Cheryl Lynne Connelly
Scott S. Blass
Campbell, Woods, Bagley, Emerson, James B. Stoneking
McNeer & Herndon Bordas & Bordas, PLLC
Huntington, West Virginia Wheeling, West Virginia
Attorney for the Appellee Attorneys for the Appellants
The Opinion of the Court was delivered PER CURIAM.
JUSTICE McGRAW dissents and reserves the right to file a dissenting opinion.
2. The West Virginia Insurance Guaranty Association Act specifically states
that the West Virginia Insurance Guaranty Association is obligated to pay covered 'claims'
rather than covered 'occurrences.' W.Va.Code § 33-26-8(1)(a) (1985). Syl. Pt. 1, West
Virginia Ins. Guar. Ass'n v. Potts, 209 W. Va. 682, 550 S.E.2d 660 (2001).
3. Loss of consortium claims presented for payment under the West Virginia
Insurance Guaranty Association Act, W.Va. Code §§ 33-26-1 to 19, by a medical malpractice
victim's spouse and children are separate and distinct covered claims. Each compensable
claim is subject to the statutory per claim limit of $300,000.00 up to the maximum liability
of the insurance policy issued by the insolvent insurer. Syl. Pt. 4, West Virginia Ins. Guar.
Ass'n v. Potts, 209 W. Va. 682, 550 S.E.2d 660 (2001).
This is an appeal by Marlyn L. Potts, Alan N. Potts, Stacey Potts, Erin Potts,
and Kristen Potts (hereinafter Appellants or Potts family) from a December 31, 2001,
order of the Circuit Court of Ohio County. The underlying civil action, a medical
malpractice claim against Dr. Robert Cross and Thoracic and Cardiovascular Surgery, Inc.
(hereinafter medical defendants), was previously before this Court in West Virginia
Insurance Guaranty Association v. Potts, 209 W. Va. 682, 550 S.E.2d 660 (2001)
(hereinafter Potts I). The Appellants now contend that the lower court erroneously applied
this Court's reasoning in Potts I.
The medical defendants were insured through a policy issued by Insurance
Corporation of America (hereinafter ICA). Two weeks prior to the scheduled trial date in
this matter, a temporary receiver was appointed for ICA. A temporary injunction was
entered, and ICA was enjoined from negotiating settlements in pending cases. However, the
West Virginia Insurance Guaranty Association (hereinafter WVIGA)
(See footnote 1)
was unable to
immediately intervene in the present malpractice action since ICA had not yet been declared
insolvent. The medical defendants' request for a continuance was denied.
On April 3, 1997, prior to the conclusion of the trial, a settlement was reached
between the Potts family and the medical defendants.
(See footnote 2)
Pursuant to that agreement, the
medical defendants agreed to pay $400,000.00 to the Appellants regardless of the ultimate
conclusion of the jury. In addition, the medical defendants agreed to pay the Appellants the
first $150,000.00 of any money collected from the WVIGA.
(See footnote 3)
In exchange, the Appellants
agreed not to pursue the personal assets of the medical defendants if the jury returned a
verdict in excess of $400,000.00. This settlement agreement was approved by the lower
On April 4, 1997, the jury concluded that the medical negligence of Dr. Robert
Cross had unnecessarily forced Mrs. Potts to undergo a mastectomy and awarded Mrs. Potts
$1,031,137.50 in compensatory damages and $1,000,000.00 in punitive damages. The jury
further awarded $10,000.00 to Mr. Alan Potts on his loss of consortium claim and
$20,000.00 to each of the three Potts children.
Subsequent to the jury verdict, the WVIGA instituted a declaratory judgment
and interpleader action, requesting the lower court to declare that its liability was limited to
a single statutory covered claim. The medical defendants answered, seeking distribution of
the interpleader fund in accordance with the terms of their settlement agreement with the
Appellants. Upon filing the declaratory judgment action, WVIGA made an interpleader
deposit of its statutory cap of $300,000.00 in payment of the acknowledged claim. An agreed
order was entered on November 22, 1999, through which WVIGA paid $300,000.00 to the
medical defendants in return for the dismissal of the medical defendants' claims against the WVIGA. The terms of that agreed order provided that any remaining claims of the Potts
family were not affected. That order further dismissed the medical defendants from the civil
action with prejudice.
The medical defendants thereafter complied with the terms of the settlement
and paid $150,000.00 to the Potts family out of the $300,000.00 they collected from the
WVIGA. The WVIGA refused to pay additional claims of the Potts family, and the action
proceeded to summary judgment in favor of the WVIGA. The Potts family appealed that
determination to this Court in Potts I.
On July 3, 2001, this Court issued Potts I, finding that each of the five
individual members of the Potts family was entitled to a separate claim against the WVIGA.
Thus, pursuant to Potts I, each of the five compensable claims was subject to the statutory
per claim limit of $300,000.00.
(See footnote 4)
In Potts I, this Court remanded the case to the lower court
with directions to enter an order consistent with that opinion.
On remand, the WVIGA moved to interplead $70,000.00 into the circuit court,
representing payment of the jury verdict of $10,000.00 for Mr. Potts and $20,000.00 for each
of the three children. The lower court granted the WVIGA's motion for summary judgment,
reasoning that the five claims of the Potts family totaled $370,000.00. The court
consequently held that the $300,000.00 distribution previously made by WVIGA to the
medical defendants was in partial satisfaction of the Appellants' claims and could be
characterized as an offset against further claims by the Appellants. On December 31, 2001,
the lower court entered a judgment order consistent with its memorandum opinion and
directed the clerk to distribute the $70,000.00 deposited by WVIGA to the Potts family
allocated under the jury verdict returned in favor of Mr. Potts ($10,000.00) and each of the
three Potts children ($20,000.00 each). The lower court further ordered prejudgment interest
to be paid on these funds.
