Case Title: Lumbermen's Underwriting v. Dave's Cabinet Inc.

Citation: 

Docket Number: 982434

State: virginia

Court: Virginia Supreme Court

Date: 1999-09-17T00:00:00Z

Document:
Present:  All the Justices 
LUMBERMEN’S UNDERWRITING ALLIANCE 
v. Record No.  982434  OPINION BY JUSTICE CYNTHIA D. KINSER 
  September 17, 1999 
DAVE’S CABINET, INC. 
 
FROM THE CIRCUIT COURT OF THE CITY OF CHESAPEAKE 
E. Preston Grissom, Judge 
 
 
This appeal arises out of litigation concerning a 
workers’ compensation and employers’ liability insurance 
policy issued to Dave’s Cabinet, Inc., by Lumbermen’s 
Underwriting Alliance (LUA).  LUA filed a motion for 
judgment against Dave’s Cabinet in the circuit court and 
sought a judgment for an alleged balance due and owing for 
insurance premiums.  Dave’s Cabinet answered the motion for 
judgment and also filed a counterclaim against LUA. 
In the counterclaim, Dave’s Cabinet asserted that LUA 
committed fraud by falsely representing that it could 
provide a savings in premium costs if Dave’s Cabinet 
purchased its workers’ compensation insurance coverage from 
LUA.  Dave’s Cabinet further alleged that LUA knew, or 
should have known, that its policy of requiring Dave’s 
Cabinet to report all workers’ compensation claims, even 
those involving only minor injuries, would substantially 
increase the amount of premiums that Dave’s Cabinet would 
pay for workers’ compensation insurance coverage. 
The motion for judgment and counterclaim proceeded to 
trial by jury.  After hearing evidence, the jury returned a 
verdict in favor of LUA against Dave’s Cabinet in the 
amount of $10,660.  The jury also returned a verdict in 
favor of Dave’s Cabinet on its counterclaim against LUA in 
the amount of $60,000.  The circuit court entered judgment 
on both jury verdicts but reduced the amount of the 
judgment in favor of Dave’s Cabinet to $42,000, which is 
the amount Dave’s Cabinet had requested in the ad damnum 
clause of its counterclaim. 
We awarded LUA this appeal on two issues.1  LUA first 
asserts that the circuit court erred by refusing to set 
aside the jury verdict in favor of Dave’s Cabinet because 
that verdict is inconsistent with the one in favor of LUA.  
Second, LUA contends that the circuit court erred by 
refusing to strike the evidence with regard to the 
counterclaim, and also in declining to set aside the 
verdict on that claim, because Dave’s Cabinet failed to 
prove the elements of constructive fraud as a matter of 
law.  Because we agree with LUA’s second argument, we do 
not need to address the question whether the verdicts are 
                     
1 Dave’s Cabinet did not assign cross-error with regard 
to the judgment entered against it. 
 
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inconsistent.  Therefore, we will reverse, in part, the 
judgment of the circuit court. 
FACTS 
Dave’s Cabinet, which is located in Chesapeake, 
manufactures kitchen cabinets and cabinet moldings, and 
also performs mill work.  The two owners of the company, 
David Alderman and David Boone, met a representative of LUA 
at an industry trade show.  As a result of that meeting, 
Rob Robertson, a district manager for LUA, and Keith 
Wright, a LUA claims adjuster, visited the office of Dave’s 
Cabinet to discuss the terms of LUA’s workers’ compensation 
insurance policy.  At trial, Alderman testified that, 
during that meeting, Robertson stated that LUA worked 
exclusively with woodworking facilities and that LUA’s 
knowledge of the industry would enable Dave’s Cabinet to 
save money by implementing loss control procedures that 
would eventually reduce the amount of premiums that Dave’s 
Cabinet would pay for workers’ compensation insurance 
coverage. 
 
LUA then sent a plant engineer to inspect the facility 
at Dave’s Cabinet.  As a result of that inspection, LUA 
recommended changes in the manner in which Dave’s Cabinet 
handled workers’ compensation claims involving minor 
injuries.  As Alderman had explained to Robertson, Dave’s 
 
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Cabinet had previously treated minor injuries "in-house" 
with appropriate first aid.  For example, the company’s 
practice had been to remove splinters, clean and bandage 
small cuts, apply ice to mashed toes, wash sawdust out of 
eyes, and then allow employees with these injuries to 
return to work.  Dave’s Cabinet sent only those employees 
who sustained more serious injuries to a doctor or hospital 
for treatment.  According to Alderman, Robertson stated 
that LUA wanted Dave’s Cabinet to send all employees who 
suffered injuries at work to the hospital for treatment 
because of LUA’s concerns about future liability and third-
party verification.  In other words, Dave’s Cabinet was 
advised to report all injuries, including "splinters, 
nicks, cuts, [and] mashed fingers," to LUA.  Wright 
likewise advised Alderman that Dave’s Cabinet was required 
to file a claim even if a "Band-aid" would take care of an 
employee’s injury. 
 
