Loudin v. Nat'l Liab. & Fire Ins. Co.

• Decision Date: 24 October 2011
• Docket Number: No. 35763.,35763.
• Citation: 228 W.Va. 34,716 S.E.2d 696
• Parties: Thomas D. LOUDIN and Alice M. Loudin, Plaintiffs Below, Appellantsv.NATIONAL LIABILITY & FIRE INSURANCE COMPANY; Jack Sergent; D.L. Thompson; and Consolidated Claim Services, Inc., Defendants Below, Appellees.
• Court: West Virginia Supreme Court

228 W.Va. 34

716 S.E.2d 696

Thomas D. LOUDIN and Alice M. Loudin, Plaintiffs Below, Appellants

v.NATIONAL LIABILITY & FIRE INSURANCE COMPANY; Jack Sergent; D.L. Thompson; and Consolidated Claim Services, Inc., Defendants Below, Appellees.

No. 35763.

Supreme Court of Appeals of West Virginia.

Submitted April 12, 2011.Decided Sept. 22, 2011.Dissenting Opinion of Justice Benjamin Oct. 24, 2011.

Syllabus by the Court

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

2. A first-party bad faith action is one wherein the insured sues his/her own insurer for failing to use good faith in settling a claim filed by the insured.

3. When a named policyholder files a claim with his/her insurer, alleging that a nonnamed insured under the same policy caused him/her injury, the policyholder is a first-party claimant in any subsequent bad

faith action against the insurer arising from the handling of the policyholder's claim.

4. As a general rule, a trial court may not grant summary judgment sua sponte on grounds not requested by the moving party. An exception to this general rule exists when a trial court provides the adverse party reasonable notice and an opportunity to address the grounds for which the court is sua sponte considering granting summary judgment.

Erika Klie Kolenich, Klie Law Offices, Buckhannon, WV, Ronald W. Zavolta, Law Office of Ronald Zavolta, Wheeling, WV, for Appellants.Don C.A. Parker, Spilman, Thomas & Battle, Charleston, WV, Attorney for Appellees.Jill Cranston Bentz, Mychal Sommer Schulz, Jacob A. Manning, Dinsmore & Shohl, Charleston, WV, Attorneys for Amicus Curiae, West Virginia Insurance Federation.

DAVIS, Justice:

This is an appeal by Thomas and Alice Loudin, appellants herein and plaintiffs below (hereinafter “the Loudins”),¹ from an order of the Circuit Court of Upshur County that granted summary judgment in favor of National Liability & Fire Insurance Company; Jack Sergent; D.L. Thompson; and Consolidated Claim Services, Inc., appellees herein and defendants below. The circuit court's summary judgment order found that the Loudins were third-party claimants and therefore could not bring an action for conduct involving an insurance policy claim on theories of common law bad faith, breach of the insurance contract, breach of the implied duty of good faith and fair dealing, and violations of the West Virginia Unfair Trade Practices Act. The order also found that the Loudins failed to present evidence to sustain their cause of action for the tort of outrage. After listening to the arguments of the parties and a careful review of the pleadings and the record before us, we reverse and remand for further proceedings.²

I.FACTUAL AND PROCEDURAL HISTORY

On September 4, 2006, Mr. Thomas Loudin was performing maintenance on his 1993 International truck with the assistance of his brother, William Loudin. At some point, William Loudin accidentally backed the truck over Mr. Thomas Loudin. The accident allegedly caused Mr. Thomas Loudin severe and permanent injuries. Mr. Thomas Loudin's truck was insured under a policy issued by National Liability & Fire Insurance Company (hereinafter “National”). After the accident, Mr. Thomas Loudin filed a claim under the Auto Medical Payments provision of the policy. In October 2006, National paid Mr. Thomas Loudin the liability limit of $5,000.00 under the Auto Medical Payments provision of the policy.³

In addition to the Auto Medical Payments claim, Mr. Thomas Loudin also filed a claim under the Liability Coverage provision of the policy.⁴ This claim was based upon the negligence of William Loudin as a permissive operator of Mr. Thomas Loudin's truck when the accident occurred. After National investigated the claim, it refused to pay Mr. Thomas Loudin's demand under the Liability Coverage provision.

Following National's denial of the liability coverage claim, the Loudins filed a negligence action against William Loudin on September 4, 2008.⁵ The complaint also included claims against National, Jack Sergent, D.L. Thompson, and Consolidated Claim Services, Inc.⁶ The complaint asserted claims against National for common law bad faith, breach of the insurance contract, breach of the implied duty of good faith and fair dealing, violations of the Unfair Trade Practices Act, and the tort of outrage.⁷

On September 15, 2009, National settled the claim against William Loudin. National paid the Loudins $150,000.00 to resolve the lawsuit against William Loudin. Thereafter, on December 8, 2009, the Loudins filed an amended complaint that deleted William Loudin as a defendant.⁸ In March 2010, National filed a motion for summary judgment. In that motion, National argued that it was entitled to summary judgment because the Loudins were third-party claimants. As such, they were barred as a matter of law from bringing their claims. The Loudins filed a response under Rule 56(f) of the West Virginia Rules of Civil Procedure contending that the motion for summary judgment was precipitous because discovery had not been completed.

