### STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS

Admiral Insurance Company, 

### FILED Defendant Below, Petitioner 

### June 5, 2018

released at 3:00 p.m. vs) No. 17-0671 (Cabell County 11-C-0826 and 12-C-65) EDYTHE NASH GAISER, CLERK

SUPREME COURT OF APPEALS

OF WEST VIRGINIA Philip Fisher, D.O., and Pairodocs, Inc., Defendants Below, Respondents



### MEMORANDUM DECISION

In July 2011, Petitioner Admiral Insuran ce Company (“Admiral”) issued a medical professional liability insurance policy to Respon dents Philip Fisher, D.O., and Pairodocs, Inc. 1 (collectively “Respondents” or individually). Months later, two plaintiffs filed medical malpractice/wrongful death lawsuits against Respondents. The Circuit Court of Cabell County, West Virginia, consolidated and stayed those laws uits while the parties lit igated this protracted declaratory judgment action w ith regard to the policy.

Admiral argued that because Dr. Fisher alle gedly made fraudulent misrepresentations and omissions during the application process concerning his involvement in multiple opioid drug overdose deaths, it was entitled to rescind the po licy pursuant to West Virginia Code § 33-6-7 (2011). The circuit court entere d summary judgment for Responde nts on the rescission issue, awarded attorneys’ fees/costs, 2 and permitted a jury to assess consequential damages for aggravation and inconvenience. 3 Ultimately, the circuit court entered judgment against Admiral for $411,709 ($211,709 for attorneys’ fees/costs and $200,000 for aggravation and inconvenience) on July 25, 2017.

On appeal to this Court, Admiral raises seve ral assignments of erro r. It argues there are genuine issues of materi al fact as to whether Dr. Fisher ma de fraudulent misrepresentations or
omissions that were material to Admiral’s ac ceptance of the risk u pon issuing this policy. Respondents deny any misrepresenta tions or omissions and furthe r contend Admiral waived its right to raise that challenge based on its failure to conduct a reasonable inquiry in light of the information it possessed. Because these issues turn on disputed facts, the circuit court’s summary

1 Pairodocs, Inc. does business as Hu ntington Spine Rehab & Pain Center.

2 See Aetna Cas. & Sur. Co. v. Pitrolo , 176 W.Va. 190, 342 S.E.2d 156 (1986), discussed
below.

3 See Hayseeds, Inc. v. State Farm Fire & Cas. , 177 W.Va. 323, 352 S.E.2d 73 (1986),
discussed below.

1judgment ruling cannot stand. This case presents no substantial question of law, satisfies the “limited circumstance” requirement of Rule 21(d ) of the West Virginia Rules of Appellate Procedure, and is appropri ate for a memorandum decision. 4

I. Factual and Procedural History

Dr. Fisher practiced medicine in Barboursv ille, West Virginia, from 1996 until August 2011. He specialized in pain management. In December 2010, the federal Drug Enforcement Agency (“DEA”) executed a search warrant for Dr . Fisher’s home and offices. The affidavit for the subpoena stated that Dr. Fi sher was under investigation for having “unlawfully obtained controlled substances from patients and re-distributed them to girl friends and others . . . and for his own personal consumption.” That affidavit furt her alleged that Dr. Fi sher was “potentially complicit in the overdose deaths of at least four teen (14) individuals, including the death of a former girlfriend.” This event was reported in the local media; however, no criminal charges resulted from this investigation.

The West Virginia Board of Osteopathic Medicine (WVBOOM) investigated similar complaints against Dr. Fisher in January 2011. The complaints alleged Dr. Fisher engaged in various misconduct, including that he unlawfully provided controlled substa nces to patients and other persons; unlawfully possessed opioid medi cations for his own use; engaged in sexual relationships with multiple patients; and was res ponsible for the overdose death of one of those individuals. This investigation ultimately resulted in the revocation of Dr. Fisher’s license to practice medicine. 5

In March 2011, Dr. Fisher’s previous insure r, National Fire and Marine, cancelled his medical malpractice insurance due to his failure to produce certain requested information.

