Barefield v. DPIC Companies, Inc.

Decision Date25 June 2004
Docket NumberNo. 31226.,31226.
Citation215 W.Va. 544,600 S.E.2d 256
CourtWest Virginia Supreme Court
PartiesHubert J. BAREFIELD, Plaintiff, v. DPIC COMPANIES, INC., Defendant.

Jeffrey V. Mehalic, Esq., Charleston, for Plaintiff.

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

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

J. David Cecil, Esq., James F. Humphreys & Associates, L.C., Charleston, for Amici Curiae, Plaintiffs in "Asbestos-Unfair Trade Practices Cases".

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 claim, and a duty to in good faith attempt to effect a prompt, fair and equitable settlement of his claim once Attorney A's liability became reasonably clear. See W.Va.Code, 33-11-4(9) [2002]. The plaintiff alleged that DPIC's acts, or its failures to act, were not isolated but resulted from DPIC's general business practices in violation of the Act.

DPIC removed the action from state court to the United States District Court for the Northern District of West Virginia. DPIC subsequently moved for summary judgment to dismiss Mr. Barefield's action, contending that an insurance company cannot be held liable under the UTPA for the actions of a defense attorney hired to represent an insured in a liability insurance matter. Furthermore, DPIC contended that the UTPA does not apply to claims that are in litigation, and therefore did not apply to the protracted settlement negotiations that occurred after Mr. Barefield filed his legal malpractice suit.

II. Certified Question

The district court did not rule upon DPIC's motion for summary judgment to dismiss the plaintiff's action. Instead, the district court certified the following question to this Court:

Under the West Virginia Unfair Trade Practices Act, specifically W.Va.Code § 33-11-4(9), is an insurer liable to a third party for the conduct of an attorney hired by the insurer, when that attorney is hired by the insurer to represent the insurer's insured, and when the attorney's conduct took place during and after the initiation of a civil action against the insurer's insured for legal malpractice?

The district court did not directly answer that part of the question relating to whether an insurance company could be held liable for the actions of an attorney hired to defend an insured in a liability matter. However, the district court did conclude that "because the attorney's actions in this case took place after litigation was initiated, the West Virginia Unfair Trade Practices Act does not apply."

III. Discussion

Before answering the questions certified by the district court, it is important to point out that we are not sitting as an appellate court; rather, pursuant to the Uniform Certification of Questions of Law Act, W.Va.Code, 51-1A-1 to -13 [1996], we are simply asked to answer questions of law. Accordingly, the factual record regarding the legal issue in dispute must be sufficiently precise and undisputed, and this Court will assume that the findings of fact by the certifying court are correct. Further, the legal issue must substantially control the case. See Syllabus Point 5, Bass v. Coltelli, 192 W.Va. 516 453 S.E.2d 350 (1994); Mutafis v. Erie Ins. Exchange, 174 W.Va. 660, 663, 328 S.E.2d 675, 678 (1985).

This Court employs a plenary standard of review when we answer certified questions from a federal district court. In Syllabus Point 1 of Light v. Allstate Ins. Co., 203 W.Va. 27, 506 S.E.2d 64 (1998), we held that "[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." Accord, Syllabus Point 1, Bower v. Westinghouse Elec. Corp., 206 W.Va. 133, 522 S.E.2d 424 (1999) ("This Court undertakes plenary review of legal issues presented by certified question from a federal district or appellate court."). However, when a certified question is framed so that this Court is not able to fully address the law which is involved in the question, then this Court retains the power to reformulate the questions certified to it. Syllabus Point 3, Kincaid v. Mangum, 189 W.Va. 404, 432 S.E.2d 74 (1993).

We discern that there are two separate issues under the Unfair Trade Practices Act contained within the district court's certified question, namely:

(1) Can an insurance company be liable under the Act for the conduct of a defense attorney hired by the insurance company to represent the insurance company's insured in a liability matter; and

(2) Can an insurance company under any circumstances be held liable for its violations of the Act that occur after the filing of a civil action against an insured?

We reformulate the district court's question to consider these two issues separately. As we discuss in detail below, we answer the first question "no,"4 and the second question "yes."

A.

Liability of an...

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