BPI, Inc. v. National Mutual Insurance Co. , 235 W. Va. 303 ( 2015 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2015 Term
________________ FILED
May 20, 2015
No. 14-0799 released at 3:00 p.m.
RORY L. PERRY II, CLERK
_______________ SUPREME COURT OF APPEALS
OF WEST VIRGINIA
BPI, INC.,
Petitioner
v.
NATIONWIDE MUTUAL INSURANCE COMPANY,
Respondent
___________________________________________________________
Certified Question from the United States District Court for the
Eastern District of Kentucky
Civil Action No. 7:12-cv-00139-ART
CERTIFIED QUESTION ANSWERED
___________________________________________________________
Submitted: March 10, 2015
Filed: May 20, 2015
Leigh G. Latherow, Esq. Ronda L. Harvey, Esq.
VanAntwerp, Monge, Jones, Bowles Rice LLP
Edwards & McCann, LLP Charleston, West Virginia
Ashland, Kentucky Drew Byron Meadows, Esq.
Counsel for Petitioner Pro Hac Vice
Kellie M. Collins, Esq.
Pro Hac Vice
Golden & Waters, PLLC
Lexington, Kentucky
Counsel for Respondent
CHIEF JUSTICE WORKMAN delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “Defective workmanship causing bodily injury or property damage is an
‘occurrence’ under a policy of commercial general liability insurance. To the extent our prior
pronouncements in Syllabus point 3 of Webster County Solid Waste Authority v. Brackenrich
and Associates, Inc., 217 W.Va. 304, 617 S.E.2d 851 (2005); Syllabus point 2 of Corder v.
William W. Smith Excavating Co., 210 W.Va. 110, 556 S.E.2d 77 (2001); Syllabus point 2
of Erie Insurance Property and Casualty Co. v. Pioneer Home Improvement, Inc., 206 W.Va.
506, 526 S.E.2d 28 (1999); and Syllabus point 2 of McGann v. Hobbs Lumber Co., 150
W.Va. 364, 145 S.E.2d 476 (1965), and their progeny are inconsistent with this opinion, they
are expressly overruled.” Syl. Pt. 6, Cherrington v. Erie Ins. Prop. & Cas. Co., 231 W.Va.
470, 745 S.E.2d 508 (2013).
2. “ ‘A de novo standard is applied by this court in addressing the legal issues
presented by a certified questions from a federal district or appellate court.’ Syl. Pt. 1, Light
v. Allstate Ins. Co., 203 W.Va. 27, 506 S.E.2d 64 (1998).” Syl. Pt. 2, Aikens v. Debow, 208
W.Va. 486, 541 S.E.2d 576 (2000).
3. “This Court undertakes plenary review of legal issues presented by certified
question from a federal district or appellate court.” Syl. Pt. 1, Bower v. Westinghouse
i
Electric Corp., 206 W.Va. 133, 522 S.E.2d 424 (1999).
4. “Retroactivity of an overruling decision is designed to provide equality of
application to the overruling decision because its new rule has been consciously designed to
correct a flawed area of the law.” Syl. Pt. 4, Bradley v. Appalachian Power Co., 163 W.Va.
332, 256 S.E.2d 879 (1979).
5. “In determining whether to extend full retroactivity, the following factors
are to be considered: First, the nature of the substantive issue overruled must be determined.
If the issue involves a traditionally settled area of law, such as contracts or property as
distinguished from torts, and the new rule was not clearly foreshadowed, then retroactivity
is less justified. Second, where the overruled decision deals with procedural law rather than
substantive, retroactivity ordinarily will be more readily accorded. Third, common law
decisions, when overruled, may result in the overruling decision being given retroactive
effect, since the substantive issue usually has a narrower impact and is likely to involve fewer
parties. Fourth, where, on the other hand, substantial public issues are involved, arising from
statutory or constitutional interpretations that represent a clear departure from prior
precedent, prospective application will ordinarily be favored. Fifth, the more radically the
new decision departs from previous substantive law, the greater the need for limiting
retroactivity. Finally, this Court will also look to the precedent of other courts which have
ii
determined the retroactive/prospective question in the same area of the law in their overruling
decisions.” Syl. pt. 5, Bradley v. Appalachian Power Co., 163 W.Va. 332, 256 S.E.2d 879
(1979).
