The opinion
IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September Term 2013
_______________ FILED
No. 12-1254 November 13, 2013
_______________ released at 3:00 p.m.
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
JOHANNA DORSEY, OF WEST VIRGINIA
Plaintiff Below, Petitioner
v.
PROGRESSIVE CLASSIC INSURANCE COMPANY,
Defendant Below, Respondent
Appeal from the Circuit Court of Ohio County
The Honorable Ronald E. Wilson, Judge
Civil Action No. 11-C-95
REVERSED AND REMANDED
Submitted October 15, 2013
Filed: November 13 , 2013
David A. Jividen, Esq. E. Kay Fuller, Esq.
Chad C. Groome, Esq. Martin & Seibert, L.C.
Jividen Law Offices, P.L.L.C. Martinsburg, West Virginia
Wheeling, West Virginia Counsel for the Respondent
Counsel for the Petitioner
Jill Cranston Rice, Esq.
Mychal Sommer Schulz, Esq.
Jacob A. Manning, Esq.
Dinsmore & Shohl, LLP
Charleston, West Virginia
Counsel for amicus curiae
West Virginia Insurance Federation
JUSTICE KETCHUM delivered the Opinion of the Court.
CHIEF JUSTICE BENJAMIN dissents and reserves the right to file a dissenting Opinion.
SYLLABUS BY THE COURT
Where a West Virginia motor vehicle insurance policy includes within the
definition of an insured person “any other person while occupying a covered vehicle,” a
guest passenger is a first-party insured under the medical payments section of the policy.
Ketchum, Justice:
Johanna Dorsey (“Dorsey”) appeals the August 29, 2012, order of the Circuit
Court of Ohio County which dismissed her action against Progressive Classic Insurance
Company (“Progressive”). Dorsey, a guest passenger in a vehicle insured by Progressive,
received medical payments coverage under the Progressive policy. Those payments were for
some of the medical expenses she incurred for the treatment of her injuries caused when the
vehicle was rear-ended by a truck.
Dorsey later prevailed in a lawsuit against the truck owner and driver for her
injuries and medical expenses. Included in the damages she recovered were the medical bills
Progressive paid under the medical payments coverage. Progressive asserted a subrogation
lien on the recovery for the amount it paid under the medical payments coverage section of
the policy.
Dorsey contends that Progressive improperly refused to reduce its subrogation
lien, for the medical payments it made on her behalf, by Progressive’s pro rata share of the
attorney fees and costs Dorsey incurred in the litigation against the truck owner and driver.
Dorsey filed a lawsuit against Progressive alleging that the refusal to reduce the lien
constituted first-party common law bad faith and a violation of the West Virginia Unfair
Trade Practices Act. However, noting that Dorsey was not the “named insured” but only an
“insured” under the Progressive policy and paid no premiums for the policy, the circuit court
dismissed the action. The circuit court concluded that Dorsey was a third-party insured under
1
the Progressive policy and that she must be a first-party insured to pursue her first-party
common law and statutory bad faith claims against Progressive.
This Court is of the opinion that the circuit court committed reversible error
in dismissing the lawsuit. A review of Progressive’s insurance policy, the undisputed facts,
and the relevant legal authorities demonstrate that Dorsey’s status under the Progressive
policy was that of a first-party insured, with standing to pursue her first-party common law
and statutory bad faith claims against Progressive. Accordingly, the August 29, 2012, order
of the Circuit Court of Ohio County is reversed, and this action is remanded to that court for
proceedings consistent with this opinion.1
I. Background
On September 18, 2007, a 1996 Subaru driven by Joshua A. Teacoach was
rear-ended by a truck owned by Comcast Corporation and driven by James Renforth.
Dorsey, a guest passenger in the Teacoach vehicle, sustained bodily injuries in the accident
and incurred medical expenses. The Teacoach vehicle was insured under a West Virginia
motor vehicle policy of insurance issued by Progressive. Dorsey filed a medical payments
claim with Progressive under the policy, and Progressive paid the medical payments policy
limit in the amount of $5,000 on her behalf.
1
In addition to the briefs and the record-appendix of the parties, this Court has
received and considered the amicus curiae brief of the West Virginia Insurance Federation.
2
Dorsey filed a personal injury action against Comcast and Renforth (the
“tortfeasors”). Meanwhile, Progressive sent the tortfeasors’s insurer, Liberty Mutual
Insurance Company, written notice of Progressive’s subrogation lien for the $5,000 in
medical payments.2 In November 2010, Dorsey settled her personal injury action for
$60,000. Soon after, a dispute arose between Dorsey and Progressive concerning the medical
payment subrogation lien. Dorsey asserted that Progressive was required to reduce its lien
by its pro rata share of the attorney fees and costs she incurred in the lawsuit against the
tortfeasors. According to Dorsey, Progressive refused to do so which delayed the closure of
the settlement.3 However, Progressive asserted that no reduction was warranted.
