Coverage Analysis
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STATE BY STATE SURVEY

WEST VIRGINIA
 (4th Circuit)

  ACCIDENTS OR OCCURRENCES

  An insured intends an injury if he "consciously desires the result of his act or knows with substantial certainty that the loss or damage will follow from his conduct regardless of his desire."  Health Care and Retirement Corp. v. St. Paul Fire & Marine Ins. Co., 621 F.Supp. 155 (S.D. W. Va. 1985).  

  Intent will be inferred as a matter of law where the insured's conduct is inherently injurious.  Dotts v. Taressa J.A., 390 S.E.2d 568, 182 W. Va. 586 (1990) and Horace Mann Ins. Co. v. Leeber, 376 S.E.2d 581, 587 (W. Va. 1988)(sexual molestation).

   In Municipal Mutual Ins. Co. of West Virginia v. Fields, 443 S.E.2d 455 (W. Va. 1994), the court ruled that an insane individual may still have expected or intended to cause injury, declaring that whether an insured understood the wrongfulness of its conduct is analytically distinct from whether he expected or intended to cause bodily injury outside the scope of the insurance policy's prohibition against coverage for the intended consequences of intentional acts.  This conclusion was criticized by a dissenting justice as reflecting an "idiosyncratic" view of insanity.
 

  APPELLATE PROCEDURES

  All appeals are heard directly by the West Virginia Supreme Court.
 

  BAD FAITH

  Unfair and deceptive practices are proscribed by Section 4 of the West Virginia Unfair Trade Practices Act, Section 33-11-1.  West Virginia recognizes a private cause of action if an insurer commits an unfair claims settlement act, if the injured party is the insured or a third-party claimant.  Jenkins v. J.C. Penny Casualty Ins. Co., 280 S.E.2d 252, 258 (W. Va. 1981), overruled on other grounds, State Farm Fire & Cas. Co. v. Madden, 451 S.E.2d 721 (W. Va. 1994). 

  A first-party insurer has a duty, once it has received a proof of loss from its policyholder, to promptly conduct a reasonable investigation based on all available information.  If, based on that investigation liability is clear, it must make a prompt, fair and equitable settlement offer.  Miller v. State Farm Mutual Automobile Ins. Co., 1997 WL 771057 (W. Va. December 16, 1997).
  Unfair or deceptive consumer practices are proscribed by W. Va. Code § 46A-6-101 (Michie 1992 & Supp. 1992).

  The Supreme Court of West Virginia held in Hayseeds, Inc. v. State Farm Fire & Casualty Co., 352 S.E.2d 73 (W. Va. 1986) that a first-party insurer may be liable to its policyholder for reasonable attorneys fees and in an appropriate case, punitive damages if the policyholder substantially prevails.

  The state Supreme Court also ruled in Elmore v.  State Farm Mutual Automobile Ins.  Co., 1998 WL 327671 (W.  Va.  June 22, 1998), that a third-party claimant has no right to pursue an action for bad faith against the tortfeasor’s liability insurer.  The Elmore court recognized however, that an agrieved third party could pursue a private right of action for unfair claims settlement practices to the extent that the insurer’s conduct was violating the provisions of West Virginia Code Section 33-11-4 (9).  In general, however, such violations must consist of more than an single instance of misconduct as the claimant must show that they arise from a habit, custom, usage or business policy of the insurer so as to constitute a “general business practice.”  

  Claims against an insurer under Section 33-11-4(9) may be joined with the underlying third-party personal injury action against an insured as long as the claims are bifurcated and proceedings against the insurer are stayed until the underlying claim has been ultimately resolved.  State Farm Fire & Casualty Co. v. Madden, 451 S.E.2d 721, 724 (W. Va. 1994).  
 

  BODILY INJURY

 Allegations of pure emotional distress are not a claim for “bodily injury.”   Animal Urgent Care, Inc. v. American States Insurance Company, No. 27058 (W.Va. November 3, 2000).  
 

  BREACH OF POLICY CONDITIONS

  The West Virginia Supreme Court has ruled that an insured must first justify its delay.  If the delay was reasonable, the burden shifts to the insurer to show how it was prejudiced.  Dairyland Ins. Co. v. Voshel, 428 S.E.2d 542 (W. Va. 1993) and State Farm Mut. Auto Ins. Co. v. Milam, 438 F.Supp. 227 (S.D. W.Va. 1977). 

