UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

TIMOTHY D. MIRANDY; SUZANNE C.

MIRANDY,

Plaintiffs-Appellants,

No. 97-1966

v.

ALLSTATE INSURANCE COMPANY,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of West Virginia, at Wheeling.

Frederick P. Stamp, Jr., Chief District Judge.

(CR-96-72-5)

Argued: March 5, 1998

Decided: June 1, 1998

Before MICHAEL and MOTZ, Circuit Judges, and

PHILLIPS, Senior Circuit Judge.

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Affirmed in part and reversed in part by unpublished per curiam opinion. Senior Judge Phillips wrote a concurring opinion.

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COUNSEL

ARGUED: Ronald William Kasserman, SEIBERT & KASSERMAN, L.C., Wheeling, West Virginia, for Appellants. Brent Karleton

Kesner, KESNER & BRAMBLE, Charleston, West Virginia, for

Appellee.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Timothy and Suzanne Mirandy filed this action in West Virginia

state court against their insurer, Allstate Insurance Company, which

timely removed the case to federal court on the basis of diversity of

citizenship. The Mirandys allege that Allstate (1) violated the West

Virginia Unfair Claims Settlement Practices Act and (2) acted in bad

faith under the common law. Both causes of action stem from Allstate's asserted bad faith failure to settle, within policy limits, a suit

brought against the Mirandys by Carol Thoburn. After a full trial in

the underlying suit, Thoburn prevailed, winning a jury verdict of

$229,500, well exceeding the limits of the Mirandys' policy. Allstate

ultimately paid the entire judgment -- even the amount in excess of

policy limits.

Nevertheless, the Mirandys sought declaratory relief as to their liability for the excess verdict, compensatory damages in the amount of

$250,000, an unspecified amount of punitive damages, attorney fees,

and costs. Allstate moved for summary judgment on all claims, which

the district court granted. See Mirandy v. Allstate Ins. Co., C.A. No.

5:96CV72 (N.D. W. Va. Feb. 10, 1997). Subsequently, the court also

denied the Mirandys' motion to lift a confidentiality order that the

magistrate judge had imposed on discovery materials produced by

Allstate and the attorney Allstate hired to represent the Mirandys in

Thoburn's suit against them. The Mirandys appeal both rulings. We

affirm in part and reverse in part.

I.

The district court set forth most of the relevant facts in its memorandum opinion granting Allstate's motion for summary judgment. Id.

We will not repeat them here but will simply refer to critical facts as

we address the legal issues.

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We review the district court's order granting summary judgment de

novo. Summary judgment is proper when no genuine issue of material

fact exists and, taking the evidence in the light most favorable to the

nonmovant, the movant is entitled to judgment as a matter of law. See

M & M Medical Supplies & Servs., Inc. v. Pleasant Valley Hosp.,

Inc., 981 F.2d 160, 162-63 (4th Cir. 1992).

II.

The Mirandys initially claimed that Allstate violated two portions

of West Virginia's Unfair Claims Settlement Practices Act. See W.

Va. Code §§ 33-11-4(f) and (n) (Michie 1996) (UCSPA).1 That statute

provides in pertinent part:

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1 A private cause of action exists under the UCSPA for both insureds

and third-parties. See Maher v. Continental Cas. Co., 76 F.3d 535, 542-

43 (4th Cir. 1996); Romano v. New England Mut. Life Ins. Co., 362

S.E.2d 334, 337 n.3 (W. Va. 1987); Jenkins v. J.C. Penney Cas. Ins. Co.,

280 S.E.2d 252, 258 (W. Va. 1981), overruled in part on other grounds

by State ex rel. State Farm Fire & Cas. Co. v. Madden, 451 S.E.2d 721,

724-25 (W. Va. 1994). However, in the cases decided under the statute

to date, the plaintiff, whether first-party insured or third-party beneficiary, was also the claimant. The Mirandys, of course, did not claim benefits (other than defense and liability coverage) from Allstate. In the

district court, Allstate asserted that for this reason the Mirandys could not

bring an action under the UCSPA. The company has not repeated that

argument before us. Thus, Allstate appears to recognize that it is probably doomed.

Although the statute provides relief for those negotiating a claim settlement with the insurer -- i.e., claimants -- it also contemplates forcing

the insurer to consider and protect the interests of insureds. See, e.g.,

§ 33-11-4(9)(k) and (l) (speaking of both"insureds or claimants").

