STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
State of West Virginia, ex rel. FILED
AIG Domestic Claims, Inc., February 21, 2014
Petitioner released at 3:00 p.m.
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
v.) No. 13-1048 (Ohio County 05-C-550) OF WEST VIRGINIA
The Honorable Larry V. Starcher,
Judge of the Circuit Court of Ohio County,
West Virginia, and Candy George, Individually
and as Guardian, Mother and Next of Friend of
Kyle George, a minor, and Mark George,
Respondents
MEMORANDUM DECISION
Petitioner (and defendant in the underlying action) AIG Domestic Claims
(“AIG”), by counsel Don C.A. Parker and Laura E. Hayes, invokes this Court’s original
jurisdiction. AIG seeks a writ prohibiting enforcement of an order of the Circuit Court of Ohio
County that allows the plaintiffs in the underlying action to seek discovery of potentially unfair
claim settlement practices that occurred after July 8, 2005, the date the Legislature abolished
third-party actions for unfair claim settlement practices under the West Virginia Unfair Trade
Practices Act (“UTPA”). AIG also asks this Court for a writ of mandamus compelling the circuit
court to rule on whether the plaintiffs will be permitted to rely upon evidence of unfair claims
handling activities by AIG that occurred after July 8, 2005, to establish their assertion that AIG
violated the UTPA. The plaintiffs in the underlying action (and respondents herein), Candy and
Mark George, appeared by their counsel Ronald W. Zavolta.
On June 30, 2005, plaintiffs Candy and Mark George brought an action for
injuries to their minor child, Kyle, arising from two accidents when he fell on a school
playground. The plaintiffs brought suit against the county school board, and against AIG for
third-party unfair claim settlement practices in violation of the UTPA. AIG was the claims
handler for the county school board’s insurance carrier.
On July 8, 2005, W.Va. Code § 33-11-4a(a) [2005] took effect and thereafter
prohibited third-party lawsuits alleging unfair claim settlement practices, lawsuits just like that
filed by the plaintiffs. The statute says, in pertinent part:
A third-party claimant may not bring a private cause of
action or any other action against any person for an unfair claims
settlement practice. A third-party claimant’s sole remedy against a
person for an unfair claims settlement practice or the bad faith
settlement of a claim is the filing of an administrative complaint
with the Commissioner. . . . A third-party claimant may not include
1
allegations of unfair claims settlement practices in any underlying
litigation against an insured.
However, while the Legislature abolished lawsuits alleging third-party unfair
claim settlement practices, the Legislature simultaneously established an administrative process
whereby litigants could pursue administrative penalties against insurers for third-party unfair
claim settlement practices. See W.Va. Code § 33-11-4a(b)-(j). Unfair claim settlement practices
by insurers are still illegal; it was simply the forum for relief that was changed.
The plaintiffs settled their lawsuit against the county school board in 2009.
Thereafter, the plaintiffs sought discovery on their allegations that AIG had engaged in unfair
claim settlement practices in the resolution of their lawsuit.
AIG filed a motion for a protective order to limit the scope of discovery that could
be sought by the plaintiffs. Specifically, AIG asked the circuit court to prohibit discovery of any
unfair claim settlement practices by AIG that occurred after either the filing of the respondent’s
complaint or the effective date of W.Va. Code § 33-11-4a. AIG argued that the statute
essentially prohibits the use at trial of unfair claim settlement practices that occurred after July 8,
2005, and therefore that conduct is not discoverable.
In an order dated April 11, 2013, the circuit court refused to issue a protective
order. The circuit court reasoned that W.Va. Code § 33-11-4a only prohibits the filing of a
lawsuit after July 8, 2005; it does not prohibit the evidence of unfair claims settlement practices
that occurred after July 8, 2005, from being used in a pending lawsuit. Thus, the circuit court
found that “the post July 8, 2005 claims activities of AIG are discoverable in this lawsuit.”
On October 18, 2013, AIG filed a petition with this Court seeking a writ of
prohibition to halt enforcement of the circuit court’s order.
