Filed: July 22, 1993
Jeffrey T. Jones
Hunt, Lees, Farrell & Kessler
Charleston, West Virginia
Counsel for the Appellants
Richard E. Rowe
B. Karleton Kesner
Goodwin & Goodwin
Charleston, West Virginia
Counsel for Appellee Westfield
CHIEF JUSTICE WORKMAN Delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. "'Where the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended.' Syllabus, Keffer v. Prudential Ins. Co., 153 W. Va. 813, 172 S.E.2d 714 (1970)." Syl. Pt. 1, Russell v. State Auto. Mut. Ins. Co., 188 W. Va. 81, 422 S.E.2d 803 (1992).
2. "Insurers may incorporate such terms, conditions and
exclusions in an automobile insurance policy as may be consistent
with the premium charged, so long as any such exclusions do not
conflict with the spirit and intent of the uninsured and
underinsured motorists statutes." Syl. Pt. 3, Deel v. Sweeney, 181
W. Va. 460, 383 S.E.2d 92 (1989).
3. A consent-to-settle provision of an automobile insurance
policy pertaining to underinsured motorists coverage whereby an
insured voids his underinsurance coverage by settling a claim with
a tortfeasor without first obtaining the insurer's written consent
when such claim involves either the insured's underinsurance
coverage or potentially involves that coverage is a valid and
enforceable means by which an insurer may protect its statutorily-mandated right to subrogate claims pursuant to West Virginia Code
§ 33-6-31(f) (1992).
4. "Where an insurer decides, after complete investigation,
not to approve payment to its insured based upon the allegedly
tortious conduct of another party, the insurer's claim that a
subsequent settlement by the insured with the other party violates
the subrogation clause of the insurance contract by prejudicing the
insurer's subrogation rights is invalid." Syl. Pt. 1, Berry v.
Nationwide Mut. Fire Ins. Co., 181 W. Va. 168, 381 S.E.2d 367
5. "In light of the preeminent public policy of the
underinsured motorist statute, which is to provide full
compensation, not exceeding coverage limits, to an injured person
for his or her damages not compensated by a negligent tortfeasor,
this Court holds that underinsured motorist coverage is activated
under W. Va. Code, 33-6-31(b), as amended, when the amount of such
tortfeasor's motor vehicle liability insurance actually available
to the injured person in question is less than the total amount of
damages sustained by the injured person, regardless of the
comparison between such liability insurance limits actually
available and the underinsured motorist coverage limits. Syl. Pt.
5, Pristavec v. Westfield Ins. Co., 184 W. Va. 331, 400 S.E.2d 575
6. "A plaintiff is not precluded under W. Va. Code, 33-6-31(d) (1988), from suing an uninsured/underinsured insurance
carrier if the plaintiff has settled with the tortfeasor's
liability carrier for the full amount of the policy and obtained
from the uninsured/underinsured carrier a waiver of its right of
subrogation against the tortfeasor." Postlethwait v.Boston Old
Colony Ins. Co., No. 21347 (W. Va. filed June 28, 1993).
7. "'A motion for summary judgment should be granted only
when it is clear that there is no genuine issue of fact to be tried
and inquiry concerning the facts is not desirable to clarify the
application of the law.' Syllabus Point 3, Aetna Casualty & Surety
Co. v. Federal Ins. Co. of N.Y., 148 W. Va. 160, 133 S.E.2d 770
(1963)." Syl. Pt. 1, Bauer Enters., Inc. v. Frye, 181 W. Va. 234,
382 S.E.2d 71 (1989).
Workman, Chief Justice:
This case is before the Court upon the appeal of Frances and
David Arndt from the May 27, 1992, final order of the Circuit Court
of Raleigh County granting the Appellee's, Westfield Insurance
Company's See footnote 1 (hereinafter referred to as Westfield), motion for
summary judgment. The sole assignment of error is whether the
circuit court erred in granting the Appellee's motion for summary
judgment. Based upon the parties' briefs, arguments and all other
matters submitted before this Court, we find that the motion for
summary judgment was properly granted, and accordingly affirm the
lower court's decision.
