The Supreme Court issued several opinions this term dealing with insurance law issues.
Two of the cases previewed by our blog addressed coverage issues. The first of these was State ex rel. North River Insurance Company v. Chafin, a case decided in March, 2014. Even though Chafin addressed procedural issues, it remains important because it reaffirmed the fact that coverage claims can be assigned. The plaintiffs settled with the tortfeasor, recovering a sum of money and, in addition, taking an assignment of coverage claims the tortfeasor had against its liability insurer. The plaintiffs then brought a claim in their own names asking the court to resolve the coverage issue. The insurer argued that the claim should have been dismissed under forum non conveniens, but the Supreme Court disagreed, noting that the plaintiffs had a right to obtain a coverage determination for themselves in a court of their own choosing.
On June 4, the Supreme Court decided another coverage case. In Flowers v. Max Specialty Insurance Company, the Court considered a comprehensive general liability policy covering a bar. The policy excluded claims for battery, but there was also an endorsement providing limited coverage for battery. The insurer argued that its duty to defend ended when the $25,000 coverage limit under its endorsement was consumed by defense costs. However, the endorsement said nothing regarding the duty to defend, and the policy itself said that the insurer was obligated to defend until the limits were paid out, in full, in judgments or settlements. The Court found this to be ambiguous, and applied the tried-and-true principle that all ambiguities must be resolved in favor of coverage.
These two cases did not really cover any new ground, but they are good illustrations of the rules of interpretation that apply to all insurance policies.
The Court addressed an issue involving insurance rates in Lightner v. Citifinancial. The plaintiff challenged the rates charged by the defendant, Citifinancial, for certain kinds of credit insurance. The issue was addressed by the insurance commissioner, who sided with Citifinancial without conducing a hearing. The plaintiff appealed, but the Supreme Court affirmed by way of a memorandum opinion. As Chris Regan noted in his opinion analysis, the Court appears to have vested “extensive, nigh-unreviewable authority” in the insurance commissioner in matters relating to rate making.
In State ex rel. AIG Domestic Claims, Inc. v. Starcher, the Court addressed an issue that has arisen frequently in bad faith cases: Does W.Va. Code 33-11-4a only prevent the filing of third-party bad faith cases, or does it prevent a plaintiff from introducing any proof of bad faith acts occurring after its effective date? The Court wrote a strong opinion affirming the importance of the Unfair Trade Practices Act, W.Va. Code 33-11-1 et seq., and stressing that any conduct that was illegal under the UTPA remained so even after the passage of W.Va. Code 33-11-4a. Therefore, the principle coming out of Starcher is simply this: as long as a case was filed before the effective date of the new law, i.e., July 8, 2005, any bad faith conduct occurring after that date is relevant and fully discoverable.
Overall, then, the spring 2014 term was plaintiff-friendly in the field of insurance law. Lightner’s outcome favored insurance companies, but the remaining cases suggest that the Supreme Court remains committed to longstanding principles that provide protection to both policyholders and tort victims.