Slone v. State Auto Property & Casualty Insurance Company

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF WEST VIRGINIA

AT CHARLESTON

PATTY SLONE,

Plaintiff,

v. Civil Action No. 2:19-cv-00408

STATE AUTO PROPERTY AND CASUALTY

INSURANCE COMPANY, JOE MASK, and

SHERI LENTHE,

Defendants.

MEMORANDUM OPINION AND ORDER

Pending is the joint motion of the defendants, State

Auto Property and Casualty Insurance Company (“State Auto”), Joe

Mask and Sheri Lenthe, to dismiss or, in the alternative, motion

for summary judgment, filed on May 28, 2019. ECF No. 3.

I. Background

Plaintiff Patty Slone, a resident of Mingo County,

West Virginia, was a guest at Janet’s Park & Eat, Inc.

(“Janet’s”) in Logan County, West Virginia, on August 4, 2016.

Compl., ECF No. 1-3, at ¶ 7; see also ECF No. 23-1, at 19 (State

Auto insurance policy providing the full legal name of Janet’s).

1

She “sustained an [undisclosed] injury” after slipping and

falling at the restaurant. Id. at ¶¶ 10, 28.

Janet’s maintained an insurance policy through State

Auto effective from April 13, 2016, to April 13, 2017. ECF No.

23-1, at 19. The policy includes a Commercial General Liability

Coverage Part that provides for medical payments coverage up to

$10,000.00, general liability coverage up to $1,000,000.00 per

occurrence, and personal injury and advertising liability

coverage up to $1,000,000.00. Id. at 29. The policy reads, in

relevant part:

COVERAGE C MEDICAL PAYMENTS

1. Insuring Agreement

a. We will pay medical expenses as described

below for "bodily injury" caused by an

accident:

(1) On premises you own or rent;

(2) On ways next to premises you own or

rent; or

(3) Because of your operations;

provided that:

(1) The accident takes place in the

"coverage territory” and during the

policy period;

(2) The expenses are incurred and

reported to us within one year of the

date of the accident; and

(3) The injured person submits to

examination, at our expense, by

physicians of our choice as often as we

reasonably require.

2

b. We will make these payments regardless of

fault. These payments will not exceed the

applicable limit of insurance. We will pay

reasonable expenses for:

(1) First aid administered at the time

of an accident;

(2) Necessary medical, surgical, x-ray

and dental services, including

prosthetic devices; and

(3) Necessary ambulance, hospital,

professional nursing and funeral

services.

Id. at 137.1 The policy then lists exclusions from medical

payments coverage:

2. Exclusions

We will not pay expenses for “bodily injury”:

a. Any Insured

To any insured, except "volunteer workers".

b. Hired Person

To a person hired to do work for or on

behalf of any insured or a tenant of any

insured.

c. Injury On Normally Occupied Premises

To a person injured on that part of premises

you own or rent that the person normally

occupies.

d. Workers Compensation And Similar Laws

To a person, whether or not an “employee” of

any insured, if benefits for the “bodily

injury” are payable or must be provided

under a workers’ compensation or disability

benefits law or a similar law.

1 Under the State Auto policy, “bodily injury” is defined as

“bodily injury, sickness, or disease sustained by a person,

including death resulting from any of these at any time.” ECF

No. 23-1, at 142. Inasmuch as the defendants do not assert that

Slone did not sustain a “bodily injury” as defined by the

policy, the court assumes for the purposes of this opinion that

this point is not at issue.

3

e. Athletics Activities

To a person injured while practicing,

instructing or participating in any physical

exercises or games, sports, or athletic

contests.

f. Products-Completed Operations Hazard

Included within the “products-completed

operations hazard”.

g. Coverage A Exclusions

Excluded under Coverage A.

Id.2

The Janet’s State Auto policy also pertinently defines

“insured.” “Insureds” include, as relevant here and with

certain exceptions: (1) an entity that is “designated in the

Declarations” and is not “a partnership, joint venture or

2 Coverage A, i.e., the general liability “Bodily Injury and

Property Damage Liability,” exclusions that pertain to bodily

injuries and not solely property damage, which is not relevant,

include: liability for expected or intended injuries;

contractual liability; liquor liability; liability under

workers’ compensation, disability benefits, unemployment

compensation, or similar laws; employers’ liability; liability

arising from pollution; liability arising from the aircraft,

auto, or watercraft of an insured; liability arising from

mobile equipment of an insured; liability arising from war;

personal and advertising injury liability; and liability

resulting from “recording and distribution of material or

information in violation of law.” ECF No. 23-1, at 132-36, 145.

The defendants do not contend that Slone fits these exclusions.

4

limited liability company”;3 (2) executive officers and directors

when acting with respect to their duties as well as stockholders

with respect to their liability as stockholders; (3) employees

and volunteer workers of the entity; and (4) any person acting

as a real estate manager for the entity. Id. at 138-39. The

policy does not confer “insured” status on guests such as Slone.

Finally, the policy’s Coverage A (the general

liability coverage titled “Bodily Injury and Property Damage

Liability”) and Coverage B (titled “Personal and Advertising

Injury Liability”) provisions each promise to pay “sums” for

certain injuries that the insured “becomes legally obligated to

pay as damages” as a result of separate civil actions. Id. at

132, 136. Coverages A and B differ from Coverage C inasmuch as

the Coverage C medical payments coverage promises to pay

“expenses” rather than “sums” relating to “damages” that result

from separate lawsuits. See id. at 137.

