Jenkins v. J. C. Penney Cas. Ins. Co.

• Decision Date: 14 July 1981
• Docket Number: No. 14607,14607
• Court: West Virginia Supreme Court
• Parties: Sharon JENKINS v. J. C. PENNEY CASUALTY INS. CO.

Page 252

280 S.E.2d 252

167 W.Va. 597

Sharon JENKINS v. J. C. PENNEY CASUALTY INS. CO.

No. 14607.

Supreme Court of Appeals of West Virginia.

July 14, 1981.

Syllabus by the Court

1. "The following is the appropriate test to determine when a State statute gives rise by implication to a private cause of action: (1) the plaintiff must be a member of the class for whose benefit the statute was enacted; (2) consideration must be given to legislative intent, express or implied, to determine whether a private cause of action was intended; (3) an analysis must be made of whether a private cause of action is consistent with the underlying purposes of the legislative scheme; and (4) such private cause of action must not intrude into an area delegated exclusively to the federal government." Syllabus Point 1, Hurley v. Allied Chemical Corp., W.Va., 262 S.E.2d 757 (1980).

2. An implied private cause of action may exist for a violation by an insurance company of the unfair settlement practice provisions of W.Va.Code, 33-11-4(9); but such implied private cause of action cannot be maintained until the underlying suit is resolved.

3. More than a single isolated violation of W.Va.Code, 33-11-4(9), must be shown in order to meet the statutory requirement of an indication of "a general business practice," which requirement must be shown in order to maintain the statutory implied cause of action.

Baer, Napier & Colburn and James Allan Colburn, Huntington, for appellant.

Campbell, Woods, Bagley, Emerson, McNeer & Herndon, R. Gregory McNeer and Robert K. Emerson, Huntington, for appellee.

MILLER, Justice:

In this case we are asked to consider whether W.Va.Code, 33-11-4(9), relating to unfair insurance claim settlement practices, gives rise to an initial direct cause of action against an insurance company by a third-party claimant. We hold that it does, but not until the underlying suit against the insured has been resolved.

Sharon Jenkins sued the J. C. Penney Casualty Insurance Company contending that through its claims agents, it had breached its statutory duty by "not attempting in good faith to effectuate prompt, fair and equitable settlement of claims in which liability has become reasonably clear." W.Va.Code, 33-11-4(9) (f). Ms. Jenkins alleged that her car had been damaged in the amount of $177.00 by the clear negligence of the insurance company's insured in changing lanes and striking her vehicle. In addition to her property damage claim, she sought punitive damages and damages for emotional distress.

The trial court granted a motion to dismiss on the basis that W.Va.Code, 33-11-4(9), could not be construed to give rise to a private cause of action. On this point, we believe the trial court was in error. However, because we do conclude that a direct suit against the insurance company cannot be maintained until after the underlying civil action against the insured is concluded, we affirm the judgment.

I.

Both parties acknowledge that whether a private cause of action exists based on a violation of a statute is determined under the standard set in Syllabus Point 1 of Hurley v. Allied Chemical Corp., W.Va., 262 S.E.2d 757 (1980):

"The following is the appropriate test to determine when a State statute gives rise by implication to a private cause of action: (1) the plaintiff must be a member of the class for whose benefit the statute was enacted; (2) consideration must be given to legislative intent, express or implied, to determine whether a private cause of action was intended; (3) an analysis must be made of whether a private cause of action is consistent with the underlying purposes of the legislative scheme; and (4) such private cause of action must not intrude into an area delegated exclusively to the federal government."

In Hurley we noted that our prior case law had not evolved a refined test but had recognized that the violation of a statute could give rise to a cause of action. ¹ We also have some general legislative confirmation of this principle under W.Va.Code, 55-7-9. ² In England v. Central Pocahontas Coal Co., 86 W.Va. 575, 104 S.E. 46 (1920), we suggested that the purpose of this statute was to preserve the right to bring a cause of action based on the violation of a statute in those situations where the statute contained a penalty or forfeiture, so as to preclude the assertion that the penalty or forfeiture prevented the bringing of a damage action.