In June 2011, Dr. Fisher submitted the appl ication for medical professional liability insurance at issue here to an agent, James Cr ouse of Wells Fargo Insura nce Services of West Virginia. Mr. Crouse forwarded the application to Mark Walker of National Specialty Underwriters, Inc. (“NSUI”), a wholesale insurance broker who submitted it to Admiral. Relevant here are the following questi ons and responses in the application:

Q: Are you or any organization proposed fo r this insurance aw are of any act, error, omission, fact, circumstance, or r ecords request from any attorney which may result in a malpractice claim or suit?

4 Admiral is represented by Avrum Levico ff, Esq. Respondents are represented by John
A. Kessler, Esq., and David R. Pogue, Esq.

5 The WVBOOM suspended Dr. Fisher’s license in November 2011. Following an administrative hearing, his licen se was revoked. Dr. Fisher appe aled that revocation to the Circuit Court of Kanawha County, which affi rmed the WVBOOM’s decision. Dr. Fisher appealed to this Court and we affirmed. See Fisher v. W.Va. Bd. Osteopathic Med. , Appeal No. 15-0690, 2016 WL 3136851 (June 3, 2016) (memorandum decision).

2A: No.

. . .

Q: Have you ever been notified to res pond to, appear before or have you ever been investigated by any licensing or regulatory agency on a complaint of any nature, including but not limited to unprofessional or unethical conduct?

A: Yes.

In the explanatory memorandum for th at answer, Dr. Fisher stated:

There is a current complaint open with the [WVBOOM.] There has been three hearing dates scheduled and cancelled in re gards to this issue. The next date is scheduled for some time in September of 2011, a definite date has not been set yet. The complaint consists of treating former girlfriends and pre-signed prescription pads. Dr. Fi sher’s license has NOT been suspended, limited, or revoked in any manner. Nor has his DEA. As a matter of fact the [WVBOOM]
renewed his license was rene wed [sic] on 06/12/2011. . . .”

Admiral assigned the insurance application to Brandon Sollers for underwriting, and he requested “full subjectivities” regarding pending complaints. 6 NSUI forwarded that request to Mr. Crouse, who responded on July 7, 2011, stating th at he “met with Dr. Fisher today and he has no patient complaints in the last few years. It turns out that the two employees who turned him in are looking for whistleblower protection. They were fired for embezzling over $300K.” On July 12, 2011, Admiral issued the professional liability policy, with pr ior acts coverage.

Shortly thereafter, Admiral received notice that Respondents were facing medical malpractice/wrongful death lawsuits related to the deaths of Marian K. Hyden and Barry Blackburn. In November 2011, the Hyden action wa s filed alleging that Dr. Fisher was responsible for Ms. Hyden’s drug overdose death b ecause he routinely gave her prescription pain medication without proper overs ight and monitoring. In Januar y 2012, the Blackburn action was filed alleging that Mr. Blackburn’s death wa s caused by Dr. Fisher over-prescribing him methadone. The Blackburn complaint included a cl aim for declaratory reli ef against Admiral, seeking a determination that the policy at issue was valid and provided coverage for the claims. The Hyden complaint was amended to include a si milar count for declarat ory relief. The circuit
court consolidated these lawsuits.

By letter dated February 10, 2012, Admiral advise d Respondents that it would “not afford coverage under the policy for these claims for several reasons.” Admiral stated:

the fact that the application for this polic y contains material misrepresentations is sufficient to avoid the policy ab initio (from the outset). Given those

6 “Subjectivities” is an insurance industry te rm for any additional information requested by the insurer during the unde rwriting process.

3circumstances, Admiral is excused from any duty or obligation that would otherwise be required under the policy. We fu lly expect that the Court will sustain that position, and will order that the policy is void and of no force and effect from its inception. Given that likelihood, you are hereby advi sed to take whatever action you and your counsel deem necessa ry and appropriate to protect your interests[.]