3 Janet’s as well as Morrison’s Drive Inn, Inc. are listed as

the “First Named Insured” in the Declarations. ECF No. 23-1, at

19. Although it is not a “First Named Insured,” Parkway Drive

Inn, Inc. is listed as a named insured in the Declarations. Id.

at 20. “Additional Interests/Insureds” include Logan Property

Management LLC as a “Manager or Lessor of Premises,” and

“Owners, Lessees or Lessor of Leased Equipment – Automatic” also

qualify as “Additional Insured[s]” in the declarations. Id. at

30, 34, 35.

5

Slone filed suit against Janet’s in the Circuit Court

of Logan County, Civil Action No. 17-C-283, purportedly seeking

damages for her fall that could be covered by the Coverage A

general liability coverage of the State Auto Policy. ECF No. 1-

3, at ¶ 22; ECF No. 4, at 2 n. 3; ECF No. 6, at 2. That action

was dismissed on summary judgment inasmuch as, according to the

plaintiff, the circuit court “found that Janet’s Restaurant was

not liable for Slone’s injuries as the hazard which caused said

injuries was open and obvious.” ECF No. 6, at 2.

The complaint does not describe when or how Slone

submitted a medical payments coverage claim under the Janet’s

State Auto policy, but Slone indicates that “Defendants State

Auto and Mask acknowledged [her] injury and applicable medical

payments coverage with limits for said incident in the amount of

$10,000.00.” ECF No. 1-3, at ¶ 11. Slone claims that the

expenses caused by her injury exceeded the $10,000.00 medical

payments coverage limit. Id. at ¶ 12. She adds that “much” of

her medical expenses were paid by Medicare and that Medicare had

a right to reimbursement of proceeds issued pursuant to the

$10,000.00 coverage. Id. at ¶ 13. It is alleged that the

defendants “acted to induce Plaintiff Slone to seek a reduction

6

of her Medicare lien, which she did, on the inducement that

Defendants would pay the reduced amount to Medicare and then pay

the balance to Plaintiff.” Id. at ¶¶ 55.

Slone further alleges that on May 29, 2018, Medicare

sent her a $4,882.58 “final demand in satisfaction of its right

of reimbursement from Defendant State Auto’s medical payments

coverage,” which she forwarded to State Auto. Id. at ¶ 15.

Slone contends, and the defendants acknowledge, that State Auto

reimbursed Medicare in the amount of $4,882.58 on August 2,

2018. Id. at ¶ 16; ECF No. 7, at 2.

Slone states that she then “immediately demanded that

the medical payment policy limits balance of $5,117.42 be paid

to her and her attorney pursuant to the provisions of the

policy.” ECF No. 1-3, at ¶ 17. She alleges that on August 29,

2018, Medicare “acknowledged no further conditional payments”

from the medical payments coverage. However, Slone claims that

State Auto erroneously opened a second medical payments claim

with Medicare and that she thereafter notified State Auto of

this error and again demanded payment of the $5,117.42 balance.

Id. at ¶¶ 20-21.

7

After this demand, Lenthe, an employee or agent of

State Auto, allegedly “attempted to induce Plaintiff Slone to

resolve the outstanding medical payments due by compromising her

liability claim against Defendant State Auto's insured,

Janet’s,” in violation of West Virginia insurance statutes and

regulations. Id. at ¶ 22; accord id. at ¶ 5. According to the

plaintiff, State Auto, Mask, and Lenthe “have failed and

continue to fail to pay the remainder of the medical payments

coverage policy limits and have not acknowledged receipt of the

demand nor offered any explanation as to why they have failed to

pay the remaining balance of the medical payments coverage that

is due.” 4 Id. at ¶ 19.

The defendants offer a slightly different version of

events. In their June 17, 2019 reply to the pending motion,

they assert that Slone acknowledged that Medicare held a second,

unresolved lien on the medical payments coverage after the first

lien was resolved. ECF No. 7, at 2. They state, however, that

on June 10, 2019, subsequent to the filing of this action on May

4 Mask’s exact role in State Auto’s conduct is not evident

from the face of the complaint other than allegations that he is

an employee or agent of the insurance company who was somehow

involved in the handling of the medical payments coverage claim.

See ECF No. 1-3, at ¶ 5. Regardless, the defendants do not

raise this as an issue.

8

24, 2019, counsel for the plaintiff disclosed a letter from

Medicare indicating that the second lien had been resolved. Id.

Counsel for the defendants confirmed during a December 21, 2020

telephonic status conference with the court and counsel that all

Medicare liens have been resolved.

Slone filed this action in the Circuit Court of Mingo

County on April 16, 2019. Her complaint alleges three counts

against the defendants: Count I, “First Party Bad Faith (Common

Law)”: Count II, “Violations of the West Virginia Unfair Trade

Practices Act,” a statutory bad faith claim brought under W. Va.

Code § 33-11-4(9); and Count III, Fraud.5 Id. at ¶¶ 27-53.

The defendants have provided the circuit court docket

sheet, which documents the plaintiff’s efforts at service during

the outset of the case and is quoted verbatim below:

Date Action / Result

04/16/2019 COMPLAINT FILED & SUMMONS ISSUED;

SUMMONS SENT TO ATTY – DID NOT

5 The plaintiff clearly asserts all three counts against

State Auto and Lenthe. However, Mask is only directly mentioned

in the context of the statutory bad faith claim, and as noted,

his precise role in State Auto’s alleged misconduct is not

clear. See ECF No. 1-3, at ¶ 53. But the defendants do not

challenge the complaint on these grounds, and the court declines

to address the issue in this opinion.

