SER Owners Insurance v. Hon. Warren R. McGraw, Judge

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2014 Term
_______________ FILED
June 18, 2014
released at 3:00 p.m.
No. 13-1153 RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
_______________ OF WEST VIRGINIA
STATE OF WEST VIRGINIA EX REL.
OWNERS INSURANCE COMPANY,
Petitioner
v.
HONORABLE WARREN R. McGRAW, JUDGE OF THE
CIRCUIT COURT OF WYOMING COUNTY, WEST VIRGINIA, and MORLAN
ENTERPRISES, INC., Respondents
____________________________________________________________
PETITION FOR WRIT OF PROHIBITION
WRIT DENIED
____________________________________________________________
Submitted: February 19, 2014
Filed: June 18, 2014
Barbara J. Keefer, Esq. Brent K. Kesner, Esq.
Karen E. Klein, Esq. Ernest G. Hentschel, Esq.
Schuda & Associates, PLLC Kesner & Kesner, PLLC
Charleston, West Virginia Charleston, West Virginia
Counsel for the Petitioner Counsel for the Respondent
The Opinion of the Court was delivered PER CURIAM.
CHIEF JUSTICE DAVIS, JUSTICE LOUGHRY and JUSTICE WORKMAN concur,
and reserve the right to file concurring opinions.
JUSTICE KETCHUM concurs, in part, and dissents, in part, and reserves the right to file
a separate opinion.
SYLLABUS BY THE COURT
1. “A writ of prohibition will not issue to prevent a simple abuse of
discretion by a trial. Court. It will only issue where the trial court has no jurisdiction or
having such jurisdiction exceeds its legitimate powers. W. Va. Code 53-1-1.” Syl. pt. 2,
State ex rel. Peacher v. Sencindiver, 160 W. Va. 314, 233 S.E.2d 426 (1977).
2. “In determining whether to entertain and issue the writ of prohibition
for cases not involving an absence of jurisdiction but only where it is claimed that the
lower tribunal exceeded its legitimate powers, this Court will examine five factors: (1)
whether the party seeking the writ has no other adequate means, such as direct appeal, to
obtain the desired relief; (2) whether the petitioner will be damaged or prejudiced in a
way that is not correctable on appeal; (3) whether the lower tribunal’s order is clearly
erroneous as a matter of law; (4) whether the lower tribunal’s order is an oft repeated
error or manifests persistent disregard for either procedural or substantive law; and (5)
whether the lower tribunal’s order raises new and important issues of law of first
impression. These factors are general guidelines that serve as a useful starting point for
determining whether a discretionary writ of prohibition should issue. Although all five
factors need not be satisfied, it is clear that the third factor, the existence of clear error as
a matter of law, should be given substantial weight.” Syl. pt. 4, State ex rel. Hoover v.
Berger, 199 W. Va. 12, 483 S.E.2d 12 (1996).
i
Per Curiam:
Petitioner Owners Insurance Company (“Owners”) invokes the original
jurisdiction of this Court seeking a writ of prohibition to stop the Circuit Court of
Wyoming County from exercising jurisdiction over it, from applying West Virginia
substantive law instead of Ohio law to an insurance coverage issue, from allowing the
respondent, Morlan Enterprises, Inc (“Morlan”) to proceed against it on a first-party bad
faith claim and for violation of the West Virginia Unfair Trade Practice Act (“UTPA”),
W. Va. Code § 33-11-1, et seq., (1974), and from prohibiting the presentation of evidence
of the payment of attorney fees sought by Morlan that were paid by another source.
Upon a thorough review of the briefs, arguments of counsel, the designated record and
applicable precedent, we find that the petitioner has not established the necessary
elements for the granting of a writ, and we therefore deny the requested writ of
prohibition.
I.
FACTUAL AND PROCEDURAL BACKGROUND
This case arises from a September 15, 2005, incident where electrician
Bobby Messer came into contact with an energized electrical transmission line while
working as a lineman for Rectron, Inc., in Mingo County. Mr. Messer alleged that his
supervisors tested the line, confirmed that it was de-energized, grounded it and instructed
him to remove the transformers and switches from the pole. At the time of the accident,
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Mr. Messer was working on a line between a substation and a cellphone tower. Mr.
Messer’s injuries required the amputation of his left arm and right leg.
Mr. Messer filed a civil action against his employer and other entities.
Through a series of amended complaints, Mr. Messer added claims against respondent
Morlan who had contracted with Rectron, Inc. for services, and against Paul Kerns, an
electrician who worked as a subcontractor for Morlan. Mr. Kerns, an Ohio resident, was
covered under a commercial general liability policy issued by Owners. This policy was
obtained in Ohio through an Ohio agent. Owners likewise operates in the State of Ohio.
