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State ex rel. Owners Insurance Company v. McGraw

State ex rel. Owners Insurance Company v. McGraw

Case No. 
13-1153
Opinion Date: 
6/18/2014
Opinion Author: 
Per Curiam
Decision 
Writ Denied
Vote: 
4-1
Facts 

Paul Kerns is an Ohio contractor.  During the relevant time period, Kerns worked exclusively for Morlan Enterprises, a West Virginia corporation.

The plaintiff was injured while working on high power lines.  The plaintiff sued several contractors, including Morlan, who in turn filed a third party complaint against Kerns.  Morlan sought to have Kerns’ insurer, Owners Insurance Company, provide it with a defense.  Owners refused, prompting Morlan to file a complaint for declaratory judgment.  Owners moved to dismiss, however, alleging that it did not have sufficient contacts with West Virginia to support jurisdiction.

The trial court found that jurisdiction over Owners was appropriate under the long arm statute.  Furthermore, the trial court found that Owners had sufficient West Virginia contacts to satisfy due process.  In subsequent orders, the trial court applied West Virginia law to the coverage dispute and also determined that Morlan was a “first party” for purposes of prosecuting any bad faith claims.  Following these rulings, Owners petitioned the Supreme Court for a writ of prohibition to prevent the case from proceeding further.

Issue 

Whether the petitioning party, Owners, established that it was entitled to a writ of prohibition?

Analysis 

It was believed this case could provide an opportunity to address some interesting questions involving jurisdiction, choice of law, and insurance bad faith.  Instead, the Supreme Court focused its analysis on the factors necessary to obtain a writ of prohibition.

Historically, a writ of prohibition has been treated an extraordinary remedy--reserved for cases where the trial court lacks jurisdiction or is exceeding its legitimate powers.  It is not simply “a substitute for appeal.”  Thus, the Supreme Court has developed a five factor test for determining when a writ of prohibition is appropriate.  State ex rel. Hoover v. Berger, 199 W.Va. 12, 483 S.E.2d 12 (1996).  Hoover very plainly says that the third factor--i.e., whether the trial court committed clear legal error--is to be “given substantial weight.”

In applying Hoover, the Supreme Court focused its analysis on this third factor.  Interestingly, the Court did not answer any of the specific legal questions raised by Owners as part of its appeal.  Instead, the Court simply concluded that the questions were at least debatable and, therefore, the trial court did not commit any error that was clear-cut in nature:  “While there were arguments that supported both Owners’ and Morlan’s response, the circuit court’s resolution of these issues does not leave this Court with a definite and firm conviction that the lower court made a mistake….”

Despite this fairly straightforward result, separate opinions were filed by three of the justices.

Justice Ketchum preferred to reach one of the legal questions raised by Owners:  Could Morlan recover for the attorney fees and costs it incurred as a result of Owners’ refusal to provide a defense?  Justice Ketchum believed that Morlan did not have a valid claim for recovering defense costs because those costs were borne entirely by Morlan’s liability insurer, Westfield.  It was, instead, Westfield that possessed the claim--not Morlan--under a doctrine known as equitable contribution.

Justice Davis responded forcefully:  Justice Ketchum was “simply…wrong to suggest that the doctrine of equitable contribution applied.”  Instead, she pointed out, Morlan actually enjoyed “first party” status because it was named as an additional insured under the policy.  Therefore, under settled law, it could recover the attorney fees and costs it incurred as a result of Owners’ failure to defend.  Furthermore, the fact that Westfield paid the defense costs on Morlan’s behalf was of no consequence.  The collateral source rule applied, preventing Owners from receiving any kind of credit for the payments Westfield had made.

Finally, Justice Loughry wrote a concurring opinion in which he was joined by Justice Workman.  Justice Loughry expressed his concern that writs of prohibition were granted too frequently and that the Court should refrain from issuing writs in all but extreme cases.  In this case, he was convinced that no clear legal error had been committed and, therefore, he concurred in the Court’s refusal to grant the writ.

 

Commentary 

Even though this was only a per curiam case, it generated an unusual amount of attention from the justices.  I detect two basic themes in their opinions.

First, the Court seems to be tightening the reigns when it comes to writ practice.  In years past, writs were granted quite frequently.  If this case truly represents the Court’s thinking on this subject, it will be important for attorneys to pay more than lip service to Hoover and its five factors.  It is up to the petitioning party to convince the Court that the circumstances are, indeed, extraordinary and that Hoover’s factors are met.

Second, it appears that the stage is now set for a future showdown over the doctrine of equitable contribution.  Two justices have set forth their positions.  Where the other three stand on the issue remains to be seen.

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