9

SENT CORRECT AMOUNT FOR CERT MAIL

& MAIL FEE;

04/25/2019 SUMMONS IS SUED FOR SHERI LENTHE &

JOE MASK CERT MAIL, RTRN REC & RES

DEL;

04/29/2019 ACCEPTED SERVICE OF PROSCESS SOS

ON BEHALF OF STATE AUTO PROPERTY

AND CASUALTY INSURANCE COMPANY

FILED;

05/03/2019 RETURN CERTIFIED MAIL CARD SIGNED

(CANT READ SIGNATURE) 04-30-19

FILED;

05/03/2019 RETURN CERTIFIED MAIL CARD SIGNED

(CANT READ SIGNATURE) 04-30-19

FILED

ECF No. 1-1. Additionally, the summonses for all three

defendants appear in the record and are dated April 16, 2019.

ECF No. 1-3, at 14-16. Neither party has filed certified mail

receipts or returns pertaining to the service of the defendants.

The defendants removed the action to this court on May

24, 2019. ECF No. 1. They filed the pending motion on May 28,

2019. ECF No. 3. In the motion, the defendants assert two

separate challenges. The first concerns Slone’s ability to

assert any of her claims, namely, West Virginia Unfair Trade

Practices Act (“UTPA”) bad faith, common law bad faith, and

fraud. ECF No. 4, at 4-8. The second concerns service of

10

process on Mask and Lenthe, who according to the defendants,

reside in Tennessee and Minnesota, respectively, and whom the

plaintiff attempted to serve at State Auto’s corporate

headquarters in Columbus, Ohio. Id. at 3, 8-9. The defendants

moved to stay discovery on September 4, 2019 pending the

resolution of the motion, whereupon the court granted a stay on

September 26, 2019. ECF No. 17.

II. Legal Standards

A. Failure to State a Claim

The challenge to Slone’s ability to bring the bad

faith and fraud claims is styled as a Federal Rule of Civil

Procedure 12(b)(6) motion for failure to state a claim or, in

the alternative, a Rule 56 motion for summary judgment. The

defendants have produced several pieces of evidence outside the

pleadings in support of their arguments relating to Slone’s

ability to bring bad faith claims. These include an excerpt of

the Janet’s State Auto policy that provides for the medical

payments coverage, its exclusions, and the definition of

“Insured” (ECF No. 3-2), a copy of the plaintiff’s May 14, 2019

administrative complaint in a related state proceeding before

11

the West Virginia Office of the Insurance Commissioner (ECF No.

7-1), and a copy of a May 15, 2019 letter from an insurance

specialist of the Office of the Insurance Commissioner to State

Auto (ECF No. 7-2). Further, upon the court’s request, the

parties submitted a jointly stipulated full copy of the State

Auto insurance policy. ECF No. 23; ECF No. 23-1.

A motion styled as a motion to dismiss or, in the

alternative, for summary judgment “implicates the [c]ourt’s

discretion under [Federal Rule of Civil Procedure] 12(d).”

Stone v. Trump, 400 F. Supp. 3d 317, 349 (D. Md. 2019) (citation

omitted). Rule 12(d) provides that “[i]f, on a motion under

Rule 12(b)(6) or 12(c), matters outside the pleadings are

presented to and not excluded by the court, the motion must be

treated as one for summary judgment under Rule 56.” The Fourth

Circuit has also clarified that documents attached to a motion

to dismiss may be considered without converting the motion to

one for summary judgment “so long as they are integral to the

complaint and authentic.” Philips v. Pitt Cnty. Mem. Hosp., 572

F.3d 176, 180 (4th Cir. 2009).

12

The excerpt of the Janet’s State Auto policy (ECF No.

3-2) was attached as an exhibit to the pending motion, and the

court considers the full stipulated policy (ECF No. 23-1) as a

timely supplement to that exhibit. The Janet’s State Auto

policy is integral to the complaint inasmuch as it is repeatedly

referenced therein and provides for the medical payments

coverage that underlies the claims in this action. See ECF No.

1-3 (Complaint). Additionally, the parties acknowledge the

authenticity of the policy in their stipulation. See ECF No. 23

(stipulating that the policy “is a full and complete certified

copy of the insurance policy”). The other documents furnished by

the defendants do not appear to be integral to the complaint.

And the resolution of the legal issues presented does not hinge

on these documents. Thus, the court considers the insurance

policy as it relates to the Rule 12(b)(6) portion of the motion

to dismiss without converting the motion to one for summary

judgment while excluding the other documents produced by the

defendants insofar as they are offered in relation to the

13

pending motion. 6

Federal Rule of Civil Procedure 8(a)(2) requires that

a pleading contain “a short and plain statement of the claim

showing that the pleader is entitled to relief.” Rule 12(b)(6)

correspondingly provides that a pleading may be dismissed when

6 The court also notes that on January 30, 2020, more than

seven months after briefing of the pending motion concluded and

more than four months after this action was stayed, the

defendants also filed a “supplemental memorandum of law” in

support of the motion. ECF No. 17. This filing includes other

exhibits relating to the separate administrative proceeding

before the Office of the Insurance Commissioner, namely, a

September 13, 2019 letter from the Office of the Insurance

Commissioner to counsel for the plaintiff closing the

administrative complaint (ECF No. 19-1), Slone’s September 17,

2019 administrative request for a hearing regarding the closing

letter (ECF No. 19-2), and the Office of the Insurance

Commissioner’s December 19, 2019 order denying a hearing on the

matter (ECF No. 19-3).

Slone has responded to this memorandum, arguing that it is

not authorized by the Federal Rules of Civil Procedure or the

Local Rules of Civil Procedure. ECF No. 20, at 1-2. She also

states that consideration of the administrative rulings is

premature inasmuch as they have been appealed to the Circuit

Court of Kanawha County. Id. at 2. Slone requests attorney’s

fees associated with responding to the unauthorized filing. Id.

