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September 17, 1999
Record No. 982434
LUMBERMEN’S UNDERWRITING ALLIANCE
DAVE’S CABINET, INC.
FROM THE CIRCUIT COURT OF THE CITY OF
E. Preston Grissom, Judge
Present: All the Justices
OPINION BY JUSTICE CYNTHIA D. KINSER
This appeal arises out of litigation concerning
a workers’ compensation and employers’ liability
insurance policy issued to Dave’s Cabinet, Inc., by
Lumbermen’s Underwriting Alliance (LUA). LUA filed a motion
for judgment against Dave’s Cabinet in the circuit court and
sought a judgment for an alleged balance due and owing for
insurance premiums. Dave’s Cabinet answered the motion for
judgment and also filed a counterclaim against LUA.
In the counterclaim, Dave’s Cabinet
asserted that LUA committed fraud by falsely representing that it
could provide a savings in premium costs if Dave’s Cabinet
purchased its workers’ compensation insurance coverage from
LUA. Dave’s Cabinet further alleged that LUA knew, or should
have known, that its policy of requiring Dave’s Cabinet to
report all workers’ compensation claims, even those
involving only minor injuries, would substantially increase the
amount of premiums that Dave’s Cabinet would pay for
workers’ compensation insurance coverage.
The motion for judgment and counterclaim
proceeded to trial by jury. After hearing evidence, the jury
returned a verdict in favor of LUA against Dave’s Cabinet in
the amount of $10,660. The jury also returned a verdict in favor
of Dave’s Cabinet on its counterclaim against LUA in the
amount of $60,000. The circuit court entered judgment on both
jury verdicts but reduced the amount of the judgment in favor of
Dave’s Cabinet to $42,000, which is the amount Dave’s
Cabinet had requested in the ad damnum clause of
We awarded LUA this appeal on two issues. LUA first asserts that the
circuit court erred by refusing to set aside the jury verdict in
favor of Dave’s Cabinet because that verdict is inconsistent
with the one in favor of LUA. Second, LUA contends that the
circuit court erred by refusing to strike the evidence with
regard to the counterclaim, and also in declining to set aside
the verdict on that claim, because Dave’s Cabinet failed to
prove the elements of constructive fraud as a matter of law.
Because we agree with LUA’s second argument, we do not need
to address the question whether the verdicts are inconsistent.
Therefore, we will reverse, in part, the judgment of the circuit
Dave’s Cabinet, which is located in
Chesapeake, manufactures kitchen cabinets and cabinet moldings,
and also performs mill work. The two owners of the company, David
Alderman and David Boone, met a representative of LUA at an
industry trade show. As a result of that meeting, Rob Robertson,
a district manager for LUA, and Keith Wright, a LUA claims
adjuster, visited the office of Dave’s Cabinet to discuss
the terms of LUA’s workers’ compensation insurance
policy. At trial, Alderman testified that, during that meeting,
Robertson stated that LUA worked exclusively with woodworking
facilities and that LUA’s knowledge of the industry would
enable Dave’s Cabinet to save money by implementing loss
control procedures that would eventually reduce the amount of
premiums that Dave’s Cabinet would pay for workers’
compensation insurance coverage.
LUA then sent a plant engineer to inspect the
facility at Dave’s Cabinet. As a result of that inspection,
LUA recommended changes in the manner in which Dave’s
Cabinet handled workers’ compensation claims involving minor
injuries. As Alderman had explained to Robertson, Dave’s
Cabinet had previously treated minor injuries
"in-house" with appropriate first aid. For example, the
company’s practice had been to remove splinters, clean and
bandage small cuts, apply ice to mashed toes, wash sawdust out of
eyes, and then allow employees with these injuries to return to
work. Dave’s Cabinet sent only those employees who sustained
more serious injuries to a doctor or hospital for treatment.
According to Alderman, Robertson stated that LUA wanted
Dave’s Cabinet to send all employees who suffered injuries
at work to the hospital for treatment because of LUA’s
concerns about future liability and third-party verification. In
other words, Dave’s Cabinet was advised to report all
injuries, including "splinters, nicks, cuts, [and] mashed
fingers," to LUA. Wright likewise advised Alderman that
Dave’s Cabinet was required to file a claim even if a
"Band-aid" would take care of an employee’s
Alderman, on behalf of Dave’s Cabinet,
entered into a "Subscriber Agreement" with LUA in May
1988. The subsequent "Workers Compensation and Employers
Liability Insurance Policy" that LUA issued to Dave’s
Cabinet required Dave’s Cabinet to "[p]rovide for
immediate medical and other services required by the workers
compensation law" and to advise LUA "at once if injury
occurs that may be covered by this policy." According to
Alderman, Robertson conceded that this policy requirement
"would cost . . . a little bit more money up
front," but insisted that it would save Dave’s Cabinet
money in the long run.
However, Dave’s Cabinet experienced the
opposite result. According to Alderman, LUA’s requirement
with regard to reporting and treating all workers’
compensation claims did not effect a reduction in the amount of
its premiums for workers’ compensation insurance coverage.