6. The determination regarding defective workmanship causing bodily injury
or property damage contained in Cherrington v. Erie Insurance Property & Casualty Co.,
231 W.Va. 470, 745 S.E.2d 508 (2013), should be applied retroactively to any pending claim.
iii
Workman, Chief Justice:
This matter is before the Court upon certified question from the United States
District Court for the Eastern District of Kentucky (hereinafter “District Court”). That court
has certified two questions regarding retroactive application of this Court’s decision in
Cherrington v. Erie Insurance Property & Casualty Co., 231 W.Va. 470, 745 S.E.2d 508
(2013). This Court accepted the certified questions and docketed the matter for resolution.
Upon review of the parties’ briefs and arguments, this Court answers the retroactivity issue
presented in the first certified question and remands this matter to the District Court for
further proceedings.
I. Factual and Procedural History
The underlying insurance dispute arose from a construction project in
Prestonsburg, Kentucky, for which BPI, Inc. (hereinafter “BPI), was the general contractor.
In February 2008, American Towers LLC (hereinafter “American Towers”) hired BPI, a
West Virginia contractor, to construct a 300-foot cell tower and cell tower compound, with
an access road to the tower, using plans engineered and provided by American Towers. The
access road collapsed within one year after the completion of the project, allegedly due to
faulty workmanship of BPI and/or its subcontractors.
1
American Towers filed a civil action against BPI, and BPI filed a cross-claim
against Nationwide Mutual Insurance Company (hereinafter “Nationwide”), claiming that
BPI’s potential liability was covered under the commercial general liability (hereinafter
“CGL”) policy it had purchased from Nationwide. In response, Nationwide sought a
declaration that it was not obligated to insure BPI for this incident. Subsequent to discovery,
BPI and Nationwide filed cross-motions for summary judgment.1
The District Court determined that West Virginia law should apply, based upon
the residence of the named insured and the contract itself. The District Court also recognized
that determinative issues in this case depend upon the application of West Virginia law
regarding BPI’s insurance policy covering property damage caused by an “occurrence.” The
District Court examined this Court’s holding in Cherrington and noted that damages arising
from faulty workmanship had not been deemed damages caused by an “occurrence” prior to
this Court’s Cherrington decision. See, e.g., Corder v. William W. Smith Excavating Co.,
210 W.Va. 110, 116, 556 S.E.2d 77, 83 (2001); Erie Ins. Prop. & Cas. Co. v. Pioneer Home
Improvement, Inc., 206 W.Va. 506, 512, 526 S.E.2d 28, 34 (1999) (“[D]amages to a building
sustained by an owner as the result of a breach of a construction contract due to a contractor’s
faulty workmanship are a business risk to be borne by the contractor and not by his
1
The parties’ motions for summary judgment were denied without prejudice, pending
the decision of this Court on the certification order.
2
commercial general liability insurer.”).
The 2013 Cherrington decision, issued after American Towers filed the
underlying civil action against BPI, overruled several cases examined by the District Court,2
holding as follows in syllabus point six:
Defective workmanship causing bodily injury or property
damage is an “occurrence” under a policy of commercial general
liability insurance. To the extent our prior pronouncements in
Syllabus point 3 of Webster County Solid Waste Authority v.
Brackenrich and Associates, Inc., 217 W.Va. 304, 617 S.E.2d
851 (2005); Syllabus point 2 of Corder v. William W. Smith
Excavating Co., 210 W.Va. 110, 556 S.E.2d 77 (2001); Syllabus
point 2 of Erie Insurance Property and Casualty Co. v. Pioneer
Home Improvement, Inc., 206 W.Va. 506, 526 S.E.2d 28 (1999);
and Syllabus point 2 of McGann v. Hobbs Lumber Co., 150
W.Va. 364, 145 S.E.2d 476 (1965), and their progeny are
inconsistent with this opinion, they are expressly overruled.
231 W.Va. at 473, 745 S.E.2d at 511-12, syl. pt. 6. Thus, under Cherrington, defective
workmanship may qualify as an occurrence, allowing resulting damages to be covered under
a policy such as BPI’s policy in this case.
In the certified questions presented to this Court, the District Court observes
that at least a portion of BPI’s potential damages may arise from what could be characterized
2
The policies in the overruled cases and the policy in the present case defined
“occurrence” in nearly identical terms. See, e.g., Corder, 210 W.Va. at 116, 556 S.E.2d at
83; Pioneer Home Improvement, 206 W.Va. at 509, 526 S.E.2d at 31.
