A widow who alleged defendant insurance carrier denied payment of the full amount of her husband’s life insurance policy until days before an administrative hearing before the state Office of the Insurance Commissioner may sue for “unfair settlement practices” in violation of the West Virginia Unfair Trade Practices Act; the 4th Circuit reverses the district court’s dismissal of the suit and says that actions brought pursuant to the WVUTPA sound in tort and not in contract.
As least three times during the past two decades, federal courts in our circuit have called upon West Virginia’s highest court to answer certified questions regarding the WVUTPA. Each time, the Supreme Court of Appeals of West Virginia determined that actions pursuant to the WVUTPA sound in tort and not in contract. In view of the want of published authority from this court and the frequency with which the WVUTPA is litigated in federal court, we take this opportunity to clarify the law for district courts, unless and until the West Virginia high court rules to the contrary.
We hold that actions brought pursuant to the WVUTPA sound in tort and not in contract, and that West Virginia law governs the underlying lawsuit.
Here, it is uncontested that plaintiff’s claim does not directly involve the policy terms or benefits; plaintiff conceded in her complaint that she substantially prevailed in obtaining the coverage to which she was always lawfully entitled. Rather, her lawsuit is based on defendant’s alleged unlawful conduct in connection with its handling of her claim. Notwithstanding the repeated references to the policy in the complaint, the essential claim underlying plaintiff’s lawsuit is defendant’s allegedly tortious conduct.
We can further reason that plaintiff’s action is one in tort – as opposed to contract – based on the type of damages available under the WVUTPA and the type of relief prayed for in the complaint. She seeks, among other relief, punitive damages and attorney’s fees and costs. She does not seek damages based on the terms of the policy itself, but instead references the policy only when describing the damages she incurred as a result of defendant’s improper refusal to honor her claim.
We hold that plaintiff’s WVUTPA claim sounds in tort and not in contract.
The district court, when it assumed arguendo that plaintiff’s claim sounds in tort, employed the Restatement 2nd of Conflict of Laws choice-of-law approach and concluded Virginia law applies. As the proper choice-of-law approach is an issue of state law and the outcome is the same under either approach, this court need not determine which approach West Virginia courts would apply here. We hold that West Virginia law applies pursuant to the lex loci delicti approach and the Restatement approach. The district court erred in determining that Virginia law applies.
Finally, we consider whether plaintiff’s complaint states a claim upon which relief can be granted pursuant to West Virginia law. Insofar as the Supreme Court of Appeals of West Virginia has previously entertained questions regarding an action brought pursuant to the WVUTPA against an insurer subsequent to settlement, where the cause of action was limited to “unfair settlement practices,” we hold that plaintiff’s complaint states a claim upon which relief can be granted should she prevail on the merits.
We reverse dismissal of plaintiff’s claim and remand for further proceedings.
Kenney v. The Independent Order of Foresters (Floyd) No. 13-1788, March 10, 2014; USDC at Martinsburg, W.Va. (Groh) Don C.A. Parker for appellant; Robert L. Massie for appellee. VLW 014-2-052, 22 pp.