PRESENT: All the Justices
TRANSPORTATION INSURANCE COMPANY
OPINION BY
v. Record No. 112283 JUSTICE LEROY F. MILLETTE, JR.
November 1, 2012
SHEILA WOMACK
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Margaret P. Spencer, Judge
In this appeal we determine that the circuit court erred
in extending summary judgment entered against a defendant
motorist to likewise bind the underinsured motorist (UIM)
insurance carrier. Despite the UIM carrier's reliance on the
defendant and her liability insurer to mount a defense, the UIM
insurance carrier retains its own right to defend in the event
that the interests of the UIM insurance carrier and the
defendant or her liability insurer diverge.
I. Facts and Proceedings
Sheila Womack filed suit against Jerrene V. Yeoman to
recover four million dollars for injuries sustained from a car
accident allegedly caused by the negligent driving of Yeoman.
A copy of the complaint was served on Transportation Insurance
Company (Transportation), Womack's UIM carrier, which is a
prerequisite under Code § 38.2-2206(F) for Womack to take
advantage of the policy's UIM provisions.
Both Yeoman, represented by her liability insurance
carrier, Government Employees Insurance Company (GEICO), and
Transportation filed answers to the complaint in their own
names. Yeoman denied all allegations of negligence and
asserted an intent to plead affirmative defenses, including a
claim of contributory negligence. Transportation similarly
denied all allegations of negligence, reserved the "right to
defend this case in its own name or in the name of the
Defendant as permitted by statute," and pled all affirmative
defenses that would be supported by evidence. Transportation
asked that Yeoman's "liability insurance carrier . . . plead
and prove the[] affirmative defenses."
Following the filing of Yeoman's and Transportation's
answers, Yeoman proceeded to file all motions for the defense
and answer all motions filed by Womack. Transportation
remained silent. In the midst of the developing litigation,
Yeoman filed a voluntary petition under Chapter 7 of the
Bankruptcy Code in the United States Bankruptcy Court for the
Eastern District of Virginia. As a result, the tort
proceedings were stayed until the conclusion of the bankruptcy
action.
In Yeoman's bankruptcy petition, fifteen million dollars
of debt surrounding the tort litigation was listed with no
indication in the provided columns of the schedules of debt
that the claim was either disputed or contingent. The
schedules listed claims of five million dollars each owed to
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Womack, GEICO, and Transportation. Based on these signed
statements, discharge under Chapter 7 of the Bankruptcy Code
was granted. The stay was subsequently lifted with
instructions that "the movant . . . not enforce the recovery or
judgment against the debtor in personam, the property of the
debtor, or property of the estate."
Based on Yeoman's designation of the debt arising from the
tort action in her Chapter 7 bankruptcy proceedings as
uncontested, and the subsequent discharge in bankruptcy, Womack
made a motion for summary judgment. The motion was heard in
the Circuit Court of the City of Richmond, where counsel for
Womack, Yeoman, and Transportation were all present. Womack
based her motion on claims that Yeoman would approbate and
reprobate and violate the doctrine of judicial estoppel if she
were permitted to continue to deny liability in the tort action
after admitting liability in bankruptcy court.
In response, Yeoman claimed that the omission of language
indicating that the liability claims were disputed or contested
was an inadvertent error that caused no prejudice to Womack,
thereby precluding summary judgment based upon approbating and
reprobating or judicial estoppel. Transportation filed a
response noting its support of Yeoman's defense. During oral
argument, Transportation objected to the suggestion that the
UIM carrier should also be bound by the bankruptcy proceeding,
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contending that it had no knowledge of the details of, and was
not a party to, the Chapter 7 bankruptcy proceeding.
The circuit court granted Womack's motion for summary
judgment on the ground that a continued denial of liability by
Yeoman would constitute impermissible approbating and
reprobating. The court was not clear, however, as to whether
Transportation was also subject to the ruling. Transportation
filed a motion to reconsider, asking that it be able to defend
its interests as the UIM carrier. The court denied the motion,
explaining that Transportation had relinquished its rights to
put forth a defense by filing an answer that relied on the
defendant's liability insurance carrier to assert its
affirmative defenses, and that "defendant and her liability
insurance carrier admitted liability." Transportation now
appeals the judgment.
