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Kenney v. Independent Order of Foresters

United States Court of Appeals, Fourth Circuit

March 10, 2014

AUDREY DIANNE KENNEY, Plaintiff - Appellant,
v.
THE INDEPENDENT ORDER OF FORESTERS, Defendant - Appellee

Argued: December 11, 2013.

Page 902

Appeal from the United States District Court for the Northern District of West Virginia, at Martinsburg. (3:12-cv-00123-GMG). Gina M. Groh, District Judge.

ARGUED:

Don C.A. Parker, SPILMAN, THOMAS & BATTLE, PLLC, Charleston, West Virginia, for Appellant.

Robert Lawrence Massie, NELSON MULLINS RILEY & SCARBOROUGH LLP, Huntington, West Virginia, for Appellee.

ON BRIEF:

Glen A. Murphy, SPILMAN, THOMAS & BATTLE, PLLC, Charleston, West Virginia, for Appellant.

S. Taylor Hood, NELSON MULLINS RILEY & SCARBOROUGH LLP, Huntington, West Virginia, for Appellee.

Before AGEE, KEENAN, and FLOYD, Circuit Judges. Judge Floyd wrote the opinion, in which Judge Agee and Judge Keenan joined.

OPINION

Page 903

FLOYD, Circuit Judge:

At 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 West Virginia Unfair Trade Practices Act (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. Taylor v. Nationwide Mut. Ins. Co., 214 W.Va. 324, 589 S.E.2d 55 (W. Va. 2003); Wilt v. State Auto. Mut. Ins. Co., 203 W.Va. 165, 506 S.E.2d 608 (W. Va. 1998); Poling v. Motorists Mut. Ins. Co., 192 W.Va. 46, 450 S.E.2d 635 (W. Va. 1994).[1] This Court, too, has decided a case under that same framework, albeit in an unpublished opinion. Yost v. Travelers Ins. Co., 181 F.3d 95 (4th Cir. 1999) (unpublished table decision). 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 Supreme Court of Appeals of West Virginia rules to the contrary.

For the reasons that follow, we hold that actions brought pursuant to the WVUTPA sound in tort and not in contract. We further hold that West Virginia law governs the underlying lawsuit and that the complaint states a claim upon which relief can be granted. Accordingly, we reverse the district court's dismissal of the complaint and remand for further proceedings.

I.

Audrey Kenney's husband, Ronald Kenney, passed away on September 19, 2011,

Page 904

leaving Mrs. Kenney as the sole beneficiary of a life-insurance policy (the " policy" ) issued by The Independent Order of Foresters (IOF), a Canadian corporation. At the time of Mr. Kenney's passing in 2011, the Kenneys were residents of West Virginia and had resided there since 2003. At the time that IOF issued the policy to Mr. Kenney in 1984, however, the Kenneys resided in Virginia. The policy contains a choice-of-law provision that states as follows: " The rights or obligations of the member or anyone rightfully claiming under this certificate will be governed by the laws of the State in which this certificate is delivered."

On September 21, 2011, Mrs. Kenney filed a claim with IOF to collect the policy benefits, which she believed to be $130,000; IOF, however, responded that the policy was worth only $80,000. In fact, although the policy was worth only $80,000 when Mr. Kenney took out the policy in 1984, Mr. Kenney subsequently applied for and received a $50,000 increase in coverage in 1994.

When IOF refused to pay $130,000 to Mrs. Kenney, she filed a complaint with the West Virginia Office of the Insurance Commissioner (the " Commissioner" ) on November 1, 2011. IOF responded to Mrs. Kenney's complaint on or around December 7, 2011, and maintained that the policy was worth only $80,000. On June 27, 2012, the Commissioner scheduled an administrative hearing to be held on August 1, 2012, regarding Mrs. Kenney's claim. Then, on July 20, 2012--nearly ten months after Mrs. Kenney first contacted IOF and just twelve days before the administrative hearing was scheduled to take place--IOF reversed course and agreed to pay $130,000 to Mrs. Kenney. Without further explanation, IOF provided the following reasoning for the sudden departure from its prior position on Mrs. Kenney's claim: " There are some inconsistencies within the file that lead us to the conclusion that Mr. Kenney would have assumed the face amount of the insurance certificate... at the increased coverage amount of $130,000. Based on this information, we will honour the death claim for that amount." [2] In its brief on appeal, IOF now reveals that Mr. Kenney allegedly " failed to sign and return the offer form before its expiration date," and thus the offer for the increase in coverage had lapsed. This explanation, however, was never provided to Mrs. Kenney during the nearly year-long period that she was denied the benefit of the increased coverage.

Mrs. Kenney sued IOF in West Virginia state court on September 19, 2012, pursuant to the WVUTPA. Specifically, Mrs. Kenney acknowledged in her complaint that she " substantially prevailed in obtaining the coverage to which she was always lawfully entitled" ; she alleged, however, that IOF's " conduct... in connection with its handling" of her claim constituted an unlawful settlement practice prohibited by the WVUTPA. See, e.g., W.Va. Code ยง 33-11-4(9)(f) (unlawful to " [n]ot attempt[] in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear" ). IOF removed the case to the district court below and ...


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