Source: http://www.bowlesrice.com/newsroom-articles-26.html
Timestamp: 2019-04-24 06:33:04+00:00

Document:
"Supreme Court of Appeals of West Virginia Issues Two important Decisions for Insurers: Dorsey v. Progressive (No. 12-1254) Estate of Bradley v. Farmers and Mechanics Mut. Ins. Co. of W. Va. (No. 12-0769)"
the Unfair Trade Practices Act and West Virginia common law.
2) The word "collapse" in most homeowner's policies is ambiguous.
Estate of Bradley v. Farmers and Mechanics Mut. Ins. Co. of W. Va.
Petitioner Dorsey was injured in a car accident while riding as a non-relative, guest-passenger in a vehicle insured by Progressive. As a guest passenger, Dorsey was entitled to and received medical payments benefits under the Progressive policy. After Dorsey pursued, and subsequently settled, a liability suit against the tortfeasor, Progressive asserted a subrogation claim against the settlement proceeds for the medical payments it had paid for Dorsey's benefit. However, Progressive refused to reduce its subrogation claim to reflect a pro rata share of attorney fees and costs incurred in pursuing the tortfeasor. Dorsey alleged that Progressive's failure to reduce the subrogation claim delayed the settlement of her claim and constituted statutory and common law bad faith.
The circuit court dismissed Dorsey's bad faith claims. The circuit court relied on the Loudin v. National Liability & Fire Insurance Company decision, which held that a first-party bad faith action is one where an insured sues his/her own insurance company. The circuit court reasoned that, because Dorsey was not a named insured and paid no premiums for the Progressive policy, she was a third-party claimant, and was therefore barred from bringing bad faith claims against Progressive.
The Supreme Court of Appeals found that Loudin was distinguishable and reversed the circuit court's dismissal of Progressive. The Court held specifically that Dorsey was a first-party insured for purposes of her statutory and common law bad faith claims. The Court reasoned that Dorsey qualified as a first-party claimant under the Insurance Commissioner's unambiguous definition of that term, because she asserted her own claim under the policy and not a liability claim against Progressive's named insured.
"Where a West Virginia motor vehicle insurance policy includes within the definition of an insured person "any other person while occupying a covered vehicle," a guest passenger is a first-party insured under the medical payments section of the policy."
By this case, the West Virginia Supreme Court has cleared up any confusion about whether a plaintiff must be a "named insured" in order to have first-party standing to bring suit against the insurer. The Dorsey decision establishes that a party who is an insured under the contract of insurance, and has asserted a direct claim for coverage benefits under the policy, is a "first-party" with standing to sue under West Virginia's bad faith jurisprudence.
Petitioner Freda Marie Bradley filed a complaint against respondent Farmers & Mechanics Mutual Insurance Company of West Virginia regarding a denial of coverage under her insurance policy. The insurance claim arose in 2008, when Bradley filed a claim under her policy for damage to her kitchen and bathroom floors. An engineer conducted an inspection, and determined that the damage was the result of long-term rotting caused by a water leak. Thereafter, Farmers & Mechanics Mutual denied Bradley's claim, citing a policy exclusion for water damage below the surface of the ground.
The policy does not define "collapse" any further.
In 2012, the circuit court granted summary judgment on behalf of the respondent, finding that "collapse" is not ambiguous, and that under the plain and ordinary meaning of the term, Bradley's floor did not collapse. The circuit court also concluded that even if it could be found that Bradley's sinking floor is a collapse, it was not caused by "hidden decay" because the floor had been sinking for six years and Bradley had to know of the decay.
Bradley appealed, and the Supreme Court of Appeals of West Virginia reversed and remanded, finding that the policy was ambiguous.
Under West Virginia law, "[w]henever the language of an insurance policy provision is reasonably susceptible of two different meanings or is of such doubtful meaning that reasonable minds might be uncertain or disagree as to its meaning, it is ambiguous." Syl. pt. 1, Prete v. Merchants Property Ins. Co., 159 W. Va. 508 (1976). And, "ambiguous terms in insurance contracts are to be strictly construed against the insurance company and in favor of the insured." Syl. pt. 4, Nat'l Mut. Ins. Co. v. McMahon & Sons, 177 W. Va. 734 (1987).
The Court recognized a split among the courts regarding the definition of the term "collapse," and found the term as defined by the Farmers & Mechanics policy ambiguous. The Court then, as the law dictates, construed the term against Farmers & Mechanics Mutual to mean "something less than the complete falling in of Ms. Bradley's kitchen floor and to include substantial impairment of the structural integrity of the floor." Finally, the Court found error in the circuit court's determination that Bradley was aware of the hidden decay: "[J]ust because Ms. Bradley was aware that the floor was sinking, does not mean that she knew the cause of the sinking."

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