Barefield v. DPIC Companies, Inc., No. 31226 (VA 6/25/2004)

Decision Date25 June 2004
Docket NumberNo. 31226,31226
CourtSupreme Court of West Virginia
PartiesHUBERT J. BAREFIELD, Plaintiff v. DPIC COMPANIES, INC., Defendant.

Appeal from the United States District Court for the Northern District of West Virginia, Hon. W. Craig Broadwater, Judge, Case No. 3:02-CV-02.


1. "A de novo standard is applied by this Court in addressing the legal issues presented by a certified question from a federal district or appellate court." Syllabus Point 1, Light v. Allstate Ins. Co., 203 W.Va. 27, 506 S.E.2d 64 (1998).

2. "The Unfair Trade Practices Act, W.Va.Code §§ 33-11-1 to 10, and the tort of bad faith apply only to those persons or entities and their agents who are engaged in the business of insurance." Syllabus Point 2, Hawkins v. Ford Motor Co., 211 W.Va. 487, 566 S.E.2d 624 (2002).

3. "A defense attorney who is employed by an insurance company to represent an insured in a liability matter is not engaged in the business of insurance. The defense attorney is therefore not directly subject to the provisions of the West Virginia Unfair Trade Practices Act, W.Va. Code, 33-11-1 to -10." Syllabus Point 5, Rose v. St. Paul Fire & Marine Ins. Co., ___ W.Va. ___, ___ S.E.2d ___ (No. 31317, June 25, 2004).

4. "A claimant can establish a violation of the West Virginia Unfair Trade Practices Act, W.Va. Code, 33-11-1 to -10, by showing that an insurance company, through its own actions, breached its duties under the Act by knowingly encouraging, directing, participating in, relying upon, or ratifying wrongful litigation conduct of a defense attorney hired by the insurance company to represent an insured." Syllabus Point 6, Rose v. St. Paul Fire & Marine Ins. Co., ___ W.Va. ___, ___ S.E.2d ___ (No. 31317, June 25, 2004).

5. "To maintain a private action based upon alleged violations of W.Va. Code § 33-11-4(9) in the settlement of a single insurance claim, the evidence should establish that the conduct in question constitutes more than a single violation of W.Va. Code § 33-11-4(9), that the violations arise from separate, discrete acts or omissions in the claim settlement, and that they arise from a habit, custom, usage, or business policy of the insurer, so that, viewing the conduct as a whole, the finder of fact is able to conclude that the practice or practices are sufficiently pervasive or sufficiently sanctioned by the insurance company that the conduct can be considered a `general business practice' and can be distinguished by fair minds from an isolated event." Syllabus Point 4, Dodrill v. Nationwide Mut. Ins. Co., 201 W.Va. 1, 491 S.E.2d 1 (1996).

6. "Where the language of a statute is clear and without ambiguity the plain meaning is to be accepted without resorting to the rules of interpretation." Syllabus Point 2, State v. Elder, 152 W.Va. 571, 165 S.E.2d 108 (1968).

7. When an insurance company hires a defense attorney to represent an insured in a liability matter, the attorney's ethical obligations are owed to the insured and not to the insurance company that pays for the attorney's services.

8. Because a defense attorney is ethically obligated to maintain an independence of professional judgment in the defense of a client/insured, an insurance company possesses no right to control the methods or means chosen by the attorney to defend the insured.

9. The conduct of an insurance company or other person in the business of insurance during the pendency of a lawsuit may support a cause of action under the West Virginia Unfair Trade Practices Act, W.Va. Code, 33-11-1 to -10.

10. An insurance company cannot be held liable under the West Virginia Unfair Trade Practices Act, W.Va. Code, 33-11-1 to -10, for the actions of a defense attorney retained to defend an insured, when the defense attorney's strategy and tactics are a result of the attorney's independent, professional discretion with regard to the representation of the client-insured, and are not otherwise relied upon or ratified by the insurance company in a manner contrary to the Act.

Jeffrey V. Mehalic, Esq., Charleston, West Virginia, Attorney for Plaintiff.

Gerard R. Stowers, Esq., Ronda L. Harvey, Esq., Rochelle L. Glover, Esq., Bowles, Rice, McDavid, Graff & Love, Charleston, West Virginia, Attorneys for Defendant.

Paul T. Farrell, Jr., Esq., Wilson, Frame, Benninger & Metheney, PLLC, Associates, L.C., Morgantown, West Virginia, Michael J. Romano, Esq., Plaintiffs in Romano Law Office, Clarksburg, West Virginia, Attorneys for Amicus Curiae, West Virginia Trial Lawyers Association.

