DeVane v. Kennedy, 25206.

CourtSupreme Court of West Virginia
Writing for the CourtDAVIS, Justice
Citation519 S.E.2d 622,205 W.Va. 519
PartiesCheryl Richardson DEVANE, Personal Representative of the Estate of Richard Walter Richardson, Plaintiff Below, Appellee, v. George KENNEDY, M.D., and Charles Town General Hospital, Inc., d/b/a Jefferson Memorial Hospital, Defendants Below, Appellees, The West Virginia Insurance Guaranty Association, Appellant.
Docket NumberNo. 25206.,25206.
Decision Date26 March 1999

James D. McQueen, Jr., Kathlene Harmon-McQueen, Glen A. Murphy, McQueen Harmon & Potter, L.C., Charleston, West Virginia, Attorneys for the Appellant.

William R. DeHaven, Martinsburg, West Virginia, Bertram M. Goldstein, Bertram M. Goldstein & Associates, Baltimore, Maryland, Attorneys for Appellee, Cheryl Richardson DeVane.

P. Gregory Haddad, Ancil G. Ramey, Steptoe & Johnson, Morgantown, West Virginia, Attorneys for Appellee, Charles Town General Hospital, Inc.

Jeffrey M. Wakefield, Michelle Marinacci, Flaherty, Sensabaugh & Bonasso, Charleston, West Virginia, Attorneys for Amici Curiae, West Virginia Hospital Association and Medical Assurance of West Virginia, Inc.

Harvey D. Peyton, Peyton, Parenti, Whittington & Fahrenz, Nitro, West Virginia, Attorney for Amicus Curiae, Jack Levine, M.D.

Cheryl Lynne Connelly, Campbell, Woods, Bagley, Emerson, McNeer & Herndon, P.L.L.C., Huntington, West Virginia, Attorney for Amicus Curiae, National Conference of Insurance Guaranty Funds.

Michael J. Farrell, Tamela J. White, Paul T. Farrell, Jr., Farrell, Farrell & Farrell, L.C., Huntington, West Virginia, Attorneys for Amicus Curiae, Pleasant Valley Hospital, Inc.

DAVIS, Justice:

The appellant herein and intervenor below, the West Virginia Insurance Guaranty Association [hereinafter "WVIGA" or "the Association"], appeals from an order entered on January 21, 1998, by the Circuit Court of Jefferson County enforcing a pre-insolvency settlement agreement entered into by Cheryl Richardson DeVane [hereinafter "Mrs. DeVane"], plaintiff below; George Kennedy, M.D. [hereinafter "Dr. Kennedy"], defendant below; and the Insurance Corporation of America [hereinafter "ICA"], Dr. Kennedy's professional liability insurer. The terms of the settlement anticipated a release, by Mrs. DeVane, of all claims against Dr. Kennedy and Charles Town General Hospital, Inc., d/b/a Jefferson Memorial Hospital [hereinafter "the Hospital"], codefendant below, in exchange for a payment of $220,000 by ICA. Following the insolvency of Dr. Kennedy's insurer, the WVIGA became liable for covered claims pending against ICA, including Mrs. DeVane's claim resulting from her settlement agreement therewith. As a result of the circuit court's order enforcing the settlement agreement and directing the WVIGA to pay Mrs. DeVane's claim, the WVIGA filed this appeal. The WVIGA asserts two errors, namely (1) that the nonduplication of recovery language contained in W. Va.Code § 33-26-12(1) (1970) (Repl.Vol.1996) requires the exhaustion of the Hospital's solvent insurance before Mrs. DeVane may recover from the WVIGA and (2) that the circuit court erred by enforcing the pre-insolvency settlement agreement against the WVIGA because the enforcement order constituted a non-binding stipulated judgment and because the Association did not participate in the settlement negotiations. Having reviewed the parties' arguments, designated record, and pertinent authorities, we conclude that the language of W. Va.Code § 33-26-12(1) requires, before resort may be had to the WVIGA, the exhaustion of solvent insurance only insofar as the claim asserted against the WVIGA is collaterally insured by such solvent insurance. We further conclude that the circuit court did not abuse its discretion in ordering the enforcement of the pre-insolvency settlement agreement, and requiring the WVIGA to satisfy ICA's obligation arising therefrom, because the enforcement order was not a stipulated judgment and because the WVIGA's nonparticipation in settlement negotiations does not constitute a valid defense to the settlement's enforcement. Accordingly, we affirm the decision of the Circuit Court of Jefferson County.


