contract”),5 and the second on November 6, 2008 (the

“2008 Contract”).6 Both of the annuity contracts issued by VALIC contain an identically-

worded endorsement–the terms of which purport to govern the rights of the parties with

regard to a participant’s decision to surrender his or her investment in the annuity.

Directly impacting the case before us was the Legislature’s decision to permit

DCP members to voluntarily transfer their retirement funds to TRS effective July 1, 2008.

See generally W.Va. Code §§ 18-7D-1 to -12 (2008). This transfer could only take place if

sixty-five percent of actively-contributing DCP members elected to make the transfer. See

id. at §§ 18-7D-3, -5. According to the trial court’s findings, more than seventy-eight percent

of the relevant DCP participants elected to make the transfer to TRS.

The record in this case evidences that VALIC or its agent7 was fully apprised

of the legislation (House Bill 101) that, upon enactment and subsequent approval by the

precluded from participating in DCP and were required to participate in TRS. See W.Va.

Code § 18-7B-7a.

5

The signatory parties to the 1991 Contract were VALIC and the Board.

6

The signatory parties to the 2008 Contract were VALIC and the IMB.

7

In referring to VALIC, we are including communications with Jim Coppedge as

Senior Vice President and General Counsel for AIG Retirement Services, the fund provider

through whom the Board obtained both the 1991 Contract and the 2008 Contract.

3

necessary percentage of DCP participants, would permit electing DCP members to join TRS.8

VALIC was similarly aware of the resulting need to remove the assets of DCP participants

electing to transfer to TRS from its annuity fund. During discussions between the Board and

VALIC in advance of the DCP participants’ vote, VALIC indicated that there was likely to

be a “surrender charge” of $11.5 million “in the event that all assets were cashed out in the

same year.”9 This potential surrender charge, which had not been anticipated by the Board,10

spawned additional and ongoing communications between VALIC, the Board, and the IMB

concerning the transfer of moneys subject to the 1991 Contract of those DCP participants

electing to join TRS.

Striving to meet its statutory duty to effectuate the timely transfer of funds from

the DCP to TRS11 and to uphold its fiduciary obligations,12 the Board, in active consultation

8

House Bill 101 passed on March 16, 2008.

9

This representation was first made by Jim Coppedge, Senior Vice President and

General Counsel of AIG Retirement, during a meeting on March 14, 2008, at the state

capitol with then governor Joe Manchin and various legislative leaders, and was later

included in an electronic communication dated March 17, 2008, from Mr. Coppedge to

Anne W. Lambright, Executive Director of the Consolidated Public Retirement System.

10

One reason that a surrender charge had not been considered by the petitioners was

the language in the endorsement to the 1991 Contract which provides: “There will be no

surrender charges under this Contract.”

11

See W.Va. Code § 18-7D-5(a) (mandating transfer of assets from DCP to TRS to

occur on either July 1, 2008, or August 1, 2008, depending on date of participant’s election).

12

See W.Va. Code § 5-10D-1(d), (g) (2013).

4

with the IMB, agreed to obtain a second annuity contract (the 2008 Contract) from VALIC.

As the record makes clear, the 2008 Contract was purposefully designed “as an investment

and funding vehicle” to “accomplish the transfer to the TRS Plan of TDC Plan [DCP] assets

of electing members currently invested in a Group Annuity Contract [1991 Contract] with

. . . (“VALIC”).”13 Through email communications from VALIC to the Board and the IMB,

the parties documented their agreement that the second annuity contract would be “materially

similar (i.e., form, endorsements, rates, and terms) to the contract issued to the CPRB

[Board] for the TDCP [DCP].14

On December 10, 2008, the petitioners submitted a request to VALIC to

transfer $248,345, 458.77 from the 1991 Contract to the 2008 Contract. VALIC effectuated

the transfer pursuant to the petitioners’ request. On December 18, 2008, IMB requested

withdrawal of all funds held under the 2008 Contract on or before December 21, 2008.15 Due

to VALIC’s unalterable position that the funds were subject to withdrawal restrictions which

13

See December 10, 2008, Letter of Understanding prepared by H. Craig Slaughter,

Executive Director of IMB and signed by Jim Coppedge, Senior Vice President and General

Counsel of VALIC, in agreement.

14

See September 25, 2008, email communication from Jim Coppedge to Anne W.

Lambright and W. Craig Slaughter, and December 10, 2008, Letter of Understanding

referencing the September 25, 2008, email communication originating from Mr. Coppedge.

15

Whereas the Board is charged statutorily with entering into contracts related to

DCP funds (W.Va. Code § 18-7B-5), the IMB is legislatively authorized to enter into

contracts pertaining to TRS (W.Va. Code § 12-6-5).

5

limited the petitioners to removing twenty percent of the surrender amount per year, the IMB

was forced to remove funds from the 2008 Contract in accord with this five-year installment

method.16

Based on the respondent’s refusal to surrender the entirety of the affected funds

in a lump sum, the petitioners instituted a declaratory judgment action against VALIC.17 In

response to the request for judicial resolution of the petitioners’ right to full and unrestricted

surrender of the annuity funds, VALIC removed the case to federal court.18 Following the

district court’s decision to remand this case to circuit court, the petitioners amended their

complaint to seek damages arising from VALIC’s refusal to timely release the funds at

issue.19 Cross motions for summary judgment were filed after the completion of discovery.

On October 21, 2013, the circuit court separately granted the respondent’s motion for

summary judgment against each of the petitioners. It is from these orders that the petitioners

assert error.

16

The first funds were removed on May 5, 2009, and the fifth and final withdrawal

occurred in May 2013.

17

The lawsuit was filed on November 12, 2009.

18

Removal was sought based on diversity of citizenship.

19

VALIC was the only fund provider that refused to permit the petitioners to have

immediate access to the funds of DCP participants electing to transfer into TRS.

6

II. Standard of Review

Our review in this case is unquestionably plenary as we are examining the

grounds upon which the trial court relied in granting summary judgment to the respondent.

See Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994) (“A circuit court’s

entry of summary judgment is reviewed de novo.”). As we articulated in Painter, “[t]he

circuit court’s function at the summary judgment stage is not to weigh the evidence and

determine the truth of the matter, but is to determine whether there is a genuine issue for

trial.” 192 W.Va. at 190, 451 S.E.2d at 756, syl. pt. 3. Also applicable is this Court’s

recognition in syllabus point two of Riffe v. Home Finders Assocs., Inc., 205 W.Va. 216, 517

S.E.2d 313 (1999), that “[t]he interpretation of an insurance contract, including the question

of whether the contract is ambiguous, is a legal determination that, like a lower court’s grant

of summary judgment, shall be reviewed de novo on appeal.” Bearing these standards in

mind, we proceed to determine whether the trial court committed error.

III. Discussion

A. Adverse Rulings Against the Board

1. Justiciable Controversy – 1991 Contract

In granting summary judgment to VALIC with regard to the Board’s

averments, the trial court separately examined the Board’s attempt to seek relief under both

the 1991 Contract and the 2008 Contract. As to the 1991 Contract, the trial court focused

7

initially on the Board’s right to seek declaratory relief under the Uniform Declaratory

Judgments Act (the “Act”). See W.Va. Code §§ 55-13-1 to -16 (2008). Looking to this

Court’s recognition in Hustead v. Ashland Oil Co., 197 W.Va 55, 475 S.E.2d 55 (1996), that

“there must be an actual, existing controversy” to grant relief under the Act, the trial court

concluded that the predicate justiciable controversy was absent with regard to the 1991

Contract. Id. at 61, 475 S.E.2d at 61.

In deciding there was no active controversy between the Board and VALIC

with regard to the 1991 Contract, the trial court relied upon carefully-crafted factual

findings.20 Illustrative of this point is the myopic focus by the trial court on the Board’s

failure to “demand immediate cash surrender of the electing teachers’ assets in June 2008 or

thereafter.”21 Only by applying a hyper-critical lens to this case can that statement be viewed

as veracious; critically, the implication that the Board never sought a cash surrender is not.22

What the record in this case reveals is that on March 14, 2008, the Governor, who is a Board

20

According to the petitioners, the summary judgment orders under review were both

prepared by the respondent’s counsel and adopted verbatim by the trial court.

21

By June 2008, the requisite percentage of votes had been cast by the electing DCP

participants to join TRS pursuant to West Virginia Code §§ 18-7D-3, -5, -7.

22

According to the deposition testimony of Anne Lambright, the Board’s Executive

Director, a phone call was made from the governor’s office to Jim Coppedge, informing him

of the dollar amount of the surrender being requested and the number of participants

involved. Additional evidence of this request is provided in an email from Mr. Coppedge,

dated June 29, 2008, written to Ms. Lambright. See infra note 28.

8

member,23 held a meeting at the state capitol with VALIC representatives and various

legislative leaders. That meeting, which took place just two days before the passage of

House Bill 101, was held to explore VALIC’s response to the legislation’s anticipated

passage. Upon being presented with this information, Mr. Coppedge, as general counsel for

AIG Retirement, indicated that an $11.5 million dollar surrender charge would be imposed.

Three days after this meeting and the passage of the authorizing legislation, Mr. Coppedge

continued to assert VALIC’s right to assess a multi-million dollar surrender charge “in the

event that all assets were cashed out in the same year.”24

Although VALIC eventually agreed that the policy prevented the imposition

of a surrender charge, another impediment to the immediate withdrawal of these funds arose

when VALIC declared that the requested withdrawal was subject to a five-year restriction.25

Looking for a way to avoid this fund-release limitation, the petitioners decided to transfer the

funds from the 1991 Contract into a bond fund option within the DCP– the American Funds.

The parties were in agreement that the terms of the endorsement permitted a transfer of

23

See W.Va. Code § 5-10D-1(b).

24

Because numerous participants elected to stay in the DCP, all of the assets were

never cashed out of the 1991 Contract. At present, $50 million in assets remain invested

under the 1991 Contract for DCP members.

25

VALIC relied on the language of the endorsement that addresses an annual 20

percent limitation “in the case of a withdrawal for transfer to another funding entity.” The

petitioners maintain that the conditions for invoking this limitation are nonexistent.

9

funds from the annuity to this particular investment without restrictions. The contemplated

transfer failed to occur when the American Funds refused to accept the large investment.

At this point, months after the transfer to TRS was to have been accomplished,26 the

petitioners relented with regard to its attempt to remove the funds from VALIC in toto and

agreed to place the funds in another VALIC annuity–the 2008 Contract.27

In view of the numerous communications between VALIC and the petitioners

in regards to effecting removal of the subject funds from the 1991 Contract, there is little

doubt that VALIC, while fully apprised of the petitioners’ objective to acquire those funds

in aggregate fashion, acted in direct response to that specific request.28 Hence, the trial

court’s hinging of its ruling on the absence of a cash demand by the Board in June 2008 or

later is nothing more than a red herring. Assuming, arguendo, that no demand was in fact

26

The petitioners note that one aspect of the transfer of the DCP funds to the TRS was

accomplished by putting those funds into the hands of the IMB (making IMB a party in lieu

of the Board to the 2008 Contract), the trustee statutorily charged with investing TRS funds.

See W.Va. Code §§ 12-6-3(a), -9a(a) (2014). The physical “movement” of these funds did

not begin until May 5, 2009, with the first installment transfer to IMB, and ended with the

last transfer of funds from VALIC to the IMB in May 2013.

27

The petitioners maintain that the creation of the 2008 Contract as a funding vehicle

for the DCP members electing to transfer into TRS was VALIC’s idea.

