Riffe v. Home Finders Associates, Inc.

Decision Date25 June 1999
Docket NumberNo. 25178.,25178.
Citation517 S.E.2d 313,205 W.Va. 216
CourtWest Virginia Supreme Court
PartiesRichard M. RIFFE and Brenda J. (Hoit) Riffe, Plaintiffs Below, Appellants, v. HOME FINDERS ASSOCIATES, INC., a West Virginia Corporation; Joe Nekoranec, an Individual, Defendants Below, Home Security of America, Inc., a Wisconsin Corporation; Marshall E. Snyder, an Individual; Judith A. Snyder, an Individual; Teresa Ann Snyder Rogers, an Individual; Jeff Snyder, an Individual; Pamela Lynn Snyder Cruikshank, an Individual; National Property Inspections of West Virginia, Inc., a West Virginia Corporation; John R. Knight, an Individual; and Jeffrey L. Marino, an Individual, Defendants Below, Appellees.

Rosalee Juba-Plumley, Esquire, Eleanor, West Virginia, Attorney for Appellants.

Phillip B. Hereford, Esquire, Hereford & Hereford, Charleston, West Virginia, Attorney for Appellee Home Security of America, Inc.

Debra L. Hamilton, Esquire, DiTrapano, Barrett & DiPiero, Charleston, West Virginia, Attorney for Appellees Snyders, Rogers and Cruikshank. McGRAW, Justice:

Appellants and plaintiffs below, Richard and Brenda Riffe (the "Riffes") appeal a grant of summary judgment against them and in favor of appellee and defendant below, Home Security of America, Inc.,1 in an action the Riffes filed claiming fraud, insurance bad faith, and breach of contract. Because we find that genuine issues of material fact existed as to these issues, we reverse the trial court's grant of summary judgment and remand this case for proceedings consistent with this opinion.

I. Factual Background

The Snyder family owned a house in South Charleston and decided to sell it. The Snyders listed the house for sale with a realty company, but received no offers. A member of the Snyder family made the acquaintance of a Mr. Joe Nekoranec, who worked as a real-estate agent for a Charleston based realty company called Home Finders Associates, which was affiliated with a national real estate company called Better Homes and Gardens Real Estate Service. The Snyders subsequently engaged Mr. Nekoranec to sell their home in August of 1989.

On April 6, 1988, Home Finders Associates, Inc. ("Home Finders") had entered into an agreement with Home Security of America, Inc. ("Home Security"), whereby the real estate agents employed by Home Finders would offer for sale a product called "The Home Security Plan," or "The Home Protection Plan2," to the sellers and buyers of homes sold through the real estate company. This plan was a so-called "home warranty contract" that purported to indemnify the homeowner for any repairs that might be necessary after a seller sold a home to a buyer. That is, under the "home warranty contract," Home Security would not pay for a repair to a seller's furnace if the house were not sold, but it would pay for a repair to the same furnace if the repair became necessary within a certain period after someone bought the home. The plan claimed to cover repairs to the home itself, as well as to certain items of personal property located on the property.

As a part of the agreement between Home Finders and Home Security, Home Security agreed to provide, free of charge, contracts and promotional materials for the plan. These promotional materials made claims that a seller could sell his or her house sooner and for more money if the house were covered by the plan. Mr. Nekoranec visited the Snyder's home and made a visual inspection of it as part of the preparations for listing the house for sale. In the course of these preparations, Mr. Snyder asked Mr. Nekoranec if there were some sort of insurance he could purchase that would cover any repairs the home might need. It appears that Mr. Snyder was concerned that he might be responsible for making repairs to the house for some period of time after selling it to a third party.3

In response to this question, Mr. Nekoranec presented a brochure provided by Home Security and suggested that Mr. Snyder apply for the plan.4 Mr. Nekoranec then helped the Snyders fill out an application that was attached to the brochure.5 No fee was due to Home Security until the house sold.

The Riffes entered into a contract with the Snyders to purchase the home in the fall of 1990. Before the closing date, the Riffes had a company called National Property Inspections examine the property. In its report, the inspection company found some minor cracks and some evidence of settling, but no major problems with the foundation.

