No. 21417 - Marshall Higginbotham v. Hanley C. Clark, Insurance
Commissioner of the State of West Virginia
Miller, Justice, concurring:
I agree with the majority that the due process rights of
the appellant in this case have been violated, and thus the order
of the trial court must be reversed. However, because I disagree
with the procedure utilized by the majority to protect the due
process rights of the appellant, I respectfully concur.
The facts of this case make clear that the appellant paid
premiums to his insurance company, State Farm Fire & Casualty
Company (State Farm), to cover damage to his house caused by mine
subsidence. Mine subsidence insurance coverage was issued to the
appellant under the mandate of W. Va. Code, 33-30-1, et seq., which
dictates that all insurance policies issued or renewed in this
State which insure a structure must include mine subsidence
insurance coverage at a separate premium from the direct
insurance.See footnote 1 An insured may then waive such coverage, and thus not
be liable for the separate mine subsidence coverage premiums, at
his discretion.See footnote 2 The appellant in this case did not waive mine
subsidence coverage, and his premiums for that coverage were paid
to and collected by State Farm.
Under W. Va. Code, 33-30-1, et seq., a rather complex bureaucratic system exists to ensure that eligible insureds receive mine subsidence coverage.See footnote 3 The system works as follows: (1) the statute mandates that mine subsidence coverage be granted to all eligible insureds unless they affirmatively waive such coverage; (2) the insured pays a mine subsidence coverage premium to the insurer; (3) the insurer then forwards the premium, minus a "ceding commission," to the state board of risk and insurance managementSee footnote 4
(Board); (4) the Board "is authorized to undertake adjustment of
losses and administer the fund" under W. Va. Code, 33-30-8; and (5)
whenever a mine subsidence claim is submitted to an insurer, it
must "be reported to the Board for assignment to qualified
independent adjusting firms. . . . The selected adjusting firm
will send all reports simultaneously to the insurer and the Board
with all settlement authority, coverage questions and related
matters being resolved by the Board." 8 W. Va. C.S.R. § 115-1-4.1.See footnote 5 (Emphasis added).
Neither the statute (W. Va. Code, 33-30-1, et seq.) nor
the applicable provisions in the West Virginia Code of State Rules
(8 W.Va. C.S.R. 115-1-1, et seq.) delineate any procedure whereby
an insured may present evidence supporting a claim brought pursuant
to mine subsidence insurance coverage. Although the Board is the
governmental entity charged with adjusting the mine subsidence
claims of an insured, the insured, under the statute and the Code
of State Rules, is not granted direct contact with the Board. As
the majority correctly points out, "[f]undamental principles of due
process require that the Board . . . set forth procedures whereby
insureds may present evidence and establish a record upon which the
Board can base any decision regarding a claim." ___ W. Va. ___,
___, ___ S.E.2d ___, ___ (Slip op. at 14), citing North v. W. Va.
Bd. of Regents, 160 W. Va. 248, 256, 233 S.E.2d 411, 416 (1977).See footnote 6
There is ample authority to support the proposition that
a valid insurance policy is a property interest which cannot be
taken without some procedural due process. See, e.g., North v.
West Virginia Bd. of Regents, supra; Campbell v. Kelly, 157 W. Va.
453, 461-62, 202 S.E.2d 369, 375 (1974) ("For the average working
person, the most valuable property rights . . . consist of social
security benefits, insurance contracts, union welfare fund benefits
and private and governmental pensions." (Emphasis added).). See
also Lynch v. United States, 292 U.S. 571, 577, 54 S. Ct. 840, 842,
78 L. Ed. 1434, 1439 (1934) ("[W]ar risk [insurance] policies,
being contracts, are property and create vested rights."); United
States v. Bess, 357 U.S. 51, 56, 78 S. Ct. 1054, 1058, 2 L. Ed. 2d
1135, 1141 (1958) (the cash remainder value of a life insurance
policy is a property interest); Sims v. Order of United Commercial
Travelers of Am., 343 F. Supp. 112, 115 (D. Mass. 1972) ("[T]he
purchaser of a life insurance policy makes an investment decision
whereby he purchases a promise to pay. . . . That promise to pay
is 'property' of substantial value to the purchaser[.]" (Emphasis
added).). Indeed, in most instances, the insured vindicates the
property interest by suing the insurer in court to obtain coverage
and damages for the denial of coverage. See Smithson v. United
States Fidelity & Guaranty Co., 186 W. Va. 195, 411 S.E.2d 850
(1991); Thomas v. State Farm Mut. Auto. Ins. Co., 181 W. Va. 604,
383 S.E.2d 786 (1989); Hayseeds, Inc. v. State Farm Fire & Casualty
Co., 177 W. Va. 323, 352 S.E.2d 73 (1986).
The majority, following its due process concept, orders
that "procedures should be implemented to afford an insured the
opportunity to present the Board with any evidence he may have in
support of his claim[.]" ___ W. Va. at ___, ___ S.E.2d at ___
(Slip op. at 15). Unfortunately, the majority goes on to require
that the appellee, the State Insurance Commissioner, and not the
Board, should hold the hearing in this case to resolve the disputed
issue. I believe that the majority's premise in ordering the
Insurance Commissioner to hold hearings on this matter is
It is clear to me that this is not a dispute over
coverage under W. Va. Code, 33-30-7 (1985), which gives the
Insurance Commissioner the right to hold a hearing. That section
concerns only the initial procurement of the subsidence coverage.