28

Through email correspondence dated June 29, 2008, Jim Coppedge, Senior Vice

President and General Counsel for AIG Retirement, wrote to Anne Lambright, the Board’s

Executive Director: “I am writing to follow up on a request that we received from Great

West [DCP plan administrator] late last week to transfer $237 Million in assets from the

VALIC Group Fixed Annuity Contract offered through the Plan. . . .”

10

made,29 the lack of demand in June 2008 or later was clearly linked to VALIC’s vacillating

position that such a release of funds would either cost $11.2 million or be subject to specified

per annum limits. Given the ongoing motivation of the Board to act consistent with its

fiduciary responsibilities,30 the lack of a demand at this particular point in time was

necessarily impelled by the need to limit the costs associated with removal of those funds.

Returning to the issue of whether an active controversy existed between the

Board and VALIC regarding the Board’s entitlement to an immediate surrender without fees

or restrictions under the 1991 Contract, we revisit the nature of a justiciable controversy.

Integral to the maintenance of a declaratory judgment action is the existence of a live “case.”

Instructive of this requirement, we have stated: “Courts are not constituted for the purpose

of making advisory decrees or resolving academic disputes. The pleadings and evidence

must present a claim of legal right asserted by one party and denied by the other before

jurisdiction of a suit may be taken.” Mainella v. Board of Trustees of Policemen’s Pension

or Relief Fund, 126 W.Va. 183, 185-86, 27 S.E.2d 486, 487-88 (1943) (emphasis supplied).

Clarification of legal rights and obligations before a party is forced to act upon those rights

and obligations is the ideal which the Act seeks to promote. See Cox v. Amick, 195 W.Va.

29

While we are not resolving the factual determination of whether a cash demand was

made by the Board in June 2008 or later, we observe that the overly-constrained manner in

which the trial court framed and ruled on the issue of a demand suggests that such a demand

may have been made at some point by some entity.

30

See supra note 12.

11

608, 618, 466 S.E.2d 459, 469 (1995) (Cleckley, J., concurring). The crux of the actual

controversy requirement, however, is that the facts must be known and existing at the time

of the filing of a declaratory judgment proceeding and the rights and obligations at issue

cannot have been previously adjudicated. See Hustead, 197 W.Va. at 61-62, 475 S.E.2d at

61-62.

We adopted the following four-pronged test in syllabus point four of Hustead

to assist judges with the identification of a justiciable controversy:

In deciding whether a justiciable controversy exists

sufficient to confer jurisdiction for purposes of the Uniform

Declaratory Judgment Act, West Virginia Code §§ 55-13-1 to ­

16 (1994), a circuit court should consider the following four

factors in ascertaining whether a declaratory judgment action

should be heard: (1) whether the claim involves uncertain and

contingent events that may not occur at all; (2) whether the

claim is dependent upon the facts; (3) whether there is

adverseness among the parties; and (4) whether the sought after

declaration would be of practical assistance in setting the

underlying controversy to rest.

Id. at 56, 475 S.E.2d at 56. Application of these factors demonstrates that a justiciable

controversy existed at the time the petitioners filed their complaint against VALIC.

In this case, there is no concern that the matter at issue– the petitioners’ attempt

to resolve their right to an immediate and aggregate removal of the annuity funds–is a

contingent event. As the facts of this case demonstrate, the removal of the subject funds has

12

been accomplished. What has yet to be determined, however, is whether the petitioners had

the right to the immediate withdrawal of those annuity funds, free of temporal or quantitative

restrictions. Consequently, the relevant adverseness still exists between the parties and the

declaration of rights sought by the petitioners is required to put this controversy to rest.

Seeking to circumvent the existence of a justiciable controversy, VALIC posits

that the Board never asserted its right to an aggregate release of the electing DCP members’

funds. See State Farm Mut. Auto Ins. Co. v. Schatken, 230 W.Va. 201, 211, 737 S.E.2d 229,

239 (2012) (finding declaratory relief improper based on insurer’s failure to plead contractual

provision upon which it relied for claimed right to reimbursement and failure to assert right

to reimbursement pre-suit). As evidence of the Board’s failure to seek a lump sum payout,

VALIC asserts that the necessary paperwork to complete a withdrawal of the subject funds

was supplied to, but never returned by, Great-West Retirement Services (“Great West”), the

third-party administrator of the DCP. The record of this case amply demonstrates why the

“Transition Information Form” supplied to Great West for processing the fund release was

not returned to VALIC. By completing and submitting the form, the Board would have been

agreeing to a five-year payout of the requested funds. At this point in the process, the Board

was simply unwilling to act in accordance with VALIC’s interpretation of the 1991

13

Contract.31 Importantly, the fact that the paperwork necessary to process the Board’s demand

for funds was not returned to VALIC does not evidence the failure of the Board to seek such

a payout under the facts of this case. All it proves is that the Board, fully aware of the

financial consequences of a cash demand based on VALIC’s position and its control of the

subject funds, was seeking to find an alternate way to gain full access to the necessary funds

without the attendant imposition of fees or withdrawal restrictions.

Our review of the record compels us to conclude that the trial court erred in

finding that VALIC had not denied any right asserted by the Board under the 1991 Contract.

That finding is clearly tied to the circuit court’s acceptance of VALIC’s argument that the

Board never requested a cash payout under the 1991 Contract. Only by turning a blind eye

to the events that transpired in this case can it even be suggested that the Board failed to

assert its claimed right to an aggregate payout of the subject funds. VALIC cannot expect

this Court, or any court for that matter, to believe that the statutory objective of gaining

access to the funds of the electing DCP members was not adequately articulated by the Board

in a manner that VALIC fully comprehended. On the facts of this case, the Board’s failure

to submit the form authorizing the withdrawal of funds is simply not determinative of

whether the Board previously asserted its right to a lump sum payout. Moreover, unlike the

31

By failing to submit the form, VALIC argues that the Board was “tacitly agreeing

that the withdrawal restriction applied to the transfer.” We find this statement to be self-

serving and unsupported by the record.