Mr. Messer and his wife ultimately settled his claims with the various corporate entities,
with the exception of Hampden Coal Company, LLC.1
The commercial general liability policy issued by Owners was obtained by
Mr. Kerns through Gladstone Insurance Agency as part of his work for Morlan. On
March 2, 2005, Mr. Kerns’ insurance agent faxed to Morlan at its headquarters in
Parkersburg a “Certificate of Insurance Coverage” dated March 2005. This certificate of
1
The underlying case in which Mr. Messer sued Hampden Coal Company, LLC,
and other entities was appealed to this Court on a juror disqualification issue. The
pertinent facts regarding the workplace accident giving rise to the present case are
derived from that opinion. The claims against Hampden Coal Company, LLC, were
tried, and the jury returned a verdict in favor of company. Mr. Messer appealed that
verdict to this Court. The verdict was affirmed by this Court in Messer v. Hampden Coal
Company, LLC, 229 W. Va. 97, 727 S.E.2d 443 (2012).
2
insurance identified a policy of insurance in effect from October 9, 2004, through
October 9, 2005. Owners was listed as the insurer providing this coverage, and Morlan
was named along with Mr. Kerns on the certificate as an additional insured.
After Mr. Messer’s lawsuit was filed against Morlan and the other
defendants, Morlan’s insurer, Westfield Insurance Company (“Westfield”), put Owners
on notice of a potential claim against the commercial general liability policy on which
Morlan was listed as an additional insured. Owners took no action to defend Morlan until
after Morlan filed a third-party complaint against Mr. Kerns, wherein Morlan asserted
that any liability it had to Mr. Messer was the result of work performed by Mr. Kerns in
April and May of 2005. Owners then engaged counsel to defend Mr. Kerns for the third-
party claim. Mr. Messer eventually also asserted a direct claim against Kerns and Owners
provided a defense to that claim. In April of 2009, Owners settled Mr. Messer’s claim
against Morlan and Kerns and obtained a full and final release of liability. The settlement
of Mr. Messer’s claim did not, however, resolve the coverage dispute between Morlan
and Owners.
While these coverage claims were pending in West Virginia, Owners twice
filed declaratory actions in Ohio courts, seeking a declaratory judgment of its duties to
Morlan. The first of these actions was filed in the Court of Common Pleas in Guernsey
3
County. That case was dismissed; the Ohio judge ruling that the matters at issue
belonged in the courts of West Virginia.2
The second action was filed in the Court of Common Pleas in Allen
County, Ohio, seeking a declaratory judgment of Owners’ duties toward Morlan. On
November 5, 2009, this case was also dismissed; the court finding that “Ohio has no
overriding interest in deciding this case. It does not involve a localized controversy. It is
a broad action for contribution based on a settlement paid in West Virginia based on
claims originating in West Virginia and involves policies issued and witnesses residing in
West Virginia.” The Allen County court specifically noted that “many of the same issues
could be covered” in the litigation pending in West Virginia.
Owners appealed the Allen County decision to the Ohio Court of Appeals.
The Ohio Court of Appeals affirmed the Allen County ruling by an opinion entered April
5, 2010, stating that West Virginia had far superior contacts with the case than Ohio did,
because the coverage issues arose from an incident in West Virginia, West Virginia was
the state where all of the transactions of direct relevance to Owners’ complaint took place
2
In its order entered June 15, 2009, the Ohio court stated that the “Plaintiff may
pursue adjudication of this matter in the Circuit Court of Wyoming County, West
Virginia, in Civil Action No. 08-C-182.”
4
and West Virginia was the site where Owners negotiated the settlement with Mr. Messer
and his wife for which it now sought indemnification.
After its Ohio appeals were exhausted, Owners filed an action in the Circuit
Court of Wyoming County separate from the one filed by Mr. Messer seeking to recover
the amounts it paid to settle the Messer claims against Morlan from Morlan’s
commercial, Westfield. This civil action was consolidated with the original civil action
filed by Mr. Messer in 2006 for the purposes of discovery.
On May 24, 2011, Owners filed a motion to apply Ohio law to this dispute.
That motion was later amended to include a motion for summary judgment on that issue.
Morlan disputed Owners’ motion, arguing that West Virginia law applied to this dispute
because the certificate of insurance issued by Owners to Morlan was issued to Morlan’s
West Virginia address and that the incident giving rise to this dispute happened in West
Virginia, making West Virginia law the governing law.
On June 11, 2013, the Circuit Court of Wyoming County denied Owners’
Motion to apply Ohio law. Furthermore, in a November 4, 2013, order the court granted
Morlan’s motion to prohibit any evidence or testimony about the payment of legal fees by
Westfield on behalf of attorneys representing Morlan in this action. The circuit court also
granted Morlan’s motion for summary judgment on the coverage issue, stating that
5
Owners’ commercial general liability policy provided primary coverage for Mr. Messer’s
claims against Morlan. The order did not address Morlan’s claims against Owners for
bad faith, breach of contract and violations of the UTPA.