J. David Cecil, Esq., James F. Humphreys & Charleston, West Virginia, Attorney for Amici Curiae, "Asbestos — Unfair Trade Practices Cases".

JUSTICE STARCHER delivered the Opinion of the Court.

JUSTICE DAVIS concurs and reserves the right to file a concurring opinion.

JUSTICE ALBRIGHT concurs and reserves the right to file a concurring opinion.

JUSTICE MAYNARD concurs in part and dissents in part, and reserves the right to file a separate opinion.

STARCHER, Justice:

This case is before this Court upon a certified question from the United States District Court for the Northern District of West Virginia at Martinsburg. The plaintiff in the federal court lawsuit, Hubert J. Barefield, alleges that an insurance company, defendant DPIC Companies, Inc., violated the West Virginia Unfair Trade Practices Act in the litigation and settlement of a legal malpractice action filed by Mr. Barefield. The plaintiff contends that the defendant hired a defense attorney to represent its insured in the underlying legal malpractice action, and permitted or required the attorney to violate the Act.

The question from the district court concerns whether an insurance company may be held liable under the Act for the conduct of a defense attorney hired to represent the interests of an insured in a liability action, and whether an insurance company can be held liable for violations of the Act that occur after a lawsuit is filed against an insured. We answer the first portion of the district court's question in the negative, but answer the second portion in the affirmative.

I. Facts & Background

In 1992, plaintiff Hubert J. Barefield was injured in Virginia. Mr. Barefield sought medical treatment from a doctor in Virginia, and continued to receive treatment through June 1994.

On October 17, 1994, Mr. Barefield met with a West Virginia attorney, "Attorney A," to investigate the possibility of filing a medical malpractice action in Virginia against the Virginia doctor. Mr. Barefield signed a contract with Attorney A on February 21, 1995, and Attorney A later videotaped a sworn statement with Mr. Barefield, in which she questioned him at length and established the factual predicates for filing a medical malpractice lawsuit.

Attorney A never filed a medical malpractice lawsuit on Mr. Barefield's behalf, thereby missing the Virginia statute of limitation. Mr. Barefield then retained another law firm to represent him in a legal malpractice claim against Attorney A, and in April 1999 Mr. Barefield's new attorneys informed Attorney A's malpractice insurer, defendant DPIC Companies, Inc. ("DPIC"), of the legal malpractice claim. DPIC then retained a defense attorney, "Attorney S," to represent Attorney A. All subsequent discussions and negotiations with the plaintiff on behalf of DPIC were apparently conducted solely by Attorney S.

Mr. Barefield filed his legal malpractice claim against Attorney A in October 1999, and trial was scheduled for February 12, 2001. Before and after filing the legal malpractice lawsuit, Mr. Barefield's attorneys submitted various settlement demands to Attorney S — demands starting as high as $2,000,000.00 — and included reports indicating that actionable medical malpractice had been committed under Virginia law against Mr. Barefield by his Virginia doctor, and that Attorney A had committed legal malpractice by failing to timely file the medical malpractice lawsuit. At the same time, Attorney S was repeatedly told that Mr. Barefield was in financial straits and in poor physical health.1 Attorney S, on behalf of DPIC, rejected the plaintiff's settlement demands.2

In February 2000, DPIC authorized Attorney S to make its first offer to settle the case in a "high-low" arrangement, such that DPIC would make an interim payment to the plaintiff of $25,000.00 in exchange for a cap on DPIC's liability at $250,000.00. The plaintiff rejected the offer,3 but DPIC eventually made an interim payment to Mr. Barefield of $5,000.00 in April 2000 (and the parties agreed this amount would be credited against any final settlement).

On November 29, 2000, after further settlement negotiations that included discussions about Mr. Barefield's financial and medical situation, Mr. Barefield agreed to settle his claim for $250,000.00, the highest amount Attorney S had proposed in February 2000. Mr. Barefield now contends he believed his case was worth more, but that he accepted this settlement primarily because of his poor financial and medical condition at the time.

One year later, on November 29, 2001, Mr. Barefield filed the instant action in the Circuit Court of Berkeley County against DPIC alleging that DPIC violated the West Virginia Unfair Trade Practices Act ("UTPA"), W.Va. Code, 33-11-1 to -10, in its defense and settlement of the legal malpractice action. Mr. Barefield alleged that DPIC, through the actions of its defense attorney, Attorney S, delayed acting on Mr. Barefield's claim even though Attorney A's liability was reasonably clear, and thereby took advantage of Mr. Barefield's physical and financial difficulties to negotiate a settlement far lower than what his claim was worth, in violation of the Act. Mr. Barefield took the position that on behalf of DPIC, Attorney S had breached several duties owed to him under the Act, including a duty to promptly conduct a reasonable investigation of his...

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