Hubbard v. State Farm Indem. Co.

• Decision Date: 13 June 2003
• Docket Number: No. 31031.,31031.
• Citation: 584 S.E.2d 176,213 W.Va. 542
• Court: West Virginia Supreme Court
• Parties: Margaret A. HUBBARD, Plaintiff below, Appellee, v. STATE FARM INDEMNITY COMPANY, et al., Defendants below, Appellants.

584 S.E.2d 176

213 W.Va. 542

Margaret A. HUBBARD, Plaintiff below, Appellee, v. STATE FARM INDEMNITY COMPANY, et al., Defendants below, Appellants.

No. 31031.

Supreme Court of Appeals of West Virginia.

Submitted April 8, 2003.

Decided June 13, 2003.

Joseph J. John, John Law Offices, Wheeling, Paul R. Cranston, Cranston & Edwards, Morgantown, for the Appellee.

R. Carter Elkins, Laura L. Gray, Campbell, Woods, Bagley, Emerson, McNeer & Herndon, Huntington, for the Appellants.

DAVIS, J.:

State Farm Mutual Automobile Insurance Company (hereinafter "State Farm Mutual") and State Farm Indemnity Company (hereinafter "State Farm Indemnity") appeal a decision of the Circuit Court of Ohio County. They assert the circuit court erred in applying Rule 60(b) of the West Virginia Rules of Civil Procedure to their motions to reconsider partial summary judgment orders against them entered in favor of Margaret A. Hubbard (hereinafter "Ms. Hubbard"). After reviewing the briefs, examining pertinent authorities and hearing the arguments of counsel, we find that the circuit court erred in applying Rule 60(b) to the motions to reconsider. Thus, we reverse and remand to the circuit court to consider the merits of the reconsideration motions.

I. FACTUAL AND PROCEDURAL HISTORY

Gregory Alli was a New Jersey resident suffering from mental problems. Gregory took a car belonging to his parents and drove it to West Virginia from New Jersey. After being arrested in West Virginia, Gregory was placed in St. Joseph's Hospital in Parkersburg for observation. He was subsequently released to his parents (hereinafter "the Allis") who had driven to West Virginia to pick up Gregory. While returning to New Jersey with Gregory, the Allis stopped at the Ellenboro Exxon to retrieve the car Gregory had originally taken. At the Exxon, Gregory stole a car belonging to Exxon employee Roy Pitts. The car was insured under an insurance policy issued by State Farm Mutual, one of the appellants herein. Gregory, who apparently was able to take the Pitts car because the keys had been left in the ignition, drove to Wheeling. During a pursuit by the Wheeling Police, Gregory collided with a car driven by Ms. Hubbard.

Ms. Hubbard sued Gregory and the Allis.¹ The vehicle the Allis used to drive from New Jersey to West Virginia to pick-up Gregory was insured by State Farm Indemnity, the second appellant in this appeal. However, State Farm Indemnity did not tender a defense to the Allis. Ms. Hubbard received a default judgment against Gregory and the Allis. The Allis then entered into an agreement, assignment, and covenant not to execute with Ms. Hubbard under which the Allis and Gregory permitted judgment to be taken against them for $300,000 plus related costs, expenses, attorneys fees and interest. The Allis also assigned to Ms. Hubbard any claims they had against State Farm Indemnity or any other insurance company. In exchange, Ms. Hubbard agreed not to execute the judgment nor to report it to any credit agency or public official in New Jersey.

Ms. Hubbard then twice amended her complaint ultimately adding the Allis as plaintiffs and naming State Farm Mutual and State Indemnity as defendants.² In her ultimate complaint, Ms. Hubbard sought a declaratory judgment against State Farm Mutual alleging that the State Farm Mutual insurance policy insuring the Pitts car provided coverage to Gregory Alli since Mr. Pitts impliedly permitted Gregory to take the car by leaving the keys in it, thus triggering the policy's permissive user coverage. Ms. Hubbard sought declaratory judgment against State Farm Indemnity (under her assignment of rights from the Allis) because the State Farm Indemnity provided insurance coverage for accidents resulting from the use of the insured vehicle. Ms. Hubbard alleged that because Gregory escaped from the Allis' State Farm Indemnity insured vehicle to steal the Pitts car, then the State Farm Indemnity insured vehicle was used in a course of events resulting in Gregory's accident with Ms. Hubbard. Ms. Hubbard also brought a bad faith claim against both State Farm Mutual and State Farm Indemnity.