Nevertheless, Admiral informed Respondents that it would afford a defense in the wrongful death actions on an “interim basis,” wh ile its anticipat ed litigation against them for rescission of the policy proceeded. Admiral advi sed Respondents “to employ counsel from the outset at your own expense” because “if and when” Admiral “withdraw[s] from the defense, this will facilitate a prompt, expeditious and orderl y transition of the defense from our appointed defense counsel to your selected counsel.” 7

In February 2013, Admiral filed its answer to the c onsolidated complaints and asserted a counterclaim to rescind the policy pursuant to West Virginia Code § 33-6-7 on the basis that Dr. Fisher made fraudulent misrepresentations and omissions in his insurance application. Respondents filed a cross-claim against Admiral s eeking a declaration that Admiral was required to afford coverage under the policy, as well as attorneys’ fees/costs (under Pitrolo ) and other consequential damages (under Hayseeds ).

The parties agreed to stay the wrongful deat h claims pending the outcome of the coverage litigation. In January 2014, the ci rcuit court entered an order fo rmally staying those claims.

In December 2014, the wrongful death plainti ffs filed a motion for summary judgment arguing that the circuit court s hould preclude Admiral from resc inding the insurance policy at issue based on Admiral’s alleged failure to fully investigate the potential insurance risk presented by Respondents prior to issuing th e policy. At a June 1, 2016, h earing, the circuit court granted the motion and stated Admiral improperly engage d in post-claim underwriting when it denied coverage despite having the relevant information at its disposal at the time of application. 8

7 Admiral filed a declaratory judgment action in the United States Di strict Court for the Southern District of West Virg inia seeking rescission of the po licy on the basis of fraudulent and material misrepresentations/omissions in the app lication. The federal court dismissed this action
in deference to the state court action.

8 “‘Underwriting’ is a label commonly applied to the process, fundamental to the concept of insurance, of deciding which risks to insure and which to reject in order to spread losses over risks in an economically feasible way.” Smith v. State Farm Mut. Auto. Ins. Co. , 93 Cal.App.4th 700, 726, 113 Cal.Rptr.2d 399 (2001). In essence, post-claim unde rwriting occurs when an
insurer waits until a claim has b een filed to obtain information and make underwriting decisions which should have been made when the applicati on was made, not after the policy was issued. In other words, the insurer does not assess an insure d’s eligibility for insurance, according to the risk he presents, until after insurance has been purchased and a claim has been made. See e.g.

, Thomas C. Cady & Georgia Lee Gates, Post Claim Underwriting , 102 W.Va. L. Rev. 809, 845 (2000) (discussing doctrines of estoppel and reas onable expectations in context of post-claim

4Shortly thereafter, Admiral sett led the wrongful death lawsuits, 9 those claims were dismissed, and Respondents were released from liability.

In May 2016, Admiral filed a motion for summary judgment ag ainst Respondents asserting that the circuit court should dismiss their claim for atto rneys’ fees/costs and damages for aggravation and inconvenience. Admiral argued that it had afforded all benefits owed under the policy, both defense and indemnification. Respondents cross-moved for summary judgment, asserting that by virtue of the settlement s, they had substant ially prevailed.

During a June 27, 2016, hearing on those mo tions, the circuit court granted summary judgment in favor of Respondents from the benc h, with a resulting order entered on or about November 23, 2016. The circuit court concluded that Hayseeds damages are available whenever an insured is forced to litigate with his own insurer and substantially prevails. The parties ultimately agreed on $211,709 as the reasonable amount of attorneys’ fees/costs (but not Respondents’ entitlement to them) and a jury trial was set on the issue of Dr. Fisher’s damages for aggravation and inconvenience. In a motion in limine, Admiral argued that damages may not properly be awarded to a policyholder for aggrav ation and inconvenience sustained in connection with an insurer pursuing a le gitimate rescission act ion. The circuit court denied that motion during a June 9, 2017, hearing.