On December 25, 1988, the Appellant, Frances Arndt, was
involved in an automobile accident on West Virginia Route 41 in
Raleigh County, West Virginia. The Appellant's car was struck in
the front by a car owned and operated by Bobby Lee Burdette. See footnote 2 The
Appellant's car was then struck in the rear by a vehicle operated
by William Lehman. Mr. Burdette was cited at the accident scene
for failure to maintain control and for being left of center. The
accident report also indicated that a contributing cause of the
accident was Mr. Lehman's failure to maintain control of his
vehicle. As a result of the accident, the Appellant suffered a
fractured knee cap, a nondisplaced fractured hip, a fractured left
rib, abrasions and lacerations. She has undergone surgery on her
knee and is expected to undergo more knee surgery. The Appellant's
vehicle also sustained over $2,000 in damage. See footnote 3
At the time of the accident, Mr. Burdette was insured by Aetna
Insurance Company (hereinafter referred to as Aetna). Mr. Lehman
was insured under a policy issued by Allstate Insurance Company
(hereinafter referred to as Allstate) with limits of $100,000 per
person and $300,000 per occurrence. The Appellants were insured
under a policy issued by the Appellee,See footnote 4 which prohibited the
Appellants from entering into any agreement which prejudiced the
rights of their insurer and from settling a claim potentially
involving underinsurance without the Appellee's written consent.
The Appellants filed claims with both Allstate and Aetna. Also, on
October 9, 1989, the Appellants, through their attorney, Jeffrey
Jones, informed the Appellee that Mrs. Arndt may need her
A settlement was negotiated and entered into with Mr.
Burdette's insurance carrier, Aetna, for $20,122.95, which
exhausted Mr. Burdette's policy limits. However, in conversations
with Larry Keefer, insurance adjustor for Allstate, Mr. Keefer
indicated to the Appellants' attorney that in his opinion, Mr.
Lehman was not negligent and that he was not the cause of Mrs.
Arndt's injuries. Mr. Keefer stated that Allstate would only
contribute a nominal fee to settle the matter on behalf of Mr.
On July 26, 1990, the Appellants' attorney sent a letter to
the Appellants indicating that it was the Appellee's position that
it would not pay underinsurance coverage until some money was
collected from Allstate. The attorney indicated to the Appellants
that he was going to attempt to negotiate a small settlement with
Allstate. Also, on the same day, the Appellants' counsel wrote a
letter to the Appellee confirming the Appellee's position that it
would not provide underinsurance coverage until some money was
obtained from Allstate. In that same letter, the attorney inquired
of the Appellee as to whether the insurer would still pay
underinsurance coverage if Mr. Lehman's policy limits were not
On November 2, 1990, Mr. Jones wrote to the Appellee stating
that Mrs. Arndt had received an offer of settlement from Allstate
for $1,250. Mr. Jones requested the Appellee to either waive its
subrogation right or forward a check for $1,250.See footnote 5 Also, Mr. Jones
indicated to the Appellee that if the company failed to either
waive subrogation, or forward the check within thirty days, the
Appellee would lose its right to subrogate claims against Mr.
Lehman and his insurer because the Appellants would release them as
part of the settlement agreement.
The Appellee informed the Appellants by letter dated November
15, 1990, that the insurer was checking into the possibility of
subrogation. Further, the Appellee indicated that it was not
certain that Mrs. Arndt's claim was in excess of Mr. Lehman's
policy limits, which it contended had to occur before the
underinsurance coverage would be accessible. Finally, the Appellee
informed the Appellants that a decision on whether or not the
insurer would give permission to settle with Allstate would be made
within thirty days. Again on November 27, 1990, the Appellee
informed the Appellants that as far as the insurer was concerned
"before the Underinsured Motorist coverage of the Arndts can be
involved, full recovery must be made from the joint tort-feasors[ ]" and "that in settlement of the claim, you cannot
jeopardize our subrogation in this matter."