It allows an insurer to decline this coverage if "a structure
evidenc[es] unrepaired subsidence damage, until necessary repairs
are made" or where the "structure . . . evidences a loss or damage
in progress."See footnote 7 The second basis for a hearing in front of the
Insurance Commissioner under W. Va. Code, 33-30-7, is "where the
insurer has declined, nonrenewed or canceled all coverage under a
policy for underwriting reasons unrelated to mine subsidence[.]"
It is obvious that neither of the conditions outlined in
W. Va. Code, 33-30-7, occurred in this case. The policy was issued
with subsidence coverage. The appellant faithfully paid premiums
for five years to cover potential damage to his home from mine
subsidence and these premiums were accepted by the insurer. There
was no cancellation of all coverage for underwriting reasons by the
insurer. Thus, none of the conditions described in W. Va. Code,
33-30-7, that could trigger a hearing with the Insurance
Because coverage was granted and the premium paid and
accepted and no underwriting reasons canceling the entire policy
exist, W. Va. Code, 33-30-7, is not applicable. The Insurance
Commissioner is out of the picture because only by virtue of the
reasons set out in W. Va. Code, 33-30-7, may the Insurance
Commissioner hold a hearing. Where a subsidence loss is claimed to
have occurred after the policy is issued, as was the case here, the
Board is required to act under W. Va. Code, 33-30-8. This section
requires the Board to undertake the adjustment of the loss or,
through its agreement with the insurer, direct the insurer to do
so.See footnote 8 Although the Board undertook to adjust the appellant's claim
in this case, it failed to provide him with his due process right
to appear and offer evidence on his behalf.
I agree with the majority that the appellant's constitutional right to due process has not been met in this case and a remand is therefore necessary. However, for the reasons stated above, I believe that the Board, and not the Insurance Commissioner, should provide that due process to the appellant.
Footnote: 1Other states have also set up mine subsidence insurance funds. See, e.g., Ohio Rev. Code Ann. § 3929.50, et seq. (Anderson 1985); Pa. Stat. Ann. tit. 52, § 3201, et seq. (1972).
Footnote: 2W. Va. Code, 33-30-6 (1985), provides, inter alia, that mine subsidence insurance provided for structures in certain counties named therein need only be provided if requested by the insured. Most counties, however, are covered by the formula stated in the text.
Footnote: 3The legislature outlined its purpose in mandating mine subsidence coverage availability in this State in W. Va. Code, 33-30-1 and -2 (1982):
33-30-1: "Mine subsidence in this
State has resulted in great loss of home,
shelter and property to the citizens of this
State to the detriment of the health, safety
and welfare of such citizens and programs for
the alleviation of such problems constitute
the carrying out a public purpose. . . ."
"33-30-2: The purpose of this
article is to make mine subsidence insurance
available in a reasonable and equitable manner
to all residents of this State through the
office of the state board of risk and
Footnote: 4W. Va. Code, 33-30-8 (1985) and -9 (1982), allow the insurer to retain a "ceding commission" in return for the insurer "agree[ing] to absorb all [its] expenses . . . necessary for the sale of policies and any administration duties of the mine subsidence insurance program imposed upon it pursuant to the terms of the reinsurance agreement," entered into by the insurer with the Board. The Board has the power to fix the proportion of the premium retained by the insurer as a ceding commission. That
proportion is fixed by virtue of 8 W. Va. C.S.R. § 115-1-3.8, whereby the insurer retains 30 percent of the gross premium collected for mine subsidence coverage from each insured as the ceding commission.
Footnote: 58 W. Va. C.S.R. § 115-1-1 et seq., was promulgated by the Board pursuant to its authority under W. Va. Code, 33-30-15 (1982), which provides: "The board is authorized to promulgate and adopt such rules and regulations relating to mine subsidence insurance as are necessary to effectuate the provisions of this article. Such rules and regulations shall be promulgated and adopted pursuant to the provisions of chapter twenty-nine-a [§ 29A-1-1 et seq.] of this Code."
Footnote: 6In Syllabus Point 2 of North, we stated:
"Applicable standards for procedural
due process, outside the criminal area, may
depend upon the particular circumstances of a
given case. However, there are certain
fundamental principles in regard to procedural
due process embodied in Article III, Section
10 of the West Virginia Constitution, which
are; First, the more valuable the right sought
to be deprived, the more safeguards will be
interposed. Second, due process must
generally be given before the deprivation
occurs unless a compelling public policy
dictates otherwise. Third, a temporary
deprivation of rights may not require as large
a measure of procedural due process protection
as a permanent deprivation."
See also Matthews v. Eldridge, 424 U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976).
Footnote: 7W. Va. Code, 33-30-7, states:
"An insurer may refuse to provide
subsidence coverage (1) on a structure
evidencing unrepaired subsidence damage, until
necessary repairs are made; or (2) where the
insurer has declined, nonrenewed or canceled
all coverage under a policy for underwriting
reasons unrelated to mine subsidence:
Provided, That an insurer shall refuse to
provide subsidence coverage on a structure
which evidences a loss or damage in progress."
Footnote: 8W. Va. Code, 33-30-8, in relevant part, states:
"The Board is authorized to undertake adjustment of losses and administer the fund, or it may provide in a reinsurance agreement that the insurer do so. The board shall agree to reimburse the insurer from the fund for all amounts paid policyholders for claims resulting from mine subsidence and shall pay from the fund all costs of administration incurred by the board[.]"