Charles v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 18 November 1994
• Docket Number: No. 21662,21662
• Citation: Charles v. State Farm Mut. Auto. Ins. Co., 452 S.E.2d 384, 192 W.Va. 293 (W. Va. 1994)
• Court: West Virginia Supreme Court
• Parties: Annie CHARLES, Administratrix of the Estate of Deborah Jewell, Deceased, Plaintiff Below, Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, James Muncy and Stanley Bowen, Defendants Below, State Farm Mutual Automobile Insurance Company, Plaintiff Below, Appellant. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant, v. James MUNCY, Stanley Bowen and Annie Charles, Administratrix of the Estate of Deborah Jewell, Deceased, Defendants Below, Appellees.

Page 384

452 S.E.2d 384

192 W.Va. 293

Annie CHARLES, Administratrix of the Estate of Deborah

Jewell, Deceased, Plaintiff Below, Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, James Muncy and Stanley Bowen, Defendants Below, State Farm Mutual Automobile Insurance Company, Plaintiff

Below, Appellant.

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant, v. James MUNCY, Stanley Bowen and Annie Charles, Administratrix

of the Estate of Deborah Jewell, Deceased,

Defendants Below, Appellees.

No. 21662.

Supreme Court of Appeals of West Virginia.

Submitted Upon Rehearing Oct. 5, 1994.

Decided Nov. 18, 1994.

Syllabus by the Court

1. "The liability of the insurance carrier with respect to the insurance required by this chapter [ W.Va.Code 17D-4-2 [1979], et seq. ] shall become absolute whenever injury or damage covered by said motor vehicle liability policy occurs; said policy may not be cancelled or annulled as to such liability by an agreement between the insurance carrier and the insured after the occurrence of the injury or damage; no statement made by the insured or on his behalf and no violation of said policy shall defeat or void said policy." W.Va.Code 17D-4-12(f)(1) [1991].

2. Coverage in excess of or in addition to the minimum requirements under W.Va.Code 17D-4-7 [1979] is not subject to the provisions of Chapter 17D, Article 4, as to such excess coverage. W.Va.Code 17D-4-12(g) [1991].

3. In order for an insurer to avoid liability for an excess judgement when the insurer has failed to offer to settle within the policy limits, "[i]t will be the insurer's burden to prove by clear and convincing evidence that it attempted in good faith to negotiate a settlement, that any failure to enter into a settlement where the opportunity to do so existed was based on reasonable and substantial grounds, and that it accorded the interests and rights of the insured at least as great a respect as its own." Syl. Pt. 3, Shamblin v. Nationwide Mut. Ins. Co., 183 W.Va. 585, 396 S.E.2d 766 (1990).

4. "In assessing whether an insurer is liable to its insured for personal liability in excess of policy limits, the proper test to be applied is whether the reasonably prudent insurer would have refused to settle within policy limits under the facts and circumstances, bearing in mind always its duty of good faith and fair dealing with the insured. Further, in determining whether the efforts of the insurer to reach settlement and to secure a release for its insured as to personal liability are reasonable, the trial court should consider whether there was appropriate investigation and evaluation of the claim based upon objective and cogent evidence; whether the insurer had a reasonable basis to conclude that there was a genuine and substantial issue as to liability of its insured; and whether there was potential for substantial recovery of an excess verdict against its insured. Not one of these factors may be considered to the exclusion of the others." Syl. Pt. 4, Shamblin v. Nationwide Mut. Ins. Co., 183 W.Va. 585, 396 S.E.2d 766 (1990).

5. Before an insurance policy will be voided because of the insured's failure to cooperate, such failure must be substantial and of such nature as to prejudice the insurer's rights. Syllabus Point 1, Bowyer by Bowyer v. Thomas, 188 W.Va. 297, 423 S.E.2d 906 (1992).

6. In addition to prejudice, the insurer must show that its insured willfully and intentionally violated the cooperation clause of the insurance policy before it can deny coverage. Syllabus Point 2, Bowyer by Bowyer v. Thomas, 188 W.Va. 297, 423 S.E.2d 906 (1992).

7. The insurer must exercise reasonable diligence in obtaining the insured's cooperation, including attendance at trial, before the policy will be voided. Syllabus Point 3, Bowyer by Bowyer v. Thomas, 188 W.Va. 297, 423 S.E.2d 906 (1992).

8. " 'Where a payment is made, and release obtained, by one joint tort-feasor, the other joint tort-feasors shall be given credit for the amount of such payment in the satisfaction of the wrong.' Point 2, Syllabus, Hardin v. The New York Central Railroad Company, 145 W.Va. 676 [116 S.E.2d 697 (1960) ]. Syllabus Point 1, Tennant v. Craig, 156 W.Va. 632, 195 S.E.2d 727 (1973)." Syllabus Point 5, Board of Educ. of McDowell County v. Zando, Martin et al., 182 W.Va. 597, 390 S.E.2d 796 (1990).