In Syllabus Point 4 of State ex rel. Hoover v. Berger, 199 W.Va. 12, 483 S.E.2d
12 (1996), we adopted the following guidelines where a writ of prohibition is sought:
In determining whether to entertain and issue the writ of
prohibition for cases not involving an absence of jurisdiction but
only where it is claimed that the lower tribunal exceeded its
legitimate powers, this Court will examine five factors: (1) whether
the party seeking the writ has no other adequate means, such as
direct appeal, to obtain the desired relief; (2) whether the petitioner
will be damaged or prejudiced in a way that is not correctable on
appeal; (3) whether the lower tribunal’s order is clearly erroneous
as a matter of law; (4) whether the lower tribunal’s order is an oft
repeated error or manifests persistent disregard for either
procedural or substantive law; and (5) whether the lower tribunal’s
order raises new and important problems or issues of law of first
impression. These factors are general guidelines that serve as a
useful starting point for determining whether a discretionary writ
of prohibition should issue. Although all five factors need not be
2
satisfied, it is clear that the third factor, the existence of clear error
as a matter of law, should be given substantial weight.
AIG asks that we prohibit enforcement of the circuit court’s order allowing
discovery of unfair claim settlement practices after July 8, 2005. AIG contends that the circuit
court’s order is clearly wrong “as a matter of common sense” because AIG’s violations of the
UTPA after July 8, 2005 “could not form the basis of a lawsuit when they took place.” AIG
further contends it should not be subjected to compensatory and punitive damages based upon
unfair claim settlement practices that occurred after July 8, 2005. Lastly, AIG argues that any of
AIG’s violations of the UTPA after July 8, 2005 would not be admissible at trial.
We reject AIG’s contentions. The UTPA, W.Va. Code § 33-11-4 [2002], was last
amended in 2002 and prohibits a long list of activities by insurance companies. The UTPA
declares violations of this list to be “unfair methods of competition and unfair or deceptive acts
or practices in the business of insurance.” These activities are prohibited, regardless of whether
the insurance company is dealing with a first-party insured or a third-party to an insurance
policy.
More importantly, nothing in W.Va. Code § 33-11-4a (that was adopted in 2005)
altered the list of prohibited activities contained in W.Va. Code § 33-11-4. All that the 2005
statute changed was to proscribe third-party plaintiffs from filing lawsuits based on insurance
company claim settlement misconduct. Third-party plaintiffs must now file an administrative
complaint with the insurance commissioner. First-party plaintiffs, however, may continue to
bring lawsuits for violations of the UTPA.
Furthermore, the UTPA delineates certain activities as “unfair claims settlement
practices.” W.Va. Code § 33-11-4(9) prohibits various unfair claim settlement activities, but
only so long as they are committed “with such frequency as to indicate a general business
practice[.]” Hence, a first- or third-party plaintiff cannot simply complain that an insurance
company violated W.Va. Code § 33-11-4(9) on one occasion; instead, they must establish “that
the practice or practices are sufficiently pervasive or sufficiently sanctioned by the insurance
company that the conduct can be considered a ‘general business practice’ and can be
distinguished by fair minds from an isolated event.” Syllabus Point 4, Doddrill v. Nationwide
Mut. Ins. Co., 201 W.Va. 1, 491 S.E.2d 1 (1996). See also, Syllabus Point 3, Jenkins v. J.C.
Penney Cas. Ins. Co., 167 W.Va. 597, 280 S.E.2d 252 (1981) (“More than a single isolated
violation of W.Va. Code, 33–11–4(9), must be shown in order to meet the statutory requirement
of an indication of ‘a general business practice,’ which requirement must be shown in order to
maintain the statutory implied cause of action.”).
In the instant case, the plaintiffs brought suit on June 30, 2005, before the
effective date of W.Va. Code § 33-11-4a. To establish their claim that AIG committed unfair
claims settlement practices in the resolution of their lawsuit in violation of the UTPA, W.Va.
Code § 33-11-4(9) requires more than simply showing one isolated violation. The UTPA
requires the plaintiffs to show that AIG engaged in unfair claim settlement practices with such
frequency as to establish that the conduct was a pervasive “general business practice.” To
establish a “general business practice,” the plaintiffs should be permitted discovery of AIG’s
claims settlement practices, whether or not those actions pre- or post-dated when W.Va. Code §
3
33-11-4a went into operation. Our rules indisputably permit “discovery regarding any matter,
not privileged, which is relevant to the subject matter involved in the pending action[.]”
W.Va.R.Civ.Pro. 26(b)(1).
The plaintiffs timely filed their UTPA lawsuit when the law still permitted the
filing of such suits. There is nothing in W.Va. Code § 33-11-4a to suggest the Legislature
intended to retroactively preempt existing suits. And the circuit court’s order permits discovery
of AIG’s claim settlement practices that post-date the adoption of the statute, and that will assist
the plaintiffs in proving their allegation that AIG had a general business practice of violating the
UTPA. On this record, we can find no error by the circuit court.
