Cheryl Lynne Connelly, Esq.
Campbell, Woods, Bagley, Emerson,
McNeer & Herndon, P.L.L.C.
Huntington, West Virginia
Attorney for West Virginia Insurance
Scott S. Blass, Esq.
James B. Stoneking, Esq.
Christopher J. Regan, Esq.
Bordas, Bordas & Jividen
Wheeling, West Virginia
Attorneys for Potts
Robert L. Greer, Esq.
F. James Foley, Esq.
Michael Thomas, Esq.
National Conference of Insurance Guaranty Funds
JUSTICE MAYNARD delivered the Opinion of the Court.
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)
2. The failure to allow each injured party to recover under the West Virginia Insurance Guaranty Association Act would largely defeat the remedial purpose of the Guaranty Act, which provides that [t]his article shall be liberally construed to effect [its] purpose[.] W.Va. Code § 33-26-4 (1970). A primary intention of the Legislature in promulgating the Guaranty Act was the scrupulous protection of those having claims against insurers, which have been declared insolvent, by facilitating and expediting the process of recovering monies due and owing on such claims.
3. Pursuant to the West Virginia Guaranty Association Act, specifically, W.Va.Code, 33-26-8(1)(a) , the West Virginia Guaranty Association is 'obligated to the extent of covered claims existing prior to the determination of insolvency, and for such claims arising within thirty days after the determination of insolvency. . . .' Syllabus Point 5, in part, Cannelton Indus. v. Aetna Cas. & Sur. Co., 194 W.Va. 203, 460 S.E.2d 18 (1994).
4. 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.
Appellants, Marlyn Potts,
Alan Potts, Kristen Potts, Erin Potts, and Stacey Potts (the Pottses), appeal
the June 26, 2000 order of the Circuit Court of Ohio County, West Virginia,
which granted summary judgment to the appellee, West Virginia Insurance Guaranty
Association (WVIGA). The appellants contend they presented five claims, rather
than one aggregate claim, for payment pursuant to the West Virginia Insurance
Guaranty Association Act (the Guaranty Act), W.Va. Code §§ 33-26-1
to 19. We agree.
The Pottses, Marlyn Potts
along with her husband, Alan Potts, and their children, Kristen Potts, Erin
Potts, and Stacey Potts, filed a complaint against Dr. Cross and TCSI alleging
medical negligence and loss of companionship and comfort. The Pottses later
amended their complaint by contending that Dr. Cross was liable to Marlyn Potts
for intentional interference with her employment relationship, intentional interference
with her doctor-patient relationships, and outrage.See
footnote 1 1
During the relevant time period,
Dr. Cross and TCSI were insured by Insurance Corporation of American (ICA).
The ICA policy became effective on July 7, 1993 and carried a retroactive date
of January 1, 1987. The policy provided $1,000,000 coverage per claim with an
annual aggregate of $3,000,000 subject to the following limitation:
IV. LIMITS OF LIABILITY
The Per Claim amount stated in the Schedule of Declarations, or any applicable endorsement wherein the Limits of Liability have been amended, in effect at the time a claim is first made is the maximum amount we will pay for all claims resulting from one incident. Our total liability during any one policy period will not exceed the Annual Aggregate amount.
Regardless of the imposition of interest, including prejudgment interest, on any final adjudication against you, our total liability for injury will not exceed the Per Claim amount filed for any one incident and, subject to the same per claim limit filed for each incident, our total liability during any one policy period will not exceed the stated annual aggregate.
For the purpose of determining our per claim limit of liability, per claim means the total amount of all claims filed by all claimants for any one incident. The following will be considered one incident:
a. all injury resulting from a series of acts or omissions in providing medical services to one person and
b. all injury arising out of continuous or repeated exposure to substantially the same general condition and
c. all injury to a mother and her unborn child or children arising out of acts or omissions in providing medical services.
The trial in this case was scheduled to begin on April 1, 1997. Two weeks prior to this date, ICA was placed in receivership and was enjoined from conducting business. As a result, ICA was precluded from negotiating settlements in pending cases. Neither could WVIGA intervene because the prerequisites necessary to trigger its statutory obligations had not yet occurred.See footnote 2 2 Due to the posture of the case, Dr. Cross and TCSI requested a continuance which was denied by the circuit court. The case proceeded to trial as scheduled. Two days later, before a verdict was returned by the jury, the parties settled the Pottses' claims, placing the terms of the agreement on the record. Dr. Cross and TCSI agreed to pay the Pottses $400,000 before May 1, 1997; the Pottses would receive the first $150,000 collected from WVIGA; and the proceeds from any bad faith claims would be split with 40% going to counsel, 30% going to the Pottses, and 30% going to Dr. Cross and TCSI.