14

situation in Schatken, the pleadings of this case fully evidence that the Board asserted its

right to an immediate demand of the subject funds without fees or restrictions from the initial

filing of this case in May 2009.

In clear contrast to the circuit court, we find that the requisite assertion of a

legal right by one party and the denial of that right by another party to a declaratory judgment

action has been demonstrated. See Board of Educ. v. Board of Public Works, 144 W.Va. 593,

601, 109 S.E.2d 552, 557 (1959). VALIC’s actions in response to the Board’s unmistakably

clear and statutorily-mandated objective of removing the corpus of the electing DCP

members’ funds32 constituted the necessary controversy to proceed under the Act.33 See

Robertson v. Hatcher, 148 W.Va. 239, 247, 135 S.E.2d 675, 681 (1964) (“‘The controversy

between the plaintiff and the defendant is actual, existing and justiciable in the sense that the

defendant has made evident his purpose to enforce provisions of the statute and that such

enforcement will directly and materially affect the rights of the plaintiff.’”) (internal citation

omitted). That controversy has yet to be resolved. See Mainella, 126 W.Va. at 186, 27

32

VALIC’s sophistic suggestion that the statutory mandate was met when the 2008

Contract was created and IMB was given “control” of the funds is decidedly wrong. As

long as the funds remained with VALIC, IMB lacked the ability to utilize those moneys for

the benefit of the TRS system as a whole and, correspondently, it had no ability to increase

the return on the investment.

33

As noted above, every investment provider other than VALIC transferred the assets

of the electing DCP members without restriction or penalty in accordance with the Board’s

instructions. See supra note 19.

15

S.E.2d at 488 (recognizing need for resolution through declaratory judgment of former

policeman’s right, that had been partially denied, to pension or restoration to active duty).

Accordingly, we reverse the trial court’s finding that no justiciable controversy exists

between the Board and VALIC with regard to the 1991 Contract.34

2. Standing – 2008 Contract

Similar to its handling of the 1991 Contract, the trial court resorted to cherry-

picked facts and resulting summary conclusions to rule that the Board has no standing to

assert relief in connection with the 2008 Contract. Intentionally minimizing the Board’s role

as a trustee of TRS, the circuit court reasoned that the Board lacked the requisite standing to

be a party to any proceeding involving the 2008 Contract.35 For the reasons stated below, we

find this conclusion both erroneous and specious.

In VALIC’s vision of the trustee position that the Board occupies in relation

to the IMB, the Board is nothing but a check issuer. Overlooked by VALIC is both statutory

and case law recognizing the significance of the Board’s role as a trustee of this state’s

34

Although we find it unnecessary to address at length the trial court’s conclusion that

the Board cannot establish it suffered harm in connection with the 1991 Contract, we are

unpersuaded by VALIC’s contention that the issuance of the 2008 Contract fully eliminates

the issue of harm to the Board. Whether the Board can demonstrate damages arising from

the 1991 Contract has yet to be established.

35

The parties to the 2008 Contract were the IMB and VALIC.

16

various retirement funds. The Board is expressly charged to “administer all public retirement

plans in this state.” W.Va. Code § 5-10D-1(a). By law, the Board “has all the powers,

duties, responsibilities and liabilities of the Public Employees Retirement System . . . ; the

Teachers Retirement System . . .; the Teachers’ Defined Contribution System. . . . ” Id. at

§ 5-10D-1(d).

Contending that the Board is a mere payment processor while the IMB is the

actual investor of TRS funds, VALIC maintains that the Board lacks the requisite significant

interest in the 2008 Contract to be a party to any dispute arising from that contract. See Syl.

Pt. 1, Shobe v. Latimer, 162 W.Va. 779, 253 S.E.2d 54 (1979) (recognizing existence of

standing for persons with significant interests who are directly injured or adversely affected

by governmental action under Uniform Declaratory Judgements Act). The indefensibility

of these arguments is easily demonstrated. The Legislature both envisioned and empowered

the Board to be more than a distributor of retirement checks. In designating the Board as a

trustee for all the state’s retirement plans, the Legislature expressly accorded the Board “all

the powers, duties, responsibilities and liabilities” of each of those plans. W.Va. Code § 5­

10D-1(d). Inherent to the legislative reposition of trust in the Board is “a fiduciary duty to

protect the fund[s] and the interests of all beneficiaries thereof” which requires that “it must

exercise due care, diligence, and skill in administering the trust.” Syl. Pt. 14, in part,

17

Dadisman v. Moore, 181 W.Va. 779, 384 S.E.2d 816 (1988).36 As a further means of

ensuring proper oversight of this state’s public retirement funds, the Legislature mandated

that members of the Board “shall have recognized competence or significant experience in

pension management or administration, actuarial analysis, institutional management or

accounting.” W.Va. Code § 5-10D-1(b).

The extent of the Board’s fiduciary duty to its members has previously been

recognized by this Court:

The fiduciary duty of the Consolidated Public

Retirement Board established by W.Va. Code, 5-10D-1 [1998]

and its members, with respect to the public employee pension

funds and assets entrusted to the Board, includes the affirmative

duty to monitor and evaluate the effect of legislative actions that

may affect such funds and assets, and to take all necessary

actions including initiating court proceedings if necessary to

protect the fiscal and actuarial solvency of such funds and

assets.”

Syl. Pt. 2, State ex rel. Deputy Sheriff’s Assoc’n v. Sims, 204 W.Va. 442, 513 S.E.2d 669

(1998) (emphasis supplied). As we acknowledged in Sims, the Board has a responsibility as

“‘financial prognosticator and micromanager’” to “use the court system to protect the rights

36

Although this holding of Dadisman addressed the authority of the Public Employees

Retirement System Board, the same principles equally apply to the Consolidated Public

Retirement Board as it replaced the PERS Board upon its creation in 1991. See State ex rel.