3
as defective workmanship. Thus, the District Court requests this Court to answer the
question of whether our decision in Cherrington applies retroactively. Further, the District
Court poses the question: “if Cherrington does not apply retroactively, and the road collapsed
because it was poorly constructed, then does the collapse of the road nevertheless qualify as
an ‘occurrence’?” For reasons explained below, this Court holds that Cherrington applies
retroactively.
II. Standard of Review
Pursuant to West Virginia Code § 51-1A-3 (2014),
the supreme court of appeals of West Virginia may answer a
question of law certified to it by any court of the United States
or by the highest appellate court or the intermediate appellate
court of another state or of a tribe of Canada, a Canadian
province or territory, Mexico or a Mexican state, if the answer
may be determinative of an issue in a pending cause in the
certifying court and if there is no controlling appellate decision,
constitutional provision or statute of this state.
This Court has consistently explained that “‘[a] de novo standard is applied by this court in
addressing the legal issues presented by a certified questions from a federal district or
appellate court.’ Syl. Pt. 1, Light v. Allstate Ins. Co., 203 W.Va. 27, 506 S.E.2d 64 (1998).”
Syl. Pt. 2, Aikens v. Debow, 208 W.Va. 486, 541 S.E.2d 576 (2000); see also Syl. Pt. 1, T.
Weston Inc. v. Mineral Cnty., 219 W.Va. 564, 638 S.E.2d 167 (2006): Syl. Pt. 1, Feliciano
v. 7-Eleven, Inc., 210 W.Va. 740, 559 S.E.2d 713 (2001); Syl. Pt. 1, Gallapoo v. Wal-Mart
Stores, Inc., 197 W.Va. 172, 475 S.E.2d 172 (1996). Likewise, in syllabus point one of
4
Bower v. Westinghouse Electric Corp., 206 W.Va. 133, 522 S.E.2d 424 (1999), this Court
explained that we “undertake[] plenary review of legal issues presented by certified question
from a federal district or appellate court.” Under this plenary standard of review, we proceed
to consider this matter.
III. Discussion
A. Holding of Cherrington: No Specific Reference to Retroactivity
As referenced above, this Court’s decision in Cherrington addressed the issue
of defective workmanship causing bodily injury or property damage and held that such event
is properly characterized as an “occurrence” under a CGL insurance policy. The Cherrington
decision altered the law in West Virginia with regard to that issue, and the new principle was
applied to the 2004 insurance policy under review in Cherrington. Beyond its decision to
apply the new principle to the 2004 policy in that case, this Court did not address the matter
of retroactivity in Cherrington, and no reference to past or future insurance policies was
made.
B. Retroactivity of Judicial Decisions
This Court has wisely explained that we will not attempt to formulate a “single
answer to questions that may arise on the issue of retroactivity.” Adkins v. Leverette, 161
5
W.Va. 14, 20, 239 S.E.2d 496, 499 (1977).3 In this Court’s scrutiny of concepts of
retroactivity, however, discussions appropriately commence with the recognition that this
Court, “like all courts in the country, adheres to the common law principle that, ‘[a]s a
general rule, judicial decisions are retroactive in the sense that they apply both to the parties
in the case before the court and to all other parties in pending cases.’ Crowe v. Bolduc, 365
F.3d 86, 93 (1st Cir. 2004).” Caperton v. A.T. Massey Coal Co., 225 W. Va. 128, 157, 690
S.E.2d 322, 351 (2009); see also Alaskan Vill., Inc. v. Smalley, 720 P.2d 945, 949 (Alaska
1986) (“Absent special circumstances, a new rule of law will apply in the case before the
court and in all subsequent cases.”); Citicorp N. Am., Inc. v. Franchise Tax Bd., 100
Cal. Rptr. 2d 509, 525 (Cal. Ct. App. 2000) (“[T]he general rule as to judicial opinions is that
they are fully retroactive.”); Findley v. Findley, 629 S.E.2d 222, 228 (Ga. 2006) (“[W]e shall
continue to apply the general rule that a judicial decision announcing a new rule is
retroactive[.]”); Aleckson v. Village of Round Lake Park, 679 N.E.2d 1224, 1226 (Ill. 1997)
(“Generally, when a court issues an opinion, the decision is presumed to apply . . .
retroactively [.]”); Dempsey v. Allstate Ins. Co., 104 P.3d 483, 489 (Mont. 2004) (“Therefore
today we reaffirm our general rule that [w]e give retroactive effect to judicial decisions.”