The jury returned a verdict in favor of the Pottses on April 4, 1997. Marlyn Potts was awarded $1,031,137.50 in compensatory damages and $1,000,000 in punitive damages. Alan Potts was awarded damages for mental anguish in the amount of $10,000 and each of the children was awarded damages for mental anguish in the amount of $20,000. The verdict was reflected in the judgment order entered by the circuit court on April 7, 1997.
On April 28, 1997, ICA was
declared to be insolvent and was ordered to be liquidated. This event triggered
the statutory obligations of WVIGA. When WVIGA's efforts to settle the claims
were unsuccessful, WVIGA brought a declaratory judgment action and paid into
the registry of the court the statutory cap of $300,000.See
footnote 3 3 WVIGA specifically asked the court to declare that its liability and obligation was limited to
a single statutory covered claim and to require the defendants to interplead
and settle among themselves their rights to the interpleader fund.
Dr. Cross and TCSI counterclaimed
by asserting that they paid the Pottses $400,000 in conformity with the settlement
agreement, and they, therefore, held a covered claim in the amount of $300,000.
The Pottses counterclaimed asserting that each of them held a separate and distinct
covered claim under the Guaranty Act for a total of five covered claims. Dr.
Cross and TCSI then moved for partial summary judgment, asking the court to
disperse one-half of the interpleader fund to the Pottses and one-half to them.See
footnote 4 4 At the same time, WVIGA moved for summary judgment
stating that only one covered claim was presented for payment and the statutory
cap for that claim had been paid. On November 22, 1999, the interpleader fund
was dispersed by agreed order, and Dr. Cross and TCSI were dismissed from the
action with prejudice. The counterclaims of the Pottses remained.
The agreed order states that
[t]he parties further agree that they shall not be precluded from presenting
any arguments relative to the remaining claims by and between WVIGA and the
Potts Defendants[; these claims] are not waived or otherwise affected by the
resolution of the motions referenced above. Furthermore, [t]he issue
as to whether the Potts defendants are entitled to additional monies from the plaintiff, WVIGA
with respect to their counterclaims shall remain the subject of this declaratory
judgment action. The court took WVIGA's motion for summary judgment under
advisement. Upon further consideration, the court entered a final order which
states that loss of consortium claims are derivative claims and the ICA policy
does not include loss of consortium as a separate 'incident' for which
the per claim limits apply. WVIGA's motion for summary judgment was granted.
It is from this order that the Pottses appeal.
The issue we must resolve
is whether the Pottses have presented for payment one claim or five claims under
the West Virginia Insurance Guaranty Association Act. Where the issue
on an appeal from the circuit court is clearly a question of law or involving
an interpretation of a statute, we apply a de novo standard of review.
Syllabus Point 1, Chrystal R.M. v. Charlie A.L., 194 W.Va. 138, 459 S.E.2d
WVIGA was established by statute
to protect claimants and policyholders from financial losses associated with
the insolvency of an insurance company. W.Va. Code § 33- 26-2 (1970) reads
The purpose of this article is to provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, and to provide an association to assess the cost of such protection among insurers.
WVIGA accomplishes its purpose through a guaranty fund. When an insurance insolvency occurs, WVIGA sets up a pool that is initially funded by insurance companies doing business in West VirginiaSee footnote 5 5 who then recoup these sums from their policyholders.See footnote 6 6 Claims insured by the insolvent company are paid from the fund.
The liability of WVIGA is statutorily limited to the payment of covered claims. The Guaranty Act defines a covered claim as:
an 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. Covered claim shall not include (i) any amount in excess of the applicable limits of coverage provided by an insurance policy to which this article applies[.]
W.Va. Code § 33-26-5(4) (1985). In this case we are presented with one injured claimant and four loss of consortium claims. The Pottses contend these claims represent five separate covered claims while the WVIGA contends only one aggregated covered claim exists under the Guaranty Act. The jurisdictions which have decided this question are divided.
Several jurisdictions find
the claims are aggregated. See Vickodil v. Pennsylvania Ins. Guar.