2
In a January 10, 2008, letter to Liberty Mutual entitled Updated Med-Pay Lien,
Progressive confirmed that it had previously sent formal notice of its subrogation rights.
Moreover, the letter stated that it had a $5,000 medical payments lien.
Syllabus points 3 and 4 of Nationwide Mutual Insurance Company v. Dairyland
Insurance Company, 191 W.Va. 243, 445 S.E.2d 184 (1994), state:
3. The subrogation rights of an insurance carrier are not
barred so long as the tortfeasor’s insurance carrier was notified
of the subrogation claim before it settled with the insured who
received the medical payments.
4. Ordinarily the tortfeasor’s insurance carrier is
primarily responsible for payment of the subrogation claim. It
is responsible because it was aware of the claim before it
obtained the insured’s release.
Accord Provident Life and Accident Insurance Company v. Bennett, 199 W.Va. 236, 241,
483 S.E.2d 819, 824 (1997).
3
Syllabus point 3 of Federal Kemper Insurance Company v. Arnold, 183 W.Va. 31,
393 S.E.2d 669 (1990), makes clear:
When an automobile insurer is reimbursed, under a
subrogation clause in the insurance contract, for benefits paid to
a covered person that such person has then successfully
(continued...)
3
II. Dorsey’s Claims Against Progressive
On March 25, 2011, Dorsey filed the current lawsuit in the Circuit Court of
Ohio County against Progressive. Seeking compensatory and punitive damages, Dorsey
alleged that Progressive’s refusal to reduce its $5,000 subrogation lien by its pro rata share
of the attorney fees and costs that Dorsey incurred in the personal injury lawsuit constituted
common law bad faith and a violation of the West Virginia Unfair Trade Practices Act
(“UTPA”). W.Va. Code, 33-11-1 [1974], et seq. The stated purpose of the Act is to regulate
trade practices in the insurance business in this State.
In June 2011, Progressive filed a motion to dismiss or, in the alternative, a
motion for summary judgment.4 Progressive alleged that, as a guest passenger, Dorsey’s
medical payments claim was covered under the Teacoach policy merely by virtue of her
3
(...continued)
recovered from a third party, the reimbursement should be
reduced by the insurer’s pro rata share of the cost to the covered
person of obtaining the recovery against the third party.
Accord Anderson v. Wood, 204 W.Va. 558, 564, 514 S.E.2d 408, 414 (1999).
4
Progressive also filed a third-party complaint against Liberty Mutual Insurance
Company. The third-party complaint alleged that, despite receiving multiple notices of
Progressive’s subrogation lien prior to the settlement of Dorsey’s personal injury action,
Liberty Mutual disbursed the entire amount of the settlement proceeds to Dorsey, thereby
failing to honor Progressive’s lien.
In its response, Liberty Mutual asserted that it informed Dorsey that it would (a)
withhold the $5,000 owed to Progressive from Dorsey’s settlement check or (b) include
Progressive as a payee on the check. However, Dorsey objected to those options and filed
a motion to enforce the settlement. The motion was granted, and Liberty Mutual was ordered
to issue a check to Dorsey for the full settlement amount. According to Liberty Mutual,
Dorsey, thus, assumed the obligation for Progressive’s subrogation lien and agreed to hold
Liberty Mutual harmless.
4
presence in the vehicle and that her coverage was not coextensive with Joshua A. Teacoach,
the named insured on the policy. Therefore, as a non-premium paying, extra-contractual
insured under the policy, Dorsey was a third-party insured, without standing to pursue her
common law and statutory bad faith claims against Progressive.
The circuit court denied the motion on September 12, 2011. Soon after,
however, Progressive filed a motion to reconsider based on this Court’s September 22, 2011,
opinion in Loudin v. National Liability & Fire Insurance Company, 228 W.Va. 34, 716
S.E.2d 696 (2011). Syllabus point 2 of Loudin holds: “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.” On that basis, Progressive again alleged that Dorsey was a third-party
insured without standing to pursue her bad faith claims arising under the medical payments
provision of Teacoach’s policy with Progressive.
Following a hearing, the circuit court entered the August 29, 2012, order
granting Progressive’s motion to reconsider and dismissing the action. The circuit court
emphasized that Dorsey was not a named insured under the Progressive policy and paid no
premiums for the policy. Consequently, the circuit court determined that, under Loudin,
Dorsey was a third-party insured and was, therefore, precluded from pursuing her common
law and statutory bad faith claims against Progressive. Dorsey’s appeal to this Court
followed.
