Hadorn v. Shea

• Citation: 193 W.Va. 350,456 S.E.2d 194
• Decision Date: 16 February 1995
• Docket Number: No. 22217,22217
• Court: Supreme Court of West Virginia
• Parties: Elena HADORN, Plaintiff below, Appellant, v. William SHEA, Leader National Insurance Company, State Farm Insurance Company, Defendants below, Appellees.

Page 194

456 S.E.2d 194

193 W.Va. 350

Elena HADORN, Plaintiff below, Appellant, v. William SHEA, Leader National Insurance Company, State Farm

Insurance Company, Defendants below, Appellees.

No. 22217.

Supreme Court of Appeals of

West Virginia.

Submitted Jan. 11, 1995.

Decided Feb. 16, 1995.

Syllabus by the Court

1. "The question of whether an insured has substantially prevailed against his insurance company on a property damage claim is determined by the status of negotiations between the insured and the insurer prior to the institution of the law suit. Where the insurance company has offered an amount materially below the damage estimates submitted by the insured, and the jury awards the insured an amount approximating the insured's damages, the insured has substantially prevailed." Syl. pt. 2, Thomas v. State Farm Mut. Auto. Ins. Co., 181 W.Va. 604, 383 S.E.2d 786 (1989).

2. "An insured 'substantially prevails' in a property damage action against his or her insurer when the action is settled for an amount equal to or approximating the amount claimed by the insured immediately prior to the commencement of the action, as well as when the action is concluded by a jury verdict for such an amount. In either of these situations the insured is entitled to recover reasonable attorney's fees from his or her insurer, as long as the attorney's services were necessary to obtain payment of the insurance proceeds." Syl. pt. 1, Jordan v. Nat'l Grange Mut. Ins. Co., 183 W.Va. 9, 393 S.E.2d 647 (1990).

George E. McLaughlin, Bachmann, Hess, Bachmann & Garden, Wheeling, for appellant.

Landers P. Bonenberger, Gerald G. Jacovetty, Jr., McDermott, Bonenberger, McDermott & Gallaway, Wheeling, for appellees.

NEELY, Chief Justice:

This case involves a suit by a policyholder against her underinsured motorist carrier seeking recovery of costs and expenses, including attorneys' fees, on the basis that she substantially prevailed at trial against her insurer. The appellant demanded $300,000 for personal injury, and was awarded $90,000 by a jury, having rejected State Farm's pre-trial final settlement offer of $22,500. After examining the record, we conclude that the Circuit Court was correct in granting State Farm's motion for summary judgment finding that the appellant did not substantially prevail at trial, and holding that appellant is not entitled to the recovery of costs and expenses. We granted this appeal to refine and clarify the rules under which a party "substantially prevails" at trial for the purpose of receiving attorneys' fees and expenses. I.

In February, 1987, Elena Hadorn (f/n/a Elena Johnson) was injured in an automobile accident occurring when the driver of another car, William Shea, ran a red light and crashed into Ms. Hadorn's car. Mr. Shea, a resident of Ohio, was insured by Leader National Insurance Company with liability limits of $12,500. In December, 1989, Ms. Hadorn filed suit against Mr. Shea and his insurer claiming personal injury. State Farm, Ms. Hadorn's underinsurance carrier, was provided notice of suit and filed its Notice of Appearance. However, before trial Ms. Hadorn settled her claims against Mr. Shea for the available policy limits of $12,500.

Ms. Hadorn then pursued her underinsured motorist claim against State Farm. The liability of Mr. Shea was not contested by State Farm. In December, 1991, Ms. Shea made a demand on State Farm for $300,000. In March, 1992, State Farm responded by offering $15,000. Ms. Hadorn rejected the settlement offer by State Farm. On 24 April 1992, State Farm increased its offer to $22,500. That offer was also rejected. Ms. Hadorn stood by her original demand of $300,000 throughout the negotiation period.

On 27 April 1992, the case was tried. The next day, a jury verdict of $90,000 was entered in favor of Ms. Hadorn. After factoring in pre-judgment interest, costs and a credit for the prior settlement with Mr. Shea's insurer, Ms. Hadorn accepted $80,198.09 from State Farm in satisfaction of the judgment.