By letter dated December 13, 1990, the Appellants' attorney
informed Allstate that due to the approaching statute of
limitations,See footnote 6 the Appellants wished to accept the $1,250 settlement
on behalf of Mr. Lehman and that the Appellants would sign the
requisite release. This settlement was entered into without the
Appellee's written consent.
On December 18, 1990, the Appellee withdrew any offer of
underinsurance coverage previously madeSee footnote 7 because of a December 5,
1990, report from Mrs. Arndt's treating physician, Dr. George
Orphanos, in which the doctor stated that "I can not definitely
rule out that it would be impossible for any of the injuries
sustained by Mrs. Arndt to have occurred in the rear end
collision." Due to this report, the Appellee stated that all
joint-tortfeasors' policy limits had to be exhausted prior to
collecting any underinsurance coverage. The Appellants' attorney
also attempted to withdraw the settlement agreement of $1,250 with
Allstate because of the treating physician's report.
On December 19, 1990, the Appellants instituted a lawsuit
against Mr. Lehman and Mr. Burdette with service of process also
made upon the Appellee. Subsequently, the circuit court ordered
the enforcement of the $1,250 settlement between the Appellants,
Mr. Lehman, and his insurer, Allstate. Then, on May 27, 1992, the
circuit court granted the Appellee's motion for summary judgment
which forms the basis for this appeal.
The only issue before the Court is whether the lower court
erred in granting the Appellee's motion for summary judgment. The
Appellants argue that the settlement entered into with Allstate did
not prejudice the Appellee's right of subrogation and that the
settlement did not violate the subrogation clause of the
Appellants' insurance policy. Further, the Appellants contend that
the release given to Mr. Lehman only released him and no one else,
including the Appellee.See footnote 8 Finally, the Appellants maintain that the
lower court's determination that the Appellee's subrogation rights
were prejudiced was premature since there was no negligence
determination by a jury. In contrast, the Appellee contends that
the Appellants settled with Mr. Lehman without the written consent
and over the Appellee's objection. Moreover, the Appellee argues
that the Appellants prejudiced the subrogation rights of Westfield
by settling with and releasing Mr. Lehman for less than his
Allstate policy limits, which precluded the Appellee from any
subrogation claim it may have asserted against Mr. Lehman.
Finally, the Appellee asserts that the Appellants' underinsurance
proceeds are not recoverable until all the tortfeasors' primary
liability coverage is exhausted.
This is the first opportunity this Court has had to examine a
consent-to-settle provision pertaining to the underinsurance
motorists coverage of an automobile insurance policy. The policy
issued to the Appellants by Westfield specifically provided that
A. We do not provide Underinsured Motorists Coverage for property damage or bodily injury sustained by any person:
1. If that person or the legal representative settles the bodily injury or property damage claim without our written consent.
It is well-established law in this State that "'[w]here the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended.' Syllabus, Keffer v. Prudential Ins. Co., 153 W. Va. 813, 172 S.E.2d 714 (1970)." Syl. Pt. 1, Russell v. State Auto. Mut. Ins. Co., 188 W. Va. 81, 422 S.E.2d 803 (1992). Further, "[i]nsurers may incorporate such terms, conditions and exclusions in an automobile insurance policy as may be consistent with the premium charged, so long as any such exclusions do not conflict with the spirit and intent of the uninsured and underinsured motorists statutes." Syl. Pt. 3, Deel v. Sweeney, 181 W. Va. 460,
383 S.E.2d 92 (1989); see Syl. Pt. 4, Russell, 188 W. Va. at ___,
422 S.E.2d at 803.
It is significant that we are dealing with an exclusion which
is applicable only to underinsurance coverage. As West Virginia
Code § 33-6-31(b) (1992) provides, underinsurance motorists
coverage is an optional coverage that an insurer may purchase.See footnote 9
See Deel, 181 W. Va. at 463, 383 S.E.2d at 95.