Deputy Sheriff’s Ass’n v. Sims, 204 W.Va. 442, 448, 513 S.E.2d 669, 675 (1998) (“The

affirmative duty of the Board to act . . . in an informed, proactive and independent manner

to perform its fiduciary duty is no less now than it was when Dadisman was decided.”).

18

of the beneficiaries of the funds held in trust by the Board.” Id. at 448, 513 S.E.2d at 675

(internal citation omitted).

Seeking to nullify the significance of the Board’s role as a trustee of TRS,

VALIC places undue emphasis on the IMB’s duty to provide “prudent fiscal administration,

investment and management for the funds of” TRS. W.Va. Code § 12-6-3(a) (2014).

Critically, the IMB’s duty to invest TRS funds does not extinguish the fiduciary role that the

Board occupies as a trustee of TRS. See W.Va. Code § 5-10D-1(a). Inherent to the Board’s

continued role as a statutory trustee is its responsibility to act consistent with its legislatively-

imposed duty to protect the funds of TRS as well as the interests of the TRS beneficiaries.

See W.Va. Code § 12-6-7 (2014) (recognizing continued status, power,37 and duties of public

agencies and boards with respect to retirement funds upon creation of IMB); Dadisman, 181

W.Va. at 782, 384 S.E.2d at 819, syl. pt. 14.

As the amicus curiae38 correctly observes, the Board and the IMB “serve

crucial roles that are inextricably intertwined as they relate to the retirement assets at issue.”

We agree. The Legislature has charged both the Board and the IMB to protect the retirement

37

Among those continued powers is “the right to sue and be sued, plead and be

impleaded, contract and be contracted with and . . . make all necessary rules and regulations

to carry out the provisions of this article [7A].” W.Va. Code § 18-7A-4 (2012).

38

Specifically, the American Federation of Teachers–West Virginia, AFL-CIO.

19

assets of public education employees. As part of their duties as trustees, the petitioners serve

as the legal representatives of the participants in the subject retirement plans. In bringing the

subject action in tandem, the petitioners acted consistent with their public charge to protect

the assets of the public education employees whose retirement depends upon the fiscal

soundness of TRS. Had the IMB brought this action on its own, it is likely that the Board

would have been required to intervene as a necessary party. See Mainella, 126 W.Va. at 188,

27 S.E.2d at 488 (recognizing need for joinder of necessary parties to fully adjudicate merits

of pension-related matter).

Consequently, we are unpersuaded by VALIC’s attempt to discount the Board’s

role as a trustee of TRS. While the Legislature established the IMB as an independent public

body corporate, it did not create a body authorized to act without review or oversight. See

W.Va. Code § 12-6-1a(b) (2014) (recognizing need for “independent board with its own full-

time staff of financial professionals, immune to changing political climates, in order to

provide a stable and continuous source of professional financial management”). This is

evident from the fact that the IMB is statutorily required to provide the Board with monthly

and quarterly performance reports. W.Va. Code § 12-6-6(b), (c) (2014). Of further

significance is the Legislature’s decision not to eliminate or reduce the powers and duties the

Board had with regard to TRS when it adopted legislation pertaining to the IMB. See W.Va.

Code §§ 12-6-7, 5-10D-1(d). The legislative creation of the IMB as a public body corporate

20

for investment purposes was designed as “the best means of assuring prudent financial

management of these [retirement] funds under rapidly changing market conditions and

regulations.” W.Va. Code § 12-6-1a(e). Equally evident, however, is the fact that the

statutes imbuing the IMB with investment authority do not abrogate the Legislature’s

reposition of trust in the Board with regard to the state’s public retirement plans. Finally, it

cannot be ignored that the Board is one of the entities charged with ensuring that the IMB

meets its objective of administering, investing, and managing TRS in a fiscally prudent

fashion. See W.Va. Code §§ 12-6-3(a), -6.

By choosing to dichotomize the relief awarded based upon the signatories to

the respective annuity contracts, the trial court engaged in a misadvised manner of evaluating

the issues presented in this case. While the annuity agreements are contractual in nature,

those contracts were formed for a specific governmental purpose–the investment of public

employees’ retirement funds. In view of this uncontroverted public purpose–a purpose that

entails both asset administration and protection–the signatory status of IMB to the 2008

Contract is simply not determinative of the Board’s interest in that annuity contract. As we

discussed above, the Board has “all the powers, duties, responsibilities and liabilities” of

TRS. W.Va. Code § 5-10D-1. And, as a statutory trustee of TRS, the Board in its fiduciary

role has the inherent authority “to take all necessary actions including initiating court

proceedings if necessary to protect the fiscal and actuarial solvency of such funds and

21

assets.” Sims, 204 W.Va. at 443, 513 S.E.2d at 670, syl. pt. 2, in part. Therefore, we wholly

reject VALIC’s attempt to remove the Board as a party to the controversy surrounding the

2008 Contract.

Rather than constituting precedent for the Board’s lack of standing, as VALIC

contends, this Court’s decision in Shobe demonstrates the exact converse. Addressing the

nature of the interest necessary to proceed under the Act, we concluded in Shobe that a group

of plaintiffs had standing under the Act to obtain relief with regard to riparian rights

allegedly affected by a contract between two governmental entities. Repudiating the

considerations that typically prevent third-parties from obtaining a declaration of rights

regarding a contract between private citizens, we explained that “there is a logical nexus

between the status plaintiffs in error assert and the contract claim sought to be adjudicated.”39

162 W.Va. at 787, 253 S.E.2d at 59. In discussing the distinction between standing and the

case or controversy test for assessing a justiciable controversy, we recognized that standing

involves “‘the question [of] whether the interest sought to be protected by the complainant

is arguably within the zone of interests to be protected or regulated by the statute or

constitutional guarantee in question.’” Id. at 787, 253 S.E.2d at 59-60 (quoting Ass’n of Data

Processing Serv. Organizations, Inc. v. Camp, 397 U.S. 150, 153 (1970)). Looking to the

39

As we explained in Shobe, “[b]ut for the contract the diversion [of water] would not

be taking place.” 162 W.Va. at 787, 253 S.E.2d at 59.

