INSURANCE LAW

CURRENT ARTICLES

 

Electronic Newsletter:  Update on the Law, August 27, 2001
Electronic Newsletter:  Update on the Law, March 10, 2001

Electronic Newsletter:  Update on the Law, April 12, 2002
Electronic Newsletter:  Update on the Law, November 18, 2002

For additional articles, please check our Insurance Law Archives:

2000
2001
2002

 

 

 

PLAINTIFF DENIED DOUBLE RECOVERY

The West Virginia Supreme Court of Appeals has prohibited a plaintiff from collecting uninsured motorist benefits after recovering liability proceeds from the tortfeasor.  The issue arose in Tennant v Smallwood, (No. 30036, W.Va., filed April 5, 2002).  In Tennant, the plaintiffs were involved in an automobile accident with a State Auto insured carrying mandatory minimum liability limits.  The plaintiff had uninsured motorist coverage with State Farm.  After suit was filed, the defendant’s liability carrier offered its policy limits.  The plaintiffs accepted and then asserted an uninsured motorist claim against State Farm. 

State Farm denied coverage arguing that the plaintiff did not meet the definition of an uninsured motorist event.  The Circuit Court of Wetzel County granted summary judgment to the plaintiff which the Supreme Court reversed.  Chief Justice Davis, writing for the majority, found that the plaintiff simply did not present an uninsured motorist claim pursuant to W.Va. Code §33-6-31(c).  The Court found that the tortfeasor carried liability limits at the financial responsibility minimum limits and thus, determined he was not an uninsured motorist.  The plaintiff argued that the State Farm policy was ambiguous because of the grammatical structure of the definition.  The Supreme Court disagreed indicating such an argument would require the Court to “completely ignore both the letter and intent of the UM statute.” 

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LAWYERS CAN COLLECT CONTINGENCY FEE ON MED-PAY

In a lawyer disciplinary proceeding the West Virginia Supreme Court has held that a lawyer may retain a contingency fee from medical payment recoveries.  The issue arose in Lawyer Disciplinary Board v Morton, (No. 27051, W.Va., filed May 2, 2002), in which the Board recommended a public reprimand and payment of $1,500.00 from a $5,000.00 med-pay recovery.  The Supreme Court, however, rejected the recommendation and dismissed all charges finding that counsel was engaged for full legal representation to recover “all monies and things of any value” from any person desirable or necessary.  The Court found this language of the representation agreement did not limit counsel’s role nor did it preclude pursuit of medical
payments.  The Court further found that the representation agreement empowered plaintiff’s counsel to pursue “every source of and right to recovery” to which the plaintiff may have been entitled. Furthermore, the Court considered the itemization of hours which translated to approximately $37.50 per hour and found that this fee was not grossly disproportionate to the services rendered.

In a dissenting opinion, Chief Justice Davis argued that the majority opinion permits attorneys to collect fees “when they have performed absolutely no services on behalf of those clients.”  Reviewing the contingency fee agreement, Chief Justice Davis found that counsel was retained to seek compensation from the tortfeasor and found that counsel was “not hired to merely receive checks from the insurance company.”  Chief Justice Davis based her opinion upon the fact that med-pay was never disputed and thus, no legal services were necessary and characterized counsel’s actions as picking up the telephone and instructing the insurer to “send me the money.”  This, she wrote, “is wrong.” 

In his concurring opinion, Justice Starcher argued that the dissent was merely an attack on a minority lawyer who “provides legal services to many people in her community that might otherwise go unrepresented.” 

In another disciplinary proceeding the Supreme Court found that a lawyer who withheld fees from his partners, one of whom was his father, should not be suspended or harshly disciplined because he was suffering from alcoholism and that punishment may exacerbate his condition, Lawyer Disciplinary Board v Ford, (No. 29463, W.Va., filed May 3, 2002).  In this case the Disciplinary Board recommended suspension for 45 days.  The Supreme Court, however, only admonished the lawyer finding that the lawyer had freely admitted his misconduct, and had undergone counseling and furthermore found that no prior discipline had occurred in his approximately 20 years of practice.  Finally the Court found that suspension would do substantial damage to his law firm.

