REVI, LLC v. Chi. Title Ins. Co.

• Court: Virginia Supreme Court
• Writing for the Court: Opinion by Justice WILLIAM C. MIMS.
• Citation: REVI, LLC v. Chi. Title Ins. Co., 290 Va. 203, 776 S.E.2d 808 (2015)
• Decision Date: 17 September 2015
• Docket Number: Record No. 141562.
• Parties: REVI, LLC v. CHICAGO TITLE INSURANCE COMPANY.

290 Va. 203

776 S.E.2d 808

REVI, LLC

v.CHICAGO TITLE INSURANCE COMPANY.

Record No. 141562.

Supreme Court of Virginia.

Sept. 17, 2015.

Michael S. Dingman, Falls Church (Tillman J. Breckenridge ; Brent R. Gary ; Falls Church, Reed Smith, on briefs), for appellant.

Jennifer A. Brust (James B. Davis ; William E. Evans ; Bean, Kinney & Korman, on brief), Arlington, for appellee.

Present: LEMONS, C.J., GOODWYN, MIMS, MCCLANAHAN, POWELL, and KELSEY, JJ., and MILLETTE, S.J.

Opinion

Opinion by Justice WILLIAM C. MIMS.

In this appeal, we consider whether Code § 38.2–209(A) requires a trial judge, rather than a jury, to determine whether an insurer committed a bad faith breach of an insurance contract warranting an award of attorney's fees to the insured.

I. BACKGROUND AND MATERIAL PROCEEDINGS

In 2000, REVI, LLC (“REVI”) purchased a five-acre parcel of residential property along the Potomac River in Fairfax County (the “Property”). At that time, REVI also purchased a title insurance policy from Chicago Title Insurance Company (“Chicago Title”), which insured against “loss or damage” caused by “[a]ny defect in or lien or encumbrance on the title,” among other risks.

In 2004, REVI discovered that the Property was subject to a number of restrictions contained in a stipulation arising out of a condemnation action filed by the United States in 1963. These restrictions prohibited tree removal except in limited circumstances, prescribed permissible building heights, and provided that the property could be developed only in accordance with a “master plan” approved by the United States Secretary of the Interior. Upon learning of the restrictions, REVI filed a claim with Chicago Title.

In 2005, Chicago Title accepted the claim and began negotiations with the National Park Service, a division of the United States Department of the Interior, seeking a release of the restrictions. The negotiations resulted in a new agreement (the “Release and Easement Agreement”), which recognized that REVI could subdivide the Property and construct five residences in accordance with the original stipulation without the consent of the United States. The Release and Easement Agreement modified slightly the prohibition on tree removal, allowing REVI to request permission to remove certain trees from the Property. However, the Release and Easement Agreement carried over the restriction on building height and created some additional restrictions. After receiving assurances that Chicago Title would indemnify it for any diminution in the Property's value as a result of the restrictions, REVI signed the Release and Easement Agreement in September 2011.

Subsequently, Chicago Title informed REVI that the restrictions contained in the Release and Easement Agreement did not diminish the value of the Property, and as a result, REVI had not suffered a compensable loss under the policy. However, Chicago Title invited REVI to submit an updated Proof of Loss.

In April 2012, REVI submitted an updated Proof of Loss, claiming that the restrictions contained in the Release and Easement Agreement had diminished the value of the property by $1.6 million. Chicago Title reiterated its position that the restrictions contained in the Release and Easement Agreement did not diminish the value of the Property, and it denied REVI's claim.

On April 2, 2013, REVI filed a complaint in the Circuit Court of Fairfax County, alleging that Chicago Title had breached the title insurance policy. REVI also alleged that Chicago Title had acted in bad faith, and it requested an award of attorney's fees and costs pursuant to Code § 38.2–209. REVI demanded a jury trial “on all counts so triable.”

Chicago Title filed a motion seeking to bifurcate the trial and seeking to have the trial judge, rather than the jury, consider the issues of bad faith and attorney's fees under Code § 38.2–209(A). Chief Judge Dennis J. Smith ordered the trial to be bifurcated, but he also ruled that Code § 38.2–209(A) permitted the jury to determine whether Chicago Title had breached the insurance contract in bad faith, and accordingly, permitted the jury to award attorney's fees.

Judge Brett A. Kassabian presided over the jury trial. The jury found that Chicago Title had breached the contract and awarded REVI $1,241,000 in damages. Then, the jury found that Chicago Title had acted in bad faith and awarded REVI $442,000 in attorney's fees and costs.

After receiving the verdicts, Judge Kassabian sua sponte suspended the final order. He then asked the parties to submit post-trial briefs on whether Code § 38.2–209(A) permits a jury to determine whether an insurer breached an insurance contract in bad faith and award attorney's fees and costs.

