Davis lectures Starcher in insurance opinion

By Steve Korris | Aug 16, 2007




CHARLESTON – State Supreme Court Chief Justice Robin Jean Davis lectured Justice Larry Starcher so firmly over a dissent that he probably can count it as credit for continuing education.

Davis hammered Starcher for 44 pages in a July 19 opinion concurring with a decision in favor of Farmers and Mechanics Mutual Insurance.

The decision curbed the tricky business of a personal injury plaintiff and a defendant teaming up against an insurer.

Starcher would encourage the practice. He argued in a June 29 dissent that policy holders must protect their assets from insurers that act in bad faith.

"The insurance industry wants to grind plaintiffs down and force them to settle their claims for pennies on the dollar," he wrote, calling the majority decision pointless and cruel.

"No matter what the defendant-insured's motivation was for entering into an agreement with a plaintiff, a majority of courts nationwide support such an assignment of rights or consent agreements."

Starcher apparently lit a fire under Davis. In three weeks, she picked apart every case that plaintiff Daniel Strahin cited.

"The complexity of the issue is quite evident in view of the fact that absolutely none of the fifteen string-cited cases in Mr. Strahin's brief is on point with the facts of his case," Davis wrote. "I should note that the dissenting opinion of Justice Starcher repeats Mr. Strahin's error, by citing to cases that are not on point with the fact pattern presented to and addressed by the majority opinion."

The fact pattern started with a bullet.

In 1998, in Braxton County, Earl Sullivan tried to drive away from his property while Robert Cleavenger waved a high power rifle at his car.

The car carried Daniel Strahin and his sister Marissa Strahin, Cleavenger's former lover who had moved in with Sullivan.

Cleavenger pulled the trigger. He missed his old flame and her new man. He hit Daniel, in the arm. Cleavenger pleaded guilty and served a penitentiary sentence.

In 1999, Daniel Strahin and his parents sued Cleavenger and his parents. The Strahins also sued Sullivan, claiming he should have foreseen Cleavenger's actions.

Sullivan carried $100,000 in homeowner coverage through Farmers and Mechanics and $25,000 in auto coverage through Erie Insurance.

Farmers and Mechanics agreed to provide Sullivan's defense.

Twice in 2000, the Strahins offered to release the claim against Sullivan for $100,000. Farmers and Mechanics refused both offers.

Sullivan and the Strahins crafted a side deal, with Erie's help.

Sullivan assigned to the Strahins his rights under the Farmers and Mechanics policy, including claims of bad faith.

The assignment anticipated a claim under a 1990 Supreme Court of Appeals decision, Shamblin v. Nationwide Mutual.

The decision held that if an insurer missed an opportunity to settle within policy limits, such failure constituted bad faith toward an insured.

It held that an insurer could be liable to an insured for personal liability in excess of policy limits.

The Strahins, for their end of the assignment, agreed not to execute judgment upon Sullivan's personal assets.

The assignment provided that any judgment against Sullivan would not be recordable at any courthouse in West Virginia.

Erie signed the assignment too, and paid its $25,000 limit.

In 2002, before Circuit Judge Alan Moats, a jury returned a verdict of $1,060,556 for the Strahins.

Jurors found Cleavenger 70 percent liable for an intentional act and Sullivan 30 percent liable for negligence.

Moats approved the amount but refused to divide blame. He pinned all liability on Sullivan.

Sullivan appealed.

The Strahins amended the complaint, adding a claim against Farmers and Mechanics for the difference between the policy limit and the verdict.

In 2004 the Supreme Court of Appeals affirmed Sullivan's full liability.

Farmers and Mechanics tendered $100,000 to the Strahins and moved for summary judgment.

The Strahins persisted in their Shamblin claim, but Moats granted summary judgment in 2005. He found that Shamblin did not apply because Sullivan's personal assets were not at risk.

