Gibson v. Northfield Ins. Co., No. 32690.

CourtSupreme Court of West Virginia
Writing for the CourtStarcher
Citation631 S.E.2d 598
PartiesLillian GIBSON, Administratrix of the Estate of Angela Dawn Huffman Anderson, Petitioner Below, Appellant v. NORTHFIELD INSURANCE COMPANY, et al., Respondents Below, Appellees.
Decision Date02 December 2005
Docket NumberNo. 32690.

Page 598

631 S.E.2d 598
Lillian GIBSON, Administratrix of the Estate of Angela Dawn Huffman Anderson, Petitioner Below, Appellant
v.
NORTHFIELD INSURANCE COMPANY, et al., Respondents Below, Appellees.
No. 32690.
Supreme Court of Appeals of West Virginia.
Submitted October 11, 2005.
Decided December 2, 2005.

Page 599

Syllabus by the Court

1. "A circuit court's entry of a declaratory judgment is reviewed de novo." Syllabus Point 3, Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995).

Page 600

2. "In the interpretation of statutory provisions the familiar maxim expressio unius est exclusio alterius, the express mention of one thing implies the exclusion of another, applies." Syllabus Point 3, Manchin v. Dunfee, 174 W.Va. 532, 327 S.E.2d 710 (1984).

3. W.Va.Code, 33-6-31(a) [1998] expressly requires that a motor vehicle insurance policy contain a provision insuring the named insured and any other person responsible for the use of or using the motor vehicle against liability to another for death, bodily injury, loss or damage sustained as a result of negligence in the operation or use of such vehicle. Any additional provision in a motor vehicle insurance policy which tends to limit, reduce or nullify that statutorily-mandated liability coverage, such as a "defense within limits provision" or similar provision that allows defense costs and litigation expenses to be deducted from the limits of liability coverage, is void and ineffective as against public policy.

4. "West Virginia Code § 29-12A-16(a) (1992) conveys broad discretion to both the West Virginia State Board of Risk and Insurance Management, as well as governmental entities, with regard to the type and amount of insurance to obtain. Consequently, when an insurer issues a custom-designed insurance policy to a governmental entity pursuant to the Governmental Tort Claims and Insurance Reform Act, West Virginia Code §§ 29-12A-1 to -18 (1992), that entity may incorporate language absolutely limiting liability under the policy, even if such language would otherwise violate the provisions of West Virginia Code § 33-6-31(b) (1996)." Syllabus Point 1, Trent v. Cook, 198 W.Va. 601, 482 S.E.2d 218 (1996).

5. An insurance company may incorporate limiting terms and conditions that violate W.Va. Code, 33-6-31 into a governmental entity's insurance policy. However, to be permissible under W.Va. Code, 29-12A-16(a) [2003], the limiting terms and conditions in the insurance policy must clearly be "determined by the political subdivision in its discretion." The limiting terms and conditions must therefore be the result of some choice, judgment, volition, wish or inclination as a result of investigation or reasoning by the governmental entity. The terms and conditions are not enforceable merely because they are different from those found in the typical insurance policy. To the extent that Trent v. Cook, 198 W.Va. 601, 482 S.E.2d 218 (1996) says otherwise, it is modified.

Margaret L. Workman, Esq., Charleston, Attorney for Appellant.

Michael J. Farrell, Esq., Robert L. Hogan, Esq., Farrell, Farrell & Farrell, Huntington, Attorneys for Appellees.

STARCHER, J.:


In this appeal from the Circuit Court of Kanawha County, we are asked to examine a "defense within limits" provision in an automobile liability insurance policy purchased by the City of Charleston. In a typical liability insurance policy, the insured receives indemnification up to the policy limits under one portion of the policy, and an unfettered defense against claims in another portion of the policy. But in a defense within limits policy, all costs of defense are chargeable against, and thereby erode or reduce, the indemnification policy limits. When the policy limits are exhausted — whether through the payment of claims to third parties or the payment of defense costs — the insurance company's obligation to provide coverage and a defense terminates, and the City is exposed to any additional liability.

The appellant filed the instant declaratory judgment action against the City's insurance company to determine the validity of the defense within limits provision. The appellant first learned of the provision in the course of a wrongful death lawsuit against the City, when the City revealed that nearly one-third of its liability coverage had been consumed by the insurance company for its attorney and litigation costs. The appellant contended that the defense within limits provision violated West Virginia law and public policy. The circuit court, however, entered an order concluding that the defense within limits provision in the City of Charleston's policy did not violate West Virginia law or public policy.