The court agrees that this filing was unauthorized. The

supplemental memorandum is essentially a surreply, which

requires leave of court under Local Rule of Civil Procedure

7.1(a)(7). The defendants did not seek leave of court prior to

filing the memorandum. Additionally, the resolution of the

pending motion does not hinge on consideration of the memorandum

or its exhibits. Although the court declines to award

attorney’s fees, it does not consider the memorandum or its

exhibits in disposing of the motion to dismiss.

14

there is a “failure to state a claim upon which relief can be

granted.”

To survive a motion to dismiss, a pleading must recite

“enough facts to state a claim to relief that is plausible on

its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570

(2007); see also Monroe v. City of Charlottesville, 579 F.3d

380, 386 (4th Cir. 2009) (quoting Giarratano v. Johnson, 521

F.3d 298, 302 (4th Cir. 2008)). In other words, the “[f]actual

allegations must be enough to raise a right to relief above the

speculative level.” Twombly, 550 U.S. at 555 (citation

omitted).

The court “must accept as true all of the factual

allegations contained in the [pleading].” Erickson v. Pardus,

551 U.S. 89, 94 (2007) (citing Twombly, 550 U.S. at 555-56).

Such factual allegations should be distinguished from “mere

conclusory statements,” which are not to be regarded as true.

Iqbal, 556 U.S. at 678. “[T]he tenet that a court must accept as

true all of the allegations contained in a complaint is

inapplicable to legal conclusions.” Id.

15

B. Sufficiency of Service

The second argument in the motion challenges the

service of Mask and Lenthe. The defendants mention that

improper service of process constitutes a lack of personal

jurisdiction over these defendants. ECF No. 4, at 9. However,

they specify that they proceed under Federal Rule of Civil

Procedure 12(b)(5) for insufficient service of process and do

not claim to proceed under Rule 12(b)(2) for lack of personal

jurisdiction. Id. at 1.

Further, it appears that the defendants pose a Rule

12(b)(5) challenge inasmuch as they title the argument as

“Plaintiff did not properly serve Defendant Mask and Defendant

Lenthe” and they do not conduct a personal jurisdiction analysis

apart from pointing out that personal jurisdiction is linked, to

some degree, with service of process. ECF No. 4, at 8-9 (citing

Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S.

344, 350 (1999) (“In the absence of service of process (or

waiver of service by the defendant), a court ordinarily may not

exercise power over a party the complaint names as

defendant.”)). Relatedly, they rely on the West Virginia Rules

of Civil Procedure in support of their sufficiency of process

16

arguments inasmuch as “[t]he issue of the sufficiency of service

of process prior to removal is strictly a state law issue.” Id.

at 8 (quoting Wolfe v. Green, 660 F. Supp. 2d 738 (S.D. W. Va.

2009)).

Accordingly, the court construes this argument as one

under Rule 12(b)(5) for insufficient service of process. Under

Rule 12(b)(5), the “[p]laintiff bears the burden of establishing

the validity of service once that service is contested.” McCoy

v. Norfolk Southern Ry. Co., 858 F. Supp. 2d 639, 651 (S.D. W.

Va. 2012) (citing Homer v. Jones–Bey, 415 F.3d 748, 754 (7th

Cir. 2005); Grand Entertainment Group, Ltd. v. Star Media Sales,

Inc., 988 F.2d 476, 488 (3d Cir. 1993)).

III. Analysis

A. Failure to State a Claim

The defendants contend that the claims alleged against

them fail as a matter of law inasmuch as they are based in bad

faith and the plaintiff is a third-party claimant who cannot

recover under West Virginia law. ECF No. 4, at 5-8.

Specifically, the defendants assert that Slone is not a

policyholder or insured under the State Auto policy, which makes

17

her a third-party claimant for the purposes of her common law

(Count I) and UTPA (Count II) bad faith claims. Id. at 6-8.

The defendants attempt to fortify their position by asserting

that the plaintiff is a third-party claimant for the purposes of

the Insurance Commissioner’s definition found in W. Va. C.S.R. §

114-14-2.8. Id. at 7. They argue that third-party claimants

have no cause of action for common law bad faith under Elmore v.

State Farm Mutual Automobile Insurance Co., 504 S.E.2d 893

(1998), or the UTPA under W. Va. Code § 33-11-4a. Id. They

also contend that the “claim for fraud (Count III) similarly

must be dismissed as it arises out of the claims-handling

process of Plaintiff’s claim for medical payments under the

policy.” Id. at 8.

Slone responds that she meets the definition of

first-party claimant under W. Va. C.S.R. § 114-14-2.3 inasmuch

as she is an individual who asserts a right to payment under the

policy rather than against an insured, such as Janet’s. ECF No.

6, at 2-3. She further contends that the definition of first-

party claimant is distinct from that of an insured and that

first-party claimants are not always insureds as evidenced by

Goff v. Penn Mutual Life Ins. Co., 729 S.E.2d 890 (W. Va. 2012)

18

(life insurance beneficiary).

West Virginia does not recognize third-party common

law or statutory causes of action for bad faith. In 1998, the

West Virginia Supreme Court of Appeals considered, inter alia,

the question of whether there exists a cognizable cause of

action for “common law breach of the implied covenant of good

faith and fair dealing (common law bad faith).” Elmore, 504

S.E.2d at 896. The Elmore court concluded that state caselaw:

makes it clear that the common law duty of good faith

and fair dealing in insurance cases under our law runs

between insurers and insureds and is based on the

existence of a contractual relationship. In the

absence of such a relationship there is simply nothing

to support a common law duty of good faith and fair

dealing on the part of insurance carriers toward

third-party claimants. We therefore decline to expand

our prior holdings regarding common law bad faith

claims to allow third parties to bring an action

against the insurance carrier of another.

