State v. Wilson
| Citation | 778 S.E.2d 677,236 W.Va. 228 |
| Decision Date | 07 October 2015 |
| Docket Number | No. 15–0424.,15–0424. |
| Court | Supreme Court of West Virginia |
| Parties | STATE of West Virginia ex rel., NATIONWIDE MUTUAL INSURANCE COMPANY, Petitioner v. The Honorable Ronald E. WILSON, Judge of the Circuit Court of Ohio County; Travis Nelson; Teresa Nelson; and Fred Hlad, individually and d/b/a Allstate Construction, Respondents. |
Donna S. Quesenberry, Esq., Maria Marino Potter, Esq., MacCorkle Lavender, PLLC, Charleston, WV, for the Petitioner.
Brian A. Ghaphery, Esq., Ghaphery Law Offices, PLLC, Wheeling, WV, for Respondents Travis and Teresa Nelson.
Petitioner, Nationwide Mutual Insurance Company (“Nationwide”) seeks a writ of prohibition to halt enforcement of a March 16, 2015, order of the Circuit Court of Ohio County. The circuit court denied Nationwide's request for declaratory relief and found that its commercial general liability (“CGL”) policy with its insured (Mr. Fred Hlad) requires it to provide coverage, defend, and “indemnify [Mr. Hlad] for any damages that may be recovered” in the underlying lawsuit. (Emphasis added). The underlying lawsuit arises out of Mr. Hlad's agreement to construct a house for the Respondents, Travis and Teresa Nelson. The Nelsons seek damages from Mr. Hlad for breach of contract, various intentional tort claims, and negligence in constructing their house.
Nationwide asserts that the circuit court erred by finding that the CGL policy provided coverage to Mr. Hlad for any damages that may be recovered in the underlying lawsuit. Upon review, we find that most of the claims asserted by the Nelsons did not trigger coverage under the CGL policy, and the claims that did trigger coverage were precluded by clear and unambiguous exclusions. Accordingly, we find that Nationwide has no duty to defend or indemnify Mr. Hlad in the underlying lawsuit, and we grant Nationwide's requested writ of prohibition and halt enforcement of the circuit court's March 16, 2015, order.
In July 2009, Mr. Hlad signed a contract to build the Nelsons a house. The agreement provided that Mr. Hlad would complete work on the house by November 2009, and that he would withdraw funds from the Nelsons' construction loan account to pay for supplies and labor.
However, the contractual relationship between the Nelsons and Mr. Hlad deteriorated. The Nelsons allege that Mr. Hlad withdrew $257,200 from their construction loan account and then failed to pay various suppliers and subcontractors. They also contend that Mr. Hlad lied to his suppliers and subcontractors about the reason for his non-payment, falsely stating that the Nelsons did not provide him money. In addition, the Nelsons claim that Mr. Hlad charged them overages without explanation. Finally, the Nelsons maintain that Mr. Hlad missed his deadline to complete construction of the house and that the work he performed was done negligently.
As a result, the Nelsons contend that they suffered damages in excess of $257,200, which include the amount Mr. Hlad withdrew from their construction loan account without performing on the contract, subcontractors' liens placed on the Nelsons' house due to Mr. Hlad failing to pay them, damage to the Nelsons' reputation due to Mr. Hlad's defamatory statements, and damage to the structural integrity of the house caused by Mr. Hlad's negligent work.
To recover these damages, the Nelsons sued Mr. Hlad in Ohio County (the underlying lawsuit). Their amended complaint contained nine counts asserting the following causes of action: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing;1(3) defamation; (4) unfair and deceptive practices under West Virginia Code § 46A–6–104; (5) fraud and intentional misrepresentation; (6) conversion; (7) unconscionability;2(8) a request for injunctive relief prohibiting Mr. Hlad from making statements that he was not paid (this count did not seek damages); and (9) negligence (defective workmanship).3
Mr. Hlad had a CGL policy with Nationwide at all times relevant to this case.4The CGL policy provided two pertinent types of coverage: Coverage A, which insures against “property damage and bodily injury liability” caused by an “occurrence,” (otherwise known as an accident); and Coverage B, which insures against “personal and advertising injury.” Both Coverage A and Coverage B are subject to exclusions in the CGL policy.
