For additional articles, please check our Insurance Law Archives - 2000





Civil juries awarded billions of dollars to plaintiffs in 2000 but verdicts against traditional target defendants declined. According to Lawyers Weekly USA, judgments against manufacturers and doctors decreased while civil verdicts against criminals garnered larger judgments. The largest verdict rendered in 2000 was to former Playboy Playmate Anna Nicole Smith who recovered $474.7 million from the Estate of her late husband. The second-largest verdict was $341.7 million against the Islamic Republic of Iran recovered by former Associated Press writer and hostage Terry Anderson. Anderson may collect a portion of the judgment from seized assets held by the U.S. Both of these verdicts were rendered by judges.

The largest verdict returned by a jury was $328 million in Massachusetts, recovered by parents of a 10-year-old against their son�s killer. The largest medical malpractice verdict last year, $268 million, was returned in Texas on behalf of a cerebral palsy patient. Disney also topped the list of large verdicts in 2000 after a Florida jury awarded two men $240 million in damages after finding Disney "stole" their idea for a sports entertainment complex.




The West Virginia Supreme Court of Appeals has held that purely emotional damages for mental harm arising from claims of sexual harassment without physical manifestation do not fall within the definition of "bodily injury" under a general commercial liability policy. The West Virginia Court joined the majority of Courts in the country in its ruling in Smith v Animal Urgent Care, Inc. & Yurko, (No. 27058, W.Va., filed Nov. 3, 2000). The issue arose when American States filed a declaratory judgment action after an employee filed a sexual harassment, wrongful discharge and intentional infliction of emotional distress suit against the insured veterinarian and clinic.


American States sought a determination whether the claims of sexual harassment absent physical manifestation fell within either the definition of "bodily injury" or "occurrence" in its CGL policy. "Bodily injury" was defined in the policy as "bodily injury, sickness or disease sustained by a person including death." "Occurrence" was defined as "an accident including continued or repeated exposure to substantially the same general harmful conditions." The Court held that the terms "bodily injury" and "personal injury" are not synonymous and that the phrases have distinct definitions. The term "personal injury" is broader and includes not only physical injury but "any affront or insult to the reputation or sensibilities of a person." "Bodily injury," however, was defined more narrowly, encompassing only physical injuries to the body and consequences thereof. Therefore, the Court concluded that the claim of sexual harassment did not constitute a "bodily injury." Although the trial Court did not rule on whether the sexual harassment claim constituted an "occurrence," the Court nonetheless reviewed policy language and again found that a claim of sexual harassment does not fall within the meaning of an "occurrence" because the term has an accident-based definition.


Finally, the Court considered the intentional acts exclusion and extended its prior holding of Horace Mann Ins. Co. v Leeber, 180 W.Va. 375, 376 S.E. 2d 581 (1988), stating that the intent in Leeber concerning the intentional acts exclusion would extend beyond instances of sexual misconduct to include allegations of sexual harassment. Finally, the Court chastised the plaintiff for alleging negligence in the Complaint, finding it to be a "transparent attempt to trigger insurance coverage by characterizing allegations of intentional tortious conduct under the guise of negligent activity."


Interestingly, the Court upheld all of the exclusions in the American States policy without any reference to Mitchell v Broadnax, (No. 25539 W.Va., filed Feb. 18, 2000), in which the Court held that in order for exclusions to be valid, at least in uninsured motorist policies, that an insurance carrier must prove adjustment of policy premiums commensurate with policy exclusions.




In a case successfully defended by this firm, the West Virginia Supreme Court of Appeals has upheld summary judgment in favor of homeowners sued after an 18-year-old was killed playing Russian Roulette in their home. In Harbaugh v Coffinbarger, (No. 26557, W.Va., filed Dec. 12, 2000), a boy was playing Russian Roulette during a party and on the second spin of the cylinder killed himself. The Circuit Court of Berkeley County granted summary judgment to the homeowners. The plaintiff appealed claiming an inadequate record for summary judgment. 

On appeal, the Supreme Court affirmed summary judgment, finding that the record below was adequately developed including statements and affidavits from all witnesses and that the plaintiff had been given adequate time for discovery. One of the plaintiff�s arguments on appeal was that the estate had been denied enough time in which to conduct discovery. The opinion was also based upon the doctrine of intervening cause. The homeowners argued that the intentional and knowing acts of the decedent were an intervening cause such as to cut off negligence, if any, of the homeowners. In affirming the decision the Harbaugh Court held: "The lower Court discerned no conflicting evidence regarding the firing of the gun; nor did the lower Court conclude that the facts were such that reasonable men could draw different conclusions therefrom." The Court dismissed any arguments of the plaintiff attempting to characterize the act either as an intentional suicide or the "tragic consequence of playing Russian Roulette." Regardless of the characterization, the Court held that the act was an intervening cause as a matter of law and thus no genuine issue of material fact regarding the self-inflicted gunshot wound existed. Therefore, the Court determined that summary judgment was appropriate.