Id. at 897.

In 2005, the West Virginia Legislature passed W. Va.

Code § 33-11-4a, which precludes third-party bad faith claims

under the UTPA. Specifically, the statute provides:

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

19

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 in accordance with

subsection (b) of this section. A third-party

claimant may not include allegations of unfair claims

settlement practices in any underlying litigation

against an insured.

W. Va. Code § 33-11-4a(a) (2005). For the purposes of the

statutory bar, a third-party claimant “means any individual,

corporation, association, partnership or any other legal entity

asserting a claim against any individual, corporation,

association, partnership or other legal entity insured under an

insurance policy or insurance contract for the claim in

question.” W. Va. Code § 33-11-4a(j) (2005) (emphasis added).

The statute’s text supports the conclusion that Slone may bring

a statutory bad faith claim. Slone is not a third-party

claimant bringing this action “against an insured.” Slone

proceeds against the insurer itself in this action. State Auto

is plainly not an entity insured under the Janet’s policy – it

is itself the insurer. Slone does not meet the statutory

definition of “third-party claimant” and inasmuch as the statute

only precludes such third-party claimants from asserting a cause

of action for UTPA bad faith, it does not purport to bar Slone

from bringing her statutory claim.

20

Other sources support this conclusion. In Goff, the

Supreme Court of Appeals considered whether a plaintiff

third-party beneficiary of a life insurance policy could bring a

statutory bad faith claim under the UTPA even though he was not

a party to the insurance contract or an insured under the

policy.7 729 S.E.2d at 892. The court first rejected the

defendant insurer’s argument that the plaintiff, the named

primary beneficiary of the life insurance policy in question,

was not a third-party beneficiary of the policy under the West

Virginia third-party beneficiary statute, W. Va. Code § 55-8-12

(2008). Id. at 894.

The court next concluded that “[j]ust because the

person who is asserting the claim is a third party with regard

to the subject insurance policy, that fact alone does not alter

the nature of the contract itself.” Id. at 895. The court

found that the life insurance policy at issue was, as to the

third-party beneficiary, “clearly a first-party contract.” Id.

at 896. Since the policy was a first-party contract and the

deceased insured policyholder clearly intended the plaintiff

7 Goff did not involve a common law bad faith claim, and the

court accordingly considers it in the context of a UTPA

analysis.

21

third-party beneficiary to obtain the relevant insurance

proceeds upon her death, the court determined that the

beneficiary had standing to bring a statutory bad faith claim

against the insurer under the UTPA even though he was not an

insured under the policy. Id. at 895-96.

Goff’s applicability to this case turns on whether

Slone is a third-party beneficiary of the State Auto policy’s

medical payments provision. According to the third-party

beneficiary statute,

[i]f a covenant or promise be made for the sole

benefit of a person with whom it is not made, or with

whom it is made jointly with others, such person may

maintain, in his own name, any action thereon which he

might maintain in case it had been made with him only,

and the consideration had moved from him to the party

making such covenant or promise.

W. Va. Code § 55-8-12. “The use of the term ‘sole’ [in W. Va.

Code § 55-8-12] does not mean the inclusion of more than a

single beneficiary prevents this provision from taking effect.”

Goff, 729 S.E.2d at 894 (citing Aetna Life Ins. Co. v. Maxwell,

89 F.2d 988, 993–94 (4th Cir. 1937); Erwin v. Bethlehem Steel

Corp., 62 S.E.2d 337 (1950)). Instead, a plaintiff may maintain

an action as a third-party beneficiary to a contract “if the

contract is made and intended for the benefit of a class of

22

persons definitely and clearly shown to come within the terms of

the contract” and the plaintiff is a member of that class.

United Dispatch v. E.J. Albrecht Co., 62 S.E.2d 289, 296 (W. Va.

1950). There is a presumption that a contract is intended to

benefit the contracting parties rather than third persons, and

“the implication to overcome that presumption must be so strong

as to amount practically to an express declaration” that a

person or class of persons hold third-party beneficiary status.

Ison v. Daniel Crisp Corp., 122 S.E.2d 553, 557 (W. Va. 1976).

In this case, the policy covenants to “pay medical

expenses” without regard to fault up to the applicable limit for

“bodily injuries” on premises that Janet’s owns or rents. ECF

No. 23-1, at 137. With a single exception for volunteer

workers, insureds are excluded from receiving medical payments

benefits under the coverage. And it does not appear, based on

the record before the court, that anyone other than Slone has

attempted to recover medical payments benefits during the year

for which the policy was effective, April 13, 2016 to April 13,

2017. On the other hand, non-insured, non-policyholding guests

injured on Janet’s property during the relevant period, such as

Slone, are not excluded from receiving medical payments

23

benefits. Thus, it is clear from the face of the insurance

policy that the plaintiff belongs to a class of individuals

intended to benefit from the medical payments coverage, i.e.

individuals (primarily guests) injured on Janet’s premises who

are eligible to receive benefits from the coverage during the

year for which it was effective.

The court accordingly concludes that Slone holds

third-party beneficiary status just as did the plaintiff in

Goff. Insofar as Goff stands for the proposition that third-

party beneficiaries may assert UTPA bad faith claims against

insurers, it tends to support the conclusion that Slone may

assert a statutory bad faith claim in this action.

