Daniel W. Thomas v. William Ray McDermitt and State Farm Mutual Insurance ( 2013 )

No. 12-0688 - Daniel W. Thomas, Angela Y. Thomas, individually, and Angela Y.
Thomas, as mother and next friend of Luke D. Thomas, an infant v.
William Ray McDermitt and State Farm Mutual Automobile Insurance
Company
FILED
November 26, 2013
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
Davis, Justice, dissenting:
This case involves a simple, straightforward issue with a correspondingly
simple, straightforward resolution. However, in rendering their decision in this case, the
majority has failed to appreciate that an insurer’s loss of the statutory presumption provided
by W. Va. Code § 33-6-31d (1993) (Repl. Vol. 2011) and a consequent reversion to the
standards enunciated by this Court in Bias v. Nationwide Mutual Insurance Company, 179
W. Va. 125, 365 S.E.2d 789 (1987), should result in the provision of underinsured motorist
coverage in this case.
The governing statute, W. Va. Code § 33-6-31d, makes clear that an insurer
must use a form prescribed by the West Virginia Insurance Commissioner to receive the
presumption that the insurer has made an effective offer of underinsured motorist coverage1
to its insured and that the use of such form is mandatory:
1
While this statutory provision also pertains to optional, additional limits of
uninsured motorist coverage, the case sub judice concerns only optional underinsured
motorist coverage. See generally W. Va. Code § 33-6-31d(a) (1993) (Repl. Vol. 2011).
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(a) Optional limits of uninsured motor vehicle coverage
and underinsured motor vehicle coverage required by section
thirty-one [§ 33-6-31] of this article shall be made available to
the named insured at the time of initial application for liability
coverage and upon any request of the named insured on a form
prepared and made available by the insurance commissioner.
The contents of the form shall be as prescribed by the
commissioner and shall specifically inform the named insured
of the coverage offered and the rate calculation therefor,
including, but not limited to, all levels and amounts of such
coverage available and the number of vehicles which will be
subject to the coverage. The form shall be made available for
use on or before the effective date of this section. The form
shall allow any named insured to waive any or all of the
coverage offered.
(b) Any insurer who issues a motor vehicle insurance
policy in this state shall provide the form to each person who
applies for the issuance of such policy by delivering the form to
the applicant or by mailing the form to the applicant together
with the applicant’s initial premium notice. . . . The contents of
a form described in this section which has been signed by an
applicant shall create a presumption that such applicant and all
named insureds received an effective offer of the optional
coverages described in this section and that such applicant
exercised a knowing and intelligent election or rejection, as the
case may be, of such offer as specified in the form. . . .
W. Va. Code §§ 33-6-31d(a-b) (emphasis added). See also W. Va. Code § 33-6-31d(c)
(applying tenets of W. Va. Code § 33-6-31d(b) to all named insureds of subject policy of
motor vehicle insurance). There is no dispute that the insurer in this case, State Farm, failed
to use the form prescribed by the Insurance Commissioner when offering Mrs. Thomas
optional underinsured motorist coverage. Because State Farm did not use the requisite form,
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it is not entitled to the statutory presumption that it made an “effective offer of the optional
coverage[]”2 to Mrs. Thomas.
The statute is silent, however, as to what happens when an insurer has lost the
presumption that it has made an effective offer of optional coverage. Absent legislative
guidance, the common law in existence at the time the statutory provision was promulgated
applies to answer this interpretive question. This is so because the Legislature specifically
has recognized that “[t]he common law . . ., so far as it is not repugnant to the principles of
the constitution of this state, shall continue in force within the same, except in those respects
wherein it . . . has been, or shall be, altered by the Legislature of this state.” W. Va. Code
§ 2-1-1 (1923) (Repl. Vol. 2013). In other words, “‘[t]he common law is not to be construed
as altered or changed by statute, unless legislative intent to do so be plainly manifested.’
Shifflette v. Lilly, 130 W. Va. 297[, 43 S.E.2d 289 (1947)].” Syl. pt. 4, Seagraves v. Legg,
147 W. Va. 331, 127 S.E.2d 605 (1962). Accord Syl. pt. 3, Seagraves, 147 W. Va. 331, 127
S.E.2d 605 (“The common law, if not repugnant of the Constitution of this State, continues
as the law of this State unless it is altered or changed by the Legislature. Article VIII,
Section 21 of the Constitution of West Virginia; Chapter 2, Article 1, Section 1, of the Code
of West Virginia.”). Because the Legislature has not supplanted the common law by
explaining the scope of coverage provided by a policy of motor vehicle insurance when the
2
W. Va. Code § 33-6-31d(b).
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statutory presumption of an effective offer of optional coverage has been lost by the insurer,
the prevailing common law governs. The common law addressing the ramifications of an
ineffective offer of optional motor vehicle insurance coverage is set forth in this Court’s
opinion in Bias v. Nationwide Mutual Insurance Company, 179 W. Va. 125, 365 S.E.2d 789
(1987).