Owners invokes the original jurisdiction of this Court, seeking a writ of
prohibition to stop the current proceedings filed by Morlan in the Circuit Court of
Wyoming County.
II.
STANDARD OF REVIEW
This Court has explained the standard of review applicable to a writ of
prohibition, stating that “[a] writ of prohibition will not issue to prevent a simple abuse of
discretion by a trial court. It will only issue where the trial court has no jurisdiction or
having such jurisdiction exceeds its legitimate powers. W. Va. Code 53-1-1.” Syl. pt. 2,
State ex rel. Peacher v. Sencindiver, 160 W. Va. 314, 233 S.E.2d 426 (1977). In Syllabus
pt. 4 of State ex rel. Hoover v. Berger, 199 W. Va. 12, 483 S.E.2d 12 (1996), this Court
said:
In determining whether to entertain and issue the writ
of prohibition for cases not involving an absence of
jurisdiction but only where it is claimed that the lower
tribunal exceeded its legitimate powers, this Court will
examine five factors: (1) whether the party seeking the writ
has no other adequate means, such as direct appeal, to obtain
the desired relief; (2) whether the petitioner will be damaged
or prejudiced in a way that is not correctable on appeal; (3)
6
whether the lower tribunal’s order is clearly erroneous as a
matter of law; (4) whether the lower tribunal’s order is an oft
repeated error or manifests persistent disregard for either
procedural or substantive law; and (5) whether the lower
tribunal’s order raises new and important problems or issues
of law of first impression. These factors are general
guidelines that serve as a useful starting point for determining
whether a discretionary writ of prohibition should issue.
Although all five factors need not be satisfied, it is clear that
the third factor, the existence of clear error as a matter of law,
should be given substantial weight.
III.
DISCUSSION
In this proceeding the petitioner seeks to prevent enforcement of the circuit
court’s order regarding its jurisdiction over Owners, the use of West Virginia substantive
law over Ohio substantive law, allowing the first-party bad faith action instituted by
Morlan to proceed against Owners and prohibiting Owners from introducing evidence of
the payment of Morlan’s attorney fees by another source.
The petitioner asserts there are four reasons why this Court should stop the
proceedings pending in the Circuit Court of Wyoming County from going forward.
Owners first asserts that the circuit court erred in ruling that West Virginia has
jurisdiction over it since it is an Ohio-based insurer who issued a policy to an Ohio
insured through an Ohio agent for a business located in Ohio that was not licensed to do
business in West Virginia. Second, Owners asserts that West Virginia law should not
7
apply to a question of coverage of an Ohio insurance policy issued to an Ohio insured by
an Ohio insurer via an Ohio agent. Third, Owners contends that the named insured set
forth on the certificate of insurance was never an actual additional insured for which
coverage was available. Fourth, Owners argues that the collateral source rule applies to
the attorney fees paid by Morlan’s own insurer in a coverage dispute regarding the
priority of coverages between Westfield and Owners. Morlan counters that the lower
court’s rulings are correct and interlocutory and that Owners is not entitled to the relief of
this Court in the form of a writ of prohibition.
We have held that an extraordinary writ, such as the one sought by Owners,
is not to be used as a substitute for an appeal.3 “Prohibition lies only to restrain inferior
courts from proceeding in causes over which they have no jurisdiction, or, in which,
having jurisdiction, they are exceeding their legitimate powers and may not be used as a
substitute for writ of error, appeal or certiorari.” Syl. pt. 1, Crawford v. Taylor, 138 W.
Va. 207, 75 S.E.2d 370 (1953). In addition, “[t]his Court is ‘restrictive in its use of
prohibition as a remedy.’ State ex rel. West Virginia Fire Cas. Co. v. Karl, 199 W.Va.
678, 683, 487 S.E.2d 336, 341 (1997).” State ex rel. Allstate Ins. Co. v. Gaughan, 220
3
“Under W. Va. Code 58-5-1 (1925) appeals may only be taken from final
decisions of a circuit court. A case is final only when it terminates the litigation between
the parties on the merits of the case and leaves nothing to be done but to enforce by
execution of what has been determined.” Syl. pt. 3, James M.B. v. Carolyn M., 193
W.Va. 289, 456 S.E.2d 16 (1995).