It is noted that some courts have rejected the view

that injured guests on the premises of insureds are third-party

beneficiaries of medical payments coverage provisions, finding

that such a class of potential third parties is too broad or

that such provisions are actually intended to benefit the

insured. See Schmalfeldt v. North Pointe Ins. Co., 670 N.W.2d

651 (Mich. 2003) (concluding that business patrons constitute

“too broad” a class “to qualify for third-party status” absent

specific language in the contract bestowing third-party

24

beneficiary status); Zegar v. Sears Roebuck and Co., 570 N.E.2d

1176, 1179 (Ill. App. Ct. 1991) (concluding that the coverage is

intended to benefit the insured); see also Trouten v. Heritage

Mut. Ins. Co., 632 N.W.2d 856 (S.D. 2001) (finding Zegar

persuasive).

Still, as the Seventh Circuit has remarked, “[t]he

weight of authority suggests that medical payment provisions

regarding injured third parties are third party beneficiary

contracts” inasmuch as medical payments provisions operate

without regard to the insured’s liability and create obligations

in insurers to injured parties. Donald v. Liberty Mutual Ins.

Co., 18 F.3d 474, 481 (7th Cir. 1994) (citing Hein v. American

Family Mutual Insurance Co., 166 N.W.2d 363, 365 (Iowa 1969)

Motto v. State Farm Mutual Insurance Co., 462 P.2d 620, 621

(N.M. 1969); Johnson v. New Jersey Manufacturers Indemnity

Insurance Co., 174 A.2d 4, 8 (N.J. Super. Ct. App. Div. 1961);

8A Appleman on Insurance Law and Practice § 4902 (Rev. Vol.

1981)); accord Harper v. Wassau Ins. Co., 66 Cal. Rptr. 2d 64,

69-70 (Cal. Ct. App. 1997) (collecting cases). Moreover,

commentators have remarked more currently that “only the injured

person has a right to enforce the obligation of the insurer” to

25

pay expenses under medical payments coverage. 11 Couch on

Insurance § 158:25 (3d ed. 2020); see also 203A Appleman on

Insurance Law and Practice § 4902 (2d ed. 2011) (“Generally,

medical payment clauses are considered to constitute separate

accident insurance coverage. Such coverage is divisible from

the remainder of the policy, and creates a direct liability to

the contemplated beneficiaries.”).

Additionally, the Supreme Court of Appeals has

consulted the West Virginia Insurance Commissioner’s definitions

in cases where it is not entirely clear whether a plaintiff

asserting UTPA and common law bad faith claims is a first or

third-party claimant. See Dorsey v. Progressive Classic Ins.

Co., 753 S.E.2d 93, 98 (W. Va. 2013); Loudin v. Nat’l Liab. Fire

Ins. Co., 716 S.E.2d 696, 702-03 (W. Va. 2011). The Insurance

Commissioner defines “third-party claimant” as “any individual,

corporation, association, partnership or other legal entity

asserting a claim against any individual, corporation,

association, partnership or other legal entity insured under an

insurance policy or insurance contract of an insurer.” W. Va.

C.S.R. § 114-14-2.8. That is, the Insurance Commissioner uses

the same third-party claimant definition as the UTPA. And as

26

indicated, Slone does not meet that definition. Thus, the

Insurance Commissioner’s definition of “third-party claimant,”

emphasized by the Supreme Court of Appeals, 8 supports the

court’s conclusion that the UTPA does not bar the plaintiff from

asserting a statutory bad faith claim.

Slone does, however, meet the Insurance Commissioner’s

definition of “first-party claimant.” According to the

Insurance Commissioner, “‘First-party claimant’ or ‘Insured’

means an individual, corporation, association, partnership or

other legal entity asserting a right to payment under an

insurance policy or insurance contract arising out of the

occurrence of the contingency or loss covered by such policy or

contract.” W. Va. C.S.R. § 114-14-2.3 (emphasis added). Slone

has asserted a right to payment under the State Auto policy, and

8 In both Dorsey and Loudin, the Supreme Court of Appeals

provided fairly in-depth analyses of whether the plaintiffs

would be first or third-party claimants under the Insurance

Commissioner’s W. Va. C.S.R. § 114-14-2 definitions while making

only passing references to the UTPA’s statutory definition. See

Dorsey, 753 F.3d at 98; Loudin, 716 S.E.2d at 701. It is not

apparent why the court did so in the context of the UTPA claims

asserted in those cases inasmuch as the statute itself

articulates which claimants lack a statutory cause of action.

Regardless, the Insurance Commissioner’s definition of “third-

party claimant” mirrors that of the statute and reinforces the

idea that W. Va. Code § 33-11-4a(a) (quoted at pp. 19-20, supra)

does not bar the statutory claim in this case.

27

she may do so under the policy inasmuch as she was injured on

Janet’s property, has incurred medical expenses, and is not

excluded from receiving medical payments benefits. Further,

while the defendants challenge her ability to bring bad faith

claims in court, they do not challenge her general ability to

submit Coverage C medical payments claims to the insurer under

the policy. The policy itself supports the position that she

may submit Coverage C claims directly to the insurer in that it

distinguishes between the insurer’s duties to pay medical

“expenses” of individuals who sustain bodily injuries under

Coverage C and its duties to pay “sums that the insured becomes

legally obligated to pay as damages” in separate suits under

Coverages A and B. ECF No. 23-1, at 132, 136-137.

