Title: Transp. Ins. Co. v. Womack

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT: All the Justices  
 
TRANSPORTATION INSURANCE COMPANY 
 
 
 
OPINION BY 
v.  Record No. 112283 
JUSTICE LEROY F. MILLETTE 
 
 
 
November 1, 2012 
SHEILA WOMACK 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
Margaret P. Spencer, Judge 
 
 
In this appeal we determine that the circuit court erred 
in extending summary judgment entered against a defendant 
motorist to likewise bind the underinsured motorist (UIM) 
insurance carrier.  Despite the UIM carrier's reliance on the 
defendant and her liability insurer to mount a defense, the UIM 
insurance carrier retains its own right to defend in the event 
that the interests of the UIM insurance carrier and the 
defendant or her liability insurer diverge. 
I.  Facts and Proceedings  
 
Sheila Womack filed suit against Jerrene V. Yeoman to 
recover four million dollars for injuries sustained from a car 
accident allegedly caused by the negligent driving of Yeoman.  
A copy of the complaint was served on Transportation Insurance 
Company (Transportation), Womack's UIM carrier, which is a 
prerequisite under Code § 38.2-2206(F) for Womack to take 
advantage of the policy's UIM provisions. 
 
Both Yeoman, represented by her liability insurance 
carrier, Government Employees Insurance Company (GEICO), and 
 
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Transportation filed answers to the complaint in their own 
names.  Yeoman denied all allegations of negligence and 
asserted an intent to plead affirmative defenses, including a 
claim of contributory negligence.  Transportation similarly 
denied all allegations of negligence, reserved the "right to 
defend this case in its own name or in the name of the 
Defendant as permitted by statute," and pled all affirmative 
defenses that would be supported by evidence.  Transportation 
asked that Yeoman's "liability insurance carrier . . . plead 
and prove the[] affirmative defenses." 
 
Following the filing of Yeoman's and Transportation's 
answers, Yeoman proceeded to file all motions for the defense 
and answer all motions filed by Womack.  Transportation 
remained silent.  In the midst of the developing litigation, 
Yeoman filed a voluntary petition under Chapter 7 of the 
Bankruptcy Code in the United States Bankruptcy Court for the 
Eastern District of Virginia.  As a result, the tort 
proceedings were stayed until the conclusion of the bankruptcy 
action. 
 
In Yeoman's bankruptcy petition, fifteen million dollars 
of debt surrounding the tort litigation was listed with no 
indication in the provided columns of the schedules of debt 
that the claim was either disputed or contingent.  The 
schedules listed claims of five million dollars each owed to 
 
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Womack, GEICO, and Transportation.  Based on these signed 
statements, discharge under Chapter 7 of the Bankruptcy Code 
was granted.  The stay was subsequently lifted with 
instructions that "the movant . . . not enforce the recovery or 
judgment against the debtor in personam, the property of the 
debtor, or property of the estate." 
 
Based on Yeoman's designation of the debt arising from the 
tort action in her Chapter 7 bankruptcy proceedings as 
uncontested, and the subsequent discharge in bankruptcy, Womack 
made a motion for summary judgment.  The motion was heard in 
the Circuit Court of the City of Richmond, where counsel for 
Womack, Yeoman, and Transportation were all present.  Womack 
based her motion on claims that Yeoman would approbate and 
reprobate and violate the doctrine of judicial estoppel if she 
were permitted to continue to deny liability in the tort action 
after admitting liability in bankruptcy court. 
 
In response, Yeoman claimed that the omission of language 
indicating that the liability claims were disputed or contested 
was an inadvertent error that caused no prejudice to Womack, 
thereby precluding summary judgment based upon approbating and 
reprobating or judicial estoppel.  Transportation filed a 
response noting its support of Yeoman's defense.  During oral 
argument, Transportation objected to the suggestion that the 
UIM carrier should also be bound by the bankruptcy proceeding, 
 
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contending that it had no knowledge of the details of, and was 
not a party to, the Chapter 7 bankruptcy proceeding. 
 