Improper settlement conduct by an insurer affects the interests of the

insured whether the insured is the actual claimant or merely the object

of a third-party suit. The effect is simply less direct in the latter case: the

insurer's bad faith settlement conduct improperly exposes the insured to

risk of liability to a third party in the event of an excess verdict. In both

situations, permitting a cause of action would seem to be equally "consistent with the underlying legislative purpose, which is to prevent improper

settlement practices." Jenkins, 280 S.E.2d at 258.

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No person shall commit or perform with such frequency as

to indicate a general business practice any of the following:

. . . .

(f) Not attempting in good faith to effectuate

prompt, fair and equitable settlements of claims in

which liability has become reasonably clear;

. . . .

(n) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a

claim or for the offer of a compromise settlement.

Id. Allstate's main contention is that the Mirandys suffered "no compensable loss" under the UCSPA because Allstate paid the entire

amount of the excess judgment.

To prevail on a claim under the UCSPA, a party obviously must

suffer injury. See Maher v. Continental Cas. Co. , 76 F.3d 535, 542-

43 (4th Cir. 1996) ("West Virginia recognizes a private cause of

action for damages arising from an insurer's violation of Subsection

(9), whether the injured party is the insured or a third-party claimant")(emphasis added); Romano v. New England Mut. Life Ins. Co.,

362 S.E.2d 334, 337 n.3 (W. Va. 1987) ("a violation of [Subsection

(9)] by an insurer gives rise to a private right of action in favor of an

aggrieved insured or beneficiary") (emphasis added; alteration in

original); Jenkins v. J.C. Penney Cas. Ins. Co. , 280 S.E.2d 252, 258

(W. Va. 1981) ("the right of a person injured as a result of an unfair

settlement practice to recover damages acts as a deterrent against violations of the act") (emphasis added), overruled in part on other

grounds by State ex rel. State Farm Fire & Cas. Co. v. Madden, 451

S.E.2d 721, 724-25 (W. Va. 1994).

However, several recent West Virginia cases indicate that plaintiffs

can recover compensatory damages and attorney fees under the

UCSPA even when the insurer pays the excess amount of the verdict.

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In Dodrill v. Nationwide Mut. Ins. Co., 491 S.E.2d 1, 8 (W. Va.

1996), a jury awarded Mr. Dodrill, a third-party claimant, over

$12,000 as compensation for annoyance and inconvenience, attorneys

fees incurred in the underlying action, and punitive damages. The

West Virginia Supreme Court of Appeals concluded that, even though

the insurer paid the entire sum of the underlying verdict to Dodrill,

"a reasonable inference to be drawn from the long sequence of events

leading up to Mr. Dodrill's initial lawsuit against Nationwide is that

he did suffer inconvenience as a result of the failure of Nationwide

to settle his claim." Id. at 13. Similarly, in Poling v. Motorists Mut.

Ins. Co., 450 S.E.2d 635 (W. Va. 1994), another third-party claimant

brought an action against the insurer for bad faith settlement of its

underlying personal injury claim. Again, the West Virginia Supreme

Court of Appeals noted that "a cause of action for insurance bad faith

settlement may arise even if there has been a settlement." Id. at 637.

In McCormick v. Allstate Ins. Co., 475 S.E.2d 507 (W. Va. 1996),

an insured sued his insurer for failure to compensate him adequately

for the loss of his automobile. The West Virginia Supreme Court of

Appeals ruled that the insured could not recover attorney fees or punitive damages under the common law cause of action identified in

Hayseeds, Inc. v. State Farm Fire & Cas., 352 S.E.2d 73 (W. Va. 1986),2

because the insured had not substantially prevailed in the underlying

action against the insurer. McCormick, 475 S.E.2d at 517-18. However, the court concluded that the insured could maintain an action

under the UCSPA, id. at 520, and stated that"[a] prevailing plaintiff

in [a UCSPA] claim may recover his increased costs and expenses,

including increased attorney fees, resulting from the insurance company's use of an unfair business practice in the settlement or failure

to settle fairly the underlying claim." Id. at 515.

Likewise, in Maher the insured filed a claim with his insurer for

lost business income resulting from a fire. Maher, 76 F.3d at 539. The

insurer denied coverage and the insured sued, asserting, among other

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2 Hayseeds, which is not central to this suit, held that where an insured

sues his own insurer over a property damage claim and substantially prevails, the insurer may be held liable for consequential damages, including

annoyance and inconvenience, attorney fees, and perhaps punitive damages, stemming from the insurer's conduct.

