Stonewall Jackson Mem. Hosp. v. AUL INS. CO., 25832.

• Decision Date: 06 December 1999
• Docket Number: No. 25832.,25832.
• Citation: 525 S.E.2d 649,206 W.Va. 458
• Court: West Virginia Supreme Court
• Parties: STONEWALL JACKSON MEMORIAL HOSPITAL COMPANY, a non-profit West Virginia Corporation, Plaintiff below, Appellant, v. AMERICAN UNITED LIFE INSURANCE COMPANY, a qualified foreign corporation; Gardner & White Corporation, a non-qualified foreign corporation; Gardner & White, Inc., a non-qualified foreign corporation; Harry D. Jackson, an individual, Defendants below, Appellees.

525 S.E.2d 649

206 W.Va. 458

STONEWALL JACKSON MEMORIAL HOSPITAL COMPANY, a non-profit West Virginia Corporation, Plaintiff below, Appellant, v. AMERICAN UNITED LIFE INSURANCE COMPANY, a qualified foreign corporation; Gardner & White Corporation, a non-qualified foreign corporation; Gardner & White, Inc., a non-qualified foreign corporation; Harry D. Jackson, an individual, Defendants below, Appellees.

No. 25832.

Supreme Court of Appeals of West Virginia.

Submitted September 21, 1999.

Decided December 6, 1999

Robert G. Steele, Esq., Daniel C. Cooper, Esq., Steptoe & Johnson, Clarksburg, West Virginia, Attorneys for Appellant.

David K. Schwirian, Esq., Pauley, Curry, Sturgeon & Vanderford, Charleston, West Virginia, Phillip R. Scaletta, Esq., Ice, Miller, Donadio & Ryan, Indianapolis, Indiana, Counsel for Appellee American United Life Insurance Company.

Stephen R. Brooks, Esq., Furbee, Amos, Webb & Critchfield, Fairmont, West Virginia, Counsel for Appellees Gardner & White Corporation; Gardner & White, Inc.; and Harry D. Jackson.

STARCHER, Chief Justice:

In this appeal from the Circuit Court of Lewis County, we are asked to examine the July 13, 1998 order of the circuit court that granted partial summary judgment against the appellant on the issue of whether the appellee insurance company, as a general business practice, violated the West Virginia Unfair Trade Practices Act ("Act"), W.Va. Code, 33-11-1 to -10.

The parties in this appeal dispute whether the Act applies to an insurance policy that provides an insured with life insurance annuities. As set forth below, we conclude that the Act does regulate the actions of an insurance company in the handling of claims against an annuity policy. However, we also conclude that the appellant in this case, when responding to the appellees' motion for summary judgment, failed to provide the circuit court with evidence sufficient to establish a genuine question of material fact regarding whether the appellees violated the Act as a general business practice.

Accordingly, we affirm the circuit court's partial summary judgment order.

I. Facts & Background

Appellee American United Life Insurance Company ("AUL") is a mutual life insurance company. In 1971, AUL entered into a "Master Group Annuity Contract" ("the Contract") with the West Virginia Hospital Association ("WVHA") to provide insurance annuities as an investment medium for the pension plans of hospitals that were members of the WVHA. Member hospitals were not required to participate in the plan, but could elect to become a participant in the Contract if they so chose.

Appellant Stonewall Jackson Memorial Hospital ("Hospital") is a private, non-profit hospital located in Weston, West Virginia. Until January 1997, the Hospital was a member of the WVHA.

Effective October 1, 1975, the Hospital elected to participate in the Contract negotiated between AUL and the WVHA. Under the Contract, the Hospital could buy annuities at a set interest rate as an investment to generate pension benefits for its employees. The Hospital would pay money to AUL to purchase the annuities, and in return AUL would pay money out to Hospital employees upon certain events, such as an employee's termination, retirement or death.

The 1971 Master Group Annuity Contract contained no provision that explicitly prohibited the Hospital from terminating its participation in the Contract and withdrawing the money it had contributed toward the purchase of annuities. It was under the 1971 Contract provisions that the Hospital had elected to participate in 1975. The Hospital therefore argues that it could cease to be a participant in the Contract and withdraw its contributions at any time.

AUL counters by arguing that the original 1971 Contract contained no provision that explicitly allowed the Hospital to withdraw its pension contributions. Therefore, the only way the Hospital could recover the money it invested under the original Contract was through the occurrence of specific events, such as the termination, retirement or death of an employee.

The 1971 Contract allowed AUL and the WVHA to agree, in writing, to make changes in the Contract. However, the Contract also stated that no change could be made that "adversely affect[ed] the benefits provided... unless the consent of any Participant affected is obtained."

