CHARLESTON – California insurer TIG retained William Wilmoth of Wheeling to defend lawyer William Galloway of Weirton in a Marshall County legal malpractice claim, but Wilmoth defended Galloway by attacking TIG from a witness stand.
Wilmoth persuaded Circuit Judge Arthur Recht to drop a hammer on the company that hired him, but TIG will seek reversal of Recht's ruling from the West Virginia Supreme Court of Appeals in oral arguments Jan. 8.
The case spotlights the tricky situation that arises when an insurer retains a lawyer who directly represents a policyholder while indirectly representing the insurer.
Recht, after a hearing last year, ordered TIG to honor a settlement that Wilmoth negotiated between Galloway and former client Jeffrey Horkulic.
TIG stands for Transamerica Insurance Group.
Horkulic had sued Galloway for letting the statute of limitations run out on an injury claim. TIG, as Galloway's insurer, hired Wilmoth to defend Galloway.
Wilmoth negotiated a settlement that exhausted Galloway's $500,000 policy limit without exposing him to personal liability for further damages.
Galloway confessed that Horkulic suffered $1,400,000 in damages and wife Rebecca Horkulic suffered $100,000 in damages, but they agreed not to execute the judgment.
The settlement would prevent TIG from seeking to recover from Galloway.
Wilmoth then testified in Recht's court that TIG agreed to the settlement. For proof he swore that Mark Rapponotti of TIG said "OK" in a telephone conversation.
No one else testified at the hearing.
TIG attorneys didn't contest the testimony, because Recht wouldn't let them. He did not allow them to appear at the hearing, except to record an objection.
Horkulic's lawyer, Robert Fitzsimmons, defined TIG as "interlopers" and told Recht, "This does not have anything to do with the insurance companies."
Recht also imposed sanctions on TIG, assessing $50,750 in fees for Wilmoth's work in preparing and arguing the motion to compel TIG's compliance.
On appeal, TIG attorney Thomas Flaherty challenges the order and the fees.
Flaherty wrote July 12 that Recht deprived TIG of property without due process.
"TIG not only never consented to the purported settlement, but has a well documented history of objection to the proposed settlement," Flaherty declared.
"If Appellees are sure that TIG agreed to the settlement," he asked, "then why were they so adamant that TIG be blocked from the plenary hearing?"
He answered his own question: "If TIG disputed this on the record, then policy provisions come into play that void coverage if the insured admits liability without the consent of the insurer as well as the provisions of the policy requiring the insured to cooperate with the insurer."
He wrote, "Appellees knew that if Mr. Galloway's coverage from TIG was gone, so were their chances of recovery."
Flaherty also argues that Recht allowed hearsay, by talking Wilmoth's testimony about a phone conversation with Rapponotti.
Fitzsimmons answered Aug. 13 that, "... the settlement agreement was between the Horkulics and Galloway only."
He wrote, "TIG became stricken with post-settlement remorse and attempted to sabotage the settlement agreement."
He accused TIG of throwing its insured to wolves to protect their own hide.
He wrote that Wilmoth is a former U. S. district attorney and "one of the most respected attorneys in the State of West Virginia."
He dared TIG to seek discipline against Wilmoth. "If TIG is dissatisfied with the results obtained by their attorneys," he wrote, "they can file such actions as they deem proper and advisable to address such misunderstandings."
As for hearsay Fitzsimmons wrote that, "Proof of an oral utterance by the party in a contract suit constituting the offer and acceptance which brought the contract into being are not evidence of assertions offered testimonially, but rather verbal conduct to which the law attaches duties and liabilities."
He wrote, "These are defined as verbal acts and are, therefore, not hearsay."