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claims, a violation of the UCSPA. Id. After several years of wrangling, and while the issue was before the district court, the insurer

offered a $12,000 settlement, which the insured refused. At trial, the

judge awarded the insured only $5,118, and dismissed his UCSPA

claim because Maher ultimately received less than the settlement

offer. Id. at 540. We reversed, finding that, regardless of the settlement amount, the insured could proceed under the UCSPA. Id. at 543-

44.

These cases indicate that annoyance and inconvenience attributable

to an insurer's underlying settlement conduct constitute compensable

injury in and of themselves under the UCSPA. This proposition comports with the broad purpose of the statutory scheme. The West Virginia legislature, rather than simply addressing the outcome of

settlement negotiations, sought in the UCSPA "to prevent improper

settlement practices" generally, Jenkins, 280 S.E.2d at 258, including

conduct during settlement negotiations. We therefore conclude that

insureds can maintain a suit against their insurer under the UCSPA to

recover compensation for any annoyance and inconvenience suffered,

as well as attorney fees, despite the fact that their insurer paid the

excess verdict.

The remaining question is whether the Mirandys have presented

sufficient evidence to raise a jury question as to whether they suffered

such damages in this case. Allstate claims that it orally told the

Mirandys prior to the March 1995 trial of Thoburn's claim that none

of the Mirandys' money was at stake. The Mirandys, however, maintain that this is not the case. Moreover, the Mirandys note that in

1993, Allstate informed them in writing that they would be responsible for any excess liability. Although Anthony Werner, the lawyer

Allstate hired for the Mirandys, sent them a letter on July 25, 1995,

four months after the March verdict, stating"[a]s I expressed to you

both on numerous occasions prior to and even subsequent to the verdict . . . none of your personal assets had been, nor will they ever be,

at stake in this case," the very next day the Mirandys' own lawyer

wrote to Allstate and denied this contention. In that letter, the Mirandys' lawyer further stated: "Allstate Insurance Company [has] never

acknowledged its responsibility to me or the Mirandys. . . . For over

two (2) years Timothy and Suzanne Mirandy have anguished over

their potential personal exposure for liability to Mrs. Thoburn. . . .

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[T]heir fear that they could lose their homes to Mrs. Thoburn during

the time their claim against Allstate was pending[ ] has been significant." He asked the company to "[p]lease confirm, in writing, that

Allstate is going to pay the entire verdict . . . so that Timothy and

Suzanne Mirandy will have no personal liability." Allstate did not

respond to this letter.

The Mirandys acknowledge that Werner told them during jury

deliberations they would not be liable for an excess verdict. However,

it not clear that Werner, a lawyer Allstate hired to represent the

Mirandys, had authority from Allstate to bind the company to pay the

excess verdict for the Mirandys. After all, despite the July 1995 letter

from the Mirandys' lawyer requesting that Allstate confirm in writing

that it would not seek recovery for the excess verdict from the Mirandys, Allstate never issued such a written statement until it filed an

amended answer to the Mirandys' complaint in July 1996. Furthermore, even if Werner did have authority from Allstate to tell the

Mirandys during jury deliberations that Allstate would pay any excess

verdict, this statement came a little late in the day. The accident had

occurred four years earlier, and two years earlier Allstate expressly

informed the Mirandys of their right to obtain their own counsel and

their personal liability for any verdict in excess of policy limits. Certainly an insured that retains counsel and faces liability for two years

may suffer annoyance and inconvenience -- and attorney fees -- just

as a claimant would where an insurer delays settlement, regardless of

whether the insurer ultimately pays the excess. Cf. Poling, 450 S.E.2d

at 637 ("The mere fact that after months of delay and hassle the insurance company deigns to speak to the injured party and settles the case

. . . does not preclude the plaintiff from later bringing a bad faith

action . . . .").

In Dodrill, the West Virginia Supreme Court of Appeals determined that, viewing the facts in the light most favorable to Dodrill,

a reasonable jury could conclude the insurer acted in bad faith in violation of the UCSPA. In reaching this conclusion, the court considered that liability was clear, that the claimant negotiated with the

insurer for two-and-a-half years without obtaining a settlement, that

numerous contacts existed between the claimant and the insurer and

that the jury rendered a verdict twice the insurer's settlement offer.

See Dodrill, 491 S.E.2d at 11-13.

