Jones v. Wesbanco Bank Parkersburg

• Court: West Virginia Supreme Court
• Writing for the Court: McHUGH; MILLER, Retired J., and CLECKLEY
• Citation: Jones v. Wesbanco Bank Parkersburg, 194 W.Va. 381, 460 S.E.2d 627 (W. Va. 1995)
• Decision Date: 14 July 1995
• Docket Number: No. 22517,22517
• Parties: Joseph C. JONES and Debra S. Jones, Plaintiffs Below, Appellees, v. WESBANCO BANK PARKERSBURG, Intervening Plaintiff Below, Appellant, v. MOTORISTS MUTUAL INSURANCE COMPANY, Defendant Below, Appellee.

Page 627

460 S.E.2d 627

194 W.Va. 381

Joseph C. JONES and Debra S. Jones, Plaintiffs Below, Appellees, v. WESBANCO BANK PARKERSBURG, Intervening Plaintiff Below, Appellant, v. MOTORISTS MUTUAL INSURANCE COMPANY, Defendant Below, Appellee.

No. 22517.

Supreme Court of Appeals of West Virginia.

Submitted May 3, 1995.

Decided Filed July 14, 1995.

Syllabus by the Court

1. "A circuit court's entry of summary judgment is reviewed de novo." Syl. pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).

2. " ' "A motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law." Syllabus Point 3, Aetna Casualty & Surety Co. v. Federal Insurance Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963).' Syllabus Point 1, Andrick v. Town of Buckhannon, 187 W.Va. 706, 421 S.E.2d 247 (1992)." Syl. pt. 2, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).

3. "If a fire insurance contract between an insurer and a property owner includes a standard mortgage clause naming as mortgagee the lender under a deed of trust executed by the property owner to secure a debt owing on the property, the lender under the deed of trust pursuant to that clause has an independent and distinct contract with the insurer, as if the lender under the deed of trust had taken out a separate policy with the insurer, and is deemed to be an insured to the extent of the balance due it from the property owner." Syl. pt. 1, Firstbank Shinnston v. West Virginia Insurance Co., 185 W.Va. 754, 408 S.E.2d 777 (1991).

4. Where the lender under a deed of trust executed by a property owner to secure a debt owing on the property is named as mortgagee in a standard mortgage clause in a fire insurance contract between an insurer and a property owner, it has an independent and distinct contract with the insurer and is deemed to be an insured to the extent of the balance due it from the property owner. Thus, the right of the lender under a deed of trust named as mortgagee to the insurance proceeds is determined at the time of the fire loss to the extent of the balance due it from the property owner.

5. "Whenever a policyholder substantially prevails in a property damage suit against its insurer, the insurer is liable for: (1) the insured's reasonable attorneys' fees in vindicating its claim; (2) the insured's damages for net economic loss caused by the delay in settlement, and damages for aggravation and inconvenience." Syl. pt. 1, Hayseeds, Inc. v. State Farm Fire & Cas., 177 W.Va. 323, 352 S.E.2d 73 (1986).

Ronald W. Musser, Phillips, Gardill, Kaiser & Altmeyer, Wheeling, for appellant, Wesbanco Bank Parkersburg.

Diana Everett, Ruley & Everett, Parkersburg, for appellee, Motorists Mut.

McHUGH, Chief Justice:

In this appeal from the Circuit Court of Wood County, West Virginia, appellant Wesbanco Bank Parkersburg (hereinafter "Wesbanco") seeks a determination from this Court that, as the named mortgagee on a certain homeowners insurance policy, it suffered a loss as of the date of the fire that destroyed the collateral real estate even though the mortgagors continued to make monthly payments on the mortgage debt for approximately two years and seven months after the date of the fire. Wesbanco further appeals the circuit court's ruling that Wesbanco failed to establish a prima facie case of bad faith against the insurer, appellee Motorists Mutual Insurance Company.

This Court has before it the petition for appeal, all matters of record and the briefs and argument of counsel. For the reasons stated below, the order of the circuit court is affirmed, in part, reversed, in part, and this case is remanded.

I.

On or about September 1, 1989, Joseph C. and Debra S. Jones purchased a homeowners insurance policy from appellee Motorists Mutual Insurance Company (hereinafter "Motorists Mutual"). The insurance policy, which covered Mr. and Mrs. Jones' residence as well as their personal property, listed Mountain State Bank, now Wesbanco, as mortgagee. ¹

On February 8, 1990, a fire occurred at Mr. and Mrs. Jones' residence, causing substantial damage. Mr. and Mrs. Jones subsequently sought to recover the full limits of the policy for the following: $42,000 for the dwelling; $29,400 for personal property; and $4,200 for other structures. Motorists Mutual denied coverage for the loss pursuant to policy provisions found in Section I--Perils Insured Against, which state:

We insure against risks of direct loss to property described in Coverages A [Dwelling] and B [Other Structures] only if that loss is a physical loss to property[.]