State Farm Mutual and State Farm Indemnity respectively filed separate motions for summary judgment. These motions for summary judgment related only to the coverage issues and duty to defend issues; but, not to the bad faith claim. Ms. Hubbard filed a single cross-motion for summary judgment against both State Farm Mutual and State Farm Indemnity relating "to the coverage and duty to defend issues." On July 3, 2000, the circuit court denied State Farm Mutual's motion and granted summary judgment to Ms. Hubbard. The circuit court found that State Farm Mutual was obligated to defend Gregory under the terms of the Pitts policy.³ The July 3 order specifically provided that "[t]he Court did not hear argument on the remaining issues in the parties' Motions for Summary Judgment and d[id] not rule on them at [that] time."

On November 28, 2000, the circuit court denied State Farm Indemnity's motion for summary judgment and granted Ms. Hubbard judgment against State Farm Indemnity in the amount of $300,000. The November 28 order found State Farm Indemnity liable on the failure to defend and bad faith count, but reserved ruling on the issue of damages related to the bad-faith claim. The November 28 order was not directed toward adjudicating any liability concerning State Farm Mutual and, indeed, was entitled "ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AGAINST STATE FARM INDEMNITY COMPANY."⁴ (Emphasis added).

More than a year later, on July 13, 2001, State Farm Mutual filed a "motion to reconsider" the order of July 3, 2000. In support of its motion, State Farm Mutual cited our opinion in State ex rel. Crafton v. Burnside, 207 W.Va. 74, 528 S.E.2d 768 (2000), which held that the circuit court enjoyed "inherent power to modify an interlocutory decision" and that "[a] motion for reconsideration is not analyzed by the standard enunciated in Rule of Civil Procedure 60(b), but instead is based upon the Court's inherent power `to afford such relief from interlocutory judgments... as justice requires.'"⁵ On October 10, 2001, State Farm Indemnity also filed a motion to reconsider arguing that the circuit court had inherent power to reconsider the court's November 28, 2000, granting of summary judgment against it to Ms. Hubbard.

By order of December 7, 2001, the circuit court found the July 3 order interlocutory. The circuit court reasoned that "all the issues of liability were not resolved by this Order, and thus not dispositive on all the claims of liability that appeared before the Court at that time[,]" and that the circuit court could not "overlook the express exclusion of consideration of all remaining legal issues presented to the Court." However, the circuit court went on to conclude that "[u]pon review of the November 28, 2000 Order, the Court hereby finds and concludes as a matter of law that the Order is wholly dispositive of all issues in this case and represents a final order."⁶ The circuit court therefore analyzed the two motions to reconsider under Rule 60(b) of the West Virginia Rules of Civil Procedure. Notwithstanding that the circuit court found that State Farm Mutual's arguments "present interesting and, arguably, compelling points of law" and "that there may indeed be merit to the arguments[,]" it denied both motions. In doing so, the circuit court applied Rule 60(b) of the West Virginia Rules of Civil Procedure and determined that the two motions for reconsideration were not timely filed and that, as a result, it lacked "jurisdiction and/or standing to hear the merits of each of the motions for reconsideration."

State Farm Mutual and State Farm Indemnity then filed an original jurisdiction petition for prohibition before this Court, which we refused without prejudice. They subsequently filed this appeal asserting that the circuit court erred in finding that the July 3 and November 28 orders were final orders and in analyzing the motions to reconsider under Rule 60(b) rather than under the court's inherent power.

II. STANDARD OF REVIEW

In this case, the circuit court construed State Farm Mutual's motion for reconsideration as a Rule 60(b) motion and denied the motion. However, we are not constrained by the characterization of the circuit court and will apply the proper analysis. See Shaffer v. Charleston Area Med. Center Inc., 199 W.Va. 428, 433, 485 S.E.2d 12, 17 (1997)

(noting that we are not bound by the labels used below and that we will apply an appropriate legal analysis). The question actually posed to this Court challenges whether the circuit court was correct in applying Rule 60(b). In other words, we are asked if the circuit court applied the correct legal standard. Having so recognized in the past, we now hold that the determination of whether a circuit court applied the proper legal standard "is a question of law we review de novo." Wheeling Park Comm'n v. Hotel & Res. Employees, 198 W.Va. 215, 220-21, 479 S.E.2d 876, 881-82 (1996). See also United States v. Huddleston, 194 F.3d 214, 218 (1st Cir.1999) ("We review de novo the contention that the district court applied an incorrect legal standard."); Devaney v. Continental Am. Ins. Co., 989 F.2d 1154, 1159 (11th Cir.1993) ("We review de novo ... claims ... that the court applied an erroneous legal standard ....") Having clarified the mode for our review, we turn to the substantive issues at hand.

III. DISCUSSION

In this case, we are presented with two defendants who each had partial summary judgment entered against them. Each defendant filed a separate motion for reconsideration of the particular summary judgment entered against it. The circuit court concluded that the first summary judgment order, which was entered against State Farm Mutual on July 3, 2000, was purely interlocutory. The circuit court then concluded that the summary judgment entered...