Loudin v. National Liability & Fire Ins. Co., et al.
(Bad Faith -- Sept. 22, 2011)
In Loudin v. National Liability & Fire Ins. Co., No. 35763 (W. Va. Sept. 22, 2011), the West Virginia Supreme Court of Appeals concluded that a bad faith cause of action filed by an injured claimant, who was also the insured under the policy at issue, could proceed with a bad faith action against his insurer arising from the handling of his claim. Thomas Loudin, with the assistance of his brother, was performing maintenance on his truck when, at some point, his brother accidently backed the truck over Thomas. As a result of the accident, Thomas allegedly sustained severe and permanent injuries. The truck was insured under a policy issued by National Liability & Fire Insurance Company (“National”). After the accident, Thomas Loudin filed a claim with National and was paid the limits of the Auto Medical Payments portion of the policy. In addition, Thomas Loudin filed a claim under the Liability Coverage provision of the policy based upon the alleged negligence of his brother as a permissive operator of the truck when the accident occurred. After an investigation, National denied the claim. Thereafter, Thomas Loudin and his wife filed a negligence action against his brother and asserted claims against National for common law bad faith, breach of the insurance contract, breach of the implied duty of good faith and fair dealing, violations of the West Virginia Unfair Trade Practices Act, and the tort of outrage. The Loudins settled with National to resolve the lawsuit against the brother but continued the bad faith aspect of the lawsuit.
National moved for summary judgment, arguing that the Loudins were third-party claimants and as such, are barred as matter of law from bringing their common law and statutory bad faith claims. The circuit court granted summary judgment in favor of National on the grounds that the Loudins were asserting a common law third-party bad faith claim which is not recognized in West Virginia and a statutory third-party bad faith expressly prohibited since 2005 by W.Va. Code §33-11-4a. The Loudins appealed.
As a matter of first impression, the West Virginia Supreme Court of Appeals reversed the circuit court’s grant of summary judgment in favor of National. The Court found that, under the unique facts of the case, the Loudins’ bad faith cause of action has characteristics of both first-party and third-party bad faith claims. In so ruling, the Court noted that:
when a policyholder files a claim with his insurer, alleging that a non-named insured under the same policy caused him injury, the policyholder is a first-party claimant in any subsequent bad faith action against his insurer arising from the handling the policyholder’s claim.
Noting West Virginia’s firm public policy to hold insurers accountable in a court of law when insurers wrongfully deny coverage to insureds who have paid premiums, the Court concluded that the circuit court’s rejection of Loudin as a first-party claimant “effectively terminated [his] right to seek legal redress for alleged improper handling” of the claim.
For a copy of the September 22, 2011 decision, click HERE.