 In cases involving liability policies, a court must examine several factors before determining whether the insured’s delay in providing notice should preclude coverage.  “The length of the delay in notifying the insurer must be considered along with the reasonableness of the delay.  If the delay appears reasonable in light of the insured’s explanation, the burden shifts to the insurance company to show that the delay in notification prejudiced their investigation and defense of the claim.  If the insurer can produce evidence of prejudice, then the insurer will be held to the letter of the policy and the insured barred from making a claim against the insurance company.  If, however, the insurer cannot point to any prejudice caused by the delay in notification, then the claim is not barred by the insured’s failure to notify.”  Dairyland Insurance Company v. Voshel, 428 S.E.2d 542 (W. Va. 1993) and Colonial Insurance Company v. Barrett, No. 27772 (W. Va. December 6, 2000).  The court also ruled in Barrett  that the requirement of timely notice under a liability policy is satisfied by actual notice even if the notice is received from a party other than the insured. 
 

  BURDEN OF PROOF

  Insured has initial burden of showing that its claim is within the scope of coverage.  State Farm v. American Cas. Co., 146 S.E.2d 842, 150 W. Va. 435 (1966) and Nationwide Mutual Ins. Co. v. Vaughn, 307 F.Supp. 805 (W.D. Va. 1969).  An insurer has the burden of proving the applicability of a policy exclusion.  State Automobile Mutual Insurance Company v. Alpha Engineering Services, Inc., No. 27713 (W.Va. December 6, 2000) and National Mutual Insurance Company v. McMahon & Sons, Inc., 356 S.E.2d 488 (W. Va. 1987).

  A U.S. District Court has opined that insurers have the burden of proving that a loss was expected or intended. Supertane Gas Co. v. Perry, No. 3:90CV33 (N.D.W. Va.  September 6, 1996). 

  An insured seeking to establish the terms of a missing insurance policy must meet a "high degree of proof."  Supertane Gas Corp. v. Perry, No. 3:90CV33 (N.D.W. Va. April 16, 1996), citing Marshall v. Elmo Greer & Sons, 456 S.E.2d 554 (W. Va. 1995) (construction contract).  
 

  BUSINESS RISK EXCLUSIONS

  CGL policies “do not insure the work or workmanship which the contractor or building performs.  They are not performance bonds or builders’ risks policies.  CGL policies, instead, insure personal injury or property damage arising out of the work.”  Erie Insurance Property & Casualty Company v. Pioneer Home Improvement, Inc., 526 S.E.2d 28, 33 (W. Va. 1999) and Cincinnati Insurance Company v. Mills, No. 27805 (W. Va. December 7, 2000)(propertyowner’s suit against a contractor who negligently repaired an improperly installed sewer line held excluded).
 

  CHOICE OF LAWS

  West Virginia courts look to the law of the state where the contract was issued or delivered.  Poffenbarger v. New York Life Ins. Co., 277 F.Supp. 726 (S.D. W.Va. 167); Lee v. Saliga, 373 S.E.2d 345 (W. Va. 1988).  More recently, however, a U.S. District Court has predicted that West Virginia would adopt Section 193 of the Restatement, Conflict of Laws, so as to apply its own law to claims arising out of an insured facility in West Virginia, even though the policies were issued out of state to a corporation that had its main place of business in Tennessee.  Pen Coal Corp. v. Wm. M. McGee & Co., No. CIV A 3:95-0151 (S.D. W.Va. October 19, 1995). 
 

  "DAMAGES" 

  The meaning of "as damages" was certified to the West Virginia Supreme Court in Triangle Industries v. Liberty Mutual Ins. Co., 390 S.E.2d 562 (W. Va. 1990).  However, the court did not reach the issue due to its conclusion that New Jersey law should apply.
 

  DECLARATORY JUDGMENT ACTIONS

  Following the 4th Circuit's ruling in Mitcheson v. Harris, a federal district court has dismissed a petition for declaratory relief arising out of personal injuries caused by exposure to pesticides, holding that federal courts should not exercise jurisdiction, even where the parties are diverse, if a case involves unsettled questions of state law and arise out of tort claims that are already pending in the state courts.  Cardinal Cas. Co. v. S.E.C.U.R.E., C.A. No. 2:93-1053 (S.D. W. Va. February 2, 1994).