Ass'n, 356 Pa.Super. 325, 514 A.2d 635 (1986) (PIGA was not liable for separate
claim by wife for loss of consortium where it had already paid maximum amount
on husband's claim for bodily injury, which arose out of the same incident);
Knipp v. Ariz. Prop. & Cas. Ins., 156 Ariz. 137, 750 P.2d 895 (1987)
(a wrongful death action brought by multiple beneficiaries of an individual
killed in an airplane accident constituted only one covered claim under the
statute providing for payment of claims of insolvent insurance companies); Florida
Ins. Guar. Ass'n, Inc. v. Cole, 573 So.2d 868 (Fla.App. 2 Dist. 1990) (three survivors who sued under the Wrongful Death Act for the death
of one person caused by the act of a single insured were entitled to a single
claim against FIGA limited by statutory maximum of $300,000 even though the
limitation of liability for any one occurrence in relevant insurance policy
provided for more generous coverage); Builders Transport v. S.C. Prop. &
Cas., 307 S.C. 398, 415 S.E.2d 419 (1992) (wrongful death claim was only
one covered claim within meaning of the Act and the number of covered claims
was not determined by the number of beneficiaries entitled to proceeds from
wrongful death claim); Cox v. Minnesota Ins. Guar. Ass'n, 508 N.W.2d
536 (Minn.App. 1993) (assertion of automobile accident victim's covered claim
under the primary policy issued by an insolvent insurer precluded victim's mother
from asserting a covered claim against MIGA as the primary policy had a single,
per-accident limit and, thus, there was only one covered claim); Igwilo v.
Property Insurance, 131 Md.App. 629, 750 A.2d 646 (2000) (parents' claims
for child's pre-birth injury and for economic and non-economic damages resulting
from medical malpractice were a single covered claim for purposes of the PCIGC's
liability; also, all claims derived from the independent bodily injury to the
child's mother, including husband's claim for loss of consortium, constituted
a single covered claim).
Conversely, other jurisdictions
find the claims to be separate and distinct. See Oglesby v. Liberty Mut.
Ins. Co., 832 P.2d 834 (Okla. 1992) (Guaranty Association is obligated to
pay individual claims of each beneficiary up to the statutory maximum of $150,000 upon insolvency of insurer in wrongful death action rather than an
aggregated total of $150,000 to all victims); Dickerson v. Thompson,
89 Ohio App.3d 399, 624 N.E.2d 784 (1993) (decedent's wife and two minor children
each had a separate covered claim on which the state insurance guaranty association
was obligated to pay; decedent's personal injury action is distinct from the
wrongful death action); Cooper v. Huddy, 581 So.2d 723 (La.App. 1 Cir.
1991) (decedent's five survivors' wrongful death claims constituted five separate
claims, rather than only one claim; superceded by statute, La.R.S. 22:1382
(1990) to provide a miximum limit of three hundred thousand dollars per accident
This Court previously discussed
the term covered claim in conjunction with the Guaranty Act but
in a different context. In DeVane v. Kennedy, 205 W.Va. 519, 519 S.E.2d
622 (1999), the issues presented were whether the Guaranty Act required exhaustion
of the hospital's solvent insurance before Mrs. DeVane could recover from WVIGA
and whether the circuit court could enforce a pre-insolvency settlement agreement
against WVIGA. We were not asked to determine whether WVIGA could be liable
for multiple claims stemming from one injury.
The facts of DeVane are similar to the facts in the case sub judice. In DeVane, Richard Richardson received medical treatment from Dr. Kennedy in the emergency room of Charles Town General Hospital, Inc. As a result of such treatment, Mr. Richardson died.
The decedent's personal representative, Cheryl Richardson DeVane who was his
widow and sole beneficiary, instituted a civil action alleging medical malpractice
by Dr. Kennedy and ostensible agency and vicarious liability of the hospital.
Mrs. DeVane entered into a settlement agreement with ICA, Dr. Kennedy's insurer.
Shortly thereafter, ICA was declared to be insolvent. WVIGA assumed responsibility
for the claims for benefits filed against ICA by West Virginia residents. WVIGA
disputed its liability for ICA's obligations arising from the pre-insolvency
settlement agreement and refused to tender the settlement amount. Mrs. DeVane
asked the circuit court to enforce the settlement agreement against WVIGA. The
court directed that the agreement be entered as a judgment. WVIGA moved to intervene
and asked the court to set aside its ruling. The court granted WVIGA's motion
to intervene and WVIGA appealed to this Court.
On appeal, this Court affirmed
the ruling of the circuit court enforcing the settlement agreement against WVIGA.
In so doing, we reasoned that:
the definition of covered claim contemplates a (1) claim that is (2) unpaid; (3) which arises out of and is within the coverage of an insurance policy, which (a) is in force at the time of the occurrence giving rise to the claim and (b) was issued by an insurer which became insolvent after May 12, 1970; and (4)(a) that is asserted by a claimant or insured who is a resident of [West Virginia] at the time of the insured occurrence or (b) that arises from property which is permanently located in [West Virginia].