In the present case, the Westfield insurance policy language
clearly and unambiguously provides that underinsurance motorists
coverage will not be provided if the person sustaining property
damage or bodily injury or the legal representative thereof settles
without first obtaining the insurer's written consent. Thus, the
issue becomes whether this exclusion violates the underinsurance
provisions of the underinsured motorists statute. See W. Va. Code
West Virginia Code § 33-6-31(f), as it relates to the
subrogation of claims by an underinsurance carrier provides, in
pertinent part, that "[a]n insurer paying a claim under the
endorsement or provisions required by subsection (b) of this
section shall be subrogated to the rights of the insured to whom
such claim was paid against the person causing such injury, death
or damage to the extent that payment was made." Obviously, the
consent-to-settle provision enables the insurer to either utilize
or waive the subrogation rights mandated by this statutory
provision, depending upon whether or not consent is given. Thus,
this provision in no way conflicts with the spirit and intent of
the underinsurance motorists statute, but rather it helps the
insurer to protect its statutory subrogation right against the
tortfeasor. See Lambert v. State Farm Mut. Auto. Ins. Co., 576
So.2d 160, 164 (Ala. 1991) (explaining that purpose of consent-to-settle provisions is to protect underinsured motorist insurance
carrier's subrogation rights against tortfeasor as well as to
protect insurer against possibility of collusion between insured
Consequently, we hold that a consent-to-settle provision of an
automobile insurance policy pertaining to underinsured motorists
coverage whereby an insured voids his underinsurance coverage by
settling a claim with a tortfeasor without first obtaining the
insurer's written consentSee footnote 10 when such claim involves either the
insured's underinsurance coverage or potentially involves that
coverage is a valid and enforceable means by which an insurer may
protect its statutorily-mandated right to subrogate claims pursuant
to West Virginia Code § 33-6-31(f).See footnote 11 It is clear in this case
that the Appellants violated the consent-to-settle provision in
their insurance policy issued by Appellee since neither the
Appellants nor their attorney obtained the Appellee's written
consent to settle with Mr. Lehman and Allstate prior to actually
settling the case and signing the written release.
Next, the Appellants assert that the settlement agreement
entered into with Mr. Lehman does not violate the subrogation
clause of their insurance policySee footnote 12 and further, that the Appellee's
claims that its subrogation rights were prejudiced are invalid.
The Appellee, however, maintains that its subrogation rights were
prejudiced when the Appellants settled and released Mr. Lehman for
less than his policy limits.
The Appellants rely heavily upon this Court's decision in
Berry v. Nationwide Mutual Fire Insurance Co., 181 W. Va. 168, 381
S.E.2d 367 (1989) to support the contention that Westfield's
subrogation rights were not prejudiced. In Berry, the appellees
owned residential property next to Turman Construction Company
(hereinafter referred to as Turman). From November 1980 through
February 1981 some of the appellees' personal property was
disheveled and their home was damaged due to Turman's detonation of
several blasts. Id. at 170, 381 S.E.2d at 369. The appellees
orally notified their homeowners' insurance carrier, the appellant
Nationwide Mutual Fire Insurance Company (hereinafter referred to
as Nationwide). The insurance carrier for Turman, Transamerica
Insurance Company, was also notified. Id. Nationwide denied the
appellees' claim after an investigation because of a seismographic
report which indicated that a test blast, similar to the blasts
which allegedly caused the Appellee's damages, had nothing to do
with the Appellee's property. Id. at 171, 381 S.E.2d at 370. The
appellees filed suit against Nationwide and Turman. A pretrial
conference resulted in a settlement with Turman for $60,000. The
case against Nationwide proceeded to trial where the jury returned
a verdict in favor of the appellees and awarded compensatory and
punitive damages. Id. Nationwide, upon appeal to this Court,
maintained that its subrogation rights were precluded by the
appellees' settlement with Turman. We disagreed, holding in
syllabus point 1 that
Where an insurer decides, after complete
investigation, not to approve payment to its
insured based upon the allegedly tortious
conduct of another party, the insurer's claim
that a subsequent settlement by the insured
with the other party violates the subrogation
clause of the insurance contract by
prejudicing the insurer's subrogation rights
Id. at 169, 381 S.E.2d at 368.