Page 601

As set forth below, we reverse the circuit court's order.

I.
Facts & Background

On the afternoon of May 8, 1999, Robert T. Anderson and his wife, Angela Anderson, were riding on a motorcycle on MacCorkle Avenue in Charleston, West Virginia. They were accompanied by three other motorcyclists. As they approached the intersection with Route 119 (also called "Corridor G"), an ambulance owned by the City of Charleston passed through a red light and into the path of the four motorcycles. While the ambulance was responding to a request for emergency services and had its emergency lights on, the ambulance paused only briefly before proceeding into the intersection.1 Three of the motorcycles plowed into the side of the ambulance; the fourth motorcycle missed the ambulance, but wrecked.

Mr. Anderson sustained serious injuries when his motorcycle impacted the ambulance; Mrs. Anderson was thrown from the motorcycle and died of her injuries the next day. Thereafter, Mr. Anderson and the administratrix of Mrs. Anderson's Estate, appellant Lillian Gibson, retained different attorneys. The attorney representing Mr. Anderson filed a personal injury suit against the City on August 20, 1999; a wrongful death action on behalf of Mrs. Anderson's Estate was filed on November 16, 1999. Thereafter these two actions were consolidated for discovery and trial.

The City of Charleston had purchased a "Public Entity All Lines Aggregate" insurance policy from the appellant, Northfield Insurance Company ("Northfield"). The policy contained an "aggregation" of numerous types of coverage,2 but pertinent to this case contained a $1,000,000.00 limit for automobile liability coverage. The policy was effective from March 31, 1999, until March 31, 2000.

Under most liability insurance policies, the insurance company has the twin, but separate, duties of indemnifying the insured against liability for a claim within the limits of the policy, and in addition to the limits of the policy providing a defense of any claim. However, by 2001, the attorneys for Mr. Anderson and Mrs. Anderson's Estate discovered that the City of Charleston's liability insurance policy had a "defense within limits" provision that included defense costs and litigation expenses within the limits of liability coverage.3 Under this provision, the $1,000,000.00 limit available for paying liability

Page 602

claims was first reduced by the costs of investigating and defending these claims.

The attorney representing the appellee thereafter filed the instant declaratory judgment action against appellant Northfield, asserting that the defense within limits provision violated state law and public policy, and asked the circuit court to reform the insurance policy to include a total of $1,000,000.00 in liability coverage.

In July 2002, the attorneys for Mr. Anderson and Mrs. Anderson's Estate learned that defense litigation expenses had consumed over thirty percent of the City's insurance coverage, and that the amount of insurance coverage available continued to be reduced by ongoing defense attorney fees and costs.4 On July 12, 2002, the parties agreed to settle their claims against the City for the remaining balance of policy limits, a total of $688,361.86 — ostensibly to avoid further "cannibalization" of the policy limits by the insurance company for defense costs. Of that amount, Mr. Anderson received $150,000.00, and in return he waived his right to pursue any additional relief.

Mrs. Anderson's estate received the remaining $538,361.86. However, as part of the settlement, the attorney representing Mrs. Anderson's Estate reserved the right to pursue her declaratory judgment action against Northfield for the remaining proceeds of the $1,000,000.00 liability policy — that is, the $311,638.14 spent by the insurance company on defense costs to the date of the settlement.5

After conducting discovery, the parties submitted the petition for declaratory relief to the circuit court for decision. On April 8, 2004, the circuit court entered an order denying the appellant's request for declaratory relief and dismissed the case. The circuit court concluded that the insurance policy purchased by the City of Charleston was a "custom-designed insurance policy," and that as a custom-designed policy it could incorporate language that might violate specific requirements of West Virginia law. While the circuit court considered the appellant's argument that the Northfield insurance policy violated public policy, the court found that the public policy arguments advanced by the appellant were without merit. In dismissing the appellant's case, the circuit court refused to reform the policy to include $1,000,000.00 in liability coverage exclusive of defense attorney fees and litigation expenses.

The appellant now appeals the circuit court's April 8, 2004 order.