The circuit court granted Womack's motion for summary 
judgment on the ground that a continued denial of liability by 
Yeoman would constitute impermissible approbating and 
reprobating.  The court was not clear, however, as to whether 
Transportation was also subject to the ruling.  Transportation 
filed a motion to reconsider, asking that it be able to defend 
its interests as the UIM carrier.  The court denied the motion, 
explaining that Transportation had relinquished its rights to 
put forth a defense by filing an answer that relied on the 
defendant's liability insurance carrier to assert its 
affirmative defenses, and that "defendant and her liability 
insurance carrier admitted liability."  Transportation now 
appeals the judgment. 
II.  Analysis 
A.  Standard of Review 
 
Although the circuit court did not explicitly include 
Transportation when it granted Womack's motion for summary 
judgment, the subsequent denial of Transportation's motion to 
reconsider and refusal to permit it to defend its interests as 
the UIM carrier clearly establish Transportation as a party 
subject to the summary judgment ruling.  As this appeal arises 
from the grant of a motion for summary judgment against 
 
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Transportation and Yeoman, we will review "the application of 
law to undisputed fact de novo."  St. Joe Co. v. Norfolk 
Redevelopment & Hous. Auth., 283 Va. 403, 407, 722 S.E.2d 622, 
625 (2012). 
B.  Right to Defend 
 
Code § 38.2-2206(F) provides that when an insured 
plaintiff brings suit against a uninsured motorist (UM) or a 
UIM and intends to make a claim for recovery from the insurer, 
the UM or UIM insurance carrier will "have the right to file 
pleadings and take other action allowable by law in the name of 
the owner or operator of the uninsured or underinsured motor 
vehicle or in its own name."  It is therefore undisputed that a 
UIM insurance carrier has a statutory right to defend its 
interests in a tort action between the insured plaintiff and 
the underinsured defendant. 
 
It is also undisputed that the UIM insurance carrier's 
right to defend is not tied to the actions of the underinsured 
defendant, but rather "each is entitled to control his or its 
own action but not the actions of the other."  State Farm Mut. 
Auto. Ins. Co. v. Cuffee, 248 Va. 11, 14, 444 S.E.2d 720, 722 
(1994).  When we first discussed this issue in Cuffee, we held 
that an uninsured defendant's admission of liability for a car 
accident did not bind the UM carrier to the admission, thereby 
allowing the carrier to assert its own defense as to liability 
 
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and damages.  Id. at 14-15, 444 S.E.2d at 722.  One year later 
in State Farm Mut. Auto. Ins. Co. v. Beng, 249 Va. 165, 169, 
455 S.E.2d 2, 4 (1995), we found a confession of judgment 
"indistinguishable" from an admission of liability.  The 
confession of judgment was entered by the underinsured 
defendant for an amount $15,000 greater than was covered under 
his liability insurance coverage.  Id. at 167, 455 S.E.2d at 3.  
Even though it did not wish to contest liability, the UIM 
insurance carrier sought to continue its defense with regards 
to damages.  Id.  Because it was denied its right to proceed, 
we reversed.  Id. at 171, 455 S.E.2d at 5.  Whether an 
admission of liability or a confession of judgment, a UM or a 
UIM, a denial of the right to defend against liability or 
simply to contest damages, the effect of "deny[ing] the insurer 
the rights granted by Code § 38.2-2206(F)" remains the same.  
Id. at 169, 455 S.E.2d at 4. 
 
Womack argues that the facts of this case are different.  
Unlike in Cuffee and Beng, in which the circuit court 
completely foreclosed the UM or UIM insurance carriers from 
defending the tort claims following the defendant's admission 
of liability or confession of judgment, Womack claims that 
Transportation voluntarily relinquished its right to defend in 
its own name to Yeoman and her liability insurance company.  
 
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Transportation allegedly did so in its answer, which stated 
that: 
Transportation Insurance Company hereby pleads 
and avers any and all affirmative defenses 
required by law to be [pled] and which are 
supported by the discovery or evidence, such as 
the lack of negligence on the part of the 
Defendant, the negligence of third parties over 
whom the defendant exercised no control or right 
to control, contributory negligence, assumption 
of the risk, sudden emergency, unavoidable 
accident, Act of God, failure to mitigate 
damages, existence of pre-existing conditions, 
and the statute of limitations.  Transportation 
Insurance Company calls on the Defendant and her 
liability insurance carrier to plead and prove 
these affirmative defenses. 
 
After filing its answer, Transportation did not participate 
again in its own name until filing a response to the motion for 
summary judgment, when it once more adopted the defense 
asserted by Yeoman.  Womack contends that Transportation, based 
on its consistent reliance on Yeoman and her liability insurer, 
fully exercised its rights by turning the defense over to 
Yeoman in its entirety. 
 
Transportation denies handing its right to defend over to 
Yeoman.  As in Cuffee and Beng, Transportation filed an answer 
in its own name as permitted under Code § 38.2-2206(F).  The 
wording of its answer did not merely "call upon the Defendant 
and her liability insurance carrier to plead and prove . . . 
affirmative defenses," but also specifically denied liability 
and asserted several affirmative defenses.  Transportation 
 
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describes the "call" for Yeoman to prove these defenses as a 
demand that Yeoman act on the affirmative defenses rather than 
a relinquishment of all responsibility for the defense.  It 
claims that a liability insurance carrier has a non-delegable 
duty to defend the insured, and that by asking the liability 
insurer to assert affirmative defenses Transportation was 
merely asking the liability insurer to fulfill its statutory 
requirement to defend. 
 