 

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COURT CONTINUES TO TOLL STATUTE OF LIMITATIONS

The West Virginia Supreme Court of Appeals has again granted plaintiffs the opportunity to toll the running of the statute of limitations.  In Trafalgar House Construction, Inc. v ZMM, Inc. et al., (No. 30246, W.Va., filed June 19, 2002), the Court applied the discovery rule to toll the two-year statute of
limitations in a professional negligence/misrepresentation claim.  In Graham v Beverage, (No. 30110, W.Va., filed June 13, 2002), the Court applied the continuing tort theory to extend the running of the statute of limitations. 

In Trafalgar, a dispute occurred during construction of a Department of Labor facility in Charleston.  Contractors involved in site preparation sued the general contractor alleging misrepresentation in bid documents concerning sub-surface conditions.  The defendant argued that the claim was barred by the two-year statute of limitations and successfully obtained summary judgment in the Circuit Court of Kanawha County.  The Supreme Court, however, reversed finding genuine issues of material facts over the term “misrepresentation” in the bid documents.  The Court further found that questions remain as to when the plaintiffs first learned of misrepresentations and the defendant’s actual knowledge of the sub-surface site
conditions and held that whether a claim is barred by the statute of limitations is a question of fact for the jury. 

The Court also agreed with the plaintiffs’ arguments concerning detrimental reliance.  Because the plaintiffs performed an independent investigation of the site, the defendant argued under the independent investigation doctrine that the plaintiffs could not have relied to their detriment upon any representations contained in the bid documents.  The Court, however, disagreed finding that the independent investigation doctrine is not an absolute defense and that plaintiffs may rely on defendants’ representations due to expertise and the duty to divulge anticipated shortfalls in bid documents.  The Court concluded that a jury could therefore determine that even though the plaintiffs conducted an independent investigation of the site, representations made by the defendant contributed in part to the plaintiffs’ conclusion that the site was sufficient.  Therefore, the summary judgment order was reversed and the case remanded for further proceedings.

In a case considering when the statute of limitations begins to run, the Court has held that where a tort involves a continuing or repeated injury, the cause of action accrues at, and the statue of limitations begins to run from, the date of the last injury or when the tortious overt acts or omissions cease.  This question was presented in Graham v Beverage, et al., a case involving surface water run-off in Berkeley County.  The case began when a homeowner sued a developer, an engineer and the Department of Highways in 1991 for flooding.  The plaintiffs alleged their property was damaged by the negligent, defective and improper construction of a storm water management system.  The plaintiffs argue they first noticed ponding on their property in 1990 and 1991 and that they first experienced severe flooding in 1994.  Thereafter, the plaintiffs petitioned the Department of Highways in 1998 and filed suit in 1999.  Their suit was dismissed on summary judgment.  The Supreme Court reversed finding genuine issues of material fact did exist and then turned its attention to the statute of limitations issue also raised by the defendants.

The Court analyzed W.Va. Code §55-2-12 which includes a statutory limitation for filing claims for damage to property to two years.  However, the Court noted that there are several exceptions to the two- year statute of limitations and returned to its 1982 opinion of Handley v Town of Shinnston, 169 W.Va. 617, 289 S.E. 2d 201 (1982).  The Handley case first adopted a continuing tort theory which does not begin the running of the statute of limitations until the date of the last injury or when the tortious acts cease.  On appeal, the Graham Court found that the plaintiffs were not complaining solely about a specific traumatic event concerning construction of the storm water management system, but rather their Complaint alleged  continuing wrongful conduct and negligently failing to take action to correct  inadequacies of the system.  The Graham Court found that the allegation of negligently failing to take action to correct inadequacies could cause continuing injury to the plaintiffs’ real and personal property.  Therefore, the Court again restated its opinion in Handley that where a tort involves a continuing or repeated injury, the  cause of action accrues at, and the statute of limitations begins to run from, the date of the last injury or when the tortious overt acts or omissions cease.