In Bias, we adopted two succinct holdings. First, when an offer of optional
coverage is mandated by statute, an insurer is required to show that it made an effective offer
of such optional coverage to its insured:
Where an offer of optional coverage is required by
statute, the insurer has the burden of proving that an effective
offer was made, and that any rejection of said offer by the
insured was knowing and informed.
Syl. pt. 1, Bias, 179 W. Va. 125, 365 S.E.2d 789. The Bias Court’s explanation of the
criteria to be considered in determining whether an insurer has made an effective offer of
optional coverage to its insured has been superceded by the Legislature’s promulgation of
W. Va. Code § 33-6-31d which requires an insurer’s offer of such coverage to be made by
using the Insurance Commissioner’s form prescribed for that purpose. See W. Va. Code
§ 33-6-31d(a) (mandating use of requisite form).
Second, the Bias Court held that when the insurer cannot show that it has made
a statutorily required effective offer of optional coverage to its insured, such optional
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coverage is included in the policy of insurance by operation of law:
When an insurer is required by statute to offer optional
coverage, it is included in the policy by operation of law when
the insurer fails to prove an effective offer and a knowing and
intelligent rejection by the insured.
Syl. pt. 2, id. This holding remains good law and applies to answer the certified question
presented by the circuit court in this case.
In the case sub judice, State Farm did not use the form prescribed by the
Insurance Commissioner when it offered optional underinsured motorist coverage to Mrs.
Thomas. Therefore, by operation of W. Va. Code §§ 33-6-31d(a-b), State Farm cannot show
that it made an effective offer of optional coverage to Mrs. Thomas, and, as a result, it has
lost its statutory presumption that it did so. Syllabus point 2 of Bias holds, in pertinent part,
that such optional coverage is “included in the policy by operation of law when the insurer
fails to prove an effective offer and a knowing and intelligent rejection by the insured.” 179
W. Va. 125, 365 S.E.2d 789. It goes without saying that there can be no “knowing and
intelligent rejection by the insured” if there is no “effective offer” in the first instance. Id.
Therefore, once it has been established that an insurer has failed to prove that it has made an
effective offer of optional coverage to its insured, Syllabus point 2 of Bias makes clear that
the inquiry is over and the optional coverage is included in the subject policy of insurance
as a matter of law. 179 W. Va. 125, 365 S.E.2d 789. Accord Syl. pt. 2, Riffle v. State Farm
Mut. Auto. Ins. Co., 186 W. Va. 54, 410 S.E.2d 413 (1991) (“W. Va. Code 33-6-31(b) [1988],
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mandates that when an insurer fails to prove an effective offer and a knowing and intelligent
waiver by the insured, the insurer must provide the minimum coverage required to be offered
under the statute.”).3 This inclusion of optional coverage is derived from the common law
as it existed immediately prior to the Legislature’s adoption of W. Va. Code § 33-6-31d, and,
as such, this Court’s holding in Syllabus point 2 of Bias, 179 W. Va. 125, 365 S.E.2d 789,
should have been applied exactly as this Court intended therein. To the extent my brethren
have interpreted and applied the clearly stated and unambiguous tenets of Bias in a contrary
manner, I respectfully dissent.
3
We further have clarified how the amount of this optional coverage is to be
calculated. See Syl. pt. 5, Jewell v. Ford, 214 W. Va. 511, 590 S.E.2d 704 (2003) (“When
an insurer fails to prove an effective offer and a knowing and intelligent waiver under W. Va.
Code § 33-6-31(b) (1998), the minimum uninsured or underinsured coverage required to be
included in the insured’s policy by operation of law is a sum recoverable as damages ‘up to
an amount not less than limits of bodily injury liability insurance and property damage
liability insurance purchased by the insured[.]’ This language clearly means that the
minimum uninsured or underinsured coverage included in the insured’s policy under these
circumstances is an amount equal to the bodily injury liability insurance and the property
damage liability insurance actually purchased by the insured.”).
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