After trial, Ms. Hadorn was granted leave to amend her Complaint to name State Farm as a defendant in order to pursue recovery of costs and expenses, including attorneys' fees. In support of this action, Ms. Hadorn contends that she substantially prevailed against her insurance carrier at trial, and accordingly she should be reimbursed for approximately $29,500.00 in costs and expenses incurred as a result of the trial against State Farm. Thereafter, both Ms. Hadorn and State Farm filed motions for summary judgment.

State Farm argued that Ms. Hadorn failed to meet the burden for substantially prevailing as established by West Virginia case law. In December, 1993, the Circuit Court of Ohio County granted State Farm's motion for summary judgment, and denied Ms. Hadorn's partial summary judgment motion seeking recovery of costs and expenses. Ms. Hadorn brings this appeal asserting that the Circuit Court erred in granting State Farm's motion for summary judgment and erred in denying Ms. Hadorn's partial summary judgment motion. We disagree.

II.

In Hayseeds, Inc. v. State Farm Fire & Cas., 177 W.Va. 323, 352 S.E.2d 73 (1986), we ruled that when a policyholder must sue her own insurance company over a property damage claim, and substantially prevails, the insurance company is liable for payment of the policyholder's reasonable attorneys' fees.

It is now the majority rule in American courts that when an insurer wrongfully withholds or unreasonably delays payment of an insured's claim, the insurer is liable for all foreseeable, consequential damages naturally flowing from the delay.

Hayseeds, supra, 177 W.Va. at 330, 352 S.E.2d at 80; See also Jordan v. Nat'l Grange Mut. Ins. Co., 183 W.Va. 9, 393 S.E.2d 647 (1990).

Recently, in Marshall and Marshall v. Saseen and Erie Ins. Co., 192 W.Va. 94, 450 S.E.2d 791 (1994), we extended the right of recovery of costs and expenses provided in Hayseeds to include underinsurance claims, and by implication, to all other first party insurance claims. We stated that "[a]lthough we recognize that Hayseeds and its progeny involved insurance policies covering property damage claims, we can see no reason why these principles should not apply to uninsured and underinsured motorist coverage." Marshall, 192 W.Va. 94, 450 S.E.2d 791, 797. However, in both property damage claims and underinsurance claims, the right of recovery depends on a showing that the insured seeking reimbursement substantially prevailed in the ultimate resolution of the claim against his insurer. Were this not the case, we would be confounded in our efforts to use Hayseeds principles to keep insurance rates low and avoid needless litigation.

In Syl. pt. 2, Thomas v. State Farm Mut. Auto. Ins. Co., 181 W.Va. 604, 383 S.E.2d 786 (1989), we held that "substantially prevails" refers to the status of the claim at the time negotiations broke down.

The question of whether an insured has substantially prevailed against his insurance company on a property damage claim is determined by the status of negotiations between the insured and the insurer prior to the institution of the law suit. Where the insurance company has offered an amount materially below the damage estimates submitted by the insured, and the jury awards the insured an amount approximating the insured's damages, the insured has substantially prevailed.

Syl. pt. 2, Thomas, supra. ¹

In Thomas, the plaintiff filed suit against his insurer pursuant to an automobile collision insurance claim. The plaintiff's damage estimates before trial totaled $10,231.05, which they demanded from the insurer as payment under the policy. Instead, the insurer offered $4,960.72 as settlement for the claim. The plaintiffs rejected the insurer's offer. Ultimately, the jury awarded the plaintiffs $10,168. This Court ruled that the plaintiffs had substantially prevailed and, accordingly, were entitled to recover costs and expenses. In response to the insurer's claim that the plaintiff was unwilling to accept any settlement, we recognized that "an insured who has submitted a reasonable estimate of property damages is not required to accept a substantially lower estimate of damages from the insurer." Thomas, 181 W.Va. at 608, 383 S.E.2d at 790.

In Jordan, supra, insureds filed suit seeking $40,000 from the insurer pursuant to a fire coverage claim. The insurer offered $20,000, and made a second offer of $33,237.60 as settlement for the claim. The plaintiffs rejected both offers, continuing to demand $40,000. Ultimately, the claim was settled for $40,000. This court ruled that the plaintiffs had substantially prevailed because they...