Shamblin v. Nationwide Mut. Ins. Co., 19035

• Decision Date: 27 July 1990
• Docket Number: No. 19035,19035
• Citation: 183 W.Va. 585,396 S.E.2d 766
• Court: West Virginia Supreme Court
• Parties: Clarence SHAMBLIN, etc. v. NATIONWIDE MUTUAL INSURANCE COMPANY, et al.

Page 766

396 S.E.2d 766

183 W.Va. 585

Clarence SHAMBLIN, etc. v. NATIONWIDE MUTUAL INSURANCE COMPANY, et al.

No. 19035.

Supreme Court of Appeals of West Virginia.

July 27, 1990.

[183 W.Va. 587] Syllabus by the Court

1. Punitive damages may be awarded in favor of an insured against its insurer for failure to settle a claim within policy limits, but the policyholder must establish a high threshold of actual malice in the settlement process. Actual malice means that the insurer actually knew that the claim was proper, but the insurer nonetheless acted willfully, maliciously and intentionally in failing to settle the claim on behalf of its insured.

2. Wherever there is a failure on the part of an insurer to settle within policy limits where there exists the opportunity to settle and where such settlement within policy limits would release the insured from any and all personal liability, the insurer has prima facie failed to act in its insured's best interest and such failure to so settle prima facie constitutes bad faith toward its insured.

3. It will be the insurer's burden to prove by clear and convincing evidence that it attempted in good faith to negotiate a settlement, that any failure to enter into a settlement where the opportunity to do so existed was based on reasonable and substantial grounds, and that it accorded the interests and rights of the insured at least as great a respect as its own.

4. In assessing whether an insurer is liable to its insured for personal liability in excess of policy limits, the proper test to be applied is whether the reasonably prudent insurer would have refused to settle within policy limits under the facts and circumstances, bearing in mind always its duty of good faith and fair dealing with the insured. Further, in determining whether the efforts of the insurer to reach settlement and to secure a release for its insured as to personal liability are reasonable, the trial court should consider whether there was appropriate investigation and evaluation of the claim based upon objective and cogent evidence; whether the insurer had a reasonable basis to conclude that there was a genuine and substantial issue as to liability of its insured; and whether there was potential for substantial recovery of an excess verdict against its insured. Not one of these factors may be considered to the exclusion of the others.

5. "The provisions for impleader under Rule 14(a), West Virginia Rules of Civil Procedure, ... are within the sound discretion of the trial court and where the third party procedure may create confusion or cause complicated litigation involving separate and distinct issues the trial court does not abuse its discretion in refusing to allow impleader under third party practice." Syl. Pt. 5, in part, Bluefield Sash & Door Co., Inc. v. Corte Constr. Co., 158 W.Va. 802, 216 S.E.2d 216 (1975), overruled on other grounds, Haynes v. City of Nitro, 161 W.Va. 230, 240 S.E.2d 544 (1977).

6. "Impleader under Rule 14(a), West Virginia Rules of Civil Procedure, should not be allowed if there is a possibility of prejudice to the original plaintiff or the third party defendant." Syl. Pt. 3, Bluefield Sash & Door Co. v. Corte Constr. Co., 158 W.Va. 802, 216 S.E.2d 216 (1975), overruled on other grounds, Haynes v. City of Nitro, 161 W.Va. 230, 240 S.E.2d 544 (1977).

John R. Fowler, Mary H. Sanders, Huddleston, Bolen, Beatty, Porter & Copen, Charleston, for Nationwide Mut. Ins. Co.

Menis E. Ketchum, Larry A. Bailey, Greene, Ketchum, Bailey & Tweel, Huntington, for Clarence Shamblin.

WORKMAN, Justice:

This case is before the Court upon an appeal by Nationwide Mutual Insurance Company (hereinafter referred to as Nationwide) from a July 12, 1988 judgment order of the Kanawha County Circuit Court following a jury verdict in favor of the This lawsuit arose out of an earlier cause of action involving an automobile accident which occurred on April 10, 1980 (hereinafter referred to as the Parker case or the underlying case). On that day, Edward Owens, an employee of Shamblin, was driving a truck, covered by Shamblin's Nationwide insurance policy, which was involved in an accident on the West Virginia Turnpike when it struck a vehicle driven by Delores Ann Parker. A truck owned by Buske Lines, Inc. was also involved in the collision, as were two other truck drivers employed by Shamblin who were driving different vehicles. These vehicles were also covered by Shamblin's Nationwide policy.