In its petition to this Court, AIG also seeks a writ of mandamus. AIG asks that
we compel the circuit court to rule forthwith on the admissibility at trial of any post-July 8, 2005,
unfair claim settlement practices by AIG. We stated the standard for a writ of mandamus in
Syllabus Point 2 of State ex rel. Kucera v. City of Wheeling, 153 W.Va. 538, 170 S.E.2d 367
(1969):
A writ of mandamus will not issue unless three elements
coexist -- (1) a clear legal right in the petitioner to the relief
sought; (2) a legal duty on the part of respondent to do the thing
which the petitioner seeks to compel; and (3) the absence of
another adequate remedy.
AIG is asking this Court to force the circuit court to rule on the admissibility of
evidence before the parties have even conducted discovery. It is well established that the West
Virginia Rules of Evidence and Rules of Civil Procedure allocate significant discretion to a trial
court in making evidentiary and procedural rulings. See, e.g., Syllabus Point 1, McDougal v.
McCammon, 193 W.Va. 229, 455 S.E.2d 788 (1995); Syllabus Point 4, State v. Rodoussakis, 204
W. Va. 58, 511 S.E.2d 469 (1998); Syllabus Point 2, State v. Peyatt, 173 W.Va. 317, 315 S.E.2d
574 (1983); Syllabus Point 10, State v. Huffman, 141 W.Va. 55, 87 S.E.2d 541 (1955).
Since the admissibility or exclusion of evidence is a question within the circuit
court’s discretion, AIG cannot establish a “clear legal right” to the relief sought and is therefore
not entitled to mandamus relief.
We therefore deny the requested writ of prohibition and the requested writ of
mandamus.
Writs denied.
4
ISSUED: February 21, 2014
CONCURRED IN BY:
Chief Justice Robin Jean Davis
Justice Margaret L. Workman
Justice Menis E. Ketchum
Justice Allen H. Loughry II
DISSENTING:
Justice Brent D. Benjamin
5
Benjamin, Justice, dissenting:
Effective July 8, 2005, the West Virginia Legislature mandated that no
further third-party settlement bad faith actions could be brought in the courts of this State.
W. Va. Code § 33-11-4a(a) (2005). This included claims based upon allegations of bad
conduct after this date. Id. In clear, direct and precise terms, the Legislature directed that
claims not filed before July 8, 2005 and claims related to activities after July 8, 2005
must be brought only in an administrative action before the Insurance Commissioner of
West Virginia. Id. On this clear command of the Legislature, it was thought there could
be no serious disagreement – until today’s majority opinion.
In refusing to grant the requested writs, the majority judicially rewrites the
statutory law to circumvent the plain intention of the Legislature and, in so doing, creates
a jurisdiction for courts to entertain complaints about alleged improper conduct occurring
after July 8, 2005 -- despite the Legislature having already legislated that the proper
jurisdiction to deal with such complaints is with the Insurance Commissioner. I not only
am troubled by the majority’s legally inaccurate result, but also by the appropriation by
this Court of legislative power to reach this result.
The Unfair Trade Practices Act (“UTPA”) was enacted “to regulate trade
practices in the business of insurance . . . by defining . . . unfair methods of competition
or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or
6
determined.” W. Va. Code § 33-11-1 (1974). The UTPA prohibits unfair claim settlement
practices, which are described in W. Va. Code § 33-11-4(9) (2002):
No person shall commit or perform with such
frequency as to indicate a general business practice any of the
following:
....
(c) Failing to adopt and implement reasonable
standards for the prompt investigation of claims arising under
insurance policies;
....
(f) Not attempting in good faith to effectuate prompt,
fair and equitable settlements of claims in which liability has
become reasonably clear . . . .
(In relevant part) (emphasis added). Under the plain language of W. Va. Code § 33-11-
4(9), to maintain a suit under the statute, a plaintiff must refer to more than one act in
order to show a general business practice. In other words, a general business practice is
proven through a pattern of behavior. Here, the respondents (“Georges”) complained of
past behavior only by petitioner, AIG Domestic Claims Inc. (“AIG”).
Third-party bad faith claims had been a source of political controversy for
some time in West Virginia prior to 2005. Whether good or bad, the Legislature
ultimately resolved the controversy by barring such claims as of July 8, 2005. W. Va.
Code § 33-11-4a(a) extends this bar to the filing of claims and to allegations related to
bad faith conduct after this date. Specifically, W. Va. Code § 33-11-4a(a) states, in
pertinent part:
A third-party claimant may not bring a private cause of
action or any other action against any person for an unfair
claims settlement practice. A third-party claimant’s sole
7
remedy against a person for an unfair claims settlement
practice or the bad faith settlement of a claim is the filing of
an administrative complaint with the [Insurance
Commissioner of West Virginia] . . . . A third-party claimant
may not include allegations of unfair claims settlement
practices in any underlying litigation against an insured.