The Appellants now appeal, contending that the lower court erred in
concluding that the $300,000.00 paid by the WVIGA should be deemed an offset against any
remaining claims. The Appellants contend that despite the fact that the medical defendants
paid a settlement of $400,000.00 plus $150,000.00 of the amount received from the WVIGA,
the five individual claims held by the Potts family are worth a total of $370,000.00,
consisting of the $70,000.00 due Mr. Potts and the three Potts children and an additional
$300,000.00 for Mrs. Potts. The WVIGA contends that it already paid the $300,000.00 for
Mrs. Potts' portion of the Appellants' claims, distributed at their request and in accordance
with their settlement agreement with the medical defendants. Thus, the WVIGA maintains
that the lower court properly resolved this matter by requiring payment by the WVIGA of the
only outstanding claims, those of the husband and three children for a total of $70,000.00.
West Virginia Code § 33-26-5(4) (1985) (Repl. Vol. 2003) defines a covered claim as
[A]n unpaid claim . . . which arises out of and is within the coverage of an insurance policy to which this article applies and which policy is in force at the time of the occurrence giving rise to such unpaid claims if (a) the insurer issuing the policy becomes an insolvent insurer after the effective date of this article [May 12, 1970] and (b) the claimant or insured is a resident of this state at the time of the insured occurrence, or the property from which the claim arises is permanently located in this state.
With regard to the maximum liability of the WVIGA, West Virginia Code 33-26-8 provides that the WVIGA shall not be obligated beyond a maximum of $300,000.00 for each covered claim.
In Potts I, this Court held that the covered claim in the case sub judice consists of five separate claims asserted by the five members of the Potts family. Specifically, this Court held as follows in syllabus point one of Potts I: The West Virginia Insurance Guaranty Association Act specifically states that the West Virginia Insurance Guaranty Association is obligated to pay covered 'claims' rather than covered 'occurrences.' W.Va. Code § 33-26-8(1)(a) (1985). 209 W. Va. at 682, 550 S.E.2d at 660. Syllabus point four of Potts I explains that all five members of the Potts family maintain separate claims, as follows:
Loss of consortium claims presented for payment under
the West Virginia Insurance Guaranty Association Act, W. Va.
Code §§ 33-26-1 to 19, by a medical malpractice victim's
spouse and children are separate and distinct covered claims.
Each compensable claim is subject to the statutory per claim
limit of $300,000 up to the maximum liability of the insurance
policy issued by the insolvent insurer.
Id. This Court thus reversed the determination of the lower court and remanded the matter for entry of an order consistent with the conclusion that each of the five Potts family members could maintain a separate covered claim for which the WVIGA would be obligated up to the statutory limits. 209 W. Va. at 688, 550 S.E.2d at 666. Potts I neither addressed nor resolved the issue of whether the original $300,000.00 paid by the WVIGA should be used as a set-off against any further remaining liability.
The current appeal requires this Court to determine the character and
ramifications of the original payment by the WVIGA of $300,000.00. The WVIGA asserts
that such payment constituted full satisfaction of the $300,000.00 statutory maximum to be
paid on Mrs. Potts' individual claim, leaving only her husband and children's claims to be
satisfied. On the contrary, Mrs. Potts maintains that she is entitled to $300,000.00, as the
statutory maximum from the WVIGA, in addition to the $400,000.00 and $150,000.00
already paid pursuant to the settlement agreement.
Mrs. Potts' reasoning disregards one fundamental detail: the WVIGA is obligated to make only one payment of $300,000.00 for Mrs. Potts' individual claim. That payment was made by the WVIGA in the form of indemnification or reimbursement to the medical defendants. Mrs. Potts is only entitled to that one payment of $300,000.00 from the WVIGA whether she receives that payment directly from the WVIGA or through the medical defendants, with later reimbursement of the medical defendants by the WVIGA. Mrs. Potts argues that she is entitled to a direct payment of $300,000.00 and that the medical defendants maintain their own separate claim for reimbursement of $300,000.00. That argument is fallacious and possesses no statutory foundation. Such a resolution would result in a total of $600,000.00 paid by the WVIGA on behalf of Mrs. Potts' injury. Either a right of direct action for payment exists (See footnote 5) or a right of indemnification for payment exists. The exercise of one right operates, in our opinion, to satisfy the other. The WVIGA is obligated only up to $300,000.00 for Mrs. Potts' individual claim. Permitting both a direct action with full satisfaction of the statutory maximum and an indemnification action for the statutory maximum would result in duplication and would be in direct violation of the $300,000.00 limitation set forth in the statute. (See footnote 6)
We consequently hold that Mrs. Potts received the $300,000.00 which the WVIGA was obligated to pay on her individual claim. The WVIGA payment constitutes a reimbursement or indemnification of the medical defendants for the amount they paid to Mrs. Potts. Mrs. Potts has thereby received the intended benefit of the WVIGA statutory scheme, and she personally is entitled to no further recovery from the WVIGA. The only outstanding claims to be paid by the WVIGA are those of Mr. Potts for $10,000.00 and each of the three Potts children for $20,000.00, for a total of $70,000.00. (See footnote 7)