On July 6, 2017, the declaratory judgment action proceeded to a jury trial. The sole issue was the amount of damages, if any, Dr. Fisher was entitled to recover for the aggravation and
inconvenience he endured as a re sult of the litigation with Ad miral. The jury awarded $200,000. On July 25, 2017, the circuit court enter its judgment or der against Admiral for $411,709. Admiral appeals from that order.

II. Standard of Review

Our standard of review in this matter is well established: “A circuit court’s entry of summary judgment is reviewed de novo. ” Syl. Pt. 1, Painter v. Peavy , 192 W.Va. 189, 451 S.E.2d 755 (1994).

III. Discussion

Admiral raises several assignments of error th at can be fairly construed to fall into two distinct categories of alleged er ror regarding the circuit court’s conclusions that: (1) Respondents were entitled to summary judgment on the issue of rescission; 10 and (2) Respondents were

underwriting defense to defeat insu rer’s efforts to rescind policy as void ab initio for material misrepresentations made in application, and noting those determinations necessarily turn on facts of particular case).

9 Respondents did not contribute fina ncially to those settlements.

10 Respondents maintain that Admiral cannot appeal the circuit court’s ruling on the
rescission issue in the wake of its settlement with the plaintiffs. Respondents reason that Admiral can no longer demonstrate an inju ry that can be redressed thr ough a favorable de cision of this

5entitled to damages for attorney’s fees/costs and additional damages for aggravation and inconvenience. As such, we consolidate the assi gnments of error and discuss them accordingly. 11

We first address Admiral’s contention that whether the requirements for rescission under West Virginia Code § 33-6-7 were met necessita te a jury trial. Admiral maintains there is
abundant evidence from which a reasonable trier of fact could conclude that Dr. Fisher made fraudulent misrepresentations or omissions in the application process that were material to its acceptance of the risk. Prior to the policy’s applic ation, fourteen individuals died of opioid or narcotic drug overdoses allegedly involving drugs supplied by Respondents; there was an ongoing investigation by the DEA of those overdose deaths; articles had appeared in the local newspapers, including an article entitled “Barboursville Doctor Accused in 14 Overdose Deaths”; and the WVBOOM initiated administra tive proceedings against Dr. Fisher involving deaths of patients and sexual misconduct with multip le female patients. Admiral argues that Dr.
Fisher revealed none of this information in the application or in response to a request from the
Admiral underwriter for details of pending claims. In his explan atory note, Dr. Fisher merely stated: “The complaint consists of treating former girlfriends and pre-signe d prescription pads.”

Dr. Fisher disagrees, and states he did not make false statements in the application; he claims the WVBOOM’s complaint was based on the death of only one person, and the alleged cause was not medical malpractice but a failure to adequately secure controlled substances from theft. While the WVBOOM had filed two earlier complaints, those complaints did not relate to the death of any patient. Thus, Dr. Fisher maintains these compla ints did not put him on notice of any potential medical malpractice claim. While Dr. Fisher states he did not describe all of the WVBOOM’s allegations against him “verbatim,” he maintains his explanatory note was simply his account “as a lay person.” With regard to the DEA investigation, Dr. Fisher denies that it had merit and notes no criminal charges were fi led. Moreover, Respondent s argue that the only insurance professional with whom Dr. Fisher communicated regarding this insurance was aware of the DEA allegations. Respondents claim there were no recent patient complaints. Finally, Respondents contend Admiral’s effo rts to rescind the policy were based on information that it knew or should have known when it issued the policy.

A rescission effectively renders the policy unenforceable from the outset so that there was never any coverage. West Virg inia Code § 33-6-7 provides:

All statements and descriptions in any application for an insurance policy or in negotiations therefor, by or in behalf of the insu red, shall be deemed to be representations and not warranties. Misr epresentations, omissions, concealments of facts, and incorrect st atements shall not prevent a recovery under the policy
unless:

(a) Fraudulent; or

Court. We disagree. As Admiral notes, the su mmary judgment ruling on rescission forms the predicate for the damages at issue here.