9. "Defendants in a civil action against whom a verdict is rendered are entitled to have the verdict reduced by the amount of any good faith settlements previously made with the plaintiff by other jointly liable parties. Those defendants against whom the verdict is rendered are jointly and severally liable to the plaintiff for payment of the remainder of the verdict. Where the relative fault of the nonsettling defendants has been determined, they may seek contribution among themselves after judgment if forced to pay more than their allocated share of the verdict." Syllabus Point 7, Board of Educ. of McDowell County v. Zando, Martin et al., 182 W.Va. 597, 390 S.E.2d 796 (1990).

Richard Thompson, Huntington, for A. Charles and J. Muncy.

Kenneth H. Fisher, Huntington, for S. Bowen.

James D. McQueen, Jr., Kathlene Harmon-McQueen, Maria Marino Potter, McQueen & Brown, L.C., Charleston, for appellant.

NEELY, Justice:

This case was originally submitted for decision at the January, 1994 term of this Court and an opinion was filed on 15 June 1994. Thereafter, the appellant, State Farm Mutual Automobile Insurance Company, petitioned for a rehearing and said petition was granted. On 5 October 1994, this case was reheard and the Court thereafter withdrew the original opinion and the Court issues the following opinion.

FACTS

James Muncy, a resident of Kentucky, owned an automobile insured by State Farm under a policy issued in Kentucky. On 11 January 1989, Deborah Jewell (the daughter of James Muncy) and Stanley Bowen were occupants of the Muncy vehicle when it stalled on a Norfolk and Southern Railway Company track intersecting State Secondary Route 29/9 near Bull Creek, Crum, Wayne County, West Virginia. A train hit the car killing Deborah Jewell instantly. Stanley Bowen had leapt from the car and escaped the accident unscathed.

Annie Charles in her capacity as Administratrix of the Estate of Deborah Jewell instituted a wrongful death action against Norfolk and Southern Corporation, the Norfolk and Western Railway Company and Mr. Bowen. The Norfolk and Western filed a cross-claim against Mr. Bowen alleging that it was entitled to comparative contribution. Mr. Bowen filed a cross-claim against the Norfolk and Western alleging negligent operation of the train and negligent maintenance of the crossing. These allegations are the same allegations made by the Estate in its complaint. Mr. Bowen also filed a counterclaim against the Estate in which he claimed that Ms. Jewell was negligently operating the automobile in which he was a passenger, causing him to suffer extreme mental distress. When counsel for the Estate notified State Farm of the counterclaim, State Farm retained counsel pursuant to the liability provisions of a policy of insurance on the automobile owned by Mr. Muncy to defend the Estate against the Bowen counterclaim. According to State Farm, neither Mr. Bowen nor his lawyer commended the defense of Mr. Bowen to State Farm or otherwise sought the protection of the liability insurance coverage on the Muncy automobile.

The wrongful death action proceeded through discovery, and Mr. Bowen's discovery deposition was taken. Other discovery depositions were also taken, and eventually counsel for the Estate served notice on State Farm suggesting, for the first time, that Mr. Bowen had been the operator or user of the Muncy vehicle at the time of the accident. Thus State Farm was formally notified of a potential uninsured or underinsured motorist claim under W.Va.Code 33-6-31 [1988]. Shortly thereafter State Farm employed counsel to defend Mr. Bowen but reserved, by letter to Mr. Bowen, its right to challenge that there was liability coverage for him under the Muncy policy. The wrongful death action was scheduled for trial in April, 1991, but the Court granted a continuance until August, 1991 in response to a request from the lawyer State Farm had hired to defend Mr. Bowen.

During the following four and one half months, other discovery was conducted or attempted that dealt primarily with Mr. Bowen's damage claims against the Norfolk and Western. Because Mr. Bowen did not submit to an agreed independent medical examination or designate expert witnesses as required by circuit court order, and because Mr. Bowen's personal lawyer failed to appear at multiple hearings scheduled by the Norfolk and Western to enforce discovery, the court dismissed Mr. Bowen's counterclaim and cross-claim.

On 16 August 1991, State Farm instituted a declaratory judgment action in Federal District Court to determine coverage issues. On 18 May 1992, the federal declaratory judgment action was dismissed, without prejudice, pursuant to Mitcheson v. Harris, 955 F.2d 235 (4th Cir.1992), which strongly encourages a federal district judge to decline to entertain an insurer's declaratory judgment action when the primary litigation seeking recovery from the insured is pending in state court at the time the federal action is filed. Meanwhile, however, back in the state court, on 19 August 1991, the wrongful death action between Ms. Charles (the Administratrix of the deceased's estate) and Mr. Bowen and the Norfolk and Western began. After the selection of the jury, the Norfolk and Western settled with the Estate for $50,000. The following day, the claim against Mr. Bowen was tried to a jury and the jury returned a verdict against Mr. Bowen, finding him to be 100 percent negligent, and awarded the Estate $400,000 in damages. No offset was allowed by the circuit court for the $50,000 Norfolk and Western settlement. Mr. Bowen failed to appear at trial but was,...