The Riffes closed on the house on November 19, 1990. At closing, the Snyders' side of the closing statement was debited $395 for the "home warranty contract," which was to benefit the Riffes in the event something went wrong with the house during the first year of their ownership. Within that first year, the Riffes had a plumber in to repair a leak in the basement. Making this repair necessitated the removal of some drywall, whereupon the Riffes discovered a serious problem with their foundation.

The Riffes made a claim for the damage to the basement with Home Security, but Home Security denied the claim, stating that the problem with the foundation was a pre-existing condition, and was therefore excluded under the terms of the policy. The Riffes filed an insurance bad faith and breach of contract suit against Home Security, among others, in July of 1992. On November 17, 1997, the trial judge granted Home Security's motion for summary judgment. It is from this grant of summary judgment for the defendant that the Riffes appeal to this Court. For reasons set forth below, we reverse.

II. Standard of Review

Our review of a grant of summary judgment is de novo. Syl. pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). The burden a movant must carry to win a motion for summary judgment is manifest: "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 Casualty & Surety Co. v. Federal Insurance Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963). In the case before us, we must examine the parties' rights and obligations under a contract of insurance. In this arena our review is also de novo: "Determination of the proper coverage of an insurance contract when the facts are not in dispute is a question of law." Murray v. State Farm Fire and Cas. Co., 203 W.Va. 477, 482, 509 S.E.2d 1, 6 (1998) (citing Pacific Indemnity Co. v. Linn, 766 F.2d 754, 760 (3d Cir.1985)

). The interpretation of an insurance contract, including the question of whether the contract is ambiguous, is a legal determination that, like a lower court's grant of summary judgement, shall be reviewed de novo on appeal. See, Payne v. Weston, 195 W.Va. 502, 506-07, 466 S.E.2d 161, 165-66 (1995); Murray v. State Farm Fire and Cas. Co., 203 W.Va. 477, 482, 509 S.E.2d 1, 6 (1998).

III. Discussion

Chapter Thirty-Three, Article One of our Code states: "Insurance is a contract whereby one undertakes to indemnify another or to pay a specified amount upon determinable contingencies." W. Va.Code § 33-1-1 (1957). See, McDaniel v. Kleiss, 202 W.Va. 272, 503 S.E.2d 840 (1998)

. The same article provides: "Transacting insurance includes solicitation and inducement, preliminary negotiations, effecting a contract of insurance and transaction of matters subsequent to effecting the contract and arising out of it." W. Va.Code § 33-1-4 (1957).

Specifically, this case concerns what some have called a "service contract,"6 which may be used as a catch-all term for arrangements where a third-party, who is neither the buyer or seller of property, contracts with the buyer to indemnify him or her for repairs made to the property for a certain period of time after a sale.

Home Security maintains that the "service contract" it offers is a warranty and is not insurance, and that the company is not engaged in the business of selling insurance in the State of West Virginia. We do not agree. Under the plan, a homeowner would file a claim, have the repair made, and would be indemnified by home security for the cost of a covered repair, minus any deductible. There can be no question that the contract offered by Home Security "is a contract whereby one undertakes to indemnify another or to pay a specified amount upon determinable contingencies." W. Va.Code § 33-1-1 (1957).

The agreement provided by Home Security, although it claims to offer "warranty coverage" is an insurance policy. "Policy means the contract effecting insurance, or the certificate thereof, by whatever name called, and includes all clauses, riders, endorsements and papers attached thereto and a part thereof." W. Va.Code § 33-1-16 (1957) (emphasis added).

An Illinois appellate court considered a similar issue in Griffin Systems, Inc. v. Washburn, 153 Ill.App.3d 113, 106 Ill.Dec. 330, 505 N.E.2d 1121 (1987). In this case, Griffin Systems, Inc., provided a third-party agreement that would indemnify a car buyer for the repair or replacement of certain automotive parts. The court discussed service contracts, such as those provided by a car manufacturer to perform free service upon a new car for a specific period of time,7 as well as traditional warranties, such as those provided by a roof manufacturer that agrees to repair or replace a roof it constructed.8

In holding that the Griffin Systems agreement constituted insurance under Illinois law, the court explained:

An analysis of the cases set forth above reveals that a warranty and a service contract have many of the same features. Nonetheless, the distinguishing feature which sets them apart from an insurance policy is the fact that the respective companies manufacture or sell the products which they agreed to repair or replace. No third parties are involved nor is there a risk accepted which the company, because of its...

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