Loudin v. National Liability & Fire Insurance
228 W. Va. 34
| W. Va. | 2011Background
- Loudins sued National Liability & Fire Insurance Co. and others after National denied liability coverage and handled the claim unfavorably.
- National paid the insured Thomas Loudin $5,000 under Auto Medical Payments following the accident.
- William Loudin, a permissive operator of the truck, was the alleged tortfeasor; National defended and investigated his action.
- National settled the William Loudin suit for $150,000, and the Loudins amended their complaint to remove William as a defendant.
- Circuit Court granted summary judgment finding the Loudins were third-party claimants and thus barred from pursuing bad faith and UTCA claims, and sua sponte ruled on outrage; the Loudins appealed.
- Court reverses and remands for further proceedings, holding Loudins have mixed first- and third-party Bad Faith characteristics because Thomas Loudin was the named insured who filed a claim under his policy against a nonnamed insured.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Loudins first-party or third-party claimants? | Loudins qualify as first-party claimants since Thomas is named insured. | Loudins are third-party claimants because Thomas seeks benefits based on William’s liability under the policy. | Court holds Loudins have characteristics of both; cannot classify as purely third-party; reverses on this basis. |
| Did the circuit court err in granting summary judgment on outrage sua sponte? | National did not seek summary judgment on outrage, so court cannot decide it. | Merely incidental references to outrage allowed consideration. | Sua sponte ruling on outrage was error; remand for proper consideration. |
| Did circuit court err by relying on Gillette and similar cases to classify Loudins as third-party claimants? | Gillette misapplies; here Thomas, the policyholder, is involved as a first-party claimant. | Gillette controls third-party status of insured spouses seeking liability benefits. | Court rejects Gillette-based reasoning; Loudins are not categorically third-party. |
Key Cases Cited
- State ex rel. Allstate Ins. Co. v. Madden, 215 W. Va. 705, 601 S.E.2d 25 (2004) (W. Va. 2004) (recognizes private cause of action under UTCA and related concepts)
- Gaughan, 203 W.Va. 358, 508 S.E.2d 75 (1998) (W. Va. 1998) (distinguishes first-party vs. third-party bad faith actions; third-party bar under 33-11-4a(a))
- Gillette v. Estate of Gillette, 163 Ohio App.3d 426, 837 N.E.2d 1283 (2005) (Ohio App. 2005) (insured spouse treated as third-party claimant for liability benefits; discusses divided loyalties)
- Bonenberger v. Nationwide Mut. Ins. Co., 791 A.2d 378, 381 (Pa. Super. Ct. 2002) (Pa. Super. Ct. 2002) (first-party vs. third-party bad faith; UIM context; insurer’s duty to insured remains distinct)
- Miller v. Fluharty, 201 W. Va. 685, 500 S.E.2d 310 (1997) (W. Va. 1997) (policyholders deserve prompt benefits; public policy against vexatious litigation)