Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—W. Va. Sup. Ct.: Guest passenger was first-party insured with standing to pursue claims against auto insurer, (Nov 14, 2013)

By Kathleen Kennedy-Luczak, J.D.

A guest passenger in a car that was rear-ended was a first-party insured under the medical payments section of the auto policy and, as such, had standing to pursue West Virginia Unfair Trade Practices Act claims against the insurer, the Supreme Court of Appeals of West Virginia ruled, reversing a circuit court’s dismissal of the suit (Dorsey v. Progressive Classic Insurance Company, November 13, 2013, Ketchum, M.).

Background. Johanna Dorsey was a guest passenger in a vehicle that was insured by Progressive Classic Insurance Company. The vehicle was rear-ended by a truck owned by Comcast Corporation and insured by Liberty Mutual Insurance Company. Dorsey sustained bodily injuries in the accident and incurred medical expenses. She filed a medical payments claim with Progressive under the policy, and Progressive paid the medical payments policy limit of $5,000. Dorsey also filed a personal injury action against Comcast and its driver. Progressive sent Liberty notice of its subrogation lien for the $5,000 in medical payments.

Subsequently, Dorsey settled her personal injury action for $60,000. She argued that Progressive was required to reduce its lien by its pro rata share of the attorney fees and costs incurred in the lawsuit. Progressive refused to adjust the lien and asserted that no reduction was warranted.

Dorsey then filed suit against Progressive alleging common law bad faith and a violation of the West Virginia Unfair Trade Practices Act. The circuit court dismissed the action, noting that Dorsey was a third-party insured under the auto policy and, therefore, could not pursue first-party common law and statutory claims against Progressive.

Policy language. The medical payments section of the Progressive policy covered “the usual and customary charge for reasonable and necessary expenses” for medical services because of injury “sustained by an insured person.” Further, an “insured person” was defined to include “any other person while occupying a covered vehicle[.]”

First-party status. On appeal, the state supreme court considered whether Dorsey’s claim under the policy was that of a first-party or a third-party. Generally, a third-party insured has no cause of action against an insurer for common law breach of good faith. Also, the West Virginia legislature prohibited statutory third-party causes of action against insurers.

The high court noted that Dorsey was included as an “insured person” under the terms of the medical payments section of the policy and only asserted a claim under the policy, not against the named insured. Dorsey never alleged the named insured was a tortfeasor. As such, she had the characteristics of a first-party insured. Nothing in the case cited by the circuit court as the basis for its dismissal precludes insureds such as Dorsey from first