11 See Tudor’s Biscuit Worl d of Am. v. Critchley , 229 W.Va. 396, 401-02, 729 S.E.2d 231, 236-37 (2012) (consolidating related and/or redundant assignments of error).

6(b) Material either to th e acceptance of the risk, or to the hazard assumed by the insurer; or

(c) The insurer in good faith would either not have issued the policy, or would not have issued a policy in as large an am ount, or would not have provided coverage with respect to the hazard resulting in th e loss, if the true facts had been made known to the insurer as requ ired either by the appl ication for the policy or
otherwise.

In syllabus point four of Powell v. Time Insurance Co. , 181 W.Va. 289, 382 S.E.2d 342 (1989), we held that in order to prove that an insured fraudulen tly misrepresented facts pursuant to subsection (a) of West Virginia Code § 33-6-7, the “misrepresentations, omissions, concealments of facts, and incorre ct statements on an application for insurance by an insured must be knowingly made with an intent to deceive the insurer and relate to material facts affecting the policy.” Powell , 181 W.Va. at 291, 382 S.E.2d at 344 (emphasis added). Thus, for Admiral to prevail under West Virg inia Code § 33-6-7(a), it must establish Dr. Fish er’s specific
intent to deceive.

However, in examining subsections (b) and (c ) of West Virginia Code § 33-6-7, our focus
in Powell shifted from the insured’s culpability to th e impact the misrepresentation would have on the insurer’s business judgment used in issu ing the policy. Under thos e subsections, Admiral must establish that the alleged misrepresentation by Dr. Fisher was material to the issuance of the policy:

[I]n order for a misrepresentation in an insurance application to be material, it must relate to either the acceptance of th e risk insured or to the hazard assumed by the insurer. Materiality is determined by whether the insurer in good faith would either not have issued the policy, or would not have issued a policy in as large an amount, or would not have provide d coverage with resp ect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or otherwise.

181 W.Va. at 297, 382 S.E.2d at 350, Syl. Pt. 5. 12

Accordingly, neither West Virginia Code § 33-6-7(b) nor (c) require s that Admiral prove the subjective element that Dr. Fisher spec ifically intended to place misrepresentations, omissions, concealments of fact, or incorrect statements on an application in order to prevail in
the rescission action. Massachusetts Mut. Life Ins. Co. v. Thompson , 194 W.Va. 473, 477-78, 460 S.E.2d 719, 723-24 (1995).

12 Moreover, we held “[w]here an insurer seeks to avoid a policy based on a material misrepresentation, this assertion is in the nature of an affirmative defense which the insurer must prove by a preponderance of the evidence.” Id. , Syl. Pt. 7.

7The evidence presented at summary judgment de monstrated that Dr. Fisher was far less than candid during the application process for hi s medical professional liability insurance with Admiral. The facts developed at the administra tive hearing before th e WVBOOM are strong evidence for Admiral’s position that Dr. Fisher mu st have been aware of acts, errors, omissions, facts and circumstances “which may result in a malpractice claim or suit[.]” This Court summarized those disturbing findings and held th e evidence demonstrated that Dr. Fisher’s violations of the applicable standard of care contributed to or directly resulted in the deaths of seven patients. Fisher , 2016 WL 3136851, at *15.

For instance, we summarized the WVBOOM’s findings with regarding to Ms. Hyden (Patient 1):

Patient 1 died at her home on N ovember 29, 2009. The Board found that petitioner treated Patient 1 from December 2007 until th e time of her death for Epstein-Barr syndrome and other disorders. The evidence reveal ed that Patient 1 worked for petitioner as a registered nur se anesthetist; had a sexual relationship with him; lived in his house; and had access to prescription drugs that other patients had returned to petitioner and th at were left in petitioner’s office. According to the autopsy, the death was accidental and the cause of death was “the result of combined fentanyl, al prazolam, doxylamine intoxication, due to application of non-prescr ibed fentanyl patch.”