....

We insure for direct physical loss to the property described in Coverage C [Personal Property] caused by a peril listed below unless the loss is excluded in Section I--Exclusions.

Section I--Exclusions provides, in pertinent part:

1. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

....

h. Intentional Loss, meaning any loss arising out of any act committed;

(1) by or at the direction of an insured; and

(2) with the intent to cause a loss.

Motorists Mutual thus denied coverage to Mr. and Mrs. Jones based upon their alleged intentional acts in causing the fire.

On May 30, 1990, Mr. and Mrs. Jones filed a complaint in the Circuit Court of Wood County seeking recovery under the aforementioned insurance policy. Mr. Jones was subsequently tried and convicted of arson while Mrs. Jones was acquitted.

It was not until November of 1990, approximately nine months after the fire, that Wesbanco learned that the property securing the Jones' loan had been destroyed. In that Mr. and Mrs. Jones, or someone on their behalf, had continued making the monthly payments on the loan from and after the date of the fire, it is unclear as to precisely how Wesbanco learned of the fire loss. In any event, according to Wesbanco, it immediately contacted Motorists Mutual's regional and home offices in an attempt to collect payment under the mortgage clause of the policy, which provides:

The word 'mortgagee' includes trustee.

If a mortgagee is named in this policy, any loss payable under Coverage A or B will be paid to the mortgagee and you, as interests appear. If more than one mortgagee is named, the order of payment will be the same as the order of precedence of the mortgages.

If we deny your claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee:

a. notifies us of any change in ownership, occupancy or substantial change in risk of which the mortgagee is aware;

b. pays any premium due under this policy on demand if you have neglected to pay the premium; and

c. submits a signed, sworn statement of loss within 60 days after receiving notice from us of your failure to do so. Policy conditions relating to Appraisal, Suit Against Us and Loss Payment apply to the mortgagee.

If the policy is cancelled or not renewed by us, the mortgagee will be notified at least 10 days before the date cancellation or nonrenewal takes effect.

If we pay the mortgagee for any loss and deny payment to you:

a. we are subrogated to all the rights of the mortgagee granted under the mortgage on the property; or

b. at our option, we may pay to the mortgagee the whole principal on the mortgage plus any accrued interest. In this event, we will receive a full assignment and transfer of the mortgage and all securities held as collateral to the mortgage debt.

Subrogation will not impair the right of the mortgagee to recover the full amount of the mortgagee's claim.

In April 1991, Wesbanco completed and returned to Motorists Mutual a sworn proof of loss form. When Motorists Mutual failed to adequately respond to its claim, Wesbanco, in July 1992, filed a complaint as an intervening plaintiff in the aforementioned civil action instituted by Mr. and Mrs. Jones. Wesbanco's complaint alleged (1) that it was owed payment under the insurance policy from the date of the fire loss and (2) that Motorists Mutual acted in bad faith in refusing to pay Wesbanco the sum to which it was entitled under the policy.

In its answer to Wesbanco's complaint, Motorists Mutual maintained, inter alia, that Wesbanco had sustained no loss as a result of Motorists Mutual's refusal to pay under the insurance policy in that the loan indebtedness owed to Wesbanco by Mr. and Mrs. Jones had been timely discharged, even as of the date Wesbanco's complaint was filed, since the date of the fire.

Wesbanco subsequently filed a motion for summary judgment seeking, inter alia, payment under the insurance policy in the amount of the debt owed to it by Mr. and Mrs. Jones as of the date of the fire. In its response to Wesbanco's motion for summary judgment, Motorists Mutual again argued that Wesbanco had sustained no loss, considering the debt had continued to be timely discharged. In its supplemental response to Wesbanco's motion for summary judgment, Motorists Mutual asserted, for the first time, that the insurance policy at issue contained a loss payable, or open mortgage clause, which precluded Wesbanco from recovering thereunder due to the misconduct of the insured, Mr. Jones, who had previously been convicted of arson.

Following a hearing on March 24, 1993, Wesbanco's motion for summary judgment was denied. The circuit court ruled, in an order dated April 19, 1993, that the insurance policy at issue contained an open mortgage clause, "and further that the subject policy specifically excludes any loss caused by the intentional conduct of an insured, which renders the mortgage clause inapplicable under its express provisions[.]" ²

Wesbanco subsequently requested that the circuit court reconsider its order denying its motion for summary judgment. Wesbanco's request was denied.

On October 8, 1993...