Present: All the Justices
LUMBERMEN’S UNDERWRITING ALLIANCE
v. Record No. 982434 OPINION BY JUSTICE CYNTHIA D. KINSER
September 17, 1999
DAVE’S CABINET, INC.
FROM THE CIRCUIT COURT OF THE CITY OF CHESAPEAKE
E. Preston Grissom, Judge
This appeal arises out of litigation concerning a
workers’ compensation and employers’ liability insurance
policy issued to Dave’s Cabinet, Inc., by Lumbermen’s
Underwriting Alliance (LUA). LUA filed a motion for
judgment against Dave’s Cabinet in the circuit court and
sought a judgment for an alleged balance due and owing for
insurance premiums. Dave’s Cabinet answered the motion for
judgment and also filed a counterclaim against LUA.
In the counterclaim, Dave’s Cabinet asserted that LUA
committed fraud by falsely representing that it could
provide a savings in premium costs if Dave’s Cabinet
purchased its workers’ compensation insurance coverage from
LUA. Dave’s Cabinet further alleged that LUA knew, or
should have known, that its policy of requiring Dave’s
Cabinet to report all workers’ compensation claims, even
those involving only minor injuries, would substantially
increase the amount of premiums that Dave’s Cabinet would
pay for workers’ compensation insurance coverage.
The motion for judgment and counterclaim proceeded to
trial by jury. After hearing evidence, the jury returned a
verdict in favor of LUA against Dave’s Cabinet in the
amount of $10,660. The jury also returned a verdict in
favor of Dave’s Cabinet on its counterclaim against LUA in
the amount of $60,000. The circuit court entered judgment
on both jury verdicts but reduced the amount of the
judgment in favor of Dave’s Cabinet to $42,000, which is
the amount Dave’s Cabinet had requested in the ad damnum
clause of its counterclaim.
We awarded LUA this appeal on two issues. 1 LUA first
asserts that the circuit court erred by refusing to set
aside the jury verdict in favor of Dave’s Cabinet because
that verdict is inconsistent with the one in favor of LUA.
Second, LUA contends that the circuit court erred by
refusing to strike the evidence with regard to the
counterclaim, and also in declining to set aside the
verdict on that claim, because Dave’s Cabinet failed to
prove the elements of constructive fraud as a matter of
law. Because we agree with LUA’s second argument, we do
not need to address the question whether the verdicts are
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Dave’s Cabinet did not assign cross-error with regard
to the judgment entered against it.
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inconsistent. Therefore, we will reverse, in part, the
judgment of the circuit court.
FACTS
Dave’s Cabinet, which is located in Chesapeake,
manufactures kitchen cabinets and cabinet moldings, and
also performs mill work. The two owners of the company,
David Alderman and David Boone, met a representative of LUA
at an industry trade show. As a result of that meeting,
Rob Robertson, a district manager for LUA, and Keith
Wright, a LUA claims adjuster, visited the office of Dave’s
Cabinet to discuss the terms of LUA’s workers’ compensation
insurance policy. At trial, Alderman testified that,
during that meeting, Robertson stated that LUA worked
exclusively with woodworking facilities and that LUA’s
knowledge of the industry would enable Dave’s Cabinet to
save money by implementing loss control procedures that
would eventually reduce the amount of premiums that Dave’s
Cabinet would pay for workers’ compensation insurance
coverage.
LUA then sent a plant engineer to inspect the facility
at Dave’s Cabinet. As a result of that inspection, LUA
recommended changes in the manner in which Dave’s Cabinet
handled workers’ compensation claims involving minor
injuries. As Alderman had explained to Robertson, Dave’s
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Cabinet had previously treated minor injuries "in-house"
with appropriate first aid. For example, the company’s
practice had been to remove splinters, clean and bandage
small cuts, apply ice to mashed toes, wash sawdust out of
eyes, and then allow employees with these injuries to
return to work. Dave’s Cabinet sent only those employees
who sustained more serious injuries to a doctor or hospital
for treatment. According to Alderman, Robertson stated
that LUA wanted Dave’s Cabinet to send all employees who
suffered injuries at work to the hospital for treatment
because of LUA’s concerns about future liability and third-
party verification. In other words, Dave’s Cabinet was
advised to report all injuries, including "splinters,
nicks, cuts, [and] mashed fingers," to LUA. Wright
likewise advised Alderman that Dave’s Cabinet was required
to file a claim even if a "Band-aid" would take care of an
employee’s injury.
Alderman, on behalf of Dave’s Cabinet, entered into a
"Subscriber Agreement" with LUA in May 1988. The
subsequent "Workers Compensation and Employers Liability
Insurance Policy" that LUA issued to Dave’s Cabinet
required Dave’s Cabinet to "[p]rovide for immediate medical
and other services required by the workers compensation
law" and to advise LUA "at once if injury occurs that may
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be covered by this policy." According to Alderman,
Robertson conceded that this policy requirement “would cost
. . . a little bit more money up front,” but insisted that
it would save Dave’s Cabinet money in the long run.