By order entered May 27, 2010, the circuit court granted summary judgment in favor of National on the liability theories of common law bad faith, breach of the insurance contract, breach of the implied duty of good faith and fair dealing, and violations of the Unfair Trade Practices Act. The circuit court based its rulings on the grounds that the Loudins were third-party claimants. The circuit court also sua sponte determined that National was entitled to summary judgment on the claim for the tort of outrage, because the record failed to show that National's conduct in handling the claim was “so extreme and outrageous as to constitute ... the tort of outrage.” From these rulings, the Loudins appeal.

II.STANDARD OF REVIEW

This appeal arises from an order of the circuit court that granted summary judgment in favor of National. We have held that “[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). Our case law also has made clear that “[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.” Syl. pt. 3, Aetna Cas. & Sur. Co. v. Fed. Ins. Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963). Accord Syl. pt. 2, Jackson v. Putnam Cnty. Bd. of Educ., 221 W.Va. 170, 653 S.E.2d 632 (2007); Syl. pt. 1, Mueller v. Am. Elec. Power Energy Servs., Inc., 214 W.Va. 390, 589 S.E.2d 532 (2003). In other words, “[t]he circuit court's function at the summary judgment stage is not to weigh the evidence and determine the truth of the matter, but is to determine whether there is a genuine issue for trial.” Syl. pt. 3, Painter, 192 W.Va. 189, 451 S.E.2d 755.

With these standard of review principles in mind, we proceed to address the summary judgment ruling of the circuit court.

III.DISCUSSION

In this proceeding, the circuit court provided two separate grounds for granting summary judgment to National. First, the circuit court found that the Loudins' claims for common law bad faith, breach of the insurance contract, ⁹ breach of the implied duty of good faith and fair dealing, and violations of the West Virginia Unfair Trade Practices Act were precluded because the Loudins were third-party claimants.¹⁰ Second, the circuit court found, in essence, that no material issue of fact was in dispute on the Loudins' cause of action for the tort of outrage. Therefore, the circuit court ruled that National was entitled to summary judgment on that claim. We will examine the circuit court's rulings separately.

A. First–Party and Third–Party Bad Faith Claims

Before we determine whether the circuit court properly categorized the Loudins as third-party claimants, we first must distinguish between a first-party and a third-party claim. This Court previously has recognized, and we now hold, that:

[A] first-party bad faith action is one wherein the insured sues his/her own insurer for failing to use good faith in settling a claim ... filed by the insured.

State ex rel. Allstate Ins. Co. v. Gaughan, 203 W.Va. 358, 369, 508 S.E.2d 75, 86 (1998). Accord Noland v. Virginia Ins. Reciprocal, 224 W.Va. 372, 384 n. 34, 686 S.E.2d 23, 35 n. 34 (2009); State of West Virginia ex rel. Allstate Ins. Co. v. Madden, 215 W.Va. 705, 714 n. 4, 601 S.E.2d 25, 34 n. 4 (2004); State ex rel. Brison v. Kaufman, 213 W.Va. 624, 630, 584 S.E.2d 480, 486 (2003); State ex rel. Med. Assurance of West Virginia, Inc. v. Recht, 213 W.Va. 457, 471 n. 13, 583 S.E.2d 80, 94 n. 13 (2003). The parties in this proceeding do not dispute the fact that West Virginia recognizes the right of an insured first-party to bring a bad faith cause of action against his/her insurer under the common law and the West Virginia Unfair Trade Practices Act. See Syl. pt. 1, Morton v. Amos–Lee Secs., Inc., 195 W.Va. 691, 466 S.E.2d 542 (1995) (“There is a private cause of action for a violation of W. Va.Code 33–11–4(1)(a) (1985), of the West Virginia Unfair Trade Practices Act.”); Hayseeds, Inc. v. State Farm Fire & Cas., 177 W.Va. 323, 352 S.E.2d 73 (1986) (holding that a common law duty of good faith and fair dealing runs from insurer to its insured); Syl. pt. 5, Mutafis v. Erie Ins. Exch., 174 W.Va. 660, 328 S.E.2d 675 (1985) (“West Virginia law permits a private cause of action for violation of W. Va.Code, 33–11–4(3) and (5).”); Syl. pt. 2, in part, Jenkins v. J.C. Penney Cas. Ins. Co., 167 W.Va. 597, 280 S.E.2d 252 (1981) (“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)[.], overruled on other grounds by State ex rel. State Farm Fire & Cas. Co. v. Madden, 192 W.Va. 155, 451 S.E.2d 721 (1994)”).

The decision...