II.
Standard of Review

Our standard of review in this case is de novo. Syllabus Point 3 of Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995), holds: "A circuit court's entry of a declaratory judgment

Page 603

is reviewed de novo." More specifically, this Court stated in Cox that "because the purpose of a declaratory judgment action is to resolve legal questions, a circuit court's ultimate resolution in a...

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17 practice notes
  • Am. States Ins. Co. v. Surbaugh, No. 11–1186.
    • United States
    • Supreme Court of West Virginia
    • February 6, 2013
    ...198 W.Va. 601, 608 n. 13, 482 S.E.2d 218, 225 n. 13 (1996), overruled on other grounds by Gibson v. Northfield Ins. Co., 219 W.Va. 40, 631 S.E.2d 598 (2005) (similar exclusion). Moreover, this same policy language has been found to be unambiguous by other courts. See Aetna Cas. & Sur. Co. v......
  • Jenkins v. City of Elkins, No. 11–1059.
    • United States
    • Supreme Court of West Virginia
    • November 20, 2012
    ...to the preservation of immunity provision. The Plaintiffs contend that the decision in Gibson v. Northfield Insurance Co., 219 W.Va. 40, 631 S.E.2d 598 (2005), permits such an inquiry. The Plaintiffs' have misconstrued Gibson. The decision in Gibson addressed the issue of a policy incorpora......
  • Jenkins v. City of Elkins, No. 11-1059
    • United States
    • Supreme Court of West Virginia
    • November 15, 2012
    ...to the preservation of immunity provision. The Plaintiffs contend that the decision in Gibson v. Northfield Insurance Co., 219 W. Va. 40, 631 S.E.2d 598 (2005), permits such an inquiry. The Plaintiffs' have misconstrued Gibson. The decision in Gibson addressed the issue of a policy incorpor......
  • Credit Acceptance Corp. v. Front, Nos. 11–1646
    • United States
    • Supreme Court of West Virginia
    • June 19, 2013
    ...Const. Co., Inc., 158 W.Va. 314, 210 S.E.2d 918 (1975).”), overruled on other grounds by Gibson v. Northfield Ins. Co., 219 W.Va. 40, 631 S.E.2d 598 (2005). 11.See Diversicare Leasing Corp. v. Nowlin, No. 11–CV–1037, 2011 WL 5827208, at *5 (W.D.Ark. Nov. 18, 2011) (“The majority of courts w......
  • Request a trial to view additional results
17 cases
  • Am. States Ins. Co. v. Surbaugh, No. 11–1186.
    • United States
    • Supreme Court of West Virginia
    • February 6, 2013
    ...198 W.Va. 601, 608 n. 13, 482 S.E.2d 218, 225 n. 13 (1996), overruled on other grounds by Gibson v. Northfield Ins. Co., 219 W.Va. 40, 631 S.E.2d 598 (2005) (similar exclusion). Moreover, this same policy language has been found to be unambiguous by other courts. See Aetna Cas. & Sur. Co. v......
  • Jenkins v. City of Elkins, No. 11–1059.
    • United States
    • Supreme Court of West Virginia
    • November 20, 2012
    ...to the preservation of immunity provision. The Plaintiffs contend that the decision in Gibson v. Northfield Insurance Co., 219 W.Va. 40, 631 S.E.2d 598 (2005), permits such an inquiry. The Plaintiffs' have misconstrued Gibson. The decision in Gibson addressed the issue of a policy incorpora......
  • Jenkins v. City of Elkins, No. 11-1059
    • United States
    • Supreme Court of West Virginia
    • November 15, 2012
    ...to the preservation of immunity provision. The Plaintiffs contend that the decision in Gibson v. Northfield Insurance Co., 219 W. Va. 40, 631 S.E.2d 598 (2005), permits such an inquiry. The Plaintiffs' have misconstrued Gibson. The decision in Gibson addressed the issue of a policy incorpor......
  • Credit Acceptance Corp. v. Front, Nos. 11–1646
    • United States
    • Supreme Court of West Virginia
    • June 19, 2013
    ...Const. Co., Inc., 158 W.Va. 314, 210 S.E.2d 918 (1975).”), overruled on other grounds by Gibson v. Northfield Ins. Co., 219 W.Va. 40, 631 S.E.2d 598 (2005). 11.See Diversicare Leasing Corp. v. Nowlin, No. 11–CV–1037, 2011 WL 5827208, at *5 (W.D.Ark. Nov. 18, 2011) (“The majority of courts w......
  • Request a trial to view additional results

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