However, Dave’s Cabinet experienced the opposite
result. According to Alderman, LUA’s requirement with
regard to reporting and treating all workers’ compensation
claims did not effect a reduction in the amount of its
premiums for workers’ compensation insurance coverage.
Instead, it caused the company’s "experience modification"
to increase significantly. That increase in the
"experience mod" resulted in higher insurance premiums for
Dave’s Cabinet.
ANALYSIS
A. Standard of Review
The standard of appellate review applicable to this
appeal is well settled. As the party coming to this Court
with a jury verdict that the circuit court approved, Dave’s
Cabinet "'occupies the most favored position known to the
law.'" Ravenwood Towers, Inc. v. Woodyard, 244 Va. 51, 57,
419 S.E.2d 627, 630 (1992) (quoting Pugsley v. Privette,
220 Va. 892, 901, 263 S.E.2d 69, 76 (1980)). "A trial
court’s judgment is presumed to be correct, and on appeal,
we must view the evidence and all reasonable inferences
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deducible therefrom in the light most favorable to the
prevailing party at trial." Evaluation Research Corp. v.
Alequin, 247 Va. 143, 147, 439 S.E.2d 387, 390 (1994).
When applying this standard, an appellate court must,
however, set aside a judgment if it is "plainly wrong or
without evidence to support it." Id. at 147-48, 439 S.E.2d
at 390.
B. Fraud Claim
In support of its claim for fraud, Dave’s Cabinet
contends that LUA made two misrepresentations upon which
Dave’s Cabinet relied to its detriment. The first
misrepresentation focused on the LUA policy requiring
Dave’s Cabinet to report all work-related injuries
regardless of their severity and to send all employees with
injuries to a hospital for medical care rather than
treating employees with only minor injuries "in-house" with
appropriate first aid. The second misrepresentation
concerned the statement by LUA, through its representative,
that LUA’s policy would eventually save Dave’s Cabinet
money by lowering the amount of its premiums for workers’
compensation insurance coverage. We conclude that neither
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of these alleged misrepresentations can form the basis of
an action for constructive fraud. 2
The elements of a cause of action for constructive
fraud are "a showing by clear and convincing evidence that
a false representation of a material fact was made
innocently or negligently, and the injured party was
damaged as a result of his reliance upon the
misrepresentation." Mortarino v. Consultant Eng’g Servs.,
251 Va. 289, 295, 467 S.E.2d 778, 782 (1996). Robertson’s
and Wright’s statements that LUA wanted Dave’s Cabinet to
report even minor work-related injuries and to have
employees who sustained such injuries treated at a hospital
were not misrepresentations of a material fact. 3 They were,
instead, statements regarding LUA’s policy requirement.
2
Although the circuit court instructed the jury in
this case with regard to both actual and constructive
fraud, the court specifically overruled LUA’s motion to set
aside the verdict on the counterclaim, and entered judgment
on that verdict, on the basis that the evidence supported a
claim for constructive fraud. Dave’s Cabinet did not
assign cross-error to the court’s failure to sustain the
verdict in its favor on the grounds that the evidence also
supported a claim for actual fraud. See Rule 5:17(c).
3
The circuit court instructed the jury that Virginia
law requires an employer to keep a record of all injuries
occurring in the course of employment and that a report of
injuries shall be made and transmitted to the Workers’
Compensation Commission by the employer, its
representative, or the insurance carrier for an insured
employer. This instruction is a correct statement of the
provisions contained in Code § 65.2-900(A).
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Although Dave’s Cabinet did not agree with the requirement
since it constituted a departure from its prior practice
and eventually resulted in higher premiums for its workers’
compensation insurance coverage, LUA fully disclosed its
required procedure for reporting and treating all workers’
compensation claims, and Dave’s Cabinet knew about and
accepted that procedure when it purchased coverage from
LUA. Consequently, Dave’s Cabinet failed to prove an
essential element of a claim for constructive fraud.
With regard to the second alleged misrepresentation,
we recognize that Dave’s Cabinet did not experience any
reduction in the amount of its premiums for workers’
compensation insurance but, in fact, incurred increased
premiums. Nevertheless, Robertson’s statement that LUA’s
policy requirement for reporting and treating all work-
related injuries would eventually reduce the cost of
workers’ compensation insurance coverage for Dave’s Cabinet
was merely an unfulfilled promise as to a future event and
not a statement concerning an existing or pre-existing
fact. "'[F]raud must relate to a present or a pre-existing
fact, and cannot ordinarily be predicated on unfulfilled
promises or statements as to future events.'" Patrick v.
Summers, 235 Va. 452, 454, 369 S.E.2d 162, 164 (1988)
(quoting Soble v. Herman, 175 Va. 489, 500, 9 S.E.2d 459,
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464 (1940)). See ITT Hartford Group, Inc. v. Virginia Fin.
Assoc., Inc., 258 Va. ___, ___, ___ S.E.2d ___, ___ (1999),
decided today. Thus, the statement cannot serve as the
basis of a claim for fraud.
For these reasons, we will reverse the judgment of the
circuit court with regard to the counterclaim filed by
Dave’s Cabinet and enter judgment here in favor of LUA on
that counterclaim.
Reversed in part
and final judgment.
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