An insurer was not obligated to provide coverage to the property of a policyholder subsidiary that was not a named insured, said the Virginia Supreme Court in a ruling issued Thursday that overturned a lower court.

Rockland, Maryland-based EPC MD 15 purchased a one-year insurance policy from Erie, Pennsylvania-based Erie Insurance Exchange that did not define the term “named insured” to include EPC’s subsidiaries, according to the ruling in Erie Insurance Exchange v. EPC MD 15 LLC.

About nine months after Erie issued the policy, EPC acquired the sole membership interest in Cyrus Square LLC, which owned a building in Winchester, Virginia, according to the ruling.

Within 90 days of it acquiring this membership interest, a fire damaged the Winchester building, and EPC’s counsel filed a demand for coverage.

After Erie denied coverage, EPC filed a suit in circuit court in Winchester, Virginia, contending that because EPC had “acquired” the property when it became the sole member of Cyrus Square, Erie was obligated to provide coverage under a coverage extension provision for newly acquired buildings in the policy.

A lower court ruled in EPC’s favor, which the Virginia Supreme Court overturned on appeal in a unanimous ruling. The policy language’s provisions “all undermine the reasonableness of EPC’s argument, that merely because it had ‘control’ over Cyrus Square, EPC ‘acquired’ the real property of Cyprus Square,” said the ruling.

“It is a creative argument, to be sure, but a little too creative to be ‘equally possible’ … as Erie’s more common sense interpretation — that EPC, the named insured needed to actually acquire the property not merely acquire the property owner, for the relevant coverage-extension provision to apply,” said the ruling, in reversing the lower court and dismissing EPC’s claim.

In a dispute with Erie, the Virginia Supreme Court ruled in 2017 that Nationwide Mutual Insurance Co. units were not obligated to provide primary coverage under a commercial general liability policy in a wrongful death case in a car accident because of a policy exclusion.