II. Analysis
A. Standard of Review
Although the circuit court did not explicitly include
Transportation when it granted Womack's motion for summary
judgment, the subsequent denial of Transportation's motion to
reconsider and refusal to permit it to defend its interests as
the UIM carrier clearly establish Transportation as a party
subject to the summary judgment ruling. As this appeal arises
from the grant of a motion for summary judgment against
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Transportation and Yeoman, we will review "the application of
law to undisputed fact de novo." St. Joe Co. v. Norfolk
Redevelopment & Hous. Auth., 283 Va. 403, 407, 722 S.E.2d 622,
625 (2012).
B. Right to Defend
Code § 38.2-2206(F) provides that when an insured
plaintiff brings suit against a uninsured motorist (UM) or a
UIM and intends to make a claim for recovery from the insurer,
the UM or UIM insurance carrier will "have the right to file
pleadings and take other action allowable by law in the name of
the owner or operator of the uninsured or underinsured motor
vehicle or in its own name." It is therefore undisputed that a
UIM insurance carrier has a statutory right to defend its
interests in a tort action between the insured plaintiff and
the underinsured defendant.
It is also undisputed that the UIM insurance carrier's
right to defend is not tied to the actions of the underinsured
defendant, but rather "each is entitled to control his or its
own action but not the actions of the other." State Farm Mut.
Auto. Ins. Co. v. Cuffee, 248 Va. 11, 14, 444 S.E.2d 720, 722
(1994). When we first discussed this issue in Cuffee, we held
that an uninsured defendant's admission of liability for a car
accident did not bind the UM carrier to the admission, thereby
allowing the carrier to assert its own defense as to liability
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and damages. Id. at 14-15, 444 S.E.2d at 722. One year later
in State Farm Mut. Auto. Ins. Co. v. Beng, 249 Va. 165, 169,
455 S.E.2d 2, 4 (1995), we found a confession of judgment
"indistinguishable" from an admission of liability. The
confession of judgment was entered by the underinsured
defendant for an amount $15,000 greater than was covered under
his liability insurance coverage. Id. at 167, 455 S.E.2d at 3.
Even though it did not wish to contest liability, the UIM
insurance carrier sought to continue its defense with regards
to damages. Id. Because it was denied its right to proceed,
we reversed. Id. at 171, 455 S.E.2d at 5. Whether an
admission of liability or a confession of judgment, a UM or a
UIM, a denial of the right to defend against liability or
simply to contest damages, the effect of "deny[ing] the insurer
the rights granted by Code § 38.2-2206(F)" remains the same.
Id. at 169, 455 S.E.2d at 4.
Womack argues that the facts of this case are different.
Unlike in Cuffee and Beng, in which the circuit court
completely foreclosed the UM or UIM insurance carriers from
defending the tort claims following the defendant's admission
of liability or confession of judgment, Womack claims that
Transportation voluntarily relinquished its right to defend in
its own name to Yeoman and her liability insurance company.
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Transportation allegedly did so in its answer, which stated
that:
Transportation Insurance Company hereby pleads
and avers any and all affirmative defenses
required by law to be [pled] and which are
supported by the discovery or evidence, such as
the lack of negligence on the part of the
Defendant, the negligence of third parties over
whom the defendant exercised no control or right
to control, contributory negligence, assumption
of the risk, sudden emergency, unavoidable
accident, Act of God, failure to mitigate
damages, existence of pre-existing conditions,
and the statute of limitations. Transportation
Insurance Company calls on the Defendant and her
liability insurance carrier to plead and prove
these affirmative defenses.
After filing its answer, Transportation did not participate
again in its own name until filing a response to the motion for
summary judgment, when it once more adopted the defense
asserted by Yeoman. Womack contends that Transportation, based
on its consistent reliance on Yeoman and her liability insurer,
fully exercised its rights by turning the defense over to
Yeoman in its entirety.
Transportation denies handing its right to defend over to
Yeoman. As in Cuffee and Beng, Transportation filed an answer
in its own name as permitted under Code § 38.2-2206(F). The
wording of its answer did not merely "call upon the Defendant
and her liability insurance carrier to plead and prove . . .
affirmative defenses," but also specifically denied liability
and asserted several affirmative defenses. Transportation
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describes the "call" for Yeoman to prove these defenses as a
demand that Yeoman act on the affirmative defenses rather than
a relinquishment of all responsibility for the defense. It
claims that a liability insurance carrier has a non-delegable
duty to defend the insured, and that by asking the liability
insurer to assert affirmative defenses Transportation was
merely asking the liability insurer to fulfill its statutory
requirement to defend.
