Justices say insurer not entitled to money it did not pay out

By Kyla Asbury | Jun 22, 2016

CHARLESTON – The West Virginia Supreme Court of Appeals has ruled that an insurance company is not entitled to a statutory right of subrogation.

The case was brought before the Supreme Court upon an appeal of Old Republic Insurance Company from two orders in Wyoming Circuit Court, wherein the court denied Old Republic’s Rule 60 motion for relief from judgment and motion for summary judgment, according to the June 10 opinion.

Old Republic argues that the circuit court abused its discretion when it denied its Rule 60 motion for relief from entry of judgment order and erred in its application of statutory and substantive law by granting the respondents’ summary judgment and determining that Old republic was not entitled to a statutory right of subrogation as set forth in West Virginia code.

“Having reviewed the parties’ briefs and arguments, the appendix record and all other matters before the court, we find that the circuit court erred in denying Old Republic’s Rule 60 motion; however, we affirm the circuit court’s entry of summary judgment in favor of the plaintiffs.”

Old Republic’s claim for subrogation fails because it is attempting to recover money that is never expended and that its insured, Speed Mining, is not entitled to recover.

Justice Margaret Workman authored the majority opinion. Justice Allen Loughry concurred in part and dissented in part and authored his own opinion.

On June 20, 2009, an accident occurred at an underground mine known as American Eagle Mine in Kanawha County. Jason O’Neal, who was employed as an electrician by Speed Mining, was working in the mine when the shutter car struck and ran over him. The accident caused catastrophic injuries, including the loss of one leg and a significant portion of his pelvis and his genitalia.

On Feb. 11, 2010, Jason D. O’Neal and Andrea O’Neal, individually and as parents of Andrew Scott O’Neal, Anna Leigh Grace O’Neal and Austin Matthew O’Neal, filed their suit alleging claims of deliberate intention pursuant to West Virginia code and common law negligence.

At the time of the accident, Speed Mining was a named insured on a workers’ compensation policy of insurance issued by Old Republic to Mangum Coal Company and, as a result of the accident, Jason O’Neal filed a workers’ compensation claim and was receiving workers’ compensation benefits and continues to receive them.

On Oct. 13, 2011, the plaintiffs settled their deliberate intention claim against Speed Mining and the settlement was not subject to a workers’ compensation subrogation lien and Old Republic was not seeking any amount as a result of subrogation from the settlement.

On March 21, 2012, the plaintiffs moved the circuit court during a status conference to amend their complaint to add a declaratory judgment action against Old Republic as it had asserted a statutory subrogation lien with respect to any settlement obtained by the plaintiffs from the remaining Baughan defendants, which were four related companies and individuals that a products liability claim was asserted against.

On April 26, 2012, the plaintiffs settled the products liability claims against the Baughan defendants at a mediation and Old Republic was not a party to the mediation and had not yet been brought into the action because the circuit court had not yet ruled on the motion to amend the plaintiffs’ complaint.

On May 1, 2012, the circuit court granted the motion to amend and, on May 21, 2012, the plaintiffs filed the amended complaint.

On July 2, 2012, the plaintiffs and the Baughan defendants executed a settlement agreement release, which amounted to $3.5 million.

Old Republic filed its answer to the third-party complaint and asserted its own declaratory judgment action against the plaintiffs on July 23, 2012. Discovery followed and both parties filed motions for summary judgment. On Dec. 18, 2013, the circuit court held a hearing regarding the motions and, at the conclusion, the circuit court made no rulings on either motion and asked both parties to submit proposed orders by Jan. 15, 2014.

On Jan. 27, 2014, without any notice to Old Republic, the circuit court entered the plaintiffs’ proposed order. In late August 2014, Old Republic’s counsel contacted both the circuit court and the plaintiff’s attorney regarding the status of the case and was advised that a final order had been entered.

Old Republic filed a motion pursuant to Rule 60(b) of the West Virginia Rules of Civil Procedure on Sept. 12, 2014, and, by order entered Dec. 18, 2014, the circuit court denied Old Republic’s motion.

Under the unique facts of the case, Old Republic is attempting to recover money that it never paid and that its insured is not entitled to receive, according to the Supreme Court’s opinion.

“If this Court were to allow Old Republic to exercise the statutory right of subrogation in this matter, Old Republic would receive a windfall insofar as it would receive monies it never expended,” the opinion states. “Moreover, under such a scenario, Old Republic’s insured, Speed Mining would be allowed to circumvent its settlement of the deliberate intention claim entered into with the Plaintiffs, as Speed Mining gave up any claim of reimbursement as part of the terms of the settlement of that claim.”

Based upon the foregoing, the Supreme Court reversed the circuit court’s denial of Old Republic’s Rule 60(b) motion for relief from judgment.

“In the interest of judicial economy, deciding to forego remand for entry of an order granting Old Republic’s relief requested for purposes of pursuing an appeal, we proceed with a review of the substantive issue,” the motion states. “We affirm the circuit court’s order granting the Plaintiffs’ motion for summary judgment.”

In his separate opinion, Loughry said while is in firm agreement with the majority’s decision that the trial court erred in denying Old Republic’s motion for relief under Rule 60(b), he does not agree with the majority’s decision to affirm the trial court’s “erroneous decision on the issue of statutory subrogation.”

Given the tactics employed by plaintiffs’ counsel to obtain the circuit court’s ruling before Old Republic could even present its position, this case smacks of subterfuge and suggests that the underlying objective was to obliterate Old Republic’s statutorily-created right of subrogation, according to Loughry’s opinion.

“In affirming the circuit court’s erroneous decision on the issue of statutory subrogation, the majority arguably aided what certainly looks like an end run around these penalty provisions,” he said.

The petitioner is represented by Michael J. Schessler and Paul E. Frampton of Bowles Rice LLP.

The respondents are represented by W. Stuart Calwell and David H. Carriger of the Calwell Practice.

W.Va. Supreme Court of Appeals case number: 15-0012

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Bowles Rice LLP Calwell Luce diTrapano PLLC West Virginia Supreme Court of Appeals

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