                [183 W.Va. 588] plaintiff, Clarence Shamblin, and against the defendant, Nationwide (hereinafter frequently referred to as the bad faith case).  This action was brought by Shamblin to recover an excess verdict rendered against him in a previous lawsuit as the result of Nationwide's refusal to settle a liability claim against Shamblin within his Nationwide liability insurance policy limits. 1  The verdict returned in favor of the appellee, Shamblin, granted him compensatory damages of $1,000,000.00, punitive damages of $1,500,000.00 and attorney's fees of $330,000.00. 2  The appellant assigns the following as errors committed at the trial below:  1) the trial court erred by allowing recovery of punitive damages;  2) the trial court erred by adopting negligence as the sole standard to determine whether a liability insurer has complied with its duty to its insured regarding the settlement of third-party claims;  3) the trial court erred by failing to grant summary judgment in favor of Nationwide and failing to direct a verdict in favor of Nationwide at the close of the plaintiff's case-in-chief;  4) the trial court erred by not allowing Nationwide to bring a third-party action;  5) the trial court erred by permitting the introduction of a page of Nationwide's claims manual as rebuttal evidence;  6) the trial court erred by failing to grant Nationwide's motion in limine on the appeal issue;  and, 7) the trial court erred by continually interjecting itself into the trial with ponderous cross-examination and opinions as to witnesses.  We find that error was committed on the issue of punitive damages;  however, we find that the trial court committed no error with regard to the other assignments raised by the appellant.  We therefore affirm in part and reverse in part
                

The accident occurred when two of the Shamblin drivers signaled to the third Shamblin driver that it was clear to pass another truck owned by Buske Lines, Inc. in a no-passing zone. In attempting to pass the Buske Lines truck, the Shamblin truck collided head-on with the vehicle driven by Parker. Parker sustained severe injuries, including permanent brain damage.

On January 20, 1980, Parker filed suit against Shamblin and Buske Lines, Inc. Parker retained Rod Jackson to represent her interests in this matter. In February 1980, Nationwide retained the law firm of Jackson and Kelly, specifically Steven Crislip, to represent its interests and Shamblin, on advice of Nationwide, retained the law firm of Goodwin and Goodwin to represent him personally.

From the origination of the Parker suit, there was a dispute between Parker and Nationwide with regard to the amount of coverage available to Shamblin for the accident. Counsel for Parker contended that the policy limits of $100,000.00 for each vehicle should be available since all three drivers were negligent, and therefore a total of $300,000.00 in Nationwide insurance coverage should be available to Shamblin. Nationwide, on the other hand, contended that the accident was a single occurrence, and therefore, only $100,000.00 in coverage Rod Jackson testified at the trial of the bad faith case that by letter dated April 28, 1981, he offered to settle with Nationwide for the policy limits, whatever they were determined to be. ³ Nationwide claims that Jackson's demand was inexact and ambiguous, and that this "offer of settlement" was never conveyed to Nationwide by its attorney, Crislip. However, in Dougherty's deposition he testified that he "may have been" aware of Jackson's settlement offer, but would have insisted on a $100,000.00 policy limit. Nationwide, in Jackson's opinion, refused the settlement offer because they were unwilling to settle within the policy limits, whatever they might subsequently be determined to be.

[183 W.Va. 589] was available regardless of the number of vehicles involved. Furthermore, Nationwide, according to the deposition taken of its claims attorney, R. L. Dougherty, who was assigned to the Parker case, believed that the Parker case damages were at least $500,000.00 even though the company contended that the policy coverage was only $100,000.00.

On July 8, 1981, according to Crislip's testimony at trial, Nationwide conveyed to Jackson that it wanted to settle the Parker case, but Parker's attorney indicated to Crislip that he did not want to settle the case during 1981 for tax reasons. Then on January 4, 1982, Nationwide, through attorney Crislip, made an offer of judgment and paid $100,000.00 into court pursuant to Rule 68. See W.Va.R.Civ.P. 68.

Subsequently, in July 1982, a declaratory judgment action was filed by Shamblin in Kanawha County Circuit Court to determine exactly what the limits of Shamblin's Nationwide policy were. On October 21, 1982, Crislip wrote a letter to Nationwide in which he stated that if the coverage was greater than $100,000.00, Nationwide should settle the case within whatever limits were available. ⁴

Jackson's testimony at the bad faith trial indicated that two to three weeks prior to the Parker trial, his client, Parker, offered to settle the case and release Shamblin in exchange for policy limits, whatever they were later judicially determined to be. Nationwide again refused this offer. The appellant's evidence, on the other hand, indicated that Crislip repeatedly asked Jackson to make a settlement demand and that Jackson never did make a specific demand. Jackson's testimony revealed that an offer was again made to Parker within...