 

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10 - YEAR STATUE OF LIMITATIONS ON HOMEOWNER’S CLAIMS

The U.S. District Court for the Southern District of West Virginia in Beckley has held that the ten-year contract statute of limitations applies when a homeowner pursues a first-party claim against his or her insurance carrier under W.Va. Code §55-2-6.  Policy language requiring suit to be brought within one year after loss or damage was declared void in Beasley, et al. v Allstate Ins. Co., (Civil Action No. 5:01-1082, S.D.W.Va., filed Feb. 14, 2002).  The Beasley claim stems from roof damage which occurred in early 1998.  The plaintiff did not file a homeowner’s claim until April 1999.  Relying on policy language that required “any suit or action must be brought within one year after the inception of loss or damage,” Allstate moved to dismiss the plaintiff’s claim as untimely.  Chief Judge Charles Haden, however, denied Allstate’s motion.

Cases interpreting amendments to W.Va. Code §33-6-14 state that no policy delivered or issued in West Virginia shall contain any condition limiting the time within which an action may be brought to a period of less than two years from the time of cause of action accrues.  The Court concluded that in amending the statute, the Legislature was presumed to know that the voiding of offending provisions in an insurance policy would “result in the general contract limitations period coming into play to fill the void.”  The general contract limitations period is ten years.  Therefore, the Court concluded that the homeowners had timely filed their claim.

 

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COURT APPLIES ADDITIONAL INSURANCE COVERAGE FOR DOUBLE FATALITY

The West Virginia Supreme Court of Appeals continues in its trend of finding additional insurance coverage and in American States Ins. Co. v Tanner, et al., (No. 29991, W.Va., filed April 26, 2002), found that an insurance policy issued to the spouse of a woman involved in an automobile accident while driving a rental vehicle could provide liability coverage despite the regular use exclusion in the policy.

Mrs. Tanner was involved in an automobile accident that killed two people while she was driving a rental vehicle.  The rental vehicle had been provided to her as a result of a previous accident.  Following the collision the insured’s liability carrier, State Farm, paid its liability limits as did the insurer for the rental vehicle.  Thereafter, American States, which insured the tortfeasor’s husband, filed a declaratory judgment action in the Circuit Court of Monongalia County.  American States argued that it did not provide liability coverage because the policy excluded such coverage for the ownership, maintenance, or use of any vehicle other than the covered auto which is “furnished or available for your regular use.”  American States argued that the rental vehicle was made available for the regular use of Mrs. Tanner and therefore, liability coverage would be excluded.  The Circuit Court of Monongalia County agreed granting summary judgment to American States.

On appeal, however, the Supreme Court reversed finding that such cases must be determined on a case-by-case basis.  Factors which Courts must consider in determining whether a vehicle has been furnished or available for the insured’s or a family member’s regular use, include but are not limited to: 1)  the general availability of the vehicle; 2) the frequency of the use; 3) restrictions, if any, placed upon the vehicle’s use; and 4) nature of the use.  Analyzing these factors, the Tanner Court held that the vehicle was not generally available due to restrictions in the rental agreement and that the use of the rental vehicle was for a “specific limited purpose as a temporary substitute vehicle.”  But for the accident damaging Mrs. Tanner’s vehicle, she would not have rented another vehicle and therefore, the Court concluded that the regular use exclusion did not apply to this case.  The case was remanded for further proceedings. 

 

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SELF-INSUREDS NOT GOVERNED BY UTPA

The West Virginia Supreme Court of Appeals has held that the Unfair Claims Settlement Practices Act and the tort of “bad faith” apply only to persons, entities, or agents engaged in the business of insurance.  Finding that a self-insured entity is not in the business of insurance, the Court concluded that self-insureds would not be subject to the requirements of the UTPA in Hawkins v Ford Motor Co., (No. 30357, W.Va., filed June 19, 2002).  The Hawkins case began as a subrogation claim pursued by State Farm against Ford after an insured’s Ford van burned.  State Farm concluded the fire was a result of a malfunctioning ignition switch; Ford suspected arson and denied the claim.

Prior to trial, State Farm pursuing the claim in the name of its insured, sought to amend the Complaint to allege “bad faith” against Ford.  The Circuit Court of Kanawha County denied the Motion finding no contract of insurance existed between the plaintiff and Ford and found that the UTPA should not be applied to entities not engaged in the business of insurance.  The Supreme Court agreed.