The Board concluded that petitioner’s failure to properly secure and/or destroy controlled substances that were returned to him by patients allowed
Patient 1 to divert these c ontrolled substances and that they contributed to her death, in violation of 24 C.S.R. § 1- 18.1.10 (2001). The Board further concluded that petitioner violated 24 C.S.R. § 1-18.1.5 (2001) “by keeping controlled
substance medications that had been retu rned by some of his patients for the purpose of redistributing these substances to other persons, and by actually distributing them to other persons [i.e., a fentanyl patch], such as Patient 1.” Finally, the Board conclude d that, by “engag[ing] in sexual activity within a patient-physician relationship,” pe titioner violated 24 C.S.R. § 1-18.1.10

.

Fisher , 2016 WL 3136851, at *1-2 (footnotes omitted) . We also summarized the WVBOOM’s findings with regard to Mr . Blackburn (Patient 5):

Patient 5, a thirty-nine year-old male, died on April 24, 2008, from bronchopneumonia due to the acute combin ed effects of methadone, fluoxetine, and dextromethorphan, with a contributory cause of hypertensive cardiovascular disease with mild coronary artery stenos is. The Board found that petitioner first treated Patient 5 on April 22, 2008, when he presented with a significant medical history of motor vehicle accidents and surgeries. In a questionnaire he completed for petitioner, Patient 5 listed the drugs he was taking. Following examination, petitioner increased Pati ent 5’s methadone, maintained his dose of Klonopin, prescribed Lunesta, and took him off of Roxicodone, Neurontin, and Prozac. In doing so, petitioner did not first contact Pa tient 5’s previous physician or perform a urine drug screen.

8The Board concluded that petitione r violated and 24 C.S.R. § 1-18.1.24 (2001) and 18.1.10 in his treatment of Pa tient 5, by prescribing a controlled substance in such amounts and freque ncy, under the circumstances, which
treatment contributed to the death of Pa tient 5. Finally, the Board concluded that petitioner’s “acts and failures were a direct cause of Patient 5’s death.”

Fisher , 2016 WL 3136851, at *3 (footnotes omitted).

Consequently, because Dr. Fisher has been j udicially determined to have committed the
acts that the WVBOOM attributed to him, a reasonable finder of fact could conclude that Dr. Fisher was aware (1) this investigation dealt w ith much more serious matters than “treating former girlfriends and pre-signed prescription pads,” and (2) his ac tions could result in a medical malpractice lawsuit.

In the same fashion, material issues of fact exist as to whether Dr. Fisher’s alleged misrepresentations or omissions were material to Admiral’s acceptance of the risk. W.Va. Code § 33-6-7(b) and (c). It is difficult for one to imagine facts more “[m] aterial either to the acceptance of the risk, or to the hazard assu med by the insurer.” W.Va. Code § 33-6-7(b).

In Filiatreau v. Allstate Insurance Co. , 178 W.Va. 268, 358 S.E.2d 829 (1987), this Court recognized that “[a]ssuming there was a material misrepresentation, howev er, there is also a question of whether the insurance company waived their right to challenge that misrepresentation” based on its failu re to conduct a reasonable inquiry. Id . at 271, 358 S.E.2d at
832. In Filiatreau , we reversed and remanded the summary judgment order because there were material issues of fact for trial. The same result is compelled here. Further, Admiral is mistaken when it asserts post-claim underwri ting is not a recognized defense to a West Virginia Code § 33-6-7 rescission action. Although not using that specific phrase, this Court in Filiatreau described post-claim underwriting as an insu red’s defense precisely in this context. 13

13 In Lewis v. Equity National Life Insurance Co. , 637 So.2d 183 (Miss. 1994), the court articulated compelling policy reas ons supporting this defense:

An insurer has an obligation to its in sureds to do its underwriting at the time a policy application is made, not after a claim is filed. It is patently unfair for a claimant to obtain a policy, pay his premiums and operate under the assumption that he is insured against a specified risk, only to learn after he submits a claim
that he is not insured, and, therefore, cannot obt ain any other policy to cover the
loss. The insurer controls when the unde rwriting occurs. It therefore should be estopped from determining whether to accept an insured six months or more after a policy is issued. If the insured is not an acceptable risk, the application should be denied up front, not after a policy is issued. This allows the proposed insured to seek other coverage with another company since no company will insure an
individual who has suffered serious illness or injury.