(internal quotations and citation omitted)); In re Commitment of Thiel, 625 N.W.2d 321, 326
(Wis. Ct. App. 2001) (“Wisconsin generally adheres to the ‘Blackstonian Doctrine,’ which
3
Similarly, this Court acknowledged in Kincaid v. Mangum, 189 W.Va. 404, 432
S.E.2d 74 (1993), that “we continue to recognize that there is no one rule which will answer
questions regarding the issue of retroactivity in every case. . . .” Id. at 416, 432 S.E.2d at 86.
6
provides that a decision that clarifies, overrules, creates or changes a rule of law is to be
applied retroactively.”).
Particularly relevant in the civil context, courts have consistently held that
common law provides that appellate decisions are presumed to apply retroactively. Ireland
v. Worcester Ins. Co., 826 A.2d 577, 580-81 (N.H. 2003); see also Beavers v. Johnson
Controls World Servs., Inc., 881 P.2d 1376, 1383 (N.M. 1994) (“[W]e believe there should
be a presumption that a new rule adopted by a judicial decision in a civil case will operate
retroactively.”); Christy v. Cranberry Volunteer Ambulance Corps, Inc., 856 A.2d 43, 51 (Pa.
2004) (“Our general principle is that we apply decisions involving changes of law in civil
cases retroactively[.]”); State v. Styles, 693 A.2d 734, 735 (Vt. 1997) (“We have previously
adopted the common law rule that a change in law will be given effect while a case is on
direct review, except in extraordinary cases. This rule applies whether the proceedings are
civil or criminal.”).
In the United States Supreme Court’s decision in James B. Beam Distilling Co.
v. Georgia, 501 U.S. 529 (1991), a majority of the justices agreed that a rule of federal law,
announced and applied to the parties in the case, must be given full retroactive effect by all
courts adjudicating federal law. Id. at 540. The Court recognized the potential inequity of
selective prospectivity, defined as a situation in which a court applies a new rule “in the case
7
in which it is pronounced, then return[s] to the old one with respect to all others arising on
facts predating the pronouncement.” Id. at 537. The Court reasoned that selective
prospectivity ignores the principle that “litigants in similar situations should be treated the
same, a fundamental component of stare decisis and the rule of law generally.” Id.
Retroactivity was recognized as “overwhelmingly the norm, and is in keeping with the
traditional function of the courts to decide cases before them based upon their best current
understanding of the law” Id. at 535 (citations omitted).
These principles of retroactivity were expanded by the United States Supreme
Court in Harper v. Virginia Department of Taxation, 509 U.S. 86 (1993), and the Court
explained that a controlling interpretation of federal law “must be given full retroactive effect
in all cases still open on direct review and as to all events, regardless of whether such events
predate or postdate our announcement of the rule.” Id. at 97. The Court noted that such rule
extends the ban against selective application of new rules. Id. “[W]e can scarcely permit
the substantive law to shift and spring according to the particular equities of individual
parties’ claims of actual reliance on an old rule and of harm from a retroactive application
of the new rule.” Id. at 97 (quotations and brackets omitted). The Court in Harper concluded
that in the absence of an announcement that a decision is to have prospective effect only, “it
is fairly assumed that the decision will apply prospectively and retroactively.” Id. at 98
8
(additional citation omitted).4
Justice Harlan provided an illuminating allegory in his separate opinion in
Williams v. United States, 401 U.S. 667 (1971) (Harlan, J., concurring and dissenting),
regarding the injustice of selective prospectivity. He explained that “[s]imply fishing one
case from the stream of appellate review, using it as a vehicle for pronouncing new
constitutional standards, and then permitting a stream of similar cases subsequently to flow
4
In a purely prospective ruling, “even the party who successfully litigates the issue
does not benefit from the new rule.” Ashland Oil, Inc. v. Rose, 177 W. Va. 20, 25 n.10, 350
S.E.2d 531, 537 n.10 (1986). Thus, all cases in which new rulings are applied to the litigants
in that case must be characterized as at least partially retroactive. “Prospective application
of a judicial decision is a departure from the general rule and is only appropriate in exigent
circumstances.” Paul v. Wayne Co Dep’t of Pub. Serv., 722 N.W.2d 922, 924 (Mich. 2006).
