Shamblin’s claims demand personal liability for excessive judgments
The West Virginia Supreme Court of Appeal in West Virginia Mutual Insurance v. Covelli recently ruled that (1) West Virginia insurers will not be liable for an insured’s damages in a Shamblin action where the insured has no personal exposure to undue judgment and (2) insured claimants do not have standing to sue an insurer under Articles 33 -11-4 (9) (b) – (d) and (f) of the Unfair Commercial Practices Act (UTPA).
The Court allowed West Virginia Mutual Insurance’s motion for a writ of restraining the order of the Kanawha County Circuit Court denying summary judgment on Dr. Covelli’s claim for wrongdoing. faith in common law under Shamblin v. National mutual insurance company and claims under the UTPA for unfair claims settlement practices. The court granted Mutual’s motion for a writ of prohibition and ordered the circuit court to rule in favor of Mutual on both counts.
Prior to the immediate action, Dr Covelli was sued for medical malpractice by a former patient. The mutual provided medical malpractice insurance to Dr Covelli, with a policy limit of up to $ 2 million for each claim. When Mutual and the former patient could not come to an agreement, the case went to trial. The jury returned a verdict of nearly $ 5.8 million against Dr Covelli. Ultimately, Mutual settled the case for $ 950,000 before the circuit court issued the judgment order. However, during such a period, the Charleston Journal and West Virginia Record said the amount of the verdict. Following the publicity of the verdict, a second former patient retained the services of the same attorney at trial and sued Dr Covelli for medical malpractice. Mutual settled the second suit for $ 300,000.
Although both cases were settled within police limits, insured Dr Covelli filed a complaint alleging that Mutual caused him approximately $ 1.2-1.5 million in actual damage by failing to succeed. not to be settled sooner. Further, Dr Covelli alleged that the damages resulted from his having to report the $ 1.25 million settlement to the National Practitioner Data Bank, the adverse publicity of the jury’s verdict and the withdrawal of a job application with CAMC. Dr Covelli alleged two counts: (1) he asserted a Shamblin bad faith claim at common law for Mutual’s alleged failure to settle the two lawsuits and (2) he alleged that Mutual violated parts of the UTPA by engaging in unfair claims settlement practices. The circuit court dismissed Mutual’s motion for summary judgment on both counts.
In assessing Mutual’s writ of prohibition, the Court considered two legal questions: whether a Shamblin a claim exists when a claimant has no personal exposure to excessive judgment and an insured has standing to sue for violation of sections 33-11-4 (9) (b) – (d) and (f) of the UTPA. The Court ruled that the circuit court clearly erred in failing to issue summary judgment, concluding that personal liability for excessive judgment is an essential element of a Shamblin claim and Dr. Covelli never had personal liability for excessive judgment because both lawsuits were ultimately settled within police boundaries. Further, the court ruled that the circuit court clearly erred in denying summary judgment on the second count because an insured claimant lacked standing to pursue such claims under the UTPA. , as the Court noted in State Auto Insurance Companies Vs Stucky. The Court concluded that Articles 33-11-4 (9) (b), (c), (d) and (f) do not create obligations for liability insurers towards their insureds. The provisions are intended to protect claimants seeking damages relating to an insured’s liability and are not designed to protect the insured.
The court therefore ordered the circuit court to allow Mutual’s petition and to render judgment for Mutual on the two counts.
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