Instead, it caused the company’s "experience
modification" to increase significantly. That increase in
the "experience mod" resulted in higher insurance
premiums for Dave’s Cabinet.
A. Standard of Review
The standard of appellate review applicable to
this appeal is well settled. As the party coming to this Court
with a jury verdict that the circuit court approved, Dave’s
Cabinet "’occupies the most favored position known to the
law.’" Ravenwood Towers, Inc. v. Woodyard, 244 Va.
51, 57, 419 S.E.2d 627, 630 (1992) (quoting Pugsley v.
Privette, 220 Va. 892, 901, 263 S.E.2d 69, 76 (1980)).
"A trial court’s judgment is presumed to be correct,
and on appeal, we must view the evidence and all reasonable
inferences deducible therefrom in the light most favorable to the
prevailing party at trial." Evaluation Research Corp. v.
Alequin, 247 Va. 143, 147, 439 S.E.2d 387, 390 (1994). When
applying this standard, an appellate court must, however, set
aside a judgment if it is "plainly wrong or without evidence
to support it." Id. at 147-48, 439 S.E.2d at 390.
B. Fraud Claim
In support of its claim for fraud, Dave’s
Cabinet contends that LUA made two misrepresentations upon which
Dave’s Cabinet relied to its detriment. The first
misrepresentation focused on the LUA policy requiring Dave’s
Cabinet to report all work-related injuries regardless of their
severity and to send all employees with injuries to a hospital
for medical care rather than treating employees with only minor
injuries "in-house" with appropriate first aid. The
second misrepresentation concerned the statement by LUA, through
its representative, that LUA’s policy would eventually save
Dave’s Cabinet money by lowering the amount of its premiums
for workers’ compensation insurance coverage. We conclude
that neither of these alleged misrepresentations can form the
basis of an action for constructive fraud.
The elements of a cause of action for
constructive fraud are "a showing by clear and convincing
evidence that a false representation of a material fact was made
innocently or negligently, and the injured party was damaged as a
result of his reliance upon the misrepresentation." Mortarino
v. Consultant Eng’g Servs., 251 Va. 289, 295, 467 S.E.2d
778, 782 (1996). Robertson’s and Wright’s statements
that LUA wanted Dave’s Cabinet to report even minor
work-related injuries and to have employees who sustained such
injuries treated at a hospital were not misrepresentations of a
material fact. They were, instead, statements regarding LUA’s
policy requirement. Although Dave’s Cabinet did not agree
with the requirement since it constituted a departure from its
prior practice and eventually resulted in higher premiums for its
workers’ compensation insurance coverage, LUA fully
disclosed its required procedure for reporting and treating all
workers’ compensation claims, and Dave’s Cabinet knew
about and accepted that procedure when it purchased coverage from
LUA. Consequently, Dave’s Cabinet failed to prove an
essential element of a claim for constructive fraud.
With regard to the second alleged
misrepresentation, we recognize that Dave’s Cabinet did not
experience any reduction in the amount of its premiums for
workers’ compensation insurance but, in fact, incurred
increased premiums. Nevertheless, Robertson’s statement that
LUA’s policy requirement for reporting and treating all
work-related injuries would eventually reduce the cost of
workers’ compensation insurance coverage for Dave’s
Cabinet was merely an unfulfilled promise as to a future event
and not a statement concerning an existing or pre-existing fact.
"’[F]raud must relate to a present or a pre-existing fact,
and cannot ordinarily be predicated on unfulfilled promises or
statements as to future events.’" Patrick v. Summers,
235 Va. 452, 454, 369 S.E.2d 162, 164 (1988) (quoting Soble v.
Herman, 175 Va. 489, 500, 9 S.E.2d 459, 464 (1940)). See
ITT Hartford Group, Inc. v. Virginia Fin. Assoc., Inc.,
258 Va. ___, ___, ___ S.E.2d ___, ___ (1999), decided today.
Thus, the statement cannot serve as the basis of a claim for
For these reasons, we will reverse the judgment
of the circuit court with regard to the counterclaim filed by
Dave’s Cabinet and enter judgment here in favor of LUA on
Reversed in part and final judgment.
 Dave’s Cabinet did not assign cross-error with
regard to the judgment entered against it.
 Although the circuit court instructed the jury in this
case with regard to both actual and constructive fraud, the court
specifically overruled LUA’s motion to set aside the verdict
on the counterclaim, and entered judgment on that verdict, on the
basis that the evidence supported a claim for constructive fraud.
Dave’s Cabinet did not assign cross-error to the
court’s failure to sustain the verdict in its favor on the
grounds that the evidence also supported a claim for actual
fraud. See Rule 5:17(c).
 The circuit court instructed the jury that Virginia law
requires an employer to keep a record of all injuries occurring
in the course of employment and that a report of injuries shall
be made and transmitted to the Workers’ Compensation
Commission by the employer, its representative, or the insurance
carrier for an insured employer. This instruction is a correct
statement of the provisions contained in Code