Old Republic Ins. Co. v. O'Neal

• Citation: 788 S.E.2d 40,237 W.Va. 512
• Decision Date: 10 June 2016
• Docket Number: No. 15–0012,15–0012
• Parties: Old Republic Insurance Company, Petitioner v. Jason D. O'neal and Andrea O'neal, his wife, Individually, and as parents and next friends of Andrew Scott O'Neal, Anna Leigh Grace O'Neal, and Austin Matthew O'Neal, Infants under the age of eighteen, Respondents
• Court: Supreme Court of West Virginia

237 W.Va. 512

788 S.E.2d 40

Old Republic Insurance Company, Petitioner

v.Jason D. O'neal and Andrea O'neal, his wife, Individually, and as parents and next friends of Andrew Scott O'Neal, Anna Leigh Grace O'Neal, and Austin Matthew O'Neal, Infants under the age of eighteen, Respondents

No. 15–0012

Supreme Court of Appeals of West Virginia.

Submitted: February 10, 2016

Filed: June 10, 2016

Michael J. Schessler, Esq., Paul E. Frampton, Esq., Bowles Rice LLP, Charleston, West Virginia, Counsel for the Petitioner.

W. Stuart Calwell, Esq., David H. Carriger, Esq., The Calwell Practice, LC, Charleston, West Virginia, Counsel for the Respondents.

Workman

, Justice:

This case is before the Court upon the appeal of the Petitioner Old Republic Insurance Co. (hereinafter referred to as “Old Republic”) from two orders entered in the Circuit Court of Wyoming County, wherein the court denied Old Republic's Rule 60¹

motion for relief from judgment and motion for summary judgment. Old Republic argues² that the circuit court 1) abused its discretion when it denied Old Republic's Rule 60 motion for relief from entry of judgment order and 2) erred in its application of statutory and substantive law by granting the Respondents (hereinafter referred to collectively as “the Plaintiffs”) summary judgment and determining that Old Republic was not entitled to a statutory right of subrogation as set forth in West Virginia Code § 23–2A–1 (2010).³ Having reviewed the parties' briefs and arguments, the appendix record and all other matters before the Court, we find that the circuit court erred in denying Old Republic's Rule 60 motion; however, we affirm the circuit court's entry of summary judgment in favor of the Plaintiffs. As we will discuss in greater detail below, Old Republic's claim for subrogation fails because it is attempting to recover money that it never expended and that its insured, Speed Mining, is not entitled to recover.

I. Facts and Procedural History

This case arises from a June 20, 2009, accident at an underground American Eagle Mine in Kanawha County West Virginia. The Plaintiff, Jason O'Neal,⁴ who was employed as an electrician by Speed Mining, LLC, (“Speed Mining”), was working in the mine when a shuttle car struck and ran over him. The accident caused catastrophic injuries to Mr. O'Neal, including the loss of one leg, a significant portion of his pelvis and his genitalia.

On February 11, 2010, the Plaintiffs⁵ filed a lawsuit against Speed Mining,⁶ alleging claims of deliberate intention pursuant to West Virginia Code § 23–4–2

(2005)⁷ and common law negligence. The Plaintiffs also asserted a products liability claim against four related companies and individuals, collectively referred to as the Baughan defendants.⁸

At the time of the accident, Speed Mining was a named insured on a workers' compensation policy of insurance issued by Old Republic to Mangum Coal Company.⁹ As a result of the accident, Mr. O'Neal filed a workers' compensation claim. Mr. O'Neal has received workers' compensation benefits under Speed Mining's workers' compensation policy and he will continue to receive workers' compensation for his injuries as his workers' compensation claim remains open.¹⁰

According to the terms of Old Republic's policy, there was a $2,000,000 workers' compensation deductible amount for bodily injury by accident that was paid by Speed Mining. Beverly Sellers, Old Republic's manager of its workers' compensation unit, testified during her deposition that “[i]t was Patriot's [Speed Mining's parent company] wish to fund the $2 million deductible themselves ... and Old Republic agreed to that.” Moreover, if Old Republic paid benefits for the $2,000,000 of coverage it would be reimbursed by Speed Mining. The policy provided, “you will reimburse us up to the Deductible Amount(s) stated in the Schedule for all payments we may make on your behalf because of bodily injury to one or more persons as a result of any one accident....”

Further, under the terms of the policy, Old Republic retained all rights to subrogation, even as to deductible amounts. The policy provided:

We have your rights and the rights of persons entitled to the benefits of this insurance to recover all advances and payments, including those within the Deductible Amounts from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them. If we recover any advance or payment made under this policy from anyone liable for the injury, the amount we recover will first be applied to any payments made by us on this injury in excess of the Deductible Amount(s); only then will the remainder of the recovery, if any, be applied to reduce the Deductible Amount(s) paid or reimbursed or reimbursable by you on this injury. (See Attached Endorsement).