22

remedial purposes of the Act, this Court expressly rejected the requirement that to proceed

under the Act, a party must have a personal legal right or interest. See Shobe, 162 W.Va. at

788, 253 S.E.2d at 60 and syl. pt. 2.

Under the reasoning of Shobe, the laws charging the Board with the duties and

responsibilities of being a trustee of this state’s public retirement plans establish the requisite

“zone of interests” for the Board to seek a declaration of rights with regard to the 2008

Contract. To conclude otherwise, as we observed in Shobe, “would be contrary to the

express purpose and spirit of the [Declaratory Judgments] Act.” Id. at 787, 253 S.E.2d at 59.

With the objective of setting this issue to rest, we hold that, as a statutory trustee of this

state’s public retirement funds, the Consolidated Public Retirement Board has standing to

bring an action under the Act to resolve disputes arising from investment-related contracts

that involve public retirement funds, irrespective of whether it is a party to such contracts.

Accordingly, we reverse the trial court’s finding that the Board lacks standing in relation to

seeking and obtaining a declaration of rights and/or relief under the 2008 Contract.40

40

Not only is the trial court’s finding that the Board has not suffered any damages

related to the 2008 Contract premature, but we further reject its conclusion that the Board

was not impacted by any lost return on investments during the relevant time period. As the

personal representative of TRS, the Board was an interested party necessarily affected by any

losses that can properly be demonstrated to arise from the annuity contracts at issue.

23

B. Adverse Ruling Against IMB

1. Standing and Damages - 1991 Contract

Just as it framed its award of relief to VALIC against the Board based on the

individual annuity contracts, the trial court proceeded similarly in granting relief to VALIC

against IMB. With regard to the 1991 Contract, the circuit court narrowly framed the issue

as being controlled by the signatories to the contract. For many of the same reasons we

discarded VALIC’s arguments regarding the Board’s right to seek relief under the 2008

Contract,41 we find VALIC’s attempt to corral the relief and the parties with regard to the

1991 Contract to be similarly unavailing.

As an initial observation, we note the irony inherent to VALIC’s position that

the IMB has no standing to seek relief concerning the 1991 Contract. In regards to the 2008

Contract, VALIC purposefully sought to elevate the role the IMB occupies as trustee of TRS

charged with investing TRS assets compared to the “purely administrative” role the Board

fills. Having thus cast the IMB as the paramount trustee in view of its statutory charge to

invest TRS assets and its attendant responsibility for realizing returns on those investments,

VALIC now seeks to paint the IMB out of the investment picture with regard to the 1991

Contract. This construct does not withstand analysis.

41

See supra, Section III.A.2.

24

VALIC argues that the IMB “does not have any, much less a significant or

substantial, interest in the 1991 Contract.” In making this argument, VALIC relies upon the

fact that the Board, rather than the IMB, is charged with making investments for the DCP.

If the issues surrounding the 1991 Contract were limited to enforcing those contractual terms

for purposes of the non-electing DCP participants, VALIC’s position might resonate more

convincingly. Rather than maintaining investments subject to the 1991 Contract, however,

the subject proceedings were initiated by the petitioners to secure the withdrawal of those

funds. As the trustee charged with investing TRS assets, the IMB had a statutory mandate

to timely obtain the funds of those DCP members who elected to join TRS. See W.Va. Code

§§ 18-7D-5, -7. “[O]nce the transfer legislation was enacted,” as VALIC acknowledges, “the

transferring teacher’s funds belonged to the TRS.”

Given that the underlying action was instituted to obtain funds that the IMB

was statutorily charged to invest, the IMB had a clear right to join the Board in seeking a

declaration of rights as to the 1991 Contract. See W.Va. Code §§ 12-6-9a., 18-7D-5. The

IMB, like the Board, was acting on behalf of the public employees participating in TRS.

Apparently lost on VALIC is the fact that the IMB was not seeking to enforce rights arising

from a private contract, but rights emanating from a contract designed for the purpose of

public employees and their beneficiaries. Consequently, we have no difficulty in finding that

the IMB properly acted pursuant to its statutory grant of powers to “[s]ue and be sued” when

25

it jointly instituted the subject suit with the Board. W.Va. Code § 12-6-5 (2014).

Further evidence of error arises from the trial court’s ruling that VALIC’s

issuance of the 2008 Contract necessarily eliminated any harm that the IMB may have

suffered related to the 1991 Contract. Just as we rejected this finding with regard to the

Board’s inability to establish damages arising from the 1991 Contract,42 we similarly view

this related conclusion as baseless. Whether the IMB can establish that it incurred damages

as a direct result of its failure to obtain the assets of the electing DCP members in aggregate

fashion remains to be proven. It is not, however, a foregone conclusion as the trial court

suggests. Rather than having a preclusive effect, the issuance of the 2008 Contract is

integrally linked to whether the IMB can demonstrate injury arising from the 1991 Contract.43

Accordingly, we reverse the trial court’s finding that the IMB lacks standing in relation to

seeking and obtaining a declaration of rights and/or relief under the 1991 Contract.

2. Withdrawal Restrictions - 2008 Contract

Turning to the crux of the substantive dispute between the parties, we consider

the trial court’s rulings that pertain to the endorsement that is a part of both the 1991 and the

2008 Contract. As the trial court found, the “withdrawal restriction” contained in each of

42

See supra note 34.

43

But for the position VALIC took with regard to the endorsement contained in the

1991 Contract, the 2008 Contract would not have been issued.

26

the two contract endorsements are worded identically. In relevant part, the endorsement

provides as follows:

Section 2.03 (Surrender Value) is amended by adding the

following:

A) Except as provided in (B) below, in the case of a withdrawal

for transfer to another funding entity only 20% of the Surrender

Value may be withdrawn once a year.