  Whatever the rules with respect to declaratory judgment actions, however, the Fourth Circuit has ruled in Myles Lumber Company v. CNA Financial Corporation, 2000 WL 1784100 (4th Cir. December 5, 2000) that a federal district court in West Virginia erred in refusing to retain diversity jurisdiction over an insurance coverage case, holding that the court had no authority to abstain from exercising jurisdiction over claims for breach of contract and unfair trade practices as those claims plainly seek monetary damages.

  An insured is entitled to recover its fees for pursuing a coverage action if it "substantially prevails."  Jordan v. National Grange Mutual Ins. Co., 393 S.E.2d 647 (W. Va. 1990).  A policyholder substantially prevails if an action is settled for an amount equal to what the insured claimed immediately prior to the commencement of the coverage litigation or if it ultimately results in a judgment at or about that amount.  Miller v. State Farm Mutual Automobile Ins. Co., 1997 WL 771057 (W. Va. December 16, 1997).

  An insurer may recover its attorneys fees for successfully prosecuting an action for declaratory relief against its insured where the suit resulted in the finding that the policyholder had defrauded the insurance company and had deliberately set fire to the subject property.  Ohio Farmers Insurance Company v. McKean, 1999 WL 113308 (S.D.W. Va. September 24, 1999).
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History
 

   --Other Policyholder Claims
 

   --Reinsurance Information
 

   --Reserves
 

  DUTY TO DEFEND

  It appears that West Virginia is moving away from a strict "four corners" test.  In Farmer & Mechanics Mut. Ins. Co. v. Hutzler, 447 S.E.2d 22 (W. Va. 1994), the state Supreme Court ruled that an insurer may not restrict its scrutiny to the allegations in the underlying complaint and must undertake a "reasonable inquiry into the facts" to determine whether its coverage is potentially triggered.  See also Health Care and Retirement Corp. v. St. Paul Fire & Marine Ins. Co., No. 84-2488 (S.D. W. Va. 1985)(predicting that West Virginia Supreme Court would require a liability insurer to undertake a reasonable investigation of a claim, even where the complaint itself alleges only that the insured "expected or intended" harm).

   “In other words, an insurer has a duty to defend an action against its insured only if the claim stated in the underlying complaint could, without amendment, impose liability for risks the policy covers.”  State Automobile Mutual Insurance Company v. Alpha Engineering Services, Inc., No. 27713 (W.Va. December 6, 2000) and Butts v. Royal Vendors, Inc., 504 S.E.2d 911 (1998).

  In its most recent statement on this issue, the West Virginia Supreme Court declared that “when a complaint is filed against an insured, an insurer must look beyond the bare allegations contained in the third-party’s pleadings and conduct a reasonable inquiry into the facts in order to ascertain whether the claims asserted may come within the scope of the coverage that the insurer is obligated to provide.”  State Automobile Mutual Insurance Company v. Alpha Engineering Services, Inc., No. 27713 (W.Va. December 6, 2000).
 

  ESTOPPEL AND WAIVER

  Although the doctrine of estoppel may generally not be utilized to expand coverage, exceptions apply (1) where the insurer's misrepresentations at the time of contracting prevented the insured from purchasing coverage that would have applied; (2) where the insurer has defended without a reservation of rights; (3) where the insurer has acted in bad faith.  Potesta v. USF&G, 1998 WL 248612 (W. Va. May 15, 1998).  

  West Virginia requires proof of detrimental reliance for both waiver and estoppel.  Mundy v. Arcuri, 267 S.E.2d 454, 457 (W. Va. 1980), discussed in American Hardware Mutual Ins. Co. v. BIM, Inc.,885 F.2d 132 (4th Cir. 1989).  The general rule governing the doctrine of equitable estoppel is that...there must exist a false representation or a concealment of material facts; it must have been made with knowledge, actual or constructive, of the facts; the party to whom it was made must have been without knowledge or the means of knowledge of the real facts; it must have been made with the intention that it should be acted on; and the party to whom it was made must have relied on or acted on it to his prejudice."  Greco v. Meadow River Coal & Land Co., 113 S.E.2d 79, 85 (W.Va. 1960).

  However, an insurer that undertakes the defense of its insured without issuing a reservation of rights may be estopped to dispute coverage later.  National Mutual Ins. Co. v. McMahon & Sons, Inc.,  356 S.E.2d 488, 493 (W.Va. 1987)(rebuttable presumption of prejudice). 
 
 

  EXCESS INSURERS

  Under West Virginia law, a primary insurer owes a duty of good faith and non-negligence to an excess carrier. Vencil v. Continental Cas. Co., 433 F.Supp. 1371 (S.D.W. Va. 1977). 
 

