CHARLESTON – The state Supreme Court has overturned a Harrison County jury verdict against insurance companies that was once $58 million but later reduced to $30 million.
The companies – AIG Domestic Claims, now known as Chartis Claims, and Commerce and Industry Insurance – were appealing the verdict and the size of an originally $53 million punitive damages award.
The Supreme Court, in a ruling released Oct. 25 and authored by Justice Allen Loughry, found multiple errors were committed by Harrison Circuit Court Judge Thomas Bedell.
In reversing the verdict, the court also found there was no need to address the size of the punitive damages award that was being wiped away.
“(W)e hold that a dissolved corporation that is asserting a claim solely in its corporate name… may not recover damages for the personal aggravation, annoyance and inconvenience of its non-party former shareholders,” Loughry wrote.
“Accordingly, we find that the trial court erred in its decision that Hayseeds provided the necessary authority for an award of personal damages to Hess Oil for the aggravation, annoyance, and inconvenience of its former shareholders.
“As a result of the trial court’s failure to apply the construct of corporate separateness as well as its wrongful reliance on Hayseeds, the insurance companies are entitled to a new trial.”
The lawsuit was brought over unpaid invoices for environmental remediation work performed at Mount Storm, a community in Grant County.
Hess Oil – a local company, not the Fortune 100 corporation based in New York City – owned a gas station at which an underground leak was discovered in 1997.
At the time, Hess was insured for Underground Storage Tank liability by the State of West Virginia, but never filed a claim under that policy. The State terminated the UST insurance program later that year.
Hess says it submitted applications for insurance to the AIG defendants on Oct. 15 and Oct. 30, 1997. AIG says it only received the Oct. 30, 1997, application.
In February 1998, an oil spill on an adjacent property was discovered. The AIG defendants concluded it was Hess’ responsibility and remediation was required and covered under the policy.
Commerce and Industry paid approximately $622,000 in cleanup costs over the next 10 years.
In 2009, the AIG defendants denied coverage because of an alleged inaccuracy in Hess’ Oct. 30, 1997, insurance application.
Ryan Environmental brought suit against all parties for $252,000 in remediation and cleanup work, and Hess and the AIG defendants brought cross-claims against each other over which should pay.
In May 2011, the AIG defendants resolved the claim by reimbursing the disputed costs to Ryan Environmental. It then sought the $822,000 it paid to Ryan Environmental from Hess Oil.
A jury awarded $5 million in compensatory damages to Hess Oil and found that the AIG defendants had acted maliciously, awarding $53 million in punitive damages. Hess Oil had brought its claims under the Unfair Trade Practices Act.
Using the 5:1 ratio, Bedell multiplied the jury’s $5 million award of compensatory damages by five to arrive at the $25 million figure.
His decision pleased neither side. The defendants called the original $58 million award “jaw-dropping.”
The Supreme Court ruled Bedell wrongly viewed the former shareholders of Hess Oil as the corporation for evidentiary, damage and verdict purposes.
“The record is clear in this case that no injury was suffered by Hess Oil in connection with either the claim initiated by Ryan, which the insurance companies settled with Ryan and obtained a release in favor of Hess Oil, or the cross claims later asserted by the insurance companies against Hess Oil,” Loughry wrote.
“Mr. William Brown (a former shareholder) testified both at his deposition and at trial that Hess Oil suffered no damages.”
The insurance companies also said Bedell erred with the manner in which he handled jury instructions. The court agreed that the jury was given contradictory instructions.
The plaintiffs are represented Michael J. Romano of Clarksburg, while the insurance defendants were represented locally by John H. Tinney of The Tinney Law Firm in Charleston.
Also representing the insurance companies were the Washington, D.C., firm Jackson & Campbell and the New York firm Quinn Emanuel Urquhart & Sullivan.
The Wheeling personal injury law firm Bordas and Bordas filed an amicus brief on behalf of the state's trial lawyer group, the West Virginia Association for Justice.
From the West Virginia Record: Reach John O'Brien at firstname.lastname@example.org.