5
III. Standard of Review
Progressive initially filed a motion to dismiss or, in the alternative, a motion
for summary judgment. Following the interlocutory denial of the motion, Progressive, citing
Loudin, sought a reconsideration of the ruling. Based on Loudin, the circuit court reversed
its ruling and dismissed Dorsey’s lawsuit pursuant to the August 29, 2012, order. The
dismissal raises a question of law concerning Dorsey’s standing to pursue first-party common
law and statutory bad faith claims against Progressive.
Syllabus point 1of Chrystal R. M. v. Charlie A. L., 194 W.Va. 138, 459 S.E.2d
415 (1995), holds: “Where the issue on appeal from the circuit court is clearly a question of
law or involving an interpretation of a statute, we apply a de novo standard of review.” Syl.
pt. 4, Harrison County Commission v. Harrison County Assessor, 222 W.Va. 25, 658 S.E.2d
555 (2008). See also Wrenn v. West Virginia Department of Transportation, 224 W.Va. 424,
427, 686 S.E.2d 75, 78 (2009) (This Court “generally reviews circuit court orders granting
motions to dismiss de novo.”). Accord Doering v. City of Ronceverte, 228 W.Va. 147, 151,
718 S.E.2d 497, 501 (2011). With that standard in mind, we proceed to address the merits
of Dorsey’s appeal.
IV. Discussion
This case turns on whether Dorsey’s claim was a first-party claim under the
Progressive policy, or a third-party claim. This is because in Elmore v. State Farm Mutual
6
Automobile Insurance Company, 202 W.Va. 430, 504 S.E.2d 893 (1998), this Court held in
the syllabus that a third-party insured has no cause of action against an insurance carrier “for
common law breach of the implied covenant of good faith and fair dealing or for common
law breach of fiduciary duty.” (Emphasis added). Moreover, in 2005, the West Virginia
Legislature prohibited statutory third-party bad faith causes of action against insurers. W.Va.
Code, 33-11-4a(a) [2005], of the UTPA 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 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.
Dorsey’s action against Progressive, alleging first-party common law bad faith
and a violation of the UTPA, arose out of the section of Progressive’s policy entitled “Part
II - Medical Payments Coverage.” That section provided in relevant part:
Subject to the Limits of Liability, if you pay the premium for
Medical Payments Coverage, we will pay the usual and
customary charge for reasonable and necessary expenses,
incurred within three (3) years from the date of an accident, for
medical and funeral services because of bodily injury:
1. sustained by an insured person;
2. caused by an accident; and
3. arising out of the ownership, maintenance or use of a motor
vehicle or trailer.
. . . .
7
When used in this Part II:
1. “Insured person” and “insured persons” mean:
a. you while occupying any vehicle, other than a vehicle
owned by you which is not a covered vehicle; [and] .
. .
d. any other person while occupying a covered vehicle[.]
(Emphasis added).5
Notwithstanding those definitions of an “insured person” in the Medical
Payments Coverage section of the policy, the circuit court, relying on Loudin, determined that
Dorsey was a third-party insured. As stated, syllabus point 2 of Loudin holds: “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.” See also State ex rel. Allstate Insurance
Company v. Gaughan, 203 W.Va. 358, 369, 508 S.E.2d 75, 86 (1998). Relying solely on
Loudin, the circuit court precluded Dorsey from pursuing her common law and statutory bad
faith claims against Progressive.
The facts in Loudin, however, are very different from the circumstances in the
current matter. In Loudin, the policyholder, Thomas Loudin, was injured when his truck was
accidently backed over him while being driven by a person to whom Loudin had given
permission to drive the truck. The truck was insured by National Liability & Fire Insurance
5
In addition, the Progressive policy included a section entitled “General
Definitions.” In that section, “covered vehicle” was defined as “any vehicle shown on the
Declarations Page.” Moreover, the word “occupying” was defined as “in, on, entering, or
exiting.” It is undisputed that Dorsey was in the covered vehicle, a 1996 Subaru, at the time
of the accident.
8
Company (“National”). Loudin filed a claim under the liability coverage provision of the
policy based on the negligence of the truck driver who was insured as a “permissive user”
under Loudin’s policy. National refused to pay Loudin’s negligence claim against the
permissive user. Loudin then filed a negligence action in circuit court against the permissive
user, with counts against National alleging first-party common law bad faith and violations
of the UTPA because National improperly handled his claims against the permissive user
under the liability coverage of his policy. The action against the permissive user finally
settled, and National, asserting that Loudin was a third-party insured on his claim against the
driver, moved for summary judgment on the claims of common law bad faith and UTPA
violations. The circuit court agreed that Loudin was a third-party insured and entered
summary judgment in favor of National.
The issue before this Court in Loudin was whether the named policyholder,
Thomas Loudin, was a first-party insured entitled under West Virginia law to bring a cause
of action against National for common law bad faith and violations of the UTPA for the
improper handling of his negligence claim against the permissive driver, or whether Loudin
was a third-party insured without standing to bring the action. To resolve the issue, this
Court, in Loudin, considered, inter alia, the Insurance Commissioner’s definitions of first-
party and third-party claimant found in the West Virginia Code of State Rules pertaining to
“Unfair Trade Practices.” Those Rules contain the following definitions:
W.Va. C.S.R. § 114-14-2.3. (2006) - “First-party
claimant” or “Insured” means an individual, corporation,
9
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. § 114-14-2.8. (2006) - “Third-party
claimant” means 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.
(Emphasis added).6 See also W.Va. Code, 33-11-4a(j)(1) [2005] (providing a similar
definition of “third-party claimant” in the UTPA).
In Loudin, we found that the Commissioner’s definitions were unambiguous
and consistent with this Court’s case law. Nevertheless, under the unique facts in the case,
this Court observed that Thomas Loudin had, on the one hand, the characteristics of a first-
party claimant as the insured policyholder and, on the other hand, the characteristics of a
third-party claimant since National asserted that the permissive user was a “non-named
insured or beneficiary under the policy” when the accident occurred. 228 W.Va. at 39, 716
S.E.2d at 701. However, emphasizing that Thomas Loudin was the named insured on the
National policy, had purchased the policy, and was entitled to expect the benefits thereof, this
Court concluded that the circuit court’s classification of Loudin as a third-party insured was
6
Title 114, Series 76, of the West Virginia Code of State Rules is entitled “Rules of
Practice and Procedure for Administrative Proceedings Brought by Third Party Claimants.”
The Rules set forth therein govern proceedings before the Insurance Commissioner upon the
filing of an administrative complaint by a third-party claimant alleging an unfair claims
settlement practice.
10
error. Indicating that the rejection of Thomas Loudin as a first-party insured would have
effectively terminated his right to seek legal redress against his insurer for the alleged
improper handling of his negligence claim against the permissive user, 228 W.Va. at 41, 716
S.E.2d at 703, we held in syllabus point 3 of Loudin:
When a named policyholder files a claim with his/her
insurer, alleging that a nonnamed insured under the same policy
caused him/her injury, the policyholder is a first-party claimant
in any subsequent bad faith action against the insurer arising
from the handling of the policyholder’s claim.
In the instant case, Dorsey was not the named insured on the Progressive
policy. Dorsey, as a guest passenger in the covered vehicle, was included as an “insured
person” under the Medical Payments Coverage section of the policy Progressive issued to
the named insured, Joshua A. Teacoach. Thus, Dorsey, who never asserted any claims
against the named insured and only asserted a claim under the policy, has the characteristics
of a first-party insured. Dorsey’s brief filed in this Court accurately states:
Ms. Dorsey’s claims regarded first-party medical
payments claims and were clearly not claims presented against
an “insured tortfeasor” or their insurer. Her claims were against
the Progressive policy that provided coverage to the vehicle
within which she was a passenger. She never asserted a claim
against policy-holder, Joshua Teacoach, or otherwise alleged
that he was a tortfeasor.
Nothing in Loudin excluded insureds, such as Dorsey, from first-party status.
To the contrary, the conclusion that Dorsey is a first-party insured is supported by the
definitions found in the West Virginia Code of State Rules cited in the Loudin opinion.
11
Under W.Va. C.S.R. § 114-14-2.3. (2006), a first-party claimant or insured includes an
individual “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.”
By contrast, W.Va. C.S.R. § 114-14-2.8. (2006), includes as a third-party claimant an
individual “asserting a claim against any individual, corporation, association, partnership or
other legal entity insured under an insurance policy or insurance contract of an insurer.”
(Emphasis added).
Upon all of the above, this Court holds that where a West Virginia motor
vehicle insurance policy includes within the definition of an insured person “any other person
while occupying a covered vehicle,” a guest passenger is a first-party insured under the
medical payments section of the policy.
V. Conclusion
This Court concludes that Dorsey is a first-party insured under the Progressive
policy who may pursue an action against Progressive for common law bad faith and
violations of the UTPA. Accordingly, the August 29, 2012, order of the Circuit Court of
Ohio County is reversed, and this action is remanded to that court for proceedings consistent
with this opinion.
Reversed and Remanded
12