In 1993, with no notice, no effort to obtain consent, and without the knowledge of the Hospital, the WVHA and AUL changed the Contract by adopting "Amendment No. 3." Amendment No. 3 states that if an employer terminated its participation in the Master Group Annuity Contract, and transferred its annuity contributions to another insurance company, then the employer would have to pay significant monetary penalties including an "investment liquidation charge."

In 1994, the Hospital stopped depositing money in the AUL Contract plan. Then, on January 20, 1995, the Hospital tried to withdraw its contributions from AUL and transfer the money to another insurance company for investment. At that time, the Hospital had invested $5,250,380.27 under the annuity contract with AUL.

Upon receiving the Hospital's request that AUL transfer the entire balance of the Hospital's annuity investments, AUL notified the Hospital that it was going to impose a withdrawal penalty of $242,980.25 pursuant to Amendment No. 3. The Hospital pointed out to AUL that under the terms of the original 1971 Contract, an amendment to the Contract that adversely affected the benefits provided would not apply unless the Hospital gave its consent. Hence, because Amendment No. 3 adversely affected the benefits available to the Hospital and its employees, and because the Hospital did not agree to Amendment No. 3, it demanded that AUL relinquish the entire balance of the account without imposing any withdrawal penalties.

AUL refused to transfer any of the Hospital's annuity assets until the Hospital signed a "Notice, Election and Release" form prepared by AUL, including the undisputed amount of $5,007,400.02. The "release" form stated that the Hospital would agree to allow AUL to keep the $242,980.25 withdrawal penalty, and in effect stated that the Hospital was waiving any causes of action that might arise from the withdrawal transaction.¹

After discussions occurred between the Hospital and AUL, on March 31, 1995 a representative for the Hospital signed the AUL "Notice, Election and Release" form. However, the form was delivered to AUL with a letter stating that the form was signed under protest, and that the Hospital did not agree to the contents of the form.² The letter mailed with the form specifically reserves the Hospital's right to pursue legal relief as a result of the actions of AUL.

Several weeks after receiving the signed "Notice, Election and Release," AUL delivered to the Hospital the undisputed $5,007,400.02. However, AUL retained the withdrawal penalty of $242,980.25.

This civil action was filed by the Hospital against AUL and against the insurance agents who managed the annuity Contract, appellee Gardner & White, Inc. and Gardner & White Corporation ("Gardner & White"), and appellee Harry D. Jackson, an insurance agent. The Hospital's complaint generally alleged two causes of action. First, the complaint alleged that AUL and its agents had breached the annuity contract with the Hospital by refusing to transfer the $242,980.25. Second, the complaint alleged that the actions of AUL and its agents amounted to unfair and deceptive insurance trade practices in violation of the West Virginia Unfair Trade Practices Act, W.Va.Code, 33-11-4 [1985].

After substantial discovery, on June 9, 1998 appellee AUL filed a motion for summary judgment with the circuit court. Appellees Gardner & White and Mr. Jackson subsequently joined in the motion. Together, the appellees argued that the Hospital had not shown any evidence of duress in the signing of the "Notice, Election, and Release" form, nor any other evidence to show that the form was invalid. The appellees also argued that the Hospital had signed the "Notice, Election, and Release" in consultation with its attorneys. Therefore, the appellees argued that the release form should be construed as a bar to both the Hospital's breach of contract action and unfair trade practices action. Additionally, the appellees contended that the evidence was insufficient to show a breach of contract, or to show that the appellees had engaged in unfair trade practices as a general business practice.

In an order dated July 13, 1998, the circuit court denied the appellees' motion for summary judgment on the breach of contract issue, but granted the appellees' motion on the unfair trade practices action.

As to the breach of contract action, the circuit court ruled that the 1971 Master Group Annuity Contract contained no language whatsoever regarding the Hospital's right to withdraw its money from AUL. The circuit court therefore concluded that "it is implicit in this contract that the [Hospital] could withdraw or transfer the funds held by AUL, even before Amendment No. 3[.]" Furthermore, the circuit court held that the "Notice, Election and Release" form "is not determinative in the resolution of this case and it is clear that [the Hospital] executed this document but without waiving any rights it had to pursue legal remedies." The circuit court therefore denied summary judgment as to the Hospital's breach of contract action.

However, the circuit court granted summary judgment as to the Hospital's claim for violations of the Unfair Trade Practices Act. The court concluded that, "[g]iven the circumstances of this convoluted transaction, I find no fraud, duress, or violation of the Unfair Trade Practices Act."

The case proceeded to a jury trial on the breach of contract issue. After the presentation of evidence by the parties, the circuit court directed a verdict in favor of the Hospital. A judgment order was entered on July 27,...