McCormick v. Allstate Ins. Co.
| Decision Date | 18 July 1996 |
| Docket Number | No. 23261,23261 |
| Court | West Virginia Supreme Court |
| Parties | Donald C. McCORMICK, Plaintiff Below, Appellant, v. ALLSTATE INSURANCE COMPANY and David Dailey, Defendants Below, Appellee. |
1. When this Court reviews challenges to the findings and conclusions of the circuit court, a two-prong deferential standard of review is applied. We review the final order and the ultimate disposition under an abuse of discretion standard, and we review the circuit court's underlying factual findings under a clearly erroneous standard.
2. "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." Syllabus point 1, Hayseeds, Inc. v. State Farm Fire & Casualty, 177 W.Va. 323, 352 S.E.2d 73 (1986).
3. To recover attorney fees and net economic loss damages and damages for aggravation and inconvenience under syllabus point 1 of Hayseeds, Inc. v. State Farm Fire & Casualty, 177 W.Va. 323, 352 S.E.2d 73 (1986), it is not necessary that a plaintiff show bad faith.
4. Damages for aggravation and inconvenience in a claim under Hayseeds, Inc. v. State Farm Fire & Casualty, 177 W.Va. 323, 352 S.E.2d 73 (1986), are not limited to damages associated with loss of use of the personal property but relate as well to the aggravation and inconvenience shown in the entire claims collection process.
5. "An insurer cannot be held liable for punitive damages by its refusal to pay on an insured's property damage claim unless such refusal is accompanied by a malicious intention to injure or defraud." Syllabus point 2, Hayseeds, Inc. v. State Farm Fire & Casualty, 177 W.Va. 323, 352 S.E.2d 73 (1986).
6. "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 7. "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." Syllabus point 3, Jenkins v. J.C. Penney Casualty Insurance Company, 167 W.Va. 597, 280 S.E.2d 252 (1981).
[197 W.Va. 418] be maintained until the underlying suit is resolved." Syllabus point 2, Jenkins v. J.C. Penney Casualty Insurance Company, 167 W.Va. 597, 280 S.E.2d 252 (1981)
8. Punitive damages for failure to settle a property dispute shall not be awarded against an insurance company unless the policyholder can establish a high threshold of actual malice in the settlement process. By "actual malice" we mean that the company actually knew that the policyholder's claim was proper, but willfully, maliciously and intentionally denied the claim.
9. The conditions and predicate for bringing a case under Jenkins v. J.C. Penney Casualty Insurance Company, 167 W.Va. 597, 280 S.E.2d 252 (1981), are wholly different from those necessary for bringing an underlying contract action or for bringing an action under Hayseeds, Inc. v. State Farm Fire & Casualty, 177 W.Va. 323, 352 S.E.2d 73 (1986). Whereas under Hayseeds it is necessary that a policyholder substantially prevail on an underlying contract action before he may recover enhanced damages, under Jenkins there is no requirement that one substantially prevail; it is required that liability and damages be settled previously or in the course of the Jenkins litigation. Jenkins instead predicates entitlement to relief solely upon violation of the West Virginia Unfair Trade Practices Act, W.Va.Code § 33-11-4(9), where such violation arises from a "general business practice" on the part of the insurer.
James C. Peterson, Harry G. Deitzler, Hill, Peterson, Carper, Bee & Deitzler, Charleston, for Appellant.
Charles M. Love, III, Benjamin L. Bailey, Bowles, Rice, McDavid, Graff & Love, Charleston, and Kirk R. Ruthenberg, Kenneth J. Phaehler, Sonnenschein, Nath & Rosenthan, Washington, DC, for Appellees.