A Participant may choose to have the Surrender Value

withdrawn for transfer in one of the following ways:

(1) Five Year Equal Annual Installment Method. The

interest rate during the five year payout period will be

declared in advance by VALIC. No other withdrawals

may be made once payments begin.

(2) Decreasing Balance Method. 1/5 of the account

balance the first year. 1/4 of the remaining balance the

second year. 1/3 of the remaining balance the third year.

1/2 of the remaining balance the fourth year. The entire

remaining balance the fifth year. Interest under this

method will be credited at a rate determined by VALIC.

Withdrawals may be made under this method.

B) The 20% a year restriction does not apply if:

(1) The Surrender Value remaining would be less than

$500, or;

(2) The withdrawal is for transfer to the funding entity

for the West Virginia ORP Common Stock Fund or the

West Virginia ORP Bond Fund.

Section 3.02 is deleted. There will be no surrender charges

under this Contract. The account Surrender Value is equal to

the Annuity Value. (emphasis supplied).

27

In reaching its finding that the endorsement is unambiguous, the trial court

intentionally omitted any consideration of documents that were incorporated as part of the

1991 Contract.44 That omission is critical to a proper understanding of the meaning of the

disputed endorsement language. Consequently, our review of the trial court’s ruling

pertaining to the endorsement to the 2008 Contract impels a discussion of the 1991 Contract

and its formation. In further explanation, we note that the 2008 Contract was created to be

“materially similar (i.e., form, endorsements, rates, and terms)” to the 1991 Contract,”45 and

documents expressly incorporated into the initial annuity contract arguably address the

parties’ intentions with regard to the subject endorsement language.

a. 1991 Contract

The 1991 Contract is comprised of four documents: the Request for Proposal

issued by the Board,46 VALIC’s submitted proposal, the October 15, 1991, Letter of

Understanding (“1991 Letter of Understanding”), and the annuity policy issued to the Board

as amended by the endorsement. The Request for Proposal provides:

Each participant will choose his/her own investment options

44

VALIC’s strategy to exclude any consideration of the 1991 Contract with regard to

the meaning of the endorsement is clear from both the structure of the summary judgment

rulings as well as the bifurcation of the relief awarded.

45

See supra note 14 and accompanying text.

46

The Request for Proposal provided that both “[t]he Request for Proposal and the

accepted proposal will be incorporated into the contract.”

28

from options that the Board will provide. Each participant may

invest in one or more of these funds in multiples of 20% and

they may change options at the end of each quarter as well as

changes in their current balance. There shall be no charge or

surrender charge of any transfer from one account to another.

Responding to the Board’s response for information relative to six specified

examples, VALIC provided the following in its submitted proposal:

Example #5: Male employee joins plan at age 30, ten years later

elects to transfer his entire balance from the annuity option

account to one of the other investment options.

An employee may reallocate any percentage of his/her

contribution to another option without restriction. Additionally

a participant may transfer 100% of his/her V-Plan account

balance to the Common Stock Fund or the Bond Fund at the end

of each quarter. 20% of the participant’s accumulated account

balance can be transferred to either the Money Market Fund or

the Investment Contract once per year. This condition is

necessary in order for VALIC to invest in a manner to support

the interest rates offered under the V-Plan contract. (emphasis

supplied)

Further addressing the issue of withdrawal from the VALIC annuity, James J.

Costello, Vice President of VALIC, and James L. Sims, Acting Executive Secretary of the

Board, agreed in the 1991 Letter of Understanding: “VALIC will allow a participant to

withdraw his or her investments at any time without penalty, subject to the twenty percent

annual limitation if funds withdrawn are to be deposited into money market fund or income

fund which consist of guaranteed investment contracts.”

29

b. Ruling Regarding Endorsement to 2008 Contract

Turning to the language of the endorsement, we recognize that it concerns

three separate issues, only two of which are germane to the present dispute. The first matter

addressed is the amendment of Section 2.03, which pertains to surrender value, and the

second subject of the endorsement is the deletion of Section 3.02–both of which are quoted

in full above. Since the parties are in agreement that no surrender charges apply, the issue

that the trial court purportedly considered was whether there was any ambiguity in the

language of the endorsement as it pertained to surrender value. Without any significant

discussion of the terms included in the amendments to Section 2.03,47 the trial court simply

declared that the subject language lacked ambiguity. In marked contrast to the trial court, we

are not convinced that the terms used in the amended Section 2.03 of the endorsement are

either unambiguous or capable of application without reference to the documents that were

included as part of the 1991 Contract.

In a calculated effort to exclude from its consideration any of the documents

that comprised the 1991 Contract, the trial court decided that the only documents relevant to

its interpretation of the 2008 Contract were the 2008 Contract and a Letter of Understanding

47

With no analysis of what qualified as “another funding entity,” the trial court

summarily concluded that VALIC’s transfer of funds to the Short Term Fixed Income Pool

in December 2008, at the IMB’s request, constituted “‘another funding entity’ for purposes

of the Endorsement.”

30

(“2008 Letter of Understanding”) from Craig Slaughter, the Executive Director of the IMB,

to Jim Coppedge. Given the manner in which the 2008 Contract came into existence–as an

investment vehicle for funds invested in the 1991 Contract upon VALIC’s disallowance of

the aggregate removal of those funds–and the representation by AIG’s senior vice president

and general counsel that the 2008 Contract would be “materially similar” to the 1991

Contract with express reference to “form, endorsements, rates, and terms,” we would be hard

pressed to wholly disregard evidence that may relate to the meaning of the endorsement

language in dispute.

While declaring the subject endorsement to be unambiguous, the trial court

violated the well-established tenet of insurance and contract law that precludes reference to

extrinsic evidence to prove the meaning of unambiguous terms. See Larew v. Monongahela

Power Co., 199 W.Va. 690, 694, 487 S.E.2d 348, 352 (1997) (“The parol evidence rule . .