Where, as here, the law and the legislative intent are so straightforward and clear, there
should be no serious question but that the court below legally erred and that both writs
should issue.
The issuance of both writs is also compelled factually. In their June 30,
2005 filing, the Georges asserted the following allegation of bad faith conduct by AIG in
the settlement of their claims:
(34) Defendant AIG violated the [UTPA] and/or West
Virginia insurance regulations with such frequency as to
indicate a general business practice, specifically including,
but not limited to, not attempting in good faith to effectuate
prompt, fair and equitable settlements of claims in which
liability had become reasonably clear and other violations of
the Unfair Claims Settlement Practices Act.
(35) Defendant AIG in the handling of plaintiffs’ claims
has violated the [UTPA], West Virginia Code § 33-11-4(9),
as well as the insurance regulations promulgated thereunder,
including, but not limited to the following:
a. Failing to adopt and implement reasonable standards
for the prompt investigation of claims arising under
insurance policies;
and
b. Failing to attempt in good faith to effectuate prompt,
fair, and equitable settlements of claims in which
liability has become reasonably clear.
8
(Emphasis added). Although timely filed on June 30, 2005, to “beat” the upcoming July
8, 2005, deadline for the raising of a civil claim of third-party bad faith against AIG, the
Georges chose to narrowly plead their allegations: they only alleged past conduct
(conduct by AIG prior to June 30, 2005). Absent from their asserted claims was any
allegation of ongoing bad faith conduct by AIG related to them such as might give rise to
a legitimate discovery attempt to seek evidence after June 30, 2005. Nevertheless, the
Georges thereafter sought not only to discover post-June 30, 2005, AIG conduct, they
also now intend to rely on such conduct at the trial of this matter based upon the candid
representation of their counsel during the oral argument of this case.
AIG sought a writ from this Court to compel the circuit court to rule on
whether the Georges could rely on AIG’s activity after July 8, 2005, to support their
unfair claims settlement practices allegations. AIG also sought a writ to prohibit the
circuit court from enforcing its order allowing the Georges to seek discovery of events
that occurred after the abolition of third-party UTPA actions.
The majority’s memorandum decision denies both writs. With regard to the
writ to compel, the majority reasoned:
To establish their claim that AIG committed unfair claims
settlement practices in the resolution of their lawsuit in
violation of the UTPA, W.Va. Code § 33-11-4(9) requires
more than simply showing one isolated violation. . . . To
establish a “general business practice,” the plaintiffs should
be permitted discovery of AIG’s actions that violated the
9
UTPA, whether or not those actions pre- or post-dated when
W.Va. Code § 33-11-4a went into operation.
The majority’s decision does not clearly recognize that for the Georges to
have asserted a valid claim, enough acts establishing a general business practice must
have occurred prior to filing the claim; i.e., a cause of action cannot be maintained on
speculation of future bad acts. Furthermore, the Georges’ complaint clarifies that, through
its use of only the past tense, the Georges relied only on events occurring prior to the
filing of their complaint. Had the Georges intended to include future events to further
reinforce their allegation of a general business practice, they needed simply to include
such language in their complaint.
Had the Georges alleged in their complaint that AIG “continues to violate”
the UTPA, events occurring after the filing of the complaint and the effective date of W.
Va. Code § 33-11-4a would be usable and discoverable to show a general business
practice without violating W. Va. Code § 33-11-4a. Without that allegation in the
complaint, subsequent bad acts must constitute a separate cause of action now barred by
statute. W. Va. Code § 33-11-4a. With regard to the writ to compel, the majority erred by
failing to give effect to the language of the complaint.
The majority compounds its error by denying the writ to prohibit the
discovery of events following the effective date of W. Va. Code § 33-11-4a. The majority
10
supports this decision, stating that “our rules permit ‘discovery regarding any matter, not
privileged, which is relevant to the subject matter involved in the pending action[.]’
W.Va.R.Civ.Pro. 26(b)(1).” (Emphasis added). Evidence of AIG’s activity after the
Georges filed their complaint is wholly irrelevant as a matter of law because the Georges’
complaint specifically confines its allegations to events occurring prior to the date the
complaint was filed. The subject discovery has the potential to result in a great and
unjustified financial burden upon AIG. I would grant both the writ to prohibit and the
writ to compel.
11