The various approaches to the issue of retroactivity were aptly summarized in
Thompson v. Hagan, 523 P.2d 1365 (Idaho 1974):
Three different approaches to retroactivity can be identified. The
first approach is the traditional rule which is derived from the
concept that courts do not pronounce new law, but only discover
the true law. Under this approach there are no new decisions, but
only clarifications of the true law which makes a decision
applicable to both past and future cases. The second approach is
the prospective rule. Under this rule a decision is effective only
in future actions, and does not affect the rule of law in the case
in which the new rule is announced. The third approach is the
modified prospective rule which is a combination of the
traditional and prospective rules. Under the modified
prospective rule, the new decision applies prospectively and to
the parties bringing the action resulting in the new decision; or,
to the parties bringing the action and all similar pending actions.
Id. at 1371.
9
by unaffected by that new rule” was inconsistent with proper judicial standards. Id. at 679.
Courts have consistently applied the settled principle of treating similarly-situated defendants
in the same manner and attempting to refrain from leaving one to be a “chance beneficiary.”
United States v. Johnson, 457 U.S. 537, 555-56 n.16 (1982). The United States Supreme
Court emphasized that failure to apply new rules to pending cases creates an “actual
inequity” through the court’s selection of “which of many similarly situated defendants
should be the chance beneficiary of a new rule.” Griffith v. Kentucky, 479 U.S. 314, 323
(1987) (citations omitted).
The concept of applying new rules to pending cases was also addressed in
Forster v. North Dakota Workers Compensation Bureau, 447 N.W.2d 501 (N.D. 1989),
where the North Dakota court providing the following sound reasoning:
Thus a court upon considering the circumstances of the
particular case may determine that an overruling decision should
be given limited retroactive effect, so that the new rule, besides
governing the rights of the parties to the overruling case, will
govern the rights of parties to other cases which were pending
when the overruling case was decided, but that the old rule will
still govern the rights of the parties which had been terminated
prior to the time the overruling case was decided.
Id. at 505 n.4.
This Court has also recognized the evolution of concepts of retroactivity and
has noted that despite the common law rule of retroactivity of appellate judicial decisions,
10
“[t]he courts of this country long have recognized exceptions to the rule of retroactivity[.]”
Ashland Oil, Inc., 177 W.Va. at 23, 350 S.E.2d at 534. This Court’s seminal case regarding
exceptions to retroactivity is Bradley v. Appalachian Power Co., 163 W.Va. 332, 256 S.E.2d
879 (1979). In Bradley, this Court altered the principles of contributory negligence and held
that “[a] party is not barred from recovering damages in a tort action so long as his
negligence or fault does not equal or exceed the combined negligence or fault of the other
parties involved in the accident.” Id. at 332, 256 S.E.2d at 880, syl. pt. 3. The Court in
Bradley overruled prior contributory negligence cases to the extent that they were
inconsistent with the newly announced principles. Id. at 343, 256 S.E.2d at 885. Within the
Bradley opinion, this Court also addressed the matter of retroactivity of its decision and held
as follows in syllabus point four: “Retroactivity of an overruling decision is designed to
provide equality of application to the overruling decision because its new rule has been
consciously designed to correct a flawed area of the law.” Id. at 332, 256 S.E.2d at 880, syl.
pt. 4.
In syllabus point five of Bradley, this Court enumerated several considerations
in a determination of retroactivity, with the weight given to each factor to vary with the facts
of a particular case.
In determining whether to extend full retroactivity, the
following factors are to be considered: First, the nature of the
substantive issue overruled must be determined. If the issue
involves a traditionally settled area of law, such as contracts or
11
property as distinguished from torts, and the new rule was not
clearly foreshadowed, then retroactivity is less justified.
Second, where the overruled decision deals with procedural law
rather than substantive, retroactivity ordinarily will be more
readily accorded. Third, common law decisions, when
overruled, may result in the overruling decision being given
retroactive effect, since the substantive issue usually has a
narrower impact and is likely to involve fewer parties. Fourth,
where, on the other hand, substantial public issues are involved,
arising from statutory or constitutional interpretations that
represent a clear departure from prior precedent, prospective
application will ordinarily be favored. Fifth, the more radically
the new decision departs from previous substantive law, the
greater then need for limiting retroactivity. Finally, this Court
will also look to the precedent of other courts which have
determined the retroactive/prospective question in the same area
of the law in their overruling decisions.
