Berkeley Co. widow appeals judge's ruling in case against insurer

MARTINSBURG – A Berkeley County woman is appealing a federal judge’s decision that dismissed her lawsuit against her late husband’s life insurance provider.

On June 20, Audrey Dianne Kenney filed a notice of her appeal to the U.S. Court of Appeals for the Fourth Circuit. She is fighting a March ruling by U.S. District Judge Gina Groh, of the Northern District of West Virginia, that granted a motion to dismiss filed by the Independent Order of Foresters.

Groh has ruled that Virginia law applies to the case, and that state does not have a tort remedy for bad-faith refusal to honor a first-party insurance claim.

Kenney, who, despite eventually receiving the full amount of her late husband Ronald’s policy, sought damages for bad faith conduct, improper denial of a claim, violations of the West Virginia Unfair Trade Practices Act and punitive damages.

The Independent Order of Foresters, which initially paid only $80,000 of a $130,000 policy, said Virginia law applied under the contract’s choice of law provision. It claimed Virginia law did not recognize Kenney’s claim.

Kenney argued her lawsuit did not contain contract claims but tort claims stemming from alleged unfair settlement practices. She said a choice of law analysis should be used, and West Virginia law should apply to her case.

The Kenneys were residents of Virginia at the time the policy was taken out in 1984.

“In this case, Plaintiff has alleged violations of WVUTPA, and there are similar provisions under Virginia’s Unfair Trade Practices Act,” Groh wrote. “However, Plaintiff has not alleged a breach of contract.

“Therefore, although substance of Plaintiff’s complaint may have alleged some violation of Virginia’s Unfair Trade Practice Act, Plaintiff has only alleged torts, not a breach of contract.

“Because Virginia law does not recognize a tort remedy for bad-faith refusal to honor a first-party insurance claim and Virginia’s Unfair Trade Practices Act does not create a private right of action in tort, Plaintiff has failed to state a claim upon which relief can be granted under Virginia law.”

The Kenneys took out an $80,000 life insurance policy for Ronald on Nov. 14, 1984, with Audrey as the designated beneficiary.

Ten years later, Audrey says they were approached by agents of the Independent Order of Foresters to increase the value of the policy. On May 25, 1994, Ronald completed an application to change the value to $130,000.

The form was signed that day by Mark Ruth, an agent of the Independent Order of Foresters. The company marked the submitted form as received by its underwriting department six days later.

However, on Jan. 3, 1995, another agent of the insurer solicited a signature from Ronald on an “Acceptance of Change in Application” form without telling Ronald that it may be ineffective because it was being sent to the company two months after an expiration date that was printed in the lower right corner of it.

Ronald passed away on Sept. 19, 2011, from lung cancer, and the insurer only paid the original $80,000 value of the policy. Audrey said she had to take out a loan to pay for the costs of the funeral and that she filed a complaint with the West Virginia Insurance Commissioners’ Office.

In July, the insurer agreed to pay an extra $50,000, thus paying a total of $130,000.

Audrey filed her lawsuit Sept. 27 in Berkeley County Circuit Court, and it was removed to federal court on Oct. 16. Groh denied a motion to remand the suit on Dec. 11.

Audrey is represented by Glen Murphy of Spilman Thomas & Battle in Charleston, while the Independent Order of Foresters is represented by Stephen Taylor Hood and Robert L. Massie of Nelson, Mullins, Riley & Scarborough in Huntington.

Groh granted Audrey’s motion to reconsider her earlier ruling, but an amended opinion did not change the outcome.

From the West Virginia Record: Reach John O’Brien at jobrienwv@gmail.com.