Alderman, on behalf of Dave’s Cabinet, entered into a 
"Subscriber Agreement" with LUA in May 1988.  The 
subsequent "Workers Compensation and Employers Liability 
Insurance Policy" that LUA issued to Dave’s Cabinet 
required Dave’s Cabinet to "[p]rovide for immediate medical 
and other services required by the workers compensation 
law" and to advise LUA "at once if injury occurs that may 
 
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be covered by this policy."  According to Alderman, 
Robertson conceded that this policy requirement “would cost 
. . . a little bit more money up front,” but insisted that 
it would save Dave’s Cabinet money in the long run. 
However, Dave’s Cabinet experienced the opposite 
result.  According to Alderman, LUA’s requirement with 
regard to reporting and treating all workers’ compensation 
claims did not effect a reduction in the amount of its 
premiums for workers’ compensation insurance coverage.  
Instead, it caused the company’s "experience modification" 
to increase significantly.  That increase in the 
"experience mod" resulted in higher insurance premiums for 
Dave’s Cabinet. 
ANALYSIS 
A. Standard of Review 
The standard of appellate review applicable to this 
appeal is well settled.  As the party coming to this Court 
with a jury verdict that the circuit court approved, Dave’s 
Cabinet "'occupies the most favored position known to the 
law.'"  Ravenwood Towers, Inc. v. Woodyard, 244 Va. 51, 57, 
419 S.E.2d 627, 630 (1992) (quoting Pugsley v. Privette, 
220 Va. 892, 901, 263 S.E.2d 69, 76 (1980)).  "A trial 
court’s judgment is presumed to be correct, and on appeal, 
we must view the evidence and all reasonable inferences 
 
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deducible therefrom in the light most favorable to the 
prevailing party at trial."  Evaluation Research Corp. v. 
Alequin, 247 Va. 143, 147, 439 S.E.2d 387, 390 (1994).  
When applying this standard, an appellate court must, 
however, set aside a judgment if it is "plainly wrong or 
without evidence to support it."  Id. at 147-48, 439 S.E.2d 
at 390. 
B. Fraud Claim 
In support of its claim for fraud, Dave’s Cabinet 
contends that LUA made two misrepresentations upon which 
Dave’s Cabinet relied to its detriment.  The first 
misrepresentation focused on the LUA policy requiring 
Dave’s Cabinet to report all work-related injuries 
regardless of their severity and to send all employees with 
injuries to a hospital for medical care rather than 
treating employees with only minor injuries "in-house" with 
appropriate first aid.  The second misrepresentation 
concerned the statement by LUA, through its representative, 
that LUA’s policy would eventually save Dave’s Cabinet 
money by lowering the amount of its premiums for workers’ 
compensation insurance coverage.  We conclude that neither 
 
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of these alleged misrepresentations can form the basis of 
an action for constructive fraud.2
The elements of a cause of action for constructive 
fraud are "a showing by clear and convincing evidence that 
a false representation of a material fact was made 
innocently or negligently, and the injured party was 
damaged as a result of his reliance upon the 
misrepresentation."  Mortarino v. Consultant Eng’g Servs., 
251 Va. 289, 295, 467 S.E.2d 778, 782 (1996).  Robertson’s 
and Wright’s statements that LUA wanted Dave’s Cabinet to 
report even minor work-related injuries and to have 
employees who sustained such injuries treated at a hospital 
were not misrepresentations of a material fact.3  They were, 
instead, statements regarding LUA’s policy requirement.  
                     
2 Although the circuit court instructed the jury in 
this case with regard to both actual and constructive 
fraud, the court specifically overruled LUA’s motion to set 
aside the verdict on the counterclaim, and entered judgment 
on that verdict, on the basis that the evidence supported a 
claim for constructive fraud.  Dave’s Cabinet did not 
assign cross-error to the court’s failure to sustain the 
verdict in its favor on the grounds that the evidence also 
supported a claim for actual fraud.  See Rule 5:17(c). 
 
3 The circuit court instructed the jury that Virginia 
law requires an employer to keep a record of all injuries 
occurring in the course of employment and that a report of 
injuries shall be made and transmitted to the Workers’ 
Compensation Commission by the employer, its 
representative, or the insurance carrier for an insured 
employer.  This instruction is a correct statement of the 
provisions contained in Code § 65.2-900(A). 
 
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Although Dave’s Cabinet did not agree with the requirement 
since it constituted a departure from its prior practice 
and eventually resulted in higher premiums for its workers’ 
compensation insurance coverage, LUA fully disclosed its 
required procedure for reporting and treating all workers’ 
compensation claims, and Dave’s Cabinet knew about and 
accepted that procedure when it purchased coverage from 
LUA.  Consequently, Dave’s Cabinet failed to prove an 
essential element of a claim for constructive fraud. 
With regard to the second alleged misrepresentation, 
we recognize that Dave’s Cabinet did not experience any 
reduction in the amount of its premiums for workers’ 
compensation insurance but, in fact, incurred increased 
premiums.  Nevertheless, Robertson’s statement that LUA’s 
policy requirement for reporting and treating all work-
related injuries would eventually reduce the cost of 
workers’ compensation insurance coverage for Dave’s Cabinet 
was merely an unfulfilled promise as to a future event and 
not a statement concerning an existing or pre-existing 
fact.  "'[F]raud must relate to a present or a pre-existing 
fact, and cannot ordinarily be predicated on unfulfilled 
promises or statements as to future events.'"  Patrick v. 
Summers, 235 Va. 452, 454, 369 S.E.2d 162, 164 (1988) 
(quoting Soble v. Herman, 175 Va. 489, 500, 9 S.E.2d 459, 
 
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464 (1940)).  See ITT Hartford Group, Inc. v. Virginia Fin. 
Assoc., Inc., 258 Va. ___, ___, ___ S.E.2d ___, ___ (1999), 
decided today.  Thus, the statement cannot serve as the 
basis of a claim for fraud. 
 
For these reasons, we will reverse the judgment of the 
circuit court with regard to the counterclaim filed by 
Dave’s Cabinet and enter judgment here in favor of LUA on 
that counterclaim. 
                                      Reversed in part 
and final judgment. 
 
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