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In this case, the "negotiations," to the extent there were any, continued for four years without obtaining a settlement. Liability was clear

from the start. Even if causation was debatable, both medical experts

opined that the accident contributed to Thoburn's injuries. Moreover,

although Allstate seeks to blame Thoburn for delaying the availability

of her medical records, almost two years prior to trial an Allstate representative noted that Thoburn's medical records at that time were

"quite voluminous." Contacts with Allstate were numerous; Thoburn

and the Mirandys each made multiple requests that Allstate settle for

the policy limits.

Werner (the attorney Allstate hired) advised Allstate well prior to

trial that "if the jury does believe [Thoburn's] version, [the] verdict

can be expected to reach well into six figures," and suggested that the

company settle within the $70,000 to $80,000 range. In response, an

Allstate claims representative increased reserves for the case to

$65,000, re-valued the case at $75,000, and asked for settlement

authority in that amount, yet Allstate's managers never authorized a

settlement offer above $20,000. The jury returned a verdict more than

ten times Allstate's settlement offer.

Given the above facts, a reasonable jury could determine Allstate

acted in bad faith in violation of the UCSPA. Thus, the district court

erred in granting summary judgment to Allstate. This is not to say that

the Mirandys are entitled to judgment as a matter of law. Allstate well

may be able to demonstrate that Thoburn created delay by failing to

provide documentation, that the company acted reasonably based on

evidence that called into question the cause of Thoburn's injuries, and

that Allstate timely informed the Mirandys that they would not be liable for an excess verdict. But a jury must decide these questions.

III.

The district court also granted summary judgment to Allstate on the

Mirandys' common law bad faith claim. The court recognized that,

under Shamblin v. Nationwide Mut. Ins. Co., 396 S.E.2d 766 (W. Va.

1990), an insurer may be liable to an insured for an excess verdict

rendered against the insured in an underlying personal injury suit

where the insurer in bad faith fails to settle the claim within the policy

limits.

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The West Virginia Supreme Court of Appeals adopted a two-part

bad faith standard in Shamblin. First, "wherever there is a failure on

the part of an insurer to settle within policy limits where there exists

the opportunity to so settle and where such settlement within policy

limits would release the insured from any and all personal liability,"

the insured has established a prima facie case of bad faith. Id. at 776.

Second, when such a prima facie case has been established, the

insurer then bears the burden

to prove by clear and convincing evidence that it attempted

in good faith to negotiate a settlement, that any failure to

enter into a settlement where the opportunity to do so

existed was based on reasonable and substantial grounds,

and that it accorded the interests and rights of the insured at

least as great a respect as its own.

Id.

The district court stated that it did not think Shamblin provided a

basis for the Mirandys' claim because Allstate paid the excess verdict

without forcing the Mirandys to bring an action against Allstate. Certainly, Shamblin and its progeny deal with situations where the

insured sought recovery for an excess verdict that the insurer declined

to pay. See, e.g., id. at 771; Marshall v. Sasseen, 450 S.E.2d 791, 797-

98 (W. Va. 1994).

However, the facts and result in Shamblin suggest that in the appropriate case an insured can recover damages for an insurer's bad faith

even if the insurer pays the excess verdict prior to any action against

it by the insured. In Shamblin, the insurer refused to settle the underlying personal injury suit against the insured within the policy limits

of $100,000. After trial, a jury returned a verdict against the insured

for $697,500. Thus, the insured became personally liable for the

$597,500 -- the excess amount. The insured sued the insurer to

recover the excess verdict, asserting that the insurer acted in bad faith.

A jury awarded the insured compensatory damages of $1,000,000,

punitive damages of $1,500,000, and attorney fees of $330,000.

Shamblin, 396 S.E.2d at 769, 771. On appeal, the West Virginia

Supreme Court of Appeals affirmed the $1,000,000 award of compensatory damages, which surpassed the excess verdict amount by more

 9
than $400,000. The Mirandys assert that the $402,500 differential

between the underlying excess verdict ($597,500) and the compensatory damages awarded to the insured in Shamblin ($1,000,000)

reflected compensation to the insured for annoyance and inconvenience stemming from the insurer's bad faith. See Reply Brief of

Appellant at 12.

The Shamblin court did not explain the basis for the award of

$402,500 -- the difference between the excess verdict and the amount

the insured obtained from its insurer. Unlike the UCSPA cases, no

court has held that an insured can seek compensation for annoyance

and inconvenience in a Shamblin claim; but, no court has held that an

insured cannot so recover. In light of the extensive West Virginia case

law sustaining claims for various kinds of damages in suits brought

by insureds against their insurers, we believe the West Virginia

Supreme Court of Appeals would conclude that an insured can

recover compensation for annoyance and inconvenience suffered

when an insurer breaches its common law duty to act in good faith

and to place the insured's interest on an equal footing with its own.