It is clear that Berry is factually dissimilar and
inapplicable to the present case. In Berry, the insurer denied the
claim, while in the present case, the insurer, Westfield, did not
deny the claim, but merely took the position that in order to
recover underinsurance benefits, the Appellants first had to
exhaust the limits of the tortfeasors' liability policies; a
position which is supported by this Court's decision in Pristavec
v. Westfield Insurance Co., 184 W. Va. 331, 400 S.E.2d 575 (1990),
where we held that
in light of the preeminent public policy of the underinsured motorist statute, which is to provide full compensation, not exceeding coverage limits, to an injured person for his or her damages not compensated by a negligent tortfeasor, this Court holds that underinsured motorist coverage is activated under W. Va. Code, 33-6-31(b), as amended, when the amount of such tortfeasor's motor vehicle liability insurance actually available to the injured person in question is less than the total amount of damages sustained by the injured person, regardless of the comparison between such liability insurance limits actually available and the underinsured motorist coverage limits.
Id. at 338, 400 S.E.2d at 582 and Syl. Pt. 5. The Appellee's position is also supported by the recent decision of Postlethwait v. Boston Old Colony Insurance Co., where we held that a plaintiff is not precluded from suing an underinsurance carrier "if the plaintiff has settled with the tortfeasor's liability carrier for the full amount of the policy and obtained from the uninsured/underinsured carrier a waiver of its right of subrogation against the tortfeasor." No. 21347, slip op. at Syl. Pt. 4 (W. Va. filed June 28, 1993) (emphasis added).
In the present case, the Appellants had not only received
$20,122.95 from a settlement for Mr. Burdette's policy limits, but
the Appellants also had $100,000/$300,000 in liability coverage
actually available from Mr. Lehman's insurer, Allstate. The
Appellants, however, were willing to settle for only $1,250 from
Mr. Lehman's available liability insurance coverage. Under our
holding in Pristavec, the Appellants' underinsurance coverage was
not activated. Further, pursuant to Postlethwait, the Appellants
are precluded from suing the Appellee since the Appellants settled
for less than the full amount of the tortfeasor's liability
coverage and the Appellants failed to obtain a waiver from the
Appellee of its subrogation rights.
It is unquestionable that the Appellee's subrogation rights
were prejudiced by the Appellants' settlement. The Appellants'
left Mr. Lehman with approximately $98,750 in remaining liability
coverage for this accident. If the Appellee were required to pay
underinsurance coverage in order to give the Appellants a full
recovery, the Appellee could not have pursued a subrogation claim
against Mr. Lehman, as a joint tortfeasor, under the doctrine of
joint and several liability and pursuant to West Virginia Code §
33-6-31(f) due to the release entered between the Appellants, Mr.
Lehman and Allstate. The Appellants not only violated the
subrogation clause of their insurance policy issued by the
Appellee, but they harmed the Appellee's statutory right to
subrogate the claim against Mr. Lehman and his insurer.
The standard for granting a motion for judgment is as follows:
'A motion for summary judgment should be
granted only when it is clear that there is no
genuine issue of fact to be tried and inquiry
concerning the facts is not desirable to
clarify the application of the law.' Syllabus
Point 3, Aetna Casualty & Surety Co. v.
Federal Ins. Co. of N. Y., 148 W. Va. 160, 133
S.E.2d 770 (1963).
Syl. Pt. 1, Bauer Enterprises Inc. v. Frye, 181 W. Va. 234, 382 S.E.2d 71 (1989). Based on the applicable law, the Appellee is not liable to the Appellants for underinsurance coverage. This determination was clear without having to make any further inquiry into the facts. See id. Because of the legal determinations made, "there [wa]s no genuine issue of fact to be tried," and therefore, the trial court properly granted the Appellee's motion for summary judgment. Id.