The appellant in this proceeding, Donald McCormick, is appealing from a final order of the Circuit Court of Kanawha County, West Virginia, in an action which was instituted against his automobile insurer under an automobile policy, Allstate Insurance Company (Allstate). In count one of his complaint, the appellant claimed that Allstate not only failed to honor its insurance contract, but also breached its duty of good faith and fair dealing in handling his claim. As we interpret the claims pleaded and tried, the appellant asserted a cause of action under the principles first enunciated by this Court in Hayseeds, Inc. v. State Farm Fire & Casualty, 177 W.Va. 323, 352 S.E.2d 73 (1986). In a second count, he claimed that Allstate had violated the West Virginia Fair Trade Practices Act, W.Va.Code § 33-11-4(9), and he sought attorney fees and punitive damages under the principles set out in Jenkins v. J.C. Penney Casualty Insurance Company, 167 W.Va. 597, 280 S.E.2d 252 (1981).
Before the case was actually tried, the circuit court ordered that the trial be bifurcated, with the Hayseeds issues to be tried first and the Jenkins issues to be tried later. The Hayseeds trial resulted in the jury awarding the appellant $995.00 in compensatory damages. Because this amount was substantially less than what the court found the appellant had initially demanded, the court ruled that the appellant had not "substantially prevailed" in his underlying case and that, as a consequence, he was not entitled to pursue his attorney fees and punitive damages. In so doing, the court effectively precluded the appellant from seeking further his Hayseeds and his Jenkins relief.
On appeal, the appellant makes a number of assignments of error which, combined, pose the question of whether the court appropriately precluded the appellant from pursuing his claims for Hayseeds and Jenkins relief after the jury returned its compensatory damages award.
After reviewing the questions raised, this Court cannot conclude that the trial court committed reversible error in denying the appellant attorney fees or in precluding him from seeking punitive damages on the count tried, that is, the Hayseeds count. The Court does believe, however, that the trial court erred in denying the appellant a trial on the Jenkins issue and reverses and remands on that point.
The appellant owned a 1984 Ford Escort, which was insured by the appellee, Allstate Insurance Company (Allstate). This vehicle was damaged in a collision on August 28, 1988, and the appellant made a claim under his own insurance policy with Allstate for the damages to the vehicle.
David Dailey, the Allstate adjuster who handled the claim, inspected the vehicle and determined it was a total loss. Allstate calculated the loss payable under the policy to be $1,429.50 and on September 9, 1988, issued its check for that amount, payable to the appellant's bank which held a lien on the automobile. The payoff on the vehicle loan at that time was $2,808.36.
In determining the amount of the loss, Mr. Dailey consulted the National Automobile Dealer's Association Used Car Guide (NADA), an approved guide under West Virginia insurance regulations, and determined that the average retail value of the car was $3,100.00. He made the following adjustments to arrive at the $1,429.50 paid the appellant:
Total Loss: Average Retail Value $3,100.00
Minus: High Mileage $940.00
Automobile Reconditioning 595.00
Deductible 250.00 1,785.00
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Net: $1,315.00
Plus: AM/FM Radio $ 25.00
Taxes 79.50
License fee 10.00 114.50
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Total Claim Payment $1,429.50
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Although the appellant was unhappy with the amount paid by Allstate, there is some dispute as to whether the appellant notified Mr. Dailey of the amount which he felt he was owed and which would reasonably compensate him. We do find that at the trial of this action below, the appellant testified that he never did make a money offer to Allstate or to Mr. Dailey.
On November 4, 1988, appellant filed this action against Allstate and Mr. Dailey. His complaint contained five counts. Two of these counts were strictly against Mr. Dailey, who was later dismissed from the case. Those counts are thus irrelevant to this proceeding. A third count was also eliminated. The two counts which survived, and which are relevant to this appeal, are the Hayseeds count against Allstate and the Jenkins count against Allstate, to which considerable reference has already been made. We note that in pleading the first count, the appellant here alleged a breach of good faith and fair dealing. We note later that bad faith is not an element of the Hayseeds claim. For the surviving counts, the appellant sought $595.00 in damages under the policy terms, $100,000.00 in resulting economic damages, interest, $3,500,000.00 in punitive damages, attorney fees, and costs.
The litigation had a long and rather involved life below, much of which is irrelevant to this proceeding. However, on July 31, 1992, one particularly important event for the resolution of this appeal occurred--the trial court, as has previously been indicated, bifurcated the issues for trial purposes by entering an order which provided:
The trial shall...
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