The Plaintiffs were fully aware of the statutory right of workers' compensation subrogation as demonstrated by a May 24, 2010, letter from David H. Carriger, the Plaintiffs' attorney, to Michele Craft of Avizent, Old Republic's third-party administrator. In the letter, Mr. Carriger “requests an itemization of whatever lien amount you (or any other provider of workers compensation benefits) intend to assert, should Mr. O'Neal recover monies from third-parties as a result of the workplace injuries.” In response to the Plaintiffs' inquiry, by letter dated June 17, 2010, Christopher Brumley, an attorney for Speed Mining, indicated that Old Republic was entitled by statute to a subrogation lien and that as of that date, $1,068,993.77 from the workers' compensation claim had been paid by Speed Mining. Mr. Brumley further indicated in the letter that “Speed Mining is self insured up to its $2 million self insured retention on the policy.” According to Mr. Brumley, “Old [R]epublic is the carrier after the $2 million, so any subrogation frights [sic] after that amount will be the statutory right of Old [R]epublic.”

The information given by Mr. Brumley in the aforementioned letter concerning Speed Mining being self-insured was incorrect and was later corrected by several different communications, both emails and letters, between Old Republic, Avizent and the Plaintiffs' counsel. Additionally, Ms. Sellers testified during her deposition that Speed Mining was not self-insured. Moreover, the record contains repeated notices either from Old Republic, Speed Mining's counsel or Avizent to the Plaintiffs' counsel regarding Old Republic's statutory right of subrogation prior to any settlements in the case.

On October 13, 2011, the Plaintiffs settled their deliberate intention claim against Speed Mining.¹¹ That settlement, according to the language of West Virginia Code § 23–2A–1(e)

,¹² was not subject to a workers' compensation subrogation lien and Old Republic is not seeking any amount as a result of subrogation from this settlement. Language contained in the settlement agreement relating to the deliberate intention claim, however, is important to the resolution of this case. In the agreement, the Plaintiffs and Speed Mining expressly declared that “this Agreement is the entire agreement and encompasses all terms and agreements negotiated by them in settlement of any and all claims relating to the Subject Incident and that there are not other writings whatsoever.” (Emphasis added).

On March 21, 2012, the Plaintiffs moved the circuit court during a status conference to amend their complaint to add a declaratory judgment action against Old Republic as it had asserted a statutory subrogation lien with respect to any settlement obtained by the Plaintiffs from the remaining Baughan defendants.

The Plaintiffs thereafter settled the products liability claims against the Baughan defendants at a mediation that occurred on April 26, 2012. Old Republic was not a party to the mediation and had not yet been brought into the action, because the circuit court had not yet ruled on the motion to amend the Plaintiffs' complaint.

In an order entered May 1, 2012, the circuit court granted the Plaintiffs' motion to amend their complaint to add a declaratory judgement action against Old Republic. In granting the motion, the circuit court found that “the statutory right of subrogation under W. Va. Code § 23–2A–1

is not available to the aforementioned insurer ... [as] it is established that said insurer has not actually paid money or medical benefits to (or for the benefit of) Mr. O' Neal.” Nevertheless, the Plaintiffs thereafter filed its amended complaint adding the third-party declaratory judgment action against Old Republic on May 21, 2012.

On July 2, 2012, the Plaintiffs and the Baughan defendants executed a Settlement Agreement Release. The Plaintiffs' counsel did not take any action to protect Old Republic's claimed statutory lien¹³ before distributing the proceeds of this settlement, which amounted to $3.5 million. At the time the settlement agreement was executed and the Plaintiffs recovered this money from the Baughan defendants, workers' compensation benefits in the amount of $1,845,197.13—$1,738,513.31 in medicals and $106,683.82 in indemnity—had been paid to, or for the benefit of, Mr. O'Neal by Speed Mining due to the $2,000,000 deductible in the Old Republic workers' compensation policy. This is the subrogation amount sought by Old Republic from the settlement with the Baughan defendants arising out of the Plaintiffs' product liability claim.

Old Republic filed its answer to the third-party complaint and asserted its own declaratory judgment action against the Plaintiffs on July 23, 2012. Discovery followed and both parties filed motions for summary judgment. On December 18, 2013, the circuit court held a hearing regarding the motions. At the conclusion of the hearing, the circuit court made no rulings on either summary judgment motion; however, the court asked both parties to submit proposed orders by January 15, 2014.

On January 27, 2014, without any notice to Old Republic, the circuit court entered the Plaintiffs...