  KNOWN LOSS

  A U.S. District Court has opined in a pollution case that the West Virginia Supreme Court would not recognize the "known loss" doctrine.  Supertane Gas Co. v. Perry, No. 3:90CV33 (N.D. W. Va. September 6, 1996). 
 

  NUMBER OF OCCURRENCES

  West Virginia Supreme Court held in Shamblin v. Nationwide Mut. Ins. Co., 332 S.E.2d 639 (W. Va. 1985) that number of "occurrences" involved in auto accident was determined by physical cause of accident rather than whether insured had committed multiple acts of negligence.  Accord, Helmick v. Jones, 452 S.E.2d 408 (W. Va. 1994).

  POLLUTION EXCLUSION

  West Virginia is a particularly sensitive jurisdiction in view of the subsequent notoriety of various insurer's 1970 filings with the state Insurance Commission concerning the pollution exclusion.  In Joy Technologies, Inc. v. Liberty Mutual Ins. Co., 421 S.E.2d 493 (1992), the West Virginia Supreme Court had ruled that the exclusion is synonymous with "occurrence" and only avoids coverage if the insured expected or intended pollution to result from its routine disposal practices.  Earlier, federal courts in West Virginia interpreting New Jersey ruled in Liberty Mutual Ins. Co. v. Triangle Industries, Inc., 765 F.Supp. 881 (N.D. W. Va. 1991), aff'd, 957 F.2d 1153 (4th Cir. 1992) that the exclusion precluded coverage for pollution at a landfill to which the insured had knowingly shipped its waste.  More recently, court ruled in Supertane Gas Corp. v. Perry, No. 3:90CV33 (N.D. W. Va. April 16, 1996) that the exclusion did not apply in the absence of evidence that the insured had intentionally polluted.

  U.S. District Court ruled in Supertane Gas Corp. v. Aetna Cas. & Sur. Co., No. 92-0014 (N.D. W.Va. September 27, 1994) and Supertane Gas Corp. v. Perry, No. 3:90CV33 (N.D. W. Va. April 16, 1996) that absolute exclusion precludes coverage for cost of cleaning up pollution at former coal gas site.
 
  The West Virginia Supreme Court has reversed a lower court’s ruling that an absolute pollution exclusion in a policy of liability insurance issued to the state Department of Environmental Protection precluded coverage for a negligence action against the DEP by a property owner who complained that his property had been damaged by run off from an abandoned mine being cleaned up by the DEP.  In Ayersman v. West Virginia DEP, 2000 W. Va. LEXIS 131 (W. Va. November 22, 2000), the court remanded the case on technical grounds for further fact finding but noted in footnotes that it was “skeptical of any policy language that purports to exclude a primary function of an insured” and that the inclusion of an exclusion for clean up costs incurred at “governmental request” might create an ambiguity in a policy issued to a governmental entity.
 

  PUNITIVE DAMAGES

 West Virginia courts tend to treat punitive damages as “additional compensation for the egregious conduct of the insured party.”  Hensley v. Erie Ins. Co., 168 W. Va. 172, 283 S.E.2d 227 (1981).  In Hensley, the West Virginia Supreme Court ruled that such awards could be insured as involving “all sums” that the insured must pay as damages.
 

  STANDARDS FOR POLICY INTERPRETATION

  The doctrine of reasonable expectations requires that the objectively reasonable expectations of policyholders and their intended beneficiaries regarding the terms of a policy will be honored even though painstaking study of the provisions would have negated  those expectations.  Murray v.  State Farm Fire & Casualty Co., No.  24759 (W.  Va.  July 21, 1998 and National Mutual Ins.  Co.  v.  McMahon & Sons, 356 S.E.2d 488 (W.  Va.  1987).

  Under West Virginia law, ambiguities in an insurance contact are to be construed in favor of coverage.  West Virginia Public Employees Ins. Board v. Blue Cross, 328 S.E.2d 356, 359 (W. Va. 1985).  

  Under the doctrine of ejusdem  generis, “where general words are used in a contract after specific terms, the general words will be limited in their meaning or restricted to things of like kind and nature with those specified.”  Murray v.  State Farm Fire & Casualty Co., (No.  24759 W.  Va.  July 21, 1998).   Likewise, the doctrine of noscitur a sociis provides  that the meaning of a general word will be derived and made known from the meaning of a company’s specific words.  Id.
 

  TRIGGER OF COVERAGE

  No cases.

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