Upon further consideration, Judge Kassabian vacated the jury's award of attorney's fees and costs, ruling that Code § 38.2–209(A) requires a judge, not a jury, to determine whether an insurer committed a bad faith breach of an insurance contract warranting an award of attorney's fees. Judge Kassabian then reconsidered the evidence de novo and concluded that the evidence was insufficient to prove that Chicago Title had acted in bad faith.

REVI filed a petition for appeal challenging (1) the ruling that only a judge, not a jury, may determine whether an insurer breached an insurance contract in bad faith, and accordingly, award attorney's fees and costs to the insured pursuant to Code § 38.2–209(A) and (2) the factual finding that Chicago Title did not act in bad faith. We awarded REVI an appeal only on its first assignment of error.

II. ANALYSIS

A. Standard of Review

We review questions of statutory interpretation de novo. Eberhardt v. Fairfax Cnty. Emps. Ret. Sys., 283 Va. 190, 194, 721 S.E.2d 524, 526 (2012). We look to the words of the statute to determine its meaning, and we consider the entire statute to “place its terms in context.” Id. “[I]t is our duty to interpret the several parts of a statute as a consistent and harmonious whole so as to effectuate the legislative goal.” VEPCO v. Board of Cnty. Supervisors, 226 Va. 382, 387–88, 309 S.E.2d 308, 311 (1983).

B. The Meaning of “court” in Code § 38.2–209

Code § 38.2–209(A) states:

[I]n any civil case in which an insured individual sues his insurer to determine what coverage, if any, exists under his present policy ... or the extent to which his insurer is liable for compensating a covered loss, the individual insured shall be entitled to recover from the insurer costs and such reasonable attorney fees as the court may award. However, these costs and attorney's fees shall not be awarded unless the court determines that the insurer, not acting in good faith, has either denied coverage or failed or refused to make payment to the insured under the policy.

(Emphasis added.) REVI argues that the meaning of “court,” as used in Code § 38.2–209(A), is ambiguous. REVI contends that the word “court” when used in the Code sometimes includes a “jury” and may refer to either the judge or the jury in this statute. To support its argument, REVI draws an analogy between Code § 38.2–209(A) and a common law bad faith claim. REVI argues that a determination of bad faith is a factual finding, and it asserts that the common law entitled litigants to a jury trial on questions of fact. REVI concludes that interpreting “court” to exclude a jury alters the common law rule, ignores canons of statutory construction, and violates its constitutional right to have a jury decide whether bad faith exists. We disagree.

Code § 38.2–209 traces its origins to former Code § 38.1–32.1, enacted in 1982. 1982 Acts ch. 576. As enacted, former Code § 38.1–32.1 (Cum. Supp. 1982) provided that the insured could recover “costs and such reasonable attorney fees as the trial judge after verdict may award if it is determined by such trial judge in such case that the insurer has not in good faith either denied coverage or failed or refused to make payment to the insured under such policy.” (Emphasis added.)

Two years later, the General Assembly directed the Virginia Code Commission to study Title 38.1 of the Code, consisting of the Commonwealth's insurance laws, and “report its findings in the form of a revision.” H.J. Res. 1, Va. Gen. Assem. (Reg. Sess. 1984). The Commission submitted its report to the General Assembly in 1986. Virginia Code Commission, Report to the Governor and General Assembly of Virginia [The Revision of Title 38.1 of the Code of Virginia] (Jan. 1986), H. Doc. No. 17 (1986). Subsequently, the General Assembly enacted 1986 Acts ch. 562 (the “Recodification Act”), titled “An Act to amend the Code of Virginia by adding a title numbered 38.2 ... and to repeal Title 38.1 of the Code of Virginia ... so as to revise, rearrange, amend and recodify the insurance laws of Virginia generally.” The Recodification Act enacted the text currently codified as Code § 38.2–209(A).¹

REVI invokes the “presumption that the General Assembly, in amending a statute, intended to effect a substantive change in the law.” West Lewinsville Heights Citizens Ass'n v. Board of Supervisors, 270 Va. 259, 265, 618 S.E.2d 311, 314 (2005) (citations omitted). It contends that the term “trial judge” clearly excluded a jury. Therefore, it argues that the substitution of “court” for “trial judge” leads to the conclusion that “court” refers to either a judge or a jury. However, “there is [also] a presumption that a recodified statute does not make substantive changes in the former statute unless a contrary intent plainly appears in the recodified statute.” Waldrop v. Commonwealth, 255 Va. 210, 214, 495 S.E.2d 822, 825 (1998) (citing State Farm Mut. Auto. Ins. v. Major, 239 Va. 375, 378, 389 S.E.2d 307, 309 (1990) ). Thus, we turn to the language of the entire Recodification Act to determine whether the General Assembly intended to make a substantive change. See Eberhardt, 283 Va. at 194–95, 721 S.E.2d at 526 (courts may reference the Acts of Assembly as the “authoritative text” of a single legislative enactment).

From the...