Transportation also rejects Womack's assertion that it 
ceded its defense in its response to the motion for summary 
judgment.  Transportation contends that as Yeoman was the only 
party included in Womack's motion for summary judgment, 
Transportation had no reason at that time to argue for its own 
right to defend the case.  According to Transportation, 
regardless of the outcome of the summary judgment motion, it 
retained the right under the statute and case law to defend its 
interest as a UIM carrier. 
 
We agree with Transportation.  In reviewing 
Transportation's answer in its entirety, it is clear that 
Transportation retained its right to defend should Yeoman or 
her liability insurance carrier later abandon their own defense 
of the case.  This is evidenced by Transportation's decision to 
file an answer in its own name, reserving "the right to defend 
th[e] case in its own name or in the name of the Defendant as 
 
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permitted by statute."  Transportation went on to deny 
allegations included in Womack's complaint and assert specific 
affirmative defenses that it demanded the liability insurer 
assert in the course of litigation. 
 
In relying upon Yeoman's liability insurance carrier to 
defend the case, Transportation did not relinquish its right to 
conduct its own defense if the interests of the parties 
diverged.  As long as it was in the interest of Yeoman, her 
liability insurance carrier and Transportation to actively 
defend against Womack's claim as to liability and damages, 
there was no reason for Transportation to mount a separate 
defense.  Only when the interests of the parties diverged, as 
when Yeoman found it in her interest to file for bankruptcy, 
was it in Transportation's interest to mount a separate 
defense. 
 
The circuit court's decision to encompass the UIM 
insurance carrier in its grant of summary judgment against 
Yeoman is a result we rejected in Cuffee and Beng.  As in 
Cuffee and Beng, Transportation participated in the litigation 
when it filed an answer in its own name in which it denied the 
defendant's negligence.  Beng, 249 Va. at 167, 455 S.E.2d at 3; 
Cuffee, 248 Va. at 12, 444 S.E.2d at 721.  Thus, Transportation 
was subsequently precluded from exercising its statutory right 
to defend when it was subjected to summary judgment based 
 
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solely on the defendant's own attempts to approbate and 
reprobate, just as the UM and UIM insurance carriers in Cuffee 
and Beng were improperly prohibited from asserting a defense 
based on the defendant's admission of liability or confession 
of judgment.  Beng, 249 Va. at 167, 455 S.E.2d at 3; Cuffee, 
248 Va. at 15, 444 S.E.2d at 722.  That the judgment at hand 
was based on approbating and reprobating rather than an 
admission of liability, as in Cuffee, or a confession of 
judgment, as in Beng, warrants no alteration to our analysis.  
Transportation retained a right to defend under Code § 38.2-
2206(F) just as the UM and UIM insurance carriers have in 
previous cases before the Court.  Having been denied its right 
to continue in its own defense, summary judgment against 
Transportation must therefore be reversed and the case remanded 
to allow Transportation to assert the defense it was denied. 
 
In reversing summary judgment as to Transportation, we 
must necessarily reverse the summary judgment entered against 
Yeoman under the controlling precedent of Cuffee and Beng.  As 
in Beng, one solution to the impact of Yeoman's admission would 
be for the circuit court to find the defendant's actions worthy 
of an entry of judgment against her, but "refrain from entering 
judgment thereon until after the issues raised by [the UIM 
carrier] have been litigated."  Beng, 249 Va. at 170-71, 455 
S.E.2d at 5.  This is, however, merely one avenue for 
 
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resolution.  We continue to follow our dispositions in Cuffee 
and Beng in leaving the best means of resolving the conflict 
between the defendant's right to control her case, including 
the right to admit liability, and the UIM carrier's right to 
defend its interests to the "ingenuity of the trial courts," 
which will best be able to "fashion workable solutions to 
problem cases."  Cuffee, 248 Va. at 14, 444 S.E.2d at 722; see 
also Beng, 249 Va. at 170, 455 S.E.2d at 5. 
III.  Conclusion 
 
For the aforementioned reasons, we will reverse the 
circuit court's award of summary judgment in favor of Womack 
and remand the case to allow Transportation to present a 
defense, as permitted by Code § 38.2-2206(F) and our holdings 
in Cuffee and Beng. 
Reversed and remanded.