Bowyer v. Hi-Lad, Inc., 31697.

• Decision Date: 03 December 2004
• Docket Number: No. 31697.,31697.
• Parties: Brad BOWYER, Plaintiff Below, Appellee v. HI-LAD, INC., d/b/a Comfort Inn of Charleston, a West Virginia corporation, Defendant Below, Appellant. and Westfield Insurance Company, Intervenor Below, Appellee. and Security & Surveillance, Inc., Third-party Defendant Below, Appellee.
• Court: West Virginia Supreme Court

609 S.E.2d 895

216 W.Va. 634

Brad BOWYER, Plaintiff Below, Appellee v. HI-LAD, INC., d/b/a Comfort Inn of Charleston, a West Virginia corporation, Defendant Below, Appellant. and Westfield Insurance Company, Intervenor Below, Appellee. and Security & Surveillance, Inc., Third-party Defendant Below, Appellee.

No. 31697.

Supreme Court of Appeals of West Virginia.

Submitted September 14, 2004.

Decided December 3, 2004.

James B. Lees, Jr., Esq., Sharon F. Iskra, Esq., Hunt & Lees, L.C., Charleston, West Virginia, Attorneys for Appellee Brad Bowyer.

Rudolph L. DiTrapano, Esq., Sean P. McGinley, Esq., DiTrapano, Barrett & DiPiero, PLLC, Charleston, West Virginia, Attorneys for Appellant Hi-Lad, Inc.

Brent K. Kesner, Esq., Ellen R. Archibald, Esq., Kesner, Kesner & Bramble, PLLC, Charleston, West Virginia, Attorneys for Appellee Westfield Insurance Company.

Ancil G. Ramey, Esq., Hannah B. Curry, Esq., Steptoe & Johnson, PLLC, Andrew L. Paternostro, Esq., Atkinson, Mohler & Polak, Charleston, West Virginia, Attorneys for Appellee Security & Surveillance, Inc.

PER CURIAM:

In this appeal from the Circuit Court of Kanawha County, the appellant corporation seeks review of a jury verdict holding the appellant liable for intercepting the private conversations of an employee of the appellant through the use of hidden microphones in the workplace. The appellant challenges the circuit court's decision to uphold the jury's verdict. The appellant also challenges a circuit court order granting summary judgment to the company that manufactured and installed the microphones, and thereby dismissing the appellant's third-party complaint for contribution or indemnification. Lastly, the appellant contends that the circuit court erred in declaring that the appellant was not entitled to coverage or a legal defense under an insurance policy purchased by the appellant.

After careful review of the trial transcript, the briefs and arguments of the parties, and the relevant statutory and case law, we conclude that the circuit court correctly upheld the jury's verdict. Further, we find the circuit court properly dismissed the company that manufactured and installed the hidden microphones. We affirm the circuit court's decisions on these two points.

However, we conclude that the appellant is entitled to insurance coverage and a legal defense under its insurance policy, and reverse the circuit court's decision on this point.

I.

The appellant, Hi-Lad, Inc., is an independent owner of a 112 room "Comfort Inn" hotel franchise in Cross Lanes, West Virginia. In 1998, appellee Security & Surveillance, Inc. ("SSI") approached the owner of the appellant, Greg Hicks, and offered to professionally install an electronic surveillance system. Mr. Hicks initially leased, and later purchased, a surveillance system from SSI and executed a written contract in which Hi-Lad, Inc., agreed to indemnify SSI for any loss arising out of Hi-Lad's use of the equipment. The system that Mr. Hicks had installed consisted of cameras and microphones at three public locations within the hotel: the front desk, the lobby, and the hotel bar.¹ Mr. Hicks contends that he was reassured by the SSI salesman that the system was "completely legal" in West Virginia.

Appellee Brad Bowyer was hired by the appellant in April 2000 to work as a front desk clerk. Mr. Bowyer noticed the surveillance cameras in public areas and was not concerned. However, several days after beginning his employment, a fellow employee stated to Mr. Bowyer that there were microphones hidden in the hotel. Mr. Bowyer immediately asked an assistant manager whether this was true, and was told that there were microphones but that they had been disconnected.

In late May or early June 2000, surveillance monitoring equipment — including a television set, a videotape recorder, and a speaker — appeared in the manager's office directly off the front desk of the hotel. The monitoring equipment had originally been located and operated in a locked, upstairs manager's office that was accessible by only two people.

At some point in June 2000, Mr. Bowyer noticed the monitoring equipment and again approached the assistant manager to ask her about the existence of microphones. Again, Mr. Bowyer was reassured that the microphones were disconnected.