8
W. Va. 113, 118, 640 S.E.2d 176, 182 (2006). In syllabus point 4 of State ex rel. Hoover
v. Berger, this Court said:
In determining whether to entertain and issue the writ
of prohibition for cases not involving an absence of
jurisdiction but only where it is claimed that the lower
tribunal exceeded its legitimate powers, this Court will
examine five factors: (1) whether the party seeking the writ
has no other adequate means, such as direct appeal, to obtain
the desired relief; (2) whether the petitioner will be damaged
or prejudiced in a way that is not correctable on appeal; (3)
whether the lower tribunal’s order is clearly erroneous as a
matter of law; (4) whether the lower tribunal’s order is an oft
repeated error or manifests persistent disregard for either
procedural or substantive law; and (5) whether the lower
tribunal’s order raises new and important problems or issues
of law of first impression. These factors are general
guidelines that serve as a useful starting point for determining
whether a discretionary writ of prohibition should issue.
Although all five factors need not be satisfied, it is clear that
the third factor, the existence of clear error as a matter of law,
should be given substantial weight.
Applying this standard of review, we find that Owners is not entitled to its
requested writ of prohibition. Under the first prong of syllabus point 4 of Hoover, the
Court must examine whether the party seeking the writ has any other adequate means,
including a direct appeal, to obtain the desired relief. We find that inasmuch as the order
of the circuit court is not a final order, Owners would have an opportunity to appeal the
decision of the lower court upon entry of a final order.
Applying the second Hoover factor regarding whether Owners will be
prejudiced in a way that is not correctable upon appeal, we see no indication that any
9
error in the lower court’s interlocutory rulings would not be reparable if this matter were
directly appealed to this Court. Under prong two of Hoover, Owners is not prejudiced by
waiting to appeal a final order.
The third and most significant factor is whether the circuit court’s order is
clearly erroneous as a matter of law. We have defined “clearly erroneous” as follows:
A finding is “clearly erroneous” when, although there
is evidence to support the finding, the reviewing court on the
entire evidence is left with the definite and firm conviction
that a mistake has been committed. However, a reviewing
court may not overturn a finding simply because it would
have decided the case differently, and it must affirm a finding
if the circuit court’s account of the evidence is plausible in
light of the record viewed in its entirely.
Syl. pt. 1, in part, In the interest of Tiffany Marie S. 196 W. Va. 223, 470 S.E.2d 177(1996). Owners makes a number of arguments regarding the propriety of the lower
court’s rulings, including that the circuit court’s decision was clearly wrong because
West Virginia has no jurisdiction over an Ohio insurer, who issued a policy to cover an
Ohio resident at the request and behest of an Ohio insurance agent. Owners further
argues that Morlan is not a first-party claimant who is entitled to pursue a bad
faith/UTPA agreement against Owners. Morlan counters all of these arguments, relying
upon the issuance of the certificate of insurance naming it an additional named insured to
10
ti at its West Virginia address.4 The issuance of the certificate of insurance naming a
West Virginia company as an additional insured is also support for Morlan’s argument
that West Virginia law, not Ohio law, should apply to this case. Finally, Morlan contends
that the certificate of insurance establishes the basis of it bad faith/UTPA claim against
Owners.
The circuit court’s rulings were not clearly erroneous within our definition
of the phrase. While there were arguments that supported both Owners’ motion and
Morlan’s response, the circuit court’s resolution of these issues does not leave this Court
with a definite and firm conviction that the lower court made a mistake, such that this
matter cannot proceed to a resolution before the circuit court and then be part of an
4
Both Owners and Morlan argues that our holding in Marlin v. Wetzel
County Board of Education, 212 W. Va. 215, 569 S.E.2d 462 (2002), is applicable to the
case at bar. We held in Syllabus point 9 of Marlin that
[a] certificate of insurance is evidence of insurance
coverage, and is not a separate and distinct contract for
insurance. However, because a certificate of insurance is an
insurance company’s written representation that a
policyholder has certain insurance coverage in effect at the
time the certificate is issued, the insurance company may be
estopped from later denying the existence of that coverage
when the policyholder or the recipient of a certificate has
reasonably relied to their detriment upon a misrepresentation
in the certificate.
11
appeal by one of the parties. These issues may be further developed in the circuit court
and subsequently appealed.
Applying the fourth Hoover factor, i.e., whether the circuit court’s order is
an often-repeated error or that it manifests persistent disregard for established procedure
or substantive law, we find that the circuit court’s order does not display this type of
persistent error or blatant disregard for our jurisprudence and procedure. Furthermore,
the circuit court’s order does not raise new or important problems or issues of law of first
impression. Owners argues that this case presents an opportunity to clarify our holding in
Marlin and to provide guidance to circuit courts on the issue and legal effect of
certificates of insurance. We decline to address those questions in this proceeding prior
to an appeal of the final order of the circuit court.
Reviewing the entirety of the record before us, we find that it is premature
to issue the requested writ of prohibition based upon the interlocutory order herein. The
matters raised by Owners in this petition should be resolved in the lower court. An
appeal may then be taken from any final order.
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IV.
CONCLUSION
For the foregoing reasons, we find and conclude that the petitioner is not
entitled to a writ of prohibition.
Writ denied.
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