In Pitzer v. M.D. Tomkies & Sons, 136 W.Va. 268, 271, 67 S.E.2d 437, 440 (1951), we recognized that while W.Va.Code, 53-6-1 and 53-6-3, relating to employment of underage children, imposed "(n)o civil liability ... upon a defendant who violates (these) provisions ... Code, 55-7-9, in general, permits the recovery of damages sustained by reason of the violation of any statute." Speaking of the same statute in Flanagan v. Mott, 145 W.Va. 220, 114 S.E.2d 331 (1960), we indicated that the violations had to be the proximate cause of the injuries.

Indeed, this Court's past acceptance of an implied cause of action for a statutory violation is deeply engrained. We are virtually the only jurisdiction that permits a private cause of action for violations of statutes requiring sidewalks to be in good repair. ³ E. g., Costello v. City of Wheeling, 145 W.Va. 455, 461, 117 S.E.2d 513, 517 (1960); Barniak v. Grossman, 141 W.Va. 760, 765, 93 S.E.2d 49, 53 (1956).

Turning to the statute in question, W.Va.Code, 33-11-1, et seq., the insurance company contends that the Hurley test cannot be met because there is no indication that the statute was intended to cover injured third parties, but only insureds. Consequently, the plaintiff is not a member of the class protected by the statute. To buttress this point, the insurance company cites Scroggins v. Allstate Insurance Co., 74 Ill.App.3d 1027, 30 Ill.Dec. 682, 393 N.E.2d 718 (1979), in which the court refused to imply a private cause of action based on a somewhat similar Illinois statute.

We do not follow the Scroggins' analysis since, after finding that the statute was intended to cover third party claims, it concluded that the insurer's duty always runs to its insured. ⁴ What Scroggins ignores is that if the statute creates a positive duty, this duty is independent of any insurance contract and a cause of action may be maintained based on the violation of the statutory duty. As previously noted, our law in regard to statutory violations is clear.

There can be little question in reviewing the entire Act that it is not limited to activities between the insured and the insurance company. Among the unfair claim settlement practices there are a number of broadly worded prohibitions which are equally applicable to third parties as well as insureds. W.Va.Code, 33-11-4(9)(a), (b), (c), (d), (f), (m) or (n). ⁵ Of particular significance, however, are the following subsections of W.Va.Code, 33-11-4(9), which make particular reference to both "insureds" and "claimants" and suggest a clear legislative intent that claimants are entitled to protection under this Act:

"Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration." W.Va.Code, 33-11-4(9)(k).

"Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information." W.Va.Code, 33-11-4(9)(l ).

We also note that subsection (j) ⁶ contains a specific reference to "insureds or beneficiaries" which is a further demonstration that the Legislature intended to be specific in identifying the class of persons designed to be protected as to certain subsections.

As earlier noted, Scroggins had found that third party claimants were covered by the Illinois act. The same conclusion has been reached in Royal Globe Insurance Co. v. Superior Court, 23 Cal.3d 880, 592 P.2d 329, 153 Cal.Rptr. 842 (1979), regarding a similar California insurance act. These are the only two cases that appear to have discussed the question of the class of persons covered by the unfair insurance practices act in any detail, although several other courts have addressed the question in a cursory manner. ⁷ We also conclude that third-party claimants are covered as a protected class under the act and, therefore, the first step in the Hurley test is satisfied.

The second step in the Hurley analysis is to determine whether from the act itself or from its legislative history a private cause of action was intended. We recognized in Hurley that "state statutes often have sparse legislative history or none at all, see Note, Implied Causes of Action in the State Courts, 30 Stanford L.Rev. 1243, 1252 (1978), and in its absence, a state court would be unable to utilize the (legislative history)." 262 S.E.2d at 762. W.Va.Code, 33-11-1, ⁸ makes reference to Public Law fifteen, seventy-ninth Congress, and declares the general purpose of our act is to define and prohibit unfair insurance trade practices. The Congressional act referred to contains a general declaration that the regulation of insurance is a matter left to "the several States." 15 U.S.C.A. § 1011, et seq. While there is no legislative history, the strong policy declaration in our statute against unfair insurance practices initially suggests the appropriateness of a private cause of action.

A possible counterbalance to this strong policy statement may arise from provisions in the statute itself that provide for an administrative remedy. Under W.Va.Code, 33-11-6, the commissioner of insurance has certain administrative powers to issue cease and desist orders, and to impose monetary penalties and to revoke the license of the person found violating the Act...