The facts from which this appeal has arisen generally are not disputed by the parties. On July 2, 1990, Richard W. Richardson [hereinafter "Mr. Richardson" or "the decedent"] received medical treatment from Dr. Kennedy in the emergency room of the Hospital. The parties represent that, as a result of such medical treatment, Mr. Richardson died. Thereafter, the decedent's personal representative filed a civil action in the Circuit Court of Jefferson County, on December 10, 1992, alleging medical malpractice by Dr. Kennedy1 and ostensible agency and vicarious liability of the Hospital.2 At the time of Mr. Richardson's treatment in the Hospital's emergency room, Dr. Kennedy was employed by the Hospital as an emergency room physician and as the director of emergency services. His employment contract with the Hospital designated him as an "independent contractor" and required the Hospital to provide him with medical malpractice insurance coverage for his medical services rendered at the Hospital in this capacity. To satisfy the provision of insurance requirement, the Hospital assumed payment of Dr. Kennedy's medical malpractice insurance premiums for his policy of such insurance through ICA.3

During the course of litigating the civil lawsuit, counsel for Mrs. DeVane, widow of Mr. Richardson and administratrix and sole beneficiary of his estate, and counsel for Dr. Kennedy and his insurer, ICA,4 entered into a settlement agreement.5 On February 20, 1997, the parties memorialized this compromise in writing. The terms of the settlement agreement provided that Mrs. DeVane would release all of her tort claims against Dr. Kennedy and the Hospital, thereby surrendering her right to pursue further litigation against those parties in this matter. In exchange, Dr. Kennedy, through his medical malpractice insurance, agreed to pay Mrs. DeVane $220,000.6 Shortly thereafter, on March 12, 1997, Dr. Kennedy's malpractice insurer, ICA, was declared to be insolvent by the District Court of Travis County, Texas. The Texas court then placed ICA into receivership for the commencement of liquidation proceedings on April 28, 1997.7 As a result of ICA's insolvency and resultant liquidation, the WVIGA assumed responsibility for those claims for benefits filed against ICA by West Virginia residents, including the claim of Mrs. DeVane resulting from the February 20, 1997, settlement agreement with Dr. Kennedy. See W. Va.Code § 33-26-8(1)(a) (1985) (Repl.Vol.1996).8 The West Virginia Insurance Guaranty Association is a "nonprofit organization created and designed to help alleviate the financial burden [borne] by citizens of this State when their insurance carrier[s] cannot fully satisfy their contractual obligations due to insolvency." Cannelton Indus., Inc. v. Aetna Cas. & Sur. Co. of Am., 194 W.Va. 203, 207, 460 S.E.2d 18, 22 (1994). See also W. Va.Code § 33-26-6 (1970) (Repl.Vol.1996) (creating and describing functions of WVIGA). In other words, the WVIGA is charged, by statute, with the payment of claims that have been filed against insurance companies which are insolvent when such claims are filed, or which subsequently become insolvent before such claims have been paid. W. Va.Code § 33-26-2 (1970) (Repl.Vol.1996); W. Va. Code § 33-26-6; W. Va.Code § 33-26-8(1)(a); Cannelton, 194 W.Va. at 206-07,460 S.E.2d at 21-22.9

The WVIGA receives its resources to fulfill the claims obligations of insolvent insurers by collecting monies from all insurance companies that write insurance in the State of West Virginia. W. Va.Code § 33-26-8(1)(c) (1985) (Repl.Vol.1996) (requiring WVIGA to "[a]llocate claims paid and expenses incurred among the two accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligations of the association ... and other expenses authorized by this article"; limiting such assessments so that "[n]o member insurer may be assessed in any one year on any account an amount greater than two percent of that member insurer's net direct written premiums for the preceding calendar year on the kinds of insurance in the account"). These assessments are ultimately derived from the premiums paid by the insureds of these member insurers. W. Va. Code § 33-26-16 (1970) (Repl.Vol.1996) (authorizing member insurers to set rates and premiums in such an amount to "recoup a sum equal to the amounts paid to the association by the member insurer less any amounts returned to the member insurer by the association"). Under the circumstances arising from ICA's insolvency, the WVIGA ordinarily would assume payment of ICA's obligations arising from claims made under the insurance policies of its insureds. See W. Va.Code § 33-26-8(1)(a).10 However under the facts of the instant appeal, the WVIGA disputed its liability for ICA's obligation arising from its pre-insolvency settlement agreement with Mrs. DeVane and refused to tender the $220,000 settlement amount. Following the declaration of ICA's insolvency, Mrs. DeVane's claim, i.e., the settlement agreement, was forwarded to the WVIGA on approximately March 31, 1997. Having received no payment thereon, from either the WVIGA or ICA's liquidated estate, she moved the circuit court to enforce the settlement on November 25, 1997.11 A hearing was held on Mrs. DeVane's motion on December 23, 1997, and, by order entered January 21, 1998, the circuit court ruled as follows:12

1. That this case was settled between the Plaintiff [Mrs. DeVane] and Dr. Kennedy for the sum of $220,000.00;

2. That this settlement pre-dated the insolvency of Dr. Kennedy's insurer, ICA;

3. That this settlement is fair and reasonable;
4. That this settlement is hereby enforced;

5. That West Virginia Code, Section 33-26-1, et. seq., is designed, in part, to protect the...

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