Transportation also rejects Womack's assertion that it
ceded its defense in its response to the motion for summary
judgment. Transportation contends that as Yeoman was the only
party included in Womack's motion for summary judgment,
Transportation had no reason at that time to argue for its own
right to defend the case. According to Transportation,
regardless of the outcome of the summary judgment motion, it
retained the right under the statute and case law to defend its
interest as a UIM carrier.
We agree with Transportation. In reviewing
Transportation's answer in its entirety, it is clear that
Transportation retained its right to defend should Yeoman or
her liability insurance carrier later abandon their own defense
of the case. This is evidenced by Transportation's decision to
file an answer in its own name, reserving "the right to defend
th[e] case in its own name or in the name of the Defendant as
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permitted by statute." Transportation went on to deny
allegations included in Womack's complaint and assert specific
affirmative defenses that it demanded the liability insurer
assert in the course of litigation.
In relying upon Yeoman's liability insurance carrier to
defend the case, Transportation did not relinquish its right to
conduct its own defense if the interests of the parties
diverged. As long as it was in the interest of Yeoman, her
liability insurance carrier and Transportation to actively
defend against Womack's claim as to liability and damages,
there was no reason for Transportation to mount a separate
defense. Only when the interests of the parties diverged, as
when Yeoman found it in her interest to file for bankruptcy,
was it in Transportation's interest to mount a separate
defense.
The circuit court's decision to encompass the UIM
insurance carrier in its grant of summary judgment against
Yeoman is a result we rejected in Cuffee and Beng. As in
Cuffee and Beng, Transportation participated in the litigation
when it filed an answer in its own name in which it denied the
defendant's negligence. Beng, 249 Va. at 167, 455 S.E.2d at 3;
Cuffee, 248 Va. at 12, 444 S.E.2d at 721. Thus, Transportation
was subsequently precluded from exercising its statutory right
to defend when it was subjected to summary judgment based
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solely on the defendant's own attempts to approbate and
reprobate, just as the UM and UIM insurance carriers in Cuffee
and Beng were improperly prohibited from asserting a defense
based on the defendant's admission of liability or confession
of judgment. Beng, 249 Va. at 167, 455 S.E.2d at 3; Cuffee,
248 Va. at 15, 444 S.E.2d at 722. That the judgment at hand
was based on approbating and reprobating rather than an
admission of liability, as in Cuffee, or a confession of
judgment, as in Beng, warrants no alteration to our analysis.
Transportation retained a right to defend under Code § 38.2-
2206(F) just as the UM and UIM insurance carriers have in
previous cases before the Court. Having been denied its right
to continue in its own defense, summary judgment against
Transportation must therefore be reversed and the case remanded
to allow Transportation to assert the defense it was denied.
In reversing summary judgment as to Transportation, we
must necessarily reverse the summary judgment entered against
Yeoman under the controlling precedent of Cuffee and Beng. As
in Beng, one solution to the impact of Yeoman's admission would
be for the circuit court to find the defendant's actions worthy
of an entry of judgment against her, but "refrain from entering
judgment thereon until after the issues raised by [the UIM
carrier] have been litigated." Beng, 249 Va. at 170-71, 455
S.E.2d at 5. This is, however, merely one avenue for
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resolution. We continue to follow our dispositions in Cuffee
and Beng in leaving the best means of resolving the conflict
between the defendant's right to control her case, including
the right to admit liability, and the UIM carrier's right to
defend its interests to the "ingenuity of the trial courts,"
which will best be able to "fashion workable solutions to
problem cases." Cuffee, 248 Va. at 14, 444 S.E.2d at 722; see
also Beng, 249 Va. at 170, 455 S.E.2d at 5.
III. Conclusion
For the aforementioned reasons, we will reverse the
circuit court's award of summary judgment in favor of Womack
and remand the case to allow Transportation to present a
defense, as permitted by Code § 38.2-2206(F) and our holdings
in Cuffee and Beng.
Reversed and remanded.
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