In and about this period, while he was working at the front desk, Mr. Bowyer heard a sound coming from the computer in the manager's office that sounded like a telephone dial-up when a computer modem connects to the internet. At this point, Mr. Bowyer asked one of the hotel managers about the source of the sound:

And I asked [the manager] what that was, and she said it was Mr. Hicks dialing into the system so that he could monitor our activities, both oral and visually, so he could keep an eye on his investment.

Around the same time period, Mr. Bowyer entered the manager's office with the monitoring equipment, turned one knob on the equipment and immediately heard audio information coming over the system from microphones in areas of the hotel.

Mr. Bowyer thereafter sought the advice of an attorney, and upon returning to work photographed the surveillance monitoring equipment in the manager's office. Mr. Bowyer also ejected a videotape from the inside of the videotape recorder and took the tape.

On August 17, 2000, Mr. Bowyer filed a single-count complaint against the appellant with the circuit court. The complaint alleged that appellee Bowyer had been subjected to "illegal oral surveillance by electronic surveillance apparatus owned and operated by the [appellant]" in violation of the West Virginia Wiretapping and Electronic Surveillance Act, W.Va.Code, 62-1D-1 to — 16. The complaint demanded actual and punitive damages, reasonable attorney's fees and costs, and pre- and post-judgment interest.

Appellant Hi-Lad, Inc. sought coverage and a legal defense for Mr. Bowyer's lawsuit from its commercial general liability insurance company, appellee Westfield Insurance Company ("Westfield"). Westfield responded by filing a motion to intervene in the case pursuant to Rule 24 of the West Virginia Rules of Civil Procedure, and filed a complaint against the appellant seeking a declaratory judgment that there was no coverage for Mr. Bowyer's lawsuit under the liability policy purchased by the appellant.

The circuit court entered an order allowing Westfield to intervene on December 1, 2000. The circuit court initially ruled that Westfield was required to defend and indemnify Hi-Lad, Inc. However, after extensive discovery between the parties, on September 5, 2001, the circuit court entered an order declaring that Westfield had no duty to defend or indemnify the appellant, and dismissing Westfield from the case.

Thereafter, on April 3, 2002, appellant Hi-Lad, Inc. filed a third-party complaint against SSI seeking contribution or indemnification for Mr. Bowyer's lawsuit. The third-party complaint alleged that SSI was guilty of negligence in failing to make proper disclosures about the surveillance system, negligence that was the proximate cause of Mr. Bowyer's damages.

Appellee SSI filed a motion for summary judgment, a motion that was granted by the circuit court on October 1, 2002. The circuit court concluded that, as a matter of law, no cause of action exists under the Wiretapping and Electronic Surveillance Act against the manufacturer of electronic equipment that is used by a purchaser in violation of the statute. Thus, because Mr. Bowyer could not maintain a cause of action against SSI for manufacturing or installing the hidden microphones, appellant Hi-Lad, Inc. similarly could not maintain a cause of action against SSI for contribution. Furthermore, the circuit court concluded that appellant Hi-Lad, Inc.'s claim for indemnification should be dismissed because the appellant was charged, by operation of law, with knowledge of its obligations under the Act; the appellant therefore could not claim to be without fault. Lastly, the circuit court prohibited the appellant from amending its third-party complaint to add other causes of action because of the passage of the statute of limitation, and because of the indemnification language in the SSI contract that would, in the end, require Hi-Lad, Inc. to repay SSI for all of its losses and expenses.

The case proceeded to trial, and on February 6, 2003, a jury returned a verdict in favor of the appellee, Mr. Bowyer. The jury found that the appellant had engaged in unlawful electronic surveillance and awarded Mr. Bowyer $100,000.00 in compensatory damages and $400,000.00 in punitive damages. A judgment order was entered by the circuit court on April 11, 2003. The appellant filed post-trial motions for judgment as a matter of law or for a new trial that were denied by the circuit court on May 30, 2003.

The appellant now appeals the jury's verdict, as well as the circuit court's September 5, 2001 order declaring that Westfield had no duty to indemnify or defend the appellant, and the circuit court's October 1, 2002 order granting summary judgment to SSI.

II.

Rule 50(b) of the Rules of Civil Procedure [1998] provides that, in ruling upon a motion for judgment after a verdict is returned, a circuit court may: (a) allow the judgment to stand, (b) order a new trial or (c) direct the entry of judgment as a matter of law.² As we stated in Syllabus Point 6 of Huffman v. Appalachian Power Co., 187 W.Va. 1, 415 S.E.2d 145 (1991):

In considering whether a motion for judgment notwithstanding the verdict under Rule 50(b) of the West Virginia Rules of Civil Procedure should be granted, the evidence should be considered in the light most favorable to the plaintiff, but, if it fails to establish a prima facie right to recover, the court should grant the motion.

That standard is consistent with Syllabus Point 5 of Orr v. Crowder, 173 W.Va. 335, 315 S.E.2d 593 (1983) which states:

In determining whether there is sufficient evidence to support a

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