Id., 205 W.Va. at 530, 519 S.E.2d at 633 (footnote omitted). At that time,
we were not asked to decide if Mrs. DeVane and her deceased husband had two separate
covered claims or one aggregated claim under the Guaranty Act. We are asked to
decide that issue today.
We agree with the courts which
hold that each beneficiary or victim has a separate claim under the states'
guaranty acts. We note, as they do, that the statutes refer to covered claims
rather than to covered occurrences. In particular, the West Virginia
Insurance Guaranty Association Act, W.Va. Code § 33-26-8(1)(a) (1985),
specifically states that the West Virginia Insurance Guaranty Association is
obligated to pay covered claims rather than covered occurrences.
The failure to allow each injured party to recover would largely defeat the
remedial purpose of our Guaranty Act, which provides that [t]his article
shall be liberally construed to effect [its] purpose[.] W.Va. Code
§ 33-26-4 (1970) (emphasis added). Thus, it is evident that a primary
intention of the Legislature in promulgating the Guaranty Act was the scrupulous
protection of those having claims against insurers, which have been declared
insolvent, by facilitating and expediting the process of recovering monies due
and owing on such claims. DeVane, 205 W.Va. at 529, 519 S.E.2d
We agree with the Oglesby court
that the use of the word each in the guaranty acts denotes any
one of a number, separately considered. We also quote with approval the
following language from the Oglesby opinion:
The Legislature's use of the word each rather than all covered claims indicates that it anticipated the possibility of multiple recoveries. Additionally, § 2007 does not use the word occurrence. It expressly applies the $150,000 limit to claims. There is no basis for substituting the word occurrence for claim in order to aggregate multiple claims arising from a single accident.
The plain meaning of the text . . . does not support aggregation of multiple claims.
Oglesby, 832 P.2d at 840 (footnotes omitted). The language in our Guaranty Act is equally clear. If our Legislature had intended the statutory cap to apply to occurrences rather than to claims, they could simply have used the word occurrences instead of the word claims in the statute. 'The primary object in construing a statute is to ascertain and give effect to the intent of the Legislature. Syllabus point 1, Smith v. State Workmen's Compensation Commissioner, 159 W.Va. 108, 219 S.E.2d 361 (1975).' Syllabus point 6, State ex rel. ACF Industries, Inc. v. Vieweg, 204 W.Va. 525, 514 S.E.2d 176 (1999). Syllabus Point 1, DeVane v. Kennedy, 205 W.Va. 519, 519 S.E.2d 622 (1999).
We, therefore, hold that [p]ursuant
to the West Virginia Guaranty Association Act, specifically, W.Va.Code,
33-26-8(1)(a) , the West Virginia Guaranty Association is 'obligated to
the extent of covered claims existing prior to the determination of insolvency, and for such claims arising within thirty days after the determination of
insolvency. . . .' Syllabus Point 5, in part, Cannelton Indus. v. Aetna
Cas. & Sur. Co., 194 W.Va. 203, 460 S.E.2d 18 (1994). We further
hold that 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. Each of the five Potts claimants holds a covered claim
for which he or she is entitled to payment from WVIGA.See
footnote 7 7
(5) Insolvent insurer means an insurer (a) licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred and (b)
against whom an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction in the insurer's state of domicile or of this state.
(1) The association shall:
(a) Be obligated to the extent of the covered claims existing prior to the determination of insolvency, and for such claims arising within thirty days after the determination of insolvency, but such obligation shall include only that amount of each covered claim which is in excess of one hundred dollars and is less than three hundred thousand dollars. In no event shall the association be obligated to a policyholder or claimant in an amount in excess of the obligations of the insolvent insurer under the policy from which the claim arises.
(b) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, defenses and obligations of the insolvent insurer as if the insurer had not become insolvent.
(c) [A]ssess member insurers separately for each account amounts necessary to pay the obligations of the association under subdivision (a) of this subsection subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under section thirteen [§ 33-26-13] of this article and other expenses authorized by this article. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the preceding calendar year on the kinds of insurance in the account. Each member insurer shall be notified of the assessment not later than thirty days before it is due. No member insurer may be assessed in any one year on any account an amount greater than two percent of that member insurer's net direct written premiums for the preceding calendar year on the kinds of insurance in the account.
The rates and premiums charged for insurance policies to which this article applies shall include amounts sufficient to recoup a sum equal to the amounts paid to the association by the member insurer less any amounts returned to the member insurer by the association and such rates shall not be deemed excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.