Id . at 188-89.

9It is well established that “[a] motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried[.] ” Syl. Pt. 3, in part, Aetna Cas. & Sur. Co. v. Fed. Ins. Co. of New York , 148 W.Va. 160, 133 S.E.2d 770 (1963). Accordingly,
the circuit court erred in awar ding summary judgment in favor of Respondents on the issue of
rescission.

To give guidance to the circuit court follo wing remand, we briefly address Respondents’ request for Pitrolo and Hayseeds damages. In syllabus point two of Pitrolo , this Court held: “Where a declaratory judgment action is filed to determine whether an insurer has a duty to defend its insured under its policy, if the insure r is found to have such a duty, its insured is
entitled to recover reasona ble attorney’s fees arising from the declaratory judgment litigation.”
Pitrolo , 176 W.Va. at 191, 342 S.E.2d at 157. Pitrolo was initiated only after the insurer
breached the insurance contract by refusing to defend. We stated:

The general reason stated for allowing r ecovery of attorney’s fees in this
situation is that where an insurer has vi olated its contractua l obligation to defend its insured, the insured should be fully compensated for all expenses incurred as a
result of the insurer’s breach of contract , including those expenses incurred in a declaratory judgment action. To hold otherw ise would be unfair to the insured, who originally purchased th e insurance policy to be protected from incurring attorney’s fees and expens es arising from litigation.

Id . at 194, 342 S.E.2d at 160. We observe that Re spondents cite no case wh erein this Court has held that an insured may recover Pitrolo damages under the facts presented here. 14

Turning to Hayseeds , in syllabus point one this C ourt held: “Whenever a policyholder substantially prevails in a property damage suit against its insure r, the insurer is liable for: (1) the insured’s reasonable attorneys’ fees in vindicati ng its claim; (2) the insured’s damages for net economic loss caused by the delay in settle ment, and damages for aggravation and
inconvenience.” Hayseeds , 177 W.Va. at 324, 352 S.E.2d at 74. Th is Court has never extended those damages to the facts presented here. In State ex rel. State Auto Prop. Ins. Companies v. Stucky , 239 W.Va. 729, 806 S.E.2d 160 (2017), this Cour t addressed an anal ogous situation in
the context of a bad faith claim and found:

The insured, CMD, was defended and indemn ified by its insurer, State Auto, with respect to the lawsuit filed by the plainti ffs as required by the commercial general liability policy. A settlement was obtaine d at no cost to CMD, and no adverse judgment was entered in the circuit court. Consequently, this Court is of the

14 See e.g., Chicago Title Ins. Co. v. FDIC, 172 F.3d 601, 605 (8th Cir.1999) (“If an insurer faithfully fulfills its duty to defend its insured and also brings a declaratory judgment action to determine insurance coverage, then there will be no breach of the duty to defend [and] the insured is not entitled to attorneys’ fees and costs for the declaratory judgment action to determine coverage. Attorneys’ fees and costs are only awarded for the declaratory judgment
action if there was a breach of the dut y to defend in the underlying action.”).

10opinion that, as a matter of law, CMD cannot maintain a first-party action against State Auto for common law and statutory bad faith and breach of contract.

Id . at 736, 806 S.E.2d at 167 (footnote omitted); see also State ex rel. Universal Underwriters
Ins. Co. v. Wilson , 239 W.Va. 338, 347 n.18, 801 S.E .2d 216, 225 n.18 (2017) (recognizing insurer has right to defend itself in declarator y judgment action without risking exposure).

IV. Conclusion

The circuit court erred in gr anting summary judgment in favor of Respondents on the issue of rescission. Accordingly, the July 25, 2017, judgment order is reversed, and this case is remanded for further proceedings.