The Court also held that a consumer who prevails on a claim for breach of an implied warranty of merchantability under the Uniform Commercial Code may recover attorney’s fees under the Magnuson-Moss Act and held that a manufacturer is not unduly prejudiced by the failure to plead the Magnuson-Moss Act so long as the plaintiff sets forth sufficient factual allegations to state such a claim.  Therefore, the Supreme Court reversed the Circuit Court’s denial of attorney’s fees and costs to the plaintiff.

 

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LEGISLATIVE ENACTMENTS

The West Virginia Legislature enacted four bills during the 2002 Legislative session which impact the insurance industry.  The Legislature amended the procedure for the settlement of infant claims, determined that the Mitchell v Broadnax decision was a misinterpretation and misapplication of the law, added new procedures with respect to filing claims against the State, and created a new subsection to the Unfair Trade Practices Act concerning privacy issues as well as broadening what constitutes an official used car guide. 

INFANT SETTLEMENTS

The Legislature, through Senate Bill 215, created the “Minor Settlement Proceedings Reform Act” which requires Court approval of minor claims if a tortfeasor and/or his insurance carrier seeks a release.  The Act prescribes the form and contents of the Petition, Release, and Final Order and created additional responsibilities with respect to the investment of net settlement trust proceeds.  If net settlement trust proceeds are less than $25,000.00, the Act permits Circuit Courts to direct monies be placed in interest bearing accounts that are FDIC insured in a West Virginia bank until the minor reaches the age of majority.  The bank receiving the funds is now required to file with the County Clerk an acknowledgment that the funds have been received and that the funds will not be released to the minor before the age of majority, absent a Court Order to do so.  The Act also now requires guardians to provide an accounting within 60 days of initial expense payments and deposit of net settlement trust proceeds.  Such an accounting must be filed with the County Fiduciary Commissioner or the supervisor of the County Commission.

MITCHELL V BROADNAX

In House Bill 4670, the West Virginia Legislature amended W.Va. Code §33-6-30 and made specific findings that the Code does not provide a basis for a policyholder to sue insurers for refunds when insurance forms have been approved by the Insurance Commissioner.  The new statute further states that lawsuits based upon Mitchell v Broadnax have a negative impact on insurers operating in West Virginia by exposing insurers to unexpected risks which were not anticipated when policy forms were drafted and approved.  Policies approved by the Commissioner are presumed to be in full compliance with the law and the new Code Section specifically states that insurers are not required to provide specific line item premium discounts or rate adjustments corresponding to exclusions, conditions, definitions or terms.  The new statute found that the ruling in Mitchell v Broadnax, 208 W.Va. 36, 537 S.E. 2d 82 (2000), was a misinterpretation and misapplication of the law. 

ACTIONS AGAINST THE STATE

The Legislature amended Chapter 55 of the West Virginia Code to add Article 17 concerning procedures for certain actions brought against the State finding that actions, suits and proceedings filed against State government agencies and officials may affect the public interest.  Now, at least 30 days prior to the institution of an action against a government agency, the complaining party must provide the Chief Officer of the agency and the Attorney General written notice by certified mail of the alleged claim and the relief desired.  The agency must forward a copy of the notice to the President of the Senate and the Speaker of the House of Delegates.  Any applicable Statue of Limitations is tolled for 30 days from the date the notice is provided.  W.Va. Code §55-17-4 permits government agencies 60 days to file an Answer and prohibits default judgments and punitive damages.

PRIVACY

The Legislature also passed House Bill 4469 which amended W.Va. Code §33-11-4 and adds section 12 concerning the failure to maintain privacy of consumer financial and health information.  The new provision of the Unfair Trade Practices Act states that any violation of the Insurance Commissioner’s rule relating to the privacy of financial and health information would constitute a violation of the Unfair Trade Practices Act.  However, any insurer who complies with the provisions of the new section, Commissioner’s rule or a Court Order in disseminating such information, shall not be deemed to be a violation of the Unfair Trade Practices Act. 

USED CAR GUIDES

In addition, the West Virginia Legislature passed Senate Bill 593 amending W.Va. Code §33-6-33 concerning the type of media and/or products which could be used in West Virginia as an “official used car guide.”  Under the amendment the guide is not solely limited to publicized or printed material. The Insurance Commissioner has previously approved Automatic Data Processing, Inc., National
Automobile Dealers Association, and National Auto Research, but anticipates that additional used car guides will now be approved. 

 

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