"Farmers and Mechanics could not have breached its duty of good faith and fair dealing to him, or to the plaintiff, to the extent that the plaintiff possesses Sullivan's rights, as its insured was fully protected from personal liability exposure," Moats wrote.

The Strahins appealed. Paul Farrell Jr., of Huntington, Stephen Annand of Washington and Leonard Kelley of Philippi represented the Strahins.

James Varner, Tiffany Durst and Debra Tedeschi Herron of Clarksburg represented Farmers and Mechanics.

Justices heard arguments in January and reached a decision in February.

Justice Spike Maynard delivered the opinion. Davis and Justice Brent Benjamin concurred. Starcher and Justice Joseph Albright dissented.

Maynard quoted a 1994 decision finding that Shamblin protects those who find their hard won personal estates needlessly at risk.

"To recover under Shamblin, there must not only be a negligent refusal to accept a settlement offer by the insurer, but also subsequent harm to the insured," Maynard wrote.

He wrote that the Strahins cited Red Giant Oil v. Lawlor, an Iowa case, but he added that the insurer in Red Giant refused to provide a defense.

Although he knocked down the Shamblin claim, he wrote that assignment of such a claim is clearly permissible.

"However, the mere assignment of rights does not translate into automatic recovery," Maynard wrote. "By coupling the assignment in this case with a covenant not to execute prior to trial and thus prior to an excess verdict, the Shamblin claim was automatically extinguished.

"Holding an insurer liable for a judgment even when the insured is not legally liable for the same only encourages collusion between the insured and the plaintiff to raid the insurance proceeds."

The decision drove Starcher to literary extremes, though it took him more than four months to put it all on paper.

"The majority opinion in this case marks a new low in bad public policymaking by this Court," Starcher wrote. "Without a doubt, the opinion will go down in history as one of the most anti-consumer, anti-contract, pro-insurance company cases ever issued by this Court.

"When I was elected in 1996, I was proud of the Court's reputation –- built by earlier justices -– of issuing decisions that forced insurance companies to behave reasonably.

"And for asking insurance companies to behave reasonably, West Virginia is now routinely called a 'judicial hellhole' with 'the worst legal system in America' by various anti-consumer lobbying organizations."

Starcher said the majority opinion suggests the court now bowing to those lobbying efforts.

"The overwhelming majority of courts in America accept such assignments coupled with covenants not to execute," he wrote. "People better get used to the old days, and should expect their liability insurance company to be allowed to gamble with their assets at trial."

Davis, in her concurrence, ignored Starcher's rhetoric and focused on demolishing his claim to an overwhelming majority.

She wrote that she might have agreed with Strahin on three cases, except that all three involved assignments after judgment. She also noted that one case involved an agreement not reduced to judgment.

She wrote that six cases involved failure of an insurance agent to procure adequate coverage, an issue yet to be decided by the Court.

Where Maynard at least considered Red Giant Oil, Davis tossed it and two others aside because they involved stipulated judgments.

She wrote that the last pair of cases involved default judgments.

"Mr. Strahin was unable to find any judicial decision that squarely met the facts presented by his case," Davis wrote.

All five Justices wrote on the case.

Benjamin wrote in concurrence that a Shamblin claim requires exposure to personal liability for a jury verdict in excess of policy limits due to unreasonable failure to settle prior to a verdict.

He wrote that if parties extinguish potential personal liability for an excess verdict prior to a verdict, they extinguish any Shamblin claim.

Albright wrote that the majority altered principles that encouraged settlement of claims and avoidance of expensive litigation.

He wrote that they ignored the incentive value such agreements have had in promoting settlement.

"What other reason would Mr. Strahin have for negotiating the assignment and covenant not to sue with Mr. Sullivan in this case if not to encourage the parties and their insurers to settle the claim without further litigation?" Albright wrote.

The Court's decision has no effect on pending bad faith claims of the Strahins against Farmers and Mechanics under statute and common law.

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