Moreover, courts that have considered injured

claimants to be third-party beneficiaries under medical payments

provisions have done so in the context of determining whether

such claimants may directly recover payments from insurers under

the relevant policies. See, e.g., Donald, 18 F.3d at 481;

Harper, 66 Cal. Rptr. 2d at 69-70; Hunt v. First Ins. Co. of

Hawaii, Ltd., 922 P.2d 976, 980-81 (Haw. Ct. App. 1996). Thus,

it appears that injured medical payments coverage claimants,

28

generally and under the State Auto policy, fit the definition of

“first-party claimant” offered by the Insurance Commissioner

inasmuch as they are able to and do assert rights to payments

against insurers under medical payments coverage provisions.

In summary, Slone does not meet the statutory

definition of “third-party claimant” under W. Va. Code

§ 33-11-4a(j). Rather, she is a third-party beneficiary like

the plaintiff in Goff, and she is a first-party claimant and not

a third-party claimant under the Insurance Commissioner’s

definitions. Based on the foregoing, the court concludes that

Slone, as a first-party claimant and third-party beneficiary of

the medical payments provision, may assert a bad faith claim

under the UTPA.

The court next turns to the common law bad faith

claim. In both Dorsey and Loudin, the Supreme Court of Appeals

determined that the plaintiffs were first-party claimants

asserting cognizable statutory and common law bad faith claims

without drawing any distinctions between the separate causes of

action with regard to first and third-party status. See Dorsey,

753 S.E.2d at 96-99; Loudin, 716 S.E.2d at 700-05. This could

suggest that, based on the court’s determination that Slone may

29

bring a statutory bad faith claim, she is entitled to bring a

common law bad faith claim as well.

The Supreme Court of Appeals has articulated in the

context of a common law bad faith analysis that, generally

speaking, “[a] first-party bad faith action is one wherein the

insured sues his/her own insurer for failing to use good faith

in settling a claim filed by the insured.” Syl. Pt. 2, Loudin,

716 S.E.2d at 697. On the other hand, a “third-party bad faith

action is one that is brought against an insurer by a plaintiff

who prevailed in a separate action against an insured

tortfeasor.” Id. at 700 (quoting State ex rel. Allstate Ins.

Co. v. Gaughan, 508 S.E.2d 75, 86 (1998)).

Slone does not fall into either of these general

definitions. She is not an insured suing her own insurer. And

she has not prevailed in a separate action concerning the

medical payments claim. Slone maintains that she did, in fact,

file a separate, unsuccessful suit against Janet’s. However,

according to the complaint and the parties’ briefs, that action

concerned a liability coverage claim relating to the accident at

the restaurant and did not involve the medical payments coverage

claim that is the subject of this bad faith action. See ECF No.

30

1-3, at ¶ 22; ECF No. 4, at 2 n. 3; ECF No. 6, at 2.

As noted, the Supreme Court of Appeals has looked to

the Insurance Commissioner’s definitions when it is not obvious

whether a plaintiff is a first or third-party claimant with

regard to both common law and UTPA bad faith claims. See

Dorsey, 753 S.E.2d at 98; Loudin, 716 S.E.2d at 702-03. The

court’s determination in the UTPA context that Slone fits the

Insurance Commissioner’s first-party claimant definition and

does not fit the third-party claimant definition accordingly

applies equally in the context of a common law bad faith

analysis.

The court concludes that Slone is not precluded from

asserting a common law bad faith claim. And inasmuch as she may

assert a UTPA bad faith claim as well, the court will not

dismiss any bad faith claim asserted against the defendants on

the basis that she is a third-party claimant.

The defendants offer a conclusory argument for

dismissal of the fraud claim, asserting only that the “claim for

fraud (Count III) similarly must be dismissed as it arises out

of the claims-handling process of Plaintiff’s claim for medical

31

payments under the policy.” ECF No. 4, at 8; ECF No. 7, at 5

(same). They do not expound on this point in any manner, and

inasmuch as their argument appears to hinge on the success of

their arguments attacking the bad faith claims, the court

declines to dismiss the fraud claim for failure to state a

claim.

B. Insufficient Service of Process

The court turns to the defendants’ argument

challenging service of Mask and Lenthe. Specifically, the

defendants argue that West Virginia Rule of Civil Procedure

4(d)(1)(D) “permits service of process by certified mail

restricted to the addressee” but that “service was not

restricted to the addressee as it was delivered to State Auto’s

corporate address where neither Defendant Mask nor Defendant

Lenthe reside.” ECF No. 4, at 8-9 (emphasis in original).

Slone responds that the defendants have waived

objection to service of process by entering an appearance and

removing the action to this court. ECF No. 6, at 5. She also

argues that Rule 4(d)(1)(D) “does not distinguish whether []

service must be made at [a d]efendant’s dwelling or place of

32

business, only that it be made to the individual,” and that

service was made to Mask and Lenthe as individuals at their

place of business inasmuch as they are employees or agents of

State Auto. Id. at 5-6. Further, Slone states that the

defendants concealed Mask and Lenthe’s whereabouts and that the

Insurance Commissioner’s website had no information that would

indicate that they “could be served other than through their

employer’s main office in Columbus, Ohio.” Id. at 6.

As to the waiver issue, Federal Rule of Civil

Procedure 12(h)(1) provides for the waiver of a Rule 12(b)(5)

defense under certain circumstances, including when the defense

is not raised in a motion prior to the filing of a responsive

pleading or in a responsive pleading. However, as this court

has observed, “[a] party who removes an action from a state to a

federal court does not thereby waive any of his Rule 12(b)

defenses or objections.” Corbitt v. Air Prods. and Chems.,

Inc., No. 6:07-cv-00200, 2007 WL 9718736, at *1 (S.D. W. Va.

Aug. 31, 2007) (citing Freeman v. Bee Mach. Co., 319 U.S. 448,

451 (1943)).

