Penn-America Insurance Co. v. Beecher v. Osborne
238 W. Va. 571
W. Va.2017Background
- On May 27, 2008 Beecher V. Osborne was injured while timbering; he sued H&H (employer), Allegheny (lessee), and Heartwood (landowner).
- H&H’s insurer, Penn‑America, denied a defense to H&H based on a policy exclusion; Liberty Mutual defended Allegheny and Heartwood.
- Allegheny and Heartwood, with Liberty Mutual’s defense counsel, entered a pre‑trial settlement with Osborne: a $1,000,000 consent judgment against them, a covenant not to execute, and an assignment to Osborne of any claims they had against Penn‑America for failing to defend.
- Penn‑America was not notified of the settlement, was not a party to the underlying suit, and was precluded by the circuit court from conducting discovery into Osborne’s injuries or the reasonableness of the $1,000,000 valuation.
- Osborne dismissed Allegheny and Heartwood and sued Penn‑America on the assigned claims; the circuit court granted summary judgment to Osborne for $1,000,000. Penn‑America appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a consent judgment against insureds binds their insurer when insurer was not a party | Osborne: Consent judgment and assignment bind Penn‑America; amount within policy limits so binding | Penn‑America: Consent judgment not binding because insurer was not a party and did not agree to be bound | Court: Consent judgment not binding on nonparty insurer absent express agreement (rejects plaintiff) |
| Validity of assignment + covenant not to execute (pre‑trial assignment of insurer‑related claims) | Osborne: Such assignments with covenants are permissible to pursue insurer directly | Penn‑America: Assignment is void because it was based on false factual premises and facilitated collusion; insureds had defense/coverage from Liberty Mutual | Court: Assignment void under facts here due to fraud/collusion risk and false factual basis (Strahin rationale applies) |
| Whether summary judgment for Osborne was proper | Osborne: No genuine issue; stipulated facts support recovery | Penn‑America: Material facts disputed (injury severity, necessity of settlement); prevented from discovery; entitled to summary judgment | Court: Circuit erred; summary judgment should have been entered for Penn‑America |
| Remedy on appeal | Osborne: Uphold judgment against Penn‑America | Penn‑America: Reverse and dismiss with prejudice | Court: Reversed and remanded; direct circuit court to enter summary judgment for Penn‑America and dismiss it with prejudice |
Key Cases Cited
- Horkulic v. Galloway, 222 W.Va. 450, 665 S.E.2d 284 (W. Va. 2008) (consent or confessed judgments against insureds do not bind insurer who was not a party unless insurer expressly agreed to be bound)
- Strahin v. Sullivan, 220 W.Va. 329, 647 S.E.2d 765 (W. Va. 2007) (pre‑trial assignments and covenants not to execute may be void where recovery would be based on a falsehood and risk collusion; insured must be actually exposed to personal liability to support recovery)
- Shamblin v. Nationwide Mut. Ins. Co., 183 W.Va. 585, 396 S.E.2d 766 (W. Va. 1990) (framework for insurer liability when refusing to settle within policy limits and resulting harm to insured)