Although the Nelsons' claims against Mr. Hlad were primarily for breach of contract and intentional torts, Nationwide provided Mr. Hlad a defense in the underlying lawsuit under a reservation of rights.5Nationwide also intervened in the lawsuit and filed a complaint for declaratory relief to determine whether it has a duty to defend or indemnify Mr. Hlad.
In the meantime, Nationwide served the Nelsons with interrogatories regarding the defective workmanship claim. The Nelsons did not answer or object to the interrogatories.6When Nationwide reminded the Nelsons that answers to its interrogatories were due, counsel for the Nelsons responded in a letter that they would not comply with Nationwide's request for information. The Nelsons' counsel then demanded information about a Nationwide settlement in a separate, unrelated case and requested that two of Nationwide's agents attend a deposition at a date unilaterally set by him. The letter continued: “Upon receipt of the same, I will be happy to respond to your discovery requests.” Thereafter, Nationwide filed a motion to compel the Nelsons to answer its interrogatories and a motion for a protective order regarding the Nelsons' demands. The circuit court has not ruled on these motions.
The circuit court denied Nationwide's request for declaratory relief in an order dated March 16, 2015. In its order, the circuit court noted that defective workmanship constitutes an “occurrence,” and the Nelsons alleged that Mr. Hlad constructed their house in a defective manner.7It then concluded:
[T]he Nelsons have asserted a claim for damages that are not foreign to the risks insured against by Nationwide's CGL policies, and Nationwide has a duty to indemnify [Mr. Hlad] for any damages that may be recoveredagainst [Mr. Hlad], and Nationwide may not withdraw from its defense of the insured in this case.
(Emphasis added). Nationwide then petitioned this Court for a writ of prohibition.
When considering a petition for a writ of prohibition, we have held:
In determining whether to entertain and issue the writ of prohibition for cases not involving an absence of jurisdiction but only where it is claimed that the lower tribunal exceeded its legitimate powers, this Court will examine five factors: (1) whether the party seeking the writ has no other adequate means, such as direct appeal, to obtain the desired relief; (2) whether the petitioner will be damaged or prejudiced in a way that is not correctable on appeal; (3) whether the lower tribunal's order is clearly erroneous as a matter of law; (4) whether the lower tribunal's order is an oft repeated error or manifests persistent disregard for either procedural or substantive law; and (5) whether the lower tribunal's order raises new and important problems or issues of law of first impression. These factors are general guidelines that serve as a useful starting point for determining whether a discretionary writ of prohibition should issue. Although all five factors need not be satisfied, it is clear that the third factor, the existence of clear error as a matter of law, should be given substantial weight.
Syl. Pt. 4, State ex rel. Hoover v. Berger,199 W.Va. 12, 483 S.E.2d 12 (1996)(emphasis added).
Nationwide contends that the circuit court clearly erred by finding that its CGL policy covered the Nelsons' claims against Mr. Hlad. We have held: “[d]etermination of the proper coverage of an insurance contract when the facts are not in dispute is a question of law.” Syl. Pt. 1, Tennant v. Smallwood,211 W.Va. 703, 568 S.E.2d 10 (2002).
The circuit court held that Nationwide has a duty to provide coverage, defend, and indemnify Mr. Hlad for “any damages that may be recovered against [him]” in the underlying lawsuit. Nationwide argues the circuit court clearly erred by failing to consider (1) all relevant factors as to whether the Nelsons' claims against Mr. Hlad triggered coverage under the CGL policy, and (2) whether any exclusions precluded coverage. Thus, Nationwide asserts that it is entitled to relief in prohibition based on the third Hooverfactor. We find that the damages sought by the Nelsons were not covered by Nationwide's CGL policy because they did not trigger coverage or were precluded by clear and unambiguous exclusions. Accordingly, we grant Nationwide's requested writ of prohibition and hold that the circuit court clearly erred as a matter of law by finding that Nationwide is required to defend Mr. Hlad and indemnify him for any damages recovered against him by the Nelsons.
The circuit court found that Nationwide's CGL policy covered all nine counts in the underlying lawsuit based solely on the fact that one of those counts alleged defective workmanship. The circuit court's order stated: “defective workmanship ... is an ‘occurrence’ under a policy of commercial general liability insurance.” The circuit court continued:
Nationwide argues that eight of the nine counts asserted against Mr. Hlad (i.e.those alleging breach of contract or intentional torts) were not caused by his defective workmanship. Therefore, the mere fact that coverage was triggered on the ninth count (the defective workmanship claim), does not mean that coverage was triggered on the other eight...
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