Based on the foregoing, the opinion of the Circuit Court of
Raleigh County is hereby affirmed.
Footnote: 1The Appellee was the Appellant's insurer at the time of the accident.
Footnote: 2Mr. Burdette was a named defendant below but is not appealing the lower court's ruling.
Footnote: 3The record was void of information concerning the total amount of the Appellants' damages.
Footnote: 4The amount of the Appellants' underinsurance coverage was not made part of the record.
Footnote: 5Apparently, the Appellants' attorney was operating under the belief that receipt of any amount from Allstate would have made his
clients' own underinsurance coverage available as indicated by his statement to the Appellee in the November 2, 1990, letter that the Appellants planned to pursue underinsurance coverage in either event.
Footnote: 6The running of the statute of limitations is not a valid reason for failing to first obtain the Appellee's written consent to settle since the Appellants certainly had the option to file suit and then proceed with settlement negotiations.
Footnote: 7Apparently at some point during this period the Appellee and the Appellants' attorney had discussed by telephone a possible $10,000 to $20,000 underinsurance settlement, but no formal offer was ever made by the Appellee.
Footnote: 8Because this Court is upholding the consent-to-settle provision and since the Appellants violated that provision of their insurance policy, thereby voiding any underinsurance coverage the Appellee may have had to provide, the Appellants' contention that the Appellee was not released is without merit and will not be addressed.
Footnote: 9This Court has already upheld the following exclusionary insurance policy language regarding underinsurance coverage. For instance, an automobile insurance policy exclusion which prohibited the stacking of underinsurance coverage when more than one vehicle was insured under a single policy at rates reflecting a multi-car discount was upheld in Arbogast v. Nationwide Mutual Insurance Co., ___ W. Va. ___, 427 S.E.2d 461 (1993). Also, in Thomas v. Nationwide Mutual Insurance Co., ___ W. Va. ___, 425 S.E.2d 595 (1992), we upheld the "family use exclusion" which excluded from the definition of an underinsured vehicle "any automobile owned by or furnished for the regular use of the insured or a relative." Id. at ___, 425 S.E.2d at 596, Syl. Pt. 2. Finally, in Deel, policy language which excluded underinsurance coverage was upheld. 181 W. Va. at 461, 383 S.E.2d at 93.
Footnote: 10It is important to note that if an insurer acts unreasonably in refusing to give written consent to settle, that insurer may be subjecting itself to a bad faith claim pursuant to this Court's holding in Shamblin v. Nationwide Mutual Insurance Co., 183 W. Va. 585, 396 S.E.2d 766 (1990). However, the present case is certainly not one in which the insurer acted unreasonably.
Footnote: 11Other jurisdictions have determined that consent-to-settle provisions involving underinsurance coverage are valid and enforceable. See Jones v. Allstate Ins. Co., 601 So.2d 989 (Ala. 1992); Kapadia v. Preferred Risk Mut. Ins. Co., 418 N.W.2d 848 (Iowa 1988); March v. Mountain States Mut. Cas. Co., 101 N.M. 689, 687 P.2d 1040 (1984); Gallagher v. State Farm Mut. Auto. Ins. Co., 160 A.D.2d 1196, 555 N.Y.S.2d 463 (1990); Archer v. State Farm Ins. Co., 419 Pa. Super. 558, 615 A.2d 779 (1992); Huttleston v. Beacon Nat'l Ins. Co., 822 S.W.2d 741 (Tex. App. 1992).
Footnote: 12The subrogation clause contained within the Appellants' insurance policy provides that:
OUR RIGHT TO RECOVER PAYMENT
A. If we make a payment under this policy and the person to or for whom payment was made has a right to recover damages from another we shall be subrogated to that right. That person shall do:
1. Whatever is necessary to enable
us to exercise our rights; and
2. Nothing after loss or prejudice them.