33

In this case, the defendants actually raised the

service of process issue in the notice of removal and raised it

in the pending motion prior to the filing of any responsive

pleading. Inasmuch as the action of removal does not waive a

Rule 12(b)(5) defense, the court concludes that the defendants

have not waived their objections to service of process.

The court next turns to the validity of the service

itself. The exact date of purported service on Mask and Lenthe

is not entirely clear from the record. But the relevant

summonses are each dated April 16, 2019, and the state court

record documents two unspecified returns received on May 3,

2019. Inasmuch as the case was removed to this court on May 24,

2020, the court concludes that the purported service occurred

while the case was before the Circuit Court of Mingo County and

that West Virginia law should therefore guide the service

analysis. See, e.g., McCoy, 858 F. Supp. 2d at 651-52 (“State

law governs whether service of process is properly effected if

attempted prior to removal.”) (citing Brazell v. Green, 67 F.3d

293, 1995 WL 572890 (4th Cir. 1995) (unpublished table opinion);

Wolfe v. Green, 660 F.Supp.2d 738, 745-46 (S.D. W. Va. 2009)).

34

West Virginia Rule of Civil Procedure 4(d)(1)(D)

provides that service may generally be made on an individual by

“[t]he [county] clerk sending a copy of the summons and

complaint to the individual to be served by certified mail,

return receipt requested, and delivery restricted to the

addressee.” When considering the “delivery restricted to the

addressee” language of the rule, courts tend to focus on whether

there was an indication in the mailing that delivery was

restricted to the addressee and whether the return was actually

signed by someone other than the individual to whom delivery

should have been restricted. See, e.g., Van Wagner v. Snow, No.

11–1131, 2012 WL 3115957, at *1 n. 1 (W. Va. July 3, 2012)

(memorandum opinion) (noting in the context of Rule 4(d)(1)(D)

that the “Restricted Delivery?” spaces on certified mail cards

for the purported service of process on respondents were not

marked); State ex rel. Farber v. Mazzone, 584 S.E.2d 517, 522

(W. Va. 2003) (concluding that service was defective under Rule

4(d)(1)(B), a prior version of the rule at issue here which

contained the same “delivery restricted to the addressee”

language, where the temporary secretary of the defendant signed

the return receipt).

35

Although the summonses themselves are before the court

and the state court docket sheet record appears to indicate that

the mailings to Mask and Lenthe were supposed to be restricted

to the addressee, neither party has supplied the actual

certified mail receipts or returns that might demonstrate

whether delivery was actually marked as restricted to the

addressees. And although the state court record documents that

two certified mail returns were docketed May 3, 2020, Slone has

not shown who signed these returns. It seems likely that some

other State Auto employee inappropriately accepted service on

Mask and Lenthe’s behalf at State Auto’s Columbus headquarters

inasmuch as these defendants are individuals who allegedly

reside in Tennessee and Minnesota, respectively. See Jordan-El

v. White, No. 3:16-cv-04328, 2016 WL 6514163, at *4 (S.D. W. Va.

Oct. 7, 2016) (“Nothing in . . . West Virginia Rule of Civil

Procedure 4 permits service to be accomplished by delivering the

summons and complaint to a random employee at the home office of

a defendant’s employer.”). Inasmuch as the plaintiff bears the

burden of proving sufficiency of service and she has not done

so, these points alone may compel a finding of ineffective

service.

36

But regardless of such evidentiary issues, the

plaintiff’s other arguments, taken at face value, are also

unavailing. Slone’s arguments concerning the unavailability of

information regarding Mask and Lenthe’s whereabouts ignore the

possibility of service by other methods under West Virginia law,

in particular, the long-arm statute, which contains provisions

accounting for the inability to serve process via certified

mail. See W. Va. Code § 56-3-33(c). Additionally, it isa

plaintiff’s responsibility to effect service under Rule 4, and

it therefore does not fall on the defendants to provide their

addresses to Slone. See W. Va. R. Civ. P. 4(c) (1).

Accordingly, the court finds that Mask and Lenthe were

not properly served with process. Where the first attempt at

service is ineffective, “the appropriate remedy under the

circumstances [is] to quash the service of process” rather than

dismiss the relevant claims under Rule 12(b) (5). McCoy, 858 F.

Supp. 2d at 653 (citing Vorhees v. Fischer & Krecke, 697 F.2d

574, 576 (4th Cir. 1983); Bailey v. Boilermakers Local 667 of

Int’l Bhd. of Boilermakers, 480 F. Supp. 274, 278 (N.D. W. Va.

1979)); see also Federal Rule of Civil Procedure 4(m). Thus,

the purported service of process is quashed, and insofar as the

37

motion requests dismissal of Mask and Lenthe on service grounds,

the motion is denied without prejudice.

IV. Conclusion

Based on the foregoing, it is ORDERED that:

1. The defendants’ motion (ECF No. 3) be, and it

hereby is DENIED. The Rule 12(b)(6) arguments are denied with

prejudice. The Rule 12(b)(5) arguments concerning service of

process are denied without prejudice.

2. The attempted service of process on Mask and

Lenthe be, and it hereby is, QUASHED.

3. Slone is directed to properly serve Mask and

Lenthe within thirty days from the date of this memorandum

opinion and order. Unless service of process has been obtained

by that date, or the plaintiff shows by that date just cause for

failure to effect service within the thirty-day period, Mask and

Lenthe shall be dismissed for failure to effect service of

process.

38

The Clerk is directed to forward copies of this

memorandum opinion and order to all counsel of record and any

unrepresented parties.

ENTER: January 19, 2021

De,

Jo . Copenhaver, Jr.

Senior United States District Judge

39