The West Virginia Supreme Court of Appeals has held that the $1million cap on non-economic damages in medical malpractice cases is constitutional and rejected an attack by the plaintiff�s bar to remove the cap as violative of the equal protection, special legislation, due process, certain remedy or right to trial by jury provisions of the West Virginia Constitution. The Court so ruled in Verba v Ghaphery, (No. 27464, W.Va., filed Dec. 13, 2000). However, the Court has now granted Plaintiff�s Petition for Rehearing and the case will be argued again May 9, 2001.


The issue arose after an Ohio County jury awarded $2.5 million to the beneficiaries of a decedent�s estate. That portion of the verdict was reduced according to the statutory cap. The plaintiffs sought the Court to overturn Robinson v Charleston Area Med. Ctr. Inc., 186 W.Va. 720, 414 S.E. 2d 877 (1991), and argued that the effects of inflation in the nine years since the Robinson opinion should also be considered. The Court held that it was within the Legislature�s proper exercise of its authority to set the cap and it is "similarly up to the Legislature to make any amendments to that legislation." The Court specifically held that the judiciary should not sit as a "super legislature to judge the wisdom or desirability of legislative policy determinations made in areas that neither affect fundamental rights nor proceed along suspect lines." Likewise, the Court held that it was not the proper body to examine whether medical malpractice reform is meeting the objective cited by the Legislature in enacting the West Virginia Medical Professional Liability Act, W.Va. Code �55-7B-1 to -11. In a footnote, the Court found that the cap of $1million in West Virginia is the highest in the nation.





The West Virginia Supreme Court of Appeals has held that a claimant who sustains purely economic loss caused by negligent injury of a third person�s property may not recover damages unless the claimant is in privity of contract or some other special relationship with the tortfeasor. In answering certified questions from the Circuit Court of Berkeley County, the Court so held in Aikens v Debow & Craig Paving, Inc., (No. 27376, W.Va., filed Nov. 6, 2000). At issue in Aikens was whether the claimant, the owner of a motel, could recover damages from the defendant after the defendant struck a bridge on Interstate 81, thus closing the main access road to the plaintiff�s hotel. The bridge accident caused no personal injury or property damage to the plaintiff. The plaintiff sued solely to recover economic loss. In finding that the plaintiff did not have a cause of action, the Court held that liability, if any, of the defendant must be premised upon fundamental concepts of duties owed. The Court found that in this instance the tortfeasor owed no duty to the plaintiff and therefore the plaintiff could not state a cause of action for purely economic loss.


Writing for the majority, Justice Scott reviewed the history of tort law and held that West Virginia could not engage in the limitless expansion of duty, holding "a line must be drawn between the competing policy considerations of providing a remedy to everyone who is injured and of extending exposure to tort liability almost without limits." The Court held that nearly without exception, all other Courts which have considered this issue have concluded that economic loss alone will not warrant recovery in the absence of some special relationship between the plaintiff and the tortfeasor.


The Court was quick to point out that its opinion does not encompass and has no effect upon prior rulings regarding medical monitoring, negligent infliction of emotional distress or nuisance law and applies strictly to plaintiffs alleging purely economic loss from an interruption in commerce caused by another�s negligence and is based upon a matter of "practical politics."




The West Virginia Supreme Court of Appeals has accepted an affidavit of defense counsel as support for the plaintiff to assert additional injury claims after a settlement in Kopf v Lacy, (No. 27756, W.Va., filed Oct. 31, 2000). The issue arose after Scott Lacy, insured by West Virginia Insurance Company, cut down a tree in 1997 for his brother and sister-in-law, Patrick and Barbara Lacy. When the tree fell and injured a bystander, Louis J. Kopf, he made claims against the landowners, Patrick and Barbara Lacy, through their insurer, West Virginia Fire & Casualty, and also asserted a claim against Scott Lacy through his insurer, West Virginia Insurance. The plaintiff reached a settlement with the West Virginia Fire & Casualty insureds and executed a Release releasing them and the insurance company "as to all claims asserted with respect to an incident occurring on May 19, 1997." Thereafter, the plaintiff filed suit against Scott Lacy, individually. Scott Lacy filed a Motion for Summary Judgment seeking dismissal of the action based upon the Release which was drafted by counsel for West Virginia Fire & Casualty, Greg Schillace. In opposition to the Motion, plaintiff�s counsel submitted an affidavit from Schillace which stated: "The Release was never intended to release claims which Louis Kopf had against Scott Lacy from the May 19, 1997, accident which resulted in injuries to Louis Kopf." The Circuit Court of Harrison County considered the affidavit parol evidence and refused it finding that the Release was clear and unambiguous and thereafter granted the defendant�s Motion for Summary Judgment. On appeal, however, the West Virginia Supreme Court found that the facts of the case rendered the parties concurrent tortfeasors and therefore permitted parol evidence to be introduced. Moreover, the Court determined that a latent ambiguity existed within the Release so as to permit the introduction of parol evidence.