Cf. Miller v. Fluharty, No. 23993, 1997 WL 771057, at *7 (W. Va.

Dec. 16, 1997) (in common law Hayseeds action, insured can recover

for annoyance and inconvenience and reasonable attorney fees

incurred by insurer's failure to settle). To hold otherwise would allow

an insurer that knows it acted in bad faith to escape liability for the

insured's annoyance, inconvenience, and attorney fees simply by paying the excess verdict before the insured has opportunity to bring suit.

Accordingly, the district court erred in granting Allstate summary

judgment on the Mirandys' bad faith claim.3

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3 The district court also erred in concluding that Allstate satisfied the

second prong of Shamblin. As explained, supra, in part II, Allstate has

produced evidence that it acted in good faith, but it has not proven, as

a matter of law, that it did so. Taking the evidence in the light most

favorable to the Mirandys, a reasonable jury could conclude that Allstate

acted in bad faith. Of course, if on remand the Mirandys should prevail

on both their statutory and common law bad faith claims, there can be

no duplication of damages.

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IV.

West Virginia law provides for the availability of punitive damages

from an insurer in both UCSPA and Shamblin bad faith actions. The

plaintiff must establish that the insurer acted with actual malice,

which means the insurer knew the claim was proper but nonetheless

acted willfully, maliciously, and intentionally in failing to settle the

claim on behalf of its insured. See Dodrill, 491 S.E.2d at 14

(UCSPA); McCormick, 475 S.E.2d at 515 (same); Poling, 450 S.E.2d

at 637-38 (same); Shamblin, 396 S.E.2d at 772-73 (common law);

Berry v. Nationwide Mut. Fire Ins. Co., 381 S.E.2d 367, 374 (W. Va.

1989) (same).

The district court ruled that "in addition to finding that there has

been insufficient evidence to create a jury question on plaintiff's statutory and common law bad faith claims, this court[ ] finds that there

is no evidence in the record that Allstate acted with actual malice in

handling the Mirandys' claims." The Mirandys contend that they have

proffered sufficient evidence from which a reasonable jury could conclude Allstate acted with actual malice.

In Dodrill, after reviewing the record the West Virginia Supreme

Court of Appeals concluded that the trial court"did not commit

reversible error in committing the issue of punitive damages to the

jury . . . [because the evidence was] sufficient to support a jury conclusion that the actions of [the insurer] were willful, malicious, or

intentional." Dodrill, 491 S.E.2d at 14-15. Consistent with Dodrill,

the evidence detailed above, examined in the light most favorable to

the Mirandys, could lead a reasonable jury to conclude that Allstate

intentionally failed to settle the Thoburn claim when it knew the

claim was proper. Again, Allstate has evidence to make a very strong

case to the contrary, but that question is for a jury to decide.

V.

In the early days of this suit, Allstate moved for a protective order

pursuant to Fed. R. Civ. P. 26(c) to prevent dissemination of its

claims file and the work product of Werner by the Mirandys or their

present lawyer. Allstate worried that the Mirandys would pass the

material to Thoburn and her attorneys for use in Thoburn's similar

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bad faith case against Allstate. On November 22, 1996, a magistrate

judge granted the motion so that Allstate would have the opportunity

to litigate in state court whether the documents were discoverable by

Thoburn in her case, or whether Allstate could assert privilege vis-avis Thoburn, even though it could not do so vis-a-vis the Mirandys.

In the order, the magistrate judge noted that the Mirandys objected to

the ruling.

After the district court awarded summary judgment to Allstate, the

Mirandys filed a motion to lift the confidentiality order. The court

denied the motion, reasoning that the Mirandys had failed to properly

appeal the magistrate judge's confidentiality order. Although they

made the oral objection that was noted in the order, they did not file

written exceptions to the magistrate judge's opinion within ten days

as required by Fed. R. Civ. P. 72(a). Assuming the oral objection sufficed, the district court concluded that the magistrate judge's ruling

was not clearly erroneous. We review the trial court's refusal to lift

the order of confidentiality for abuse of discretion. See M & M Medical Supplies & Servs., 981 F.2d at 163.