. generally prohibits the introduction of any extrinsic evidence to vary or contradict the terms

of written contracts [.]”). In this case, the trial court included what clearly constitutes parol

evidence in finding that “VALIC would not have entered into the 2008 Contract had it not

included the withdrawal restriction contained in the Endorsement.” This statement, attributed

to Mr. Coppedge in the trial court’s ruling, clearly goes outside the four corners of the two

documents the trial court identified as defining the rights of the parties with regard to the

2008 Contract.

31

The petitioners argue that the amended language of Section 2.03 governing

surrender value is not applicable under the facts of this case. As support for their position

that no withdrawal restrictions were invoked, the petitioners look to the terms employed in

the endorsement and VALIC’s past practice of permitting participants to have full and

immediate access to their funds when surrender was requested.48 Looking at the phrase

“withdrawal for transfer to another funding entity,” the petitioners maintain that the funding

entities encompassed within this endorsement language were the fund providers to whom the

DCP plan participants were permitted to transfer their funds subject to the annual 20 percent

limitation imposed on money market and guaranteed investment contracts. The endorsement

simply reflects the very terms insisted upon by the Board with regard to permitting and

encouraging DCP participants to regularly assess and move their retirement funds between

the various investment options provided. This is clear, argue the petitioners, from a review

of the language of Section 2.03 which fully comports with VALIC’s submitted proposal49 by

removing the 20 percent restriction from transfers that are made to the West Virginia ORP

Common Stock Fund or the West Virginia ORP Bond Fund. And, it similarly interfaces with

VALIC’s Example #5, quoted above, as part of its submitted proposal. The petitioners insist

48

Based on limited legislative windows provided for opting out of DCP and into TRS,

DCP participants were previously permitted by VALIC to withdraw their funds from the

1991 Contract with no temporal or quantitative restrictions in 1995 and 2001.

49

In its proposal, VALIC provided: “An employee may reallocate any percentage of

his/her contribution to another [investment] option without restriction. Additionally, a

participant may transfer 100% of his/her V-PLAN account balance to the Common Stock

Fund or the Bond Fund at the end of each quarter.”

32

that the endorsement’s withdrawal restrictions were solely intended to apply to transfers that

were made to other investments included within the DCP plan. In contrast, surrenders that

involved the participants’ outright removal of their funds from the DCP were not subject to

any restriction under the annuity policy other than a possible six-month delay in payment

following a request for funds.50

Because VALIC prepared the endorsement at issue, the petitioners correctly

observe that any ambiguities in that document are required to be construed against VALIC

and in their favor. See Syl. Pt. 4, Nat’l Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W.Va.

734, 356 S.E.2d 488 (1987) (“It is well settled law in West Virginia that ambiguous terms

in insurance contracts are to be strictly construed against the insurance company and in favor

of the insured.”). In deciding whether an ambiguity exists, this Court has held: “Whenever

the language of an insurance policy provision is reasonably susceptible of two different

meanings or is of such doubtful meaning that reasonable minds might be uncertain or

disagree as to its meaning, it is ambiguous.” Syl. Pt. 1, Prete v. Merchants Prop. Ins. Co.,

159 W.Va. 508, 223 S.E.2d 441 (1976). And, in those cases where uncertainty or ambiguity

exists regarding the construction of the terms used in a written instrument, evidence of

50

The delay in payment is authorized by Section 6.08 of the annuity contract, which

permits VALIC to defer payment of any partial or total surrender for up to six months.

33

custom or usage may be considered.51 See Syl. Pt. 5, Cotiga Dev. Co. v. United Fuel Gas

Co., 147 W.Va. 484, 128 S.E.2d 626 (1962).

VALIC insists that the condition necessary to invoke the subject endorsement

occurred when IMB requested that VALIC transfer all of the funds in the 2008 Contract to

the Short Term Fixed Income Pool on December 18, 2008. In this Court’s opinion, the issue

of whether the terms of the endorsement were even applicable to this full surrender request

by the IMB is far from clear. Upon our considered examination of the record in this case,

we are convinced that the language in the endorsement pertaining to “a withdrawal for

transfer to another funding entity” is decidedly ambiguous. In light of our determination

that the endorsement language under review is of such doubtful meaning that reasonable

minds might be uncertain or disagree as to its meaning, we reverse the trial court’s decision

51

When the 1991 Annuity became unallocated (specific funds no longer attributable

to specific participants) in the late 1990s, VALIC submits that this policy alteration impacted

the endorsement to permit the operation of the withdrawal restrictions on a group rather than

an individual level. The withdrawals that occurred following the change to an unallocated

policy, according to VALIC, simply did not involve sufficient funds to require application

of the withdrawal restrictions. While we need not decide this issue, we observe that the lack

of any separate documentation (other than self-serving statements announcing VALIC’s

position) which evidences a clear, bargained for limitation may make this position untenable.

See Cabot Oil & Gas Corp. v. Huffman, 227 W.Va. 109, 117, 705 S.E.2d 806, 814 (2010)

(recognizing that “courts are not at liberty to, sua sponte, add to or detract from the parties’

agreement”). We further note that a statutory definition of what constitutes an “unallocated

annuity contract” may further call VALIC’s position into question. See W.Va. Code § 33­

26A-5(25) (2011) (excepting from definition of unallocated annuity any annuity contract

where annuity benefits are guaranteed).

34

that the endorsement is unambiguous and its related conclusion that the 2008 Contract and

Letter of Understanding restricted the IMB’s requested withdrawal from the 2008 Contract

on December 18, 2008.

IV. Conclusion

Based on the foregoing, the decision of the Circuit Court of Kanawha County

to grant summary judgment to VALIC through its orders entered on October 21, 2013, is

reversed. Given the admitted complexity of the issues presented in this case and the prior

request of the petitioners to transfer this matter to the Business Court Division,52 we are

granting that request and accordingly direct the circuit court to promptly transfer this case to

the Business Court Division for further proceedings consistent with this opinion.

Reversed with directions.

52

See W.Va. T.C.R. 29.06.

35