West Virginia District Court Grants Summary Judgment in Favor of Insurer Following Denial of Policyholder’s Mine Subsidence Claim

Carlton Fields
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Carlton Fields

In January 2019, a policyholder sued Westfield Insurance Co. after the insurer denied coverage for property damage that the policyholder believed to have occurred as a result of mine subsidence, and therefore covered under a mine subsidence endorsement to his homeowners insurance policy. The policyholder alleged that the insurer’s denial constituted a breach of contract and also alleged that the insurer violated the West Virginia Fair Trade Practices Act, as well as the implied covenant of good faith and fair dealing.

After denying Westfield’s initial motion for summary judgment on the pleadings, the insurer renewed its motion after additional evidence on the evaluation of the policyholder’s mine subsidence claim had been introduced. The court thereafter granted summary judgment in favor of Westfield. It reasoned that because mine subsidence claims – including the investigation and subsequent decision whether to pay such claims – are entirely within the purview of the West Virginia Board of Risk and Insurance Management (BRIM) as a matter of statute, Westfield was merely acting as an agent of the state and was bound by BRIM’s decision. As such, while Westfield was required by statute to include the mine subsidence endorsement in its insurance policies, it had no authority to decide whether the policyholder’s claim was paid.

In this matter, the record demonstrated that (1) the policyholder submitted a claim for mine subsidence damage to Westfield; (2) Westfield referred the matter to BRIM as it was statutorily required to do so; and (3) BRIM conducted its independent investigation of the matter and determined that the claim would not be paid. Under these circumstances, the court determined that Westfield could not be found to have breached its contract with the policyholder for an adverse decision rendered exclusively by BRIM as required by applicable statute, and granted summary judgment as a result.

Once summary judgment was granted on the breach of contract claim, the policyholder’s remaining claims were similarly dealt with. For example, West Virginia law does not recognize an independent cause of action for the breach of an implied covenant of good faith and fair dealing separate and apart from a breach of contract claim. Having found no breach of contract, Westfield was entitled to summary judgment on the policyholder’s common law bad faith claim. Further, because the exclusive authority to investigate and determine mine subsidence claims rests with BRIM, it could not be established as a matter of law that Westfield’s failure to investigate the policyholder’s claim was misconduct, let alone misconduct with sufficient frequency as to indicate a general business practice (as required for an unfair trade practices claim).

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