The per curiam opinion first found that no latent ambiguity appeared on the face of the document, but then found that "facts extraneous to the language in the Release creates a latent ambiguity." After finding an ambiguity, the Court determined that parol evidence could be introduced. The Court found a latent ambiguity because Scott Lacy was neither expressly named nor excluded as a beneficiary in the Release. The case was remanded for further factual development by the trial Court.




The U.S. Court of Appeals for the Fourth Circuit has held that a District Court may maintain jurisdiction over breach of contract and "bad faith" claims on diversity grounds in Myles Lumber Co. v CNA Financial Corp., (No. 00-1318, 4th Cir., filed December 5, 2000). The issue arose when the insured, Myles Lumber Company, filed suit in State Court against CNA, Boston Old Colony Insurance Company and Continental Insurance Company seeking coverage. Boston Old Colony removed the action to Federal Court but the District Court abstained from exercising jurisdiction and remanded the case to State Court. Upon appeal, the Fourth Circuit held that remand was inappropriate and that the District Court should have retained jurisdiction over the case because the claims for breach of contract and "bad faith" sought damages.

The Fourth Circuit reiterated the four factors a Federal Court must determine in deciding whether to exercise its discretion to hear a declaratory judgment action:

1) The strength of the State�s interest in having issues raised in the Federal declaratory action decided in the State Courts;

2) Whether the issues raised in the Federal action can more efficiently be resolved in the Court in which the State action is pending;

3) Whether permitting the Federal action to go forward would result in unnecessary "entanglement" between
the federal and State Court systems because of the presence of "overlapping issues of fact or law;" and

4) Whether the declaratory judgment action is being used merely as a device for "procedural fencing."

The Fourth Circuit held that although the case would involve the application of State law there was nothing which would give West Virginia State Courts a particularly strong interest in deciding the case. The Court held that it was significant that no State action was pending and that it would be more efficient for the District Court to adjudicate the entire case.




The West Virginia Supreme Court of Appeals has held in Colonial Ins. Co. v Barrett & Watkins, (No. 27772, W.Va., filed Dec. 6, 2000), that a third-party claimant may notify a tortfeasor�s insurance company of a potential claim and, if so, the failure of the insured to notify the insurance company will not void coverage. The issue arose after a 1995 automobile/pedestrian accident wherein the claimant notified the tortfeasor�s insurance company, Colonial, within six days of the incident. Both the claimant and his counsel had contact with Colonial which denied the claim. After several attempts to resolve the claim, suit was filed and served upon the tortfeasor. The tortfeasor/insured, however, did not provide a copy of the suit to the insurance company. The claimant, however, mailed a copy of the Complaint, Summons and Return to Colonial. The defendant never answered the Complaint nor did any representative of Colonial answer or otherwise respond. After default judgment was taken against the insured, the plaintiff sought to collect against Colonial. Colonial attempted to set aside the default judgment arguing "excusable neglect" which was denied by the Circuit Court of Mercer County.

Thereafter, Colonial filed a declaratory judgment action against the plaintiff and its insured to determine whether it had a duty to defend, indemnify or provide coverage to the insured. The Circuit Court ruled in favor of Colonial finding that the insured had never notified Colonial of the collision or the subsequent lawsuit. The plaintiff in the underlying suit appealed arguing that Colonial was not prejudiced by the insured�s failure to notify it since it had received notice from the plaintiff.

The Supreme Court noted that satisfaction of the notice provision in an insurance policy is a condition precedent to coverage. However, the Court held that notice provision may be satisfied by notice to a claim representative regardless of the source. Guidelines to be followed when notice is received from a third-party include:

1) The purported notice must be given to an individual such as an adjuster or agent acting on behalf of the insurance company;

2) The information given by the third-party must be sufficient to put the company on notice that the injured party might make a claim; and

3) Notice must be given within a reasonable period of time regardless of the source.

Finding that these factors were met and that the claim was reported within days of the incident, the Supreme Court found that Colonial was not prejudiced by the method in which it was notified. Therefore, the Order of the Circuit Court was reversed and the case was remanded.






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