The Mirandys do not assert they have been unable to obtain access

to Allstate's or Werner's records. Instead, they want the ability to

hand the records over to Thoburn's attorneys. As such, they cannot

demonstrate that the protective order resulted in"substantial prejudice" to their case. See id. The magistrate judge's conclusion that,

although Allstate cannot assert privilege with regard to the Mirandys,

the company should have the opportunity to litigate whether privilege

exists with regard to Thoburn is not unreasonable. Accordingly, the

district court did not abuse its discretion in sustaining the magistrate

judge's order. Thus, the protective order will stand. We need not

reach the district court's alternative holding involving Rule 72(a).

VI.

For all of these reasons, the judgment of the district court granting

summary judgment is reversed and the order denying the motion to

vacate the protective order is affirmed.

AFFIRMED IN PART AND REVERSED IN PART

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PHILLIPS, Senior Circuit Judge, concurring:

I concur in the judgment and in all of the majority opinion except

that portion of Part I that purports to hold for this court (though by

footnote) that W. Va. Code §§ 33-11-4(9)(f) and (n) (UCSPA) creates

a private right of action in insureds such as plaintiffs to recover damages for improper settlement practices by their insurers in matters not

involving claims by the insureds for policy benefits. Ante, slip op. 3,

n.1. That is an important and, I believe, debatable issue of West Virginia insurance law that has not been addressed by the state courts and

is not properly presented for decision by this court. Nor is its resolution necessary under the procedural circumstances of this case to our

decision to remand the statutory claim for further proceedings.

Accordingly, I think that we should, and properly may, leave it an

open question in this court in the course of remanding the claim. A

brief explanation is in order.

In the district court, Allstate specifically raised as its base-line

defense that §§ (f) and (n) of the UCSPA did not give improper settlement practice rights of action to insureds except in connection with

their own claims for insurance benefits. Alternatively, Allstate contended that if the right existed, the Mirandys had failed to raise a genuine issue of material fact respecting insurer bad faith, an essential

element of the statutory claim. The district court expressly recognized

but declined to address the statutory interpretation defense. (See

J.A. 94 (Mem. Op., n.3).) Instead, implicitly assuming for purposes of

the case that the statute did create such a right of action, the court held

that the Mirandys' claim failed as a matter of law because they had

not raised a genuine issue of fact as to Allstate's bad faith.

On the Mirandys' appeal, Allstate as appellee did not raise, as it

might have,1 the statutory interpretation issue as an alternative basis

for affirming the judgment in its favor on this claim. Under those circumstances, we should have treated that issue as procedurally

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1 Whether by cross-appeal, if it be considered that a judgment on this

basis would "enlarge" the basis upon which summary judgment was

granted, or simply by raising it as an appellee as a basis for affirming that

favorable judgment. See United States v. American Ry. Express Co., 265

U.S. 425, 435 (1924) (Brandeis, J.) (differentiating the two procedures).

 13
defaulted by Allstate. And, making the assumption of statutory coverage forced by that default, we then should have addressed only the

issue properly raised by the Mirandys: whether summary judgment

was properly granted for failure of forecast proof on the bad faith element of the assumed statutory cause of action. The majority notes the

procedural default and addresses the issue raised by the Mirandys as

the basis for remanding the claim but it does not stop there. Instead

it goes on, as I think it should not have, to hold that Allstate's alternative statutory defense, which was not addressed by the district court

and not raised on this appeal, failed as a matter of law.

How, if we did abstain from addressing that issue, would that leave

the case upon remand? Specifically, if we did not address the issue,

would Allstate be precluded by reason of its procedural default on

appeal from again raising it for initial consideration by the district

court? My solution on that would be expressly to leave it to the district court for first instance consideration as a"law of the case" question. That doctrine has sufficient flexibility to permit its fair

consideration here. See generally 18 Charles Alan Wright, et al.,

Federal Practice and Procedure § 4478 (1981). And, because the factors properly to be considered in applying the doctrine are peculiarly

within the district court's competence in this case, that is where it

should first be considered. The virtue of this approach would be that

if Allstate were held precluded by law of the case considerations, the

general question of the statute's coverage would remain open in the

federal courts, unaffected by anything unnecessarily said in this case.2

And, on the other hand, were Allstate allowed by the district court to

raise the issue again, it could then be addressed definitively by that

court, or possibly considered for certification to the West Virginia

Supreme Court.

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2 This is said with awareness that the question would in any event

remain an open one in the state courts, and that unpublished opinions of

this court can have only annoyance effect. But, even that, I believe, is

worth avoiding where possible.

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