Reversed and remanded.

ISSUED: June 5, 2018

CONCURRED IN BY:

Chief Justice Margaret L. Workman
Justice Menis E. Ketchum Justice Allen H. Loughry, II
Justice Elizabeth D. Walker

DISSENTING AND WRITING SEPARATELY:

Justice Robin Jean Davis

Davis, Justice, dissenting:

In this proceeding, the Petitioner appealed on ly from an adverse final judgment rendered against it on a cross-claim brought by the Respondent s. In granting relief to the Petitioner, the majority opinion resurrected a dismissed countercl aim that the Petitioner asserted against the plaintiffs in the two original, c onsolidated complaints. For the reasons set out below, I dissent.

The Petitioner Settled the Lawsuits Br ought by the Original Plaintiffs

A critical issue in this case that was overlooked by the majority opinion is that the original plaintiffs in this matter were not made parties to this appeal. This fact is important
because the issue of recision of the insurance contract was made as a counterclaim to those complaints by the Petitioner. In fact, the majori ty opinion conceded that the Petitioner “filed its answer to the consolidated complaints and asserted a counterclaim to rescind the policy pursuant to West Virginia Code § 33-6-7 on the basis that Dr. Fisher made fraudul ent misrepresentations and omissions in his insurance ap plication.” (Emphasis added).

11The plaintiffs in the original action file d a motion for summary judgment to preclude the Petitioner from rescinding the insurance polic y. The circuit court granted the motion. Thereafter, the Petitioner entered into a set tlement agreement with the plaintiffs. The consolidated complaints and the Petitioner’s c ounterclaim were dismissed. Subsequently, the Respondent’s cross-claim was litigated, and a fina l judgment on that claim was rendered against
the Petitioner.

The judgment against the Petitioner in the settl ed claims by the origin al plaintiffs was not appealed. The Petitioner only appealed the judgment from the cross-claim. Equally important, the plaintiffs in the original consolidated action have not been made parties to this appeal. The majority opinion did not cite to any authority that would allow this Court to reverse a ruling obtained in a judgment that is not before the Court.

Simply put, this Court did not have jurisdicti on over the attempted appeal of the dismissal
of the counterclaim. See W. Va. R. App. Proc. 5(g) (provi ding for dismissal of appeals not properly perfected); W. Va. Dep’t. of Energy v. Hobet Mining &Constr. Co. , 178 W. Va. 262, 264, 358 S.E.2d 823, 825 (1987) (finding that an un timely appeal deprives this Court of jurisdiction). The Petitioner has not shown that the settlement ag reement that disposed of the
counterclaim was invalid or set forth ot her grounds for an ancillary attack. See DiMucci v.

DiMucci , 91 F.3d 845, 847 (7th Cir. 1996) (“Once th e terms of a settlement agreement are incorporated into the court’s order, ancillary ju risdiction exists because breach of the agreement violates the district court’s j udgment.” (internal quotations and citation omitted)). Without such a showing, the majority could not address the merits of the recision issue. Further, by failing to list the original plaintiffs as respondents in this appeal, the recision issue was not properly before
this Court. See Syl. pt. 3, Hayhurst v. Hayhurst , 71 W. Va. 735, 77 S.E. 361 (1913) (“In the absence of necessary parties th is court will not enter upon the c onsideration of other points of error in the decree appealed from.”). See also Syl. pt. 3, Gifford v. Plummer , 73 Fla. 1065, 75 So. 536 (1917) (per curiam) (“Where a necessary party on an appeal has not been made such party, and has not voluntarily appe ared in the appellate court, th e appeal must be dismissed.”) ; Hughes v. Yates , 195 Ind. 182, ___, 144 N.E. 863, 864 (1924) (“Since the judgment was in his favor . . ., the failure to make him a party neces sitates the dismissal of the appeal.”) (citations omitted).

Therefore, I respectfully dissent.

12