163 W.Va. at 332, 256 S.E.2d at 880, syl. pt. 5. Despite the adoption of these factors, this
Court noted in Bradley that “while general guidelines can be evolved to determine whether
retroactive or prospective application should be given to an overruling decision, it is difficult
to etch them with precision so that they will fit all cases.” Id. at 348, 256 S.E.2d at 888. The
Court ultimately found in favor of retroactivity of the new comparative negligence approach
of Bradley. Id. at 351, 256 S.E.2d at 890.
Critically, the factors courts have adopted, such as those utilized by this Court
in Bradley, “are premised on the presumption that normally, our decisions will be given
retroactive effect. We employ the factors to determine whether equity requires a departure
from the norm.” Baatz v. Arrow Bar, 426 N.W.2d 298, 300 (S.D. 1988) (quoting Am.Jur.2d
12
Courts § 233 (1965) (“the general rule in civil cases seems to be that unless the overruling
decision declares that it shall have only prospective effect, [ ] the judicial overruling of a
precedent has both prospective and retroactive effect.”)).5
In applying the Bradley factors, this Court has “utilized principles of
retroactivity in certain cases when we have created new principles of law which have marked
a clear departure from our prior law.” City of Fairmont v. Pitrolo Pontiac-Cadillac Co., 172
W. Va. 505, 511, 308 S.E.2d 527, 533 (1983); see also Sitzes v. Anchor Motor Freight, Inc.,
169 W.Va. 698, 704, 289 S.E.2d 679, 683 (1982) (finding reversal to be “clearly
foreshadowed by our decisions . . . overruling other common law immunities, particularly
family immunities.”); Bond v. City of Huntington, 166 W.Va. 581, 276 S.E.2d 539 (1981).
In reviewing the Bradley factors, as applicable to the present case, this Court
5
Similarly, in Plumley v. Hale, 594 P.2d 497 (Alaska 1979), the Alaska court aptly
explained:
Absent special circumstances, a new decision of this court will
be given effect in the case immediately before the court, and
will be binding in all subsequent cases in which the point in
question is properly raised, regardless of the fact that the events
to which the law is applied occurred prior to the actual decision
of the Court. In a number of our cases however, we have
recognized that on occasion, the interests of justice may demand
that a new rule of law only be applied prospectively.
Id. at 502 (footnote omitted).
13
first examines the nature of the substantive issue overruled. Although the Cherrington
decision overruled prior cases to the extent they were inconsistent with the holding in
Cherrington, the definition of “occurrence,” particularly within the context of subcontractor
work performance, was not an entirely settled area of the law. For example, the Corder
decision held that “[p]oor workmanship, standing alone, cannot constitute an ‘occurrence.’”
210 W.Va. at 116, 556 S.E.2d at 83. This Court did not explain the meaning of “standing
alone” in Corder and did not address issues regarding defective work performed by a
subcontractor, as in Cherrington.6 Thus, as BPI argues, the prior holdings did not settle the
particular area of law addressed by this Court in Cherrington and presented in the current
case.
The second Bradley factor is easily resolved in this case; this is a substantive
matter, rather than a procedural one which is generally more likely to be applied
retroactively. The third Bradley factor analyzes the impact of the decision, and we address
the issue of whether Cherrington has a relatively narrow impact and is likely to affect only
a few parties. As observed by this Court in Richmond v. Levin, 219 W.Va. 512, 637 S.E.2d
6
In Cherrington, this Court held that defective workmanship may qualify as an
occurrence allowing damages resulting from the defective workmanship. This Court also
held that although the “your work” exclusion in the CGL policy excludes coverage for the
insured contractor’s work, such exclusion did not apply where the work at issue was
performed by the insured’s subcontractor. See 231 W.Va. at 482, 745 S.E.2d at 520
(explaining that policy exclusion “specifically provides coverage for work performed by
subcontractors by excepting it from ‘your work’ exclusion[.]”).
14
610 (2006), a concern that “retroactively would revive all cases decided before the decision
was reached” is not relevant. Id. at 518, 637 S.E.2d at 616. This contention was rejected in
Richmond, and this Court explained that “[t]he issue of retroactivity . . . is narrowly confined
to cases pending . . . when Louk [v. Cormier, 218 W. Va. 81, 622 S.E.2d 788 (2005)]7 was
decided.” 219 W.Va. at 518, 637 S.E.2d at 616. The Court in Richmond clarified that “we
are not aware of any prior ‘civil’ decision of this Court that was made retroactive to cases in
which the appeal period had expired.” Id. at 518-19, 637 S.E.2d at 616-17.8
In the present case, retroactive application of Cherrington would affect a
narrow portion of the law dealing specifically with insurance contracts where this type of
provision becomes pivotal, and Cherrington is a common law decision, overruling and
clarifying prior common law decisions that the Court believed to be flawed or incomplete.
As in Sitzes, applying the judicial decision retroactively would “affect only a limited number
of cases.” 169 W. Va. at 704, 289 S.E.2d at 683.
7
In Louk, this Court held that the Medical Professional Liability Act’s non-unanimous
jury verdict provision was unconstitutional. 218 W. Va. at 94, 622 S.E.2d at 801.
8
It is somewhat intriguing to note that a party in Richmond suggested the approach of
allowing a court to simply decide each question anew, presumably in the same manner as
previously decided, rather than choosing to characterize a prior judicial decision as
retroactive. 219 W.Va. at 516 n.5, 637 S.E.2d at 614 n.5. The assertion was made that “this
Court need not determine whether Louk applies retroactively, and could simply decide anew
whether or not the statute is constitutional.” Id. This Court responded: “We decline to
reinvent the wheel and will confine our analysis to the issue of retroactivity.” Id.
15
The fourth Bradley consideration is not particularly relevant to our inquiry in
this case because Cherrington did not represent a change in statutory or constitutional law.
Additionally, as addressed above, the Cherrington decision, while overruling prior cases to
the extent they were inconsistent, did not involve substantial public issues. It merely
addressed the narrow issue of whether faulty or defective workmanship could constitute an
“occurrence” under a CGL policy.
Similarly, the fifth Bradley factor requires this Court to address how radically
the new decision departs from previous substantive law. As noted above and argued by BPI,
the Cherrington decision concerned faulty workmanship performed by a subcontractor. The
holding does not represent a radical departure from previous law in West Virginia or
throughout the country. This Court’s decisions prior to Cherrington did not directly address
the issue decided by Cherrington. The sixth Bradley factor is closely connected to that
inquiry, based upon the national recognition of evolving legal principles concerning whether
faulty workmanship of a subcontractor constitutes an occurrence. See Cherrington, 231
W.Va. at 479, 745 S.E.2d at 517 (“However, a majority of other states have reached the
opposite conclusion [that faulty workmanship may constitute an occurrence]).9 In other
9
The split in authority on this issue was readily apparent as early as 2003, as indicated
by United States Fidelity & Guarantee Co. v. Continental Casualty Co., 120 S.W.3d 556
(Ark. 2003). In that case, the court noted:
[T]here is a split in the jurisdictions over whether defective
(continued...)
16
jurisdictions applying recent changes regarding whether faulty workmanship constitutes an
“occurrence,” courts have applied the new principles to pending cases immediately. See,
e.g., Trinity Homes LLC v. Ohio Cas. Ins. Co., 864 F. Supp. 2d 744, 748 (S.D. Ind. 2012)
(observing that precedential landscape had been altered by Indiana Supreme Court’s new
judicial decision while case was pending and acknowledging that new principles regarding
faulty workmanship characterized as accident would be applied).
In the present case, we also consider the insurer’s reliance interests and find
9
(...continued)
workmanship is an accident and therefore an “occurrence”
which is covered under the terms of an insurance policy. See
Heile v. Herrmann, 136 Ohio App. 3d 351, 736 N.E.2d 566
(1999); Pursell Construction, Inc. v. Hawkeye–Security Ins. Co.,
596 N.W.2d 67 (1999); Standard Fire Ins. Co. v. Chester-
O'Donley & Associates, Inc., 972 S.W.2d 1 (1998), R.N.
Thompson & Associates, Inc. v. Monroe Guaranty Ins. Co., 686
N.E.2d 160 (1997); United States Fidelity & Guaranty Corp. v.
Advance Roofing & Supply Co., Inc., 163 Ariz. 476, 788 P.2d
1227 (Ct. App. 1989) (all holding that faulty or defective
workmanship is not an accident and therefore not an
“occurrence” under the terms of an insurance policy). But see
Fidelity & Deposit Co. of Maryland v. Hartford Casualty Ins.
Co., 189 F. Supp. 2d 1212 (D.Kan.2002); Colard v. American
Family Mutual Ins. Co., 709 P.2d 11 (Colo. App. 1985) United
States Fidelity & Guaranty Co. v. Bonitz Insulation Co. Of
Alabama, 424 So. 2d 569 (1982) (all holding that faulty or
defective workmanship is an accident and therefore an
“occurrence” under the terms of an insurance policy).
120 S.W.3d at 563 n.4; see also Am. Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co.,
707 S.E.2d 369, 371 (Ga. 2011) (acknowledging “trend in a growing number of
jurisdictions” to cover damage resulting from poor workmanship).
17
they do not mandate a finding of prospectivity of the Cherrington decision. Although this
Court recognizes that retroactive application of Cherrington presents a degree of unfairness
to insurers who have presumably set their rates based upon a definition of “occurrence”
which differs from that announced in Cherrington, this “is a problem which is always
encountered when there is a change in the law brought about by judicial decision.” Suh v.
Pingo Corp., 736 P.2d 342, 348 (Alaska 1987) (Matthews, J., dissenting).
Professor Keeton also addressed the effects on liability insurers and the process
of examining the competing interests involved in a retroactivity decision. His rationale for
retroactive overruling is persuasive:
It is sometimes suggested that retrospective overruling in tort
cases is unfair not only to the uninsured institutions but also to
the liability insurers whose rates have been set in reliance on
precedent and to the group of policyholders who will pay higher
than the compensatory premiums in order to make up for the
losses the insurers suffered by collecting inadequate premiums
over the period to which the overruled decision retrospectively
applies. But the implications of this view make it wholly
unacceptable. First, its general acceptance would in effect
disable courts from creative decisions in accident law. Second,
the need for protection of the reliance interest is much less
significant in this context than in the context of uninsured
institutions, since the risk of disastrous impact upon a particular
insurer is so much less serious. Some guarantee of this appraisal
appears in the fact that ordinarily it is impossible to trace the
impact of particular legal doctrines upon liability insurance
rates. Also, even where the doctrinal change is one that might
promptly affect rates, as in the case of overruling an immunity,
a contrast between the reliance of an insurer and the reliance of
an institution in not insuring remains. A single heavy judgment
18
against an uninsured hospital would be more likely to spell
catastrophe than the number of such judgments that would fall
on a single insurer. Moreover, there is a good prospect of the
insurer’s spreading the loss among a group that comes fairly
close to corresponding to the group of policyholders who might
appropriately have been required to pay higher premiums if the
overruling decision had been forecast.
Keeton, Creative Continuity in the Law of Torts, 75 Harv.L.Rev. 463, 492-93 (1962)
(emphasis added, footnote omitted).
In the case sub judice, an exception to the general rule of retroactivity is not
warranted. This Court finds no reason to deviate from the conventional retroactivity precepts
in the present case, and this action was pending at the time Cherrington was decided. We
consequently hold that the determination regarding defective workmanship causing bodily
injury or property damage contained in Cherrington v. Erie Insurance Property & Casualty
Co., 231 W.Va. 470, 745 S.E.2d 508 (2013), should be applied retroactively to any pending
claim. Thus, any case that was not final at the time the Cherrington decision was rendered
should have the benefit of our holding in Cherrington. Based upon our holding that
Cherrington is retroactive to pending cases, the second certified question need not be
addressed.10
10
“‘In a certified case, this Court will not consider certified questions not necessary
to a decision of the case.” Syllabus Point 6, West Virginia Water Serv. Co. v. Cunningham,
143 W.Va. 1, 98 S.E.2d 891 (1957).” Syl. Pt. 7, Shell v. Metropolitan Life Ins. Co., 181
W.Va. 16, 380 S.E.2d 183 (1989).
19
IV. Conclusion
The certified question having been answered, this case is remanded to the
United States District Court for the Southern District of Kentucky for further proceedings.
Certified question answered.
20