Hartford Underwriters Ins. Co. v. Allstate Ins. Co.

Citation880 S.E.2d 786
Decision Date08 December 2022
Docket NumberRecord No. 211048
CourtSupreme Court of Virginia

Monica T. Monday (Tina C. Babcock ; Gentry Locke; Babcock & Moore, on briefs), for appellants.

Christopher R. Hedrick (Mason, Mason, Walker, & Hedrick, on brief), for appellee Allstate Insurance Company.

John G. Crandley (Preston, Wilson & Crandley, on brief), Virginia Beach, for appellee Mary Magdalene Brown.

PRESENT: All the Justices


Hartford Underwriters Insurance Company ("Hartford") and Shoe Show, Inc., doing business as The Shoe Department ("Shoe Department"), appeal from a judgment of the Circuit Court of the City of Suffolk granting the "First Amended Complaint in Interpleader with Accompanying Prayer for Declaratory Relief" filed by Allstate Insurance Company ("Allstate") and apportioning the interpleaded funds. For the reasons that follow, we affirm the judgment of the circuit court.

I. Background

On October 17, 2019, Savannah Padgett was an employee of a Shoe Department store located in Suffolk. On that day, while Padgett was at work, "Mary Magdalene Brown drove and crashed her vehicle into [the] Shoe Department store[,]" injuring Padgett.

Padgett asserted a workers’ compensation claim against Shoe Department. Hartford, Shoe Department's workers’ compensation carrier, accepted the claim and began paying Padgett medical and wage indemnity benefits.1 As of the time of trial below, Hartford had paid Padgett in excess of $100,000 in medical benefits and approximately $20,000 in wage benefits. Pursuant to Code § 65.2-309, Hartford asserted a lien against any settlement or judgment Padgett might obtain in a personal injury action against Brown.

At the time of the accident, Brown was insured under an automobile liability policy issued by Allstate. The policy had bodily injury limits of $50,000 per person and $100,000 per accident. Padgett retained counsel to pursue her claims.2 Ultimately, she filed a personal injury suit against Brown in the Circuit Court of the City of Suffolk, and her counsel asserted a statutory lien pursuant to Code § 54.1-3932 against any settlement or judgment. In addition to being potentially liable for damages caused, the filing of the suit triggered Allstate's duty to defend Brown.

Prior to Padgett filing suit against Brown, Hartford sought to initiate an arbitration with Allstate regarding its claimed lien and the $50,000 in coverage afforded by Brown's Allstate policy. Both Hartford and Allstate were signatories to an agreement among insurance companies to arbitrate disputes among signatory insurance companies.

Not wishing to incur the expense of defending Brown in a case of near certain liability, "Allstate offered to tender its limit of $50,000 per person in exchange for a release of its [i]nsured Brown under Va. Code § 38.2-2206(K)" to settle Padgett's claim against Brown. Such a settlement and release would have released Brown from any further claims by Padgett, would have allowed Padgett to proceed with a UM/UIM claim against her automobile liability carrier,3 and would have relieved Allstate of any "further duties to its insured, including the duty to defend its insured if an action has been or is brought against" Brown. Code § 38.2-2206(K). Such a settlement potentially would have extinguished any claim that Padgett's UM/UIM carrier would have had against Brown.4

Padgett wished to accept Allstate's "tender and walk" offer that would have settled her claims against Brown for Allstate's $50,000 policy limit and would have released Brown from further claims by Padgett. Hartford, however, objected to the settlement, arguing that it was entitled to the full amount of Allstate's coverage and that neither Padgett nor her counsel should be paid any portion of those funds. Hartford conceded in the proceeding below that, if Padgett entered into the settlement without Hartford's consent, she "could be foreclosed from receiving any further benefits from her employer ... or Hartford under the Virginia Workers’ Compensation Act[.]"5 As a result, Padgett did not accept Allstate's settlement offer.

Unable to settle the matter and faced with competing claims for the $50,000 in coverage, Allstate sought the assistance of the circuit court by filing a complaint in interpleader and accompanying prayer for declaratory relief. Specifically, Allstate requested that the circuit court determine the parties entitled to claim any portion of the $50,000 in coverage,6 bring those parties before the circuit court, determine how the $50,000 should be distributed amongst said parties, discharge Allstate from any liability to such defendants related to the $50,000, restrain all such parties from instituting or prosecuting any proceedings in any court or by way of arbitration that sought to recover the $50,000 in coverage, "enter a declaratory judgment that the payment of Allstate's funds constitutes a tender and walk under Va. Code § 38.2-2206 [,] and order that Padgett execute a valid release" of Allstate and Brown.

In responding to Allstate's complaint, Hartford again asserted its claimed "lien of nearly $125,000.00 pursuant to § 65.2-309 of the Code of Virginia" and further averred that it had "made its intention to file intercompany arbitration known to both counsel for Padgett and Allstate six weeks after the date of injury" and had "independently investigated the claim, gathered evidence, identified and contacted the third-party carrier, and filed its intercompany arbitration, all while assisting counsel for Padgett." Hartford argued that, because "[n]either the employer ... nor Hartford benefited from any action taken by counsel for Padgett[,]" "no attorney fee is due or has been earned [by Padgett's counsel] as it relates to the Allstate policy limit."

In addition to answering the allegations in Allstate's interpleader action, Hartford also requested that the circuit court award it declaratory relief. Hartford first requested that the circuit court declare that Hartford's request for arbitration against Allstate and any resulting arbitration were proper. Hartford also asked the circuit court to allow arbitration to proceed, to prohibit Allstate from paying its coverage limit into the circuit court, and to dismiss the interpleader action. Alternatively, Hartford requested that the circuit court order "Padgett to sign the Release presented to her by Allstate[,]" that "Padgett is not entitled to any portion of the Allstate policy limit given Hartford's workers’ compensation lien[,]" that Padgett's counsel "is not entitled to any portion of the Allstate policy limit[,]" that Allstate directly pay Hartford all of the $50,000 in coverage available, and other related relief.

The circuit court held a hearing where the parties presented their respective positions. Relying heavily on the decision of the Court of Appeals in Williams v. Capital Hospice & Companion Property & Casualty Insurance Co. , 66 Va. App. 161, 783 S.E.2d 67 (2016), Hartford argued that, independent of any action of either Padgett or Brown, it had a right to utilize intercompany arbitration to recover directly from Allstate the amount it had paid for Padgett's benefit up to Allstate's coverage limit.

Allstate and multiple other parties contested Hartford's position, particularly the reliance on Williams . Multiple parties called into question whether Williams had been correctly decided and further noted that, assuming that it had, it had been superseded by statutory amendments to Code § 65.2-309 that limited the scope of arbitrations in which an employer seeks to exercise its right of subrogation related to a workers’ compensation lien.

Having heard the arguments of the various parties, the circuit court granted Allstate's motion for interpleader and its request for declaratory relief.7 In its order apportioning the interpleaded funds, the circuit court recognized that those funds were "subject to the workers’ compensation lien of Hartford Underwriters Insurance Company, which lien is itself subject to the allowance out of it to Savannah Nicole Padgett of a proportionate attorney's fee and reimbursement of costs, as provided in Virginia Code § 65.2-311 [.]" The circuit court then ordered that $16,667 was to be "apportioned to Savannah Nicole Padgett for her proportionate attorney's fee" and that $206.36 "be paid to Decker, Cardon, Thomas, Weintraub & Neskis, P.C., in reimbursement of costs it ha[d] advanced on behalf of Savannah Nicole Padgett[.]" The circuit court then ordered that all of the remaining funds be paid to Hartford "in full satisfaction of its lien/subrogation claim in respect to the medical bills and lost wages paid to Savannah Nicole Padgett on account of her injuries in the underlying motor vehicle accident" and determined that "[t]he arbitration underlying this matter, which had been initiated by Hartford ... against Allstate ... is now moot, and shall not proceed."8

Hartford appeals to this Court. Specifically, it asserts that the circuit "court erred in its construction and application of Code §§ 65.2-309 and 65.2-311 and Williams v. Capital Hospice & Property & Casualty Insurance Co. , 66 Va. App. 161, 783 S.E.2d 67 (2016), to this case[,]" and therefore, erred by failing to award the available Allstate coverage "to Hartford in full" or, alternatively, by failing to "permit [the requested] intercompany arbitration to proceed."

II. Analysis
A. Standard of review

Hartford's appeal poses questions of statutory interpretation. As such, it presents questions of law subject to de novo review in this Court. See Virginia Dep't of Tax'n v. R.J. Reynolds Tobacco Co. , 300 Va. 446, 454, 868 S.E.2d 429 (2022).

When interpreting a statute, "our primary objective is ‘to ascertain and give effect to legislative intent,’ as expressed by the language used in the statute." Cuccinelli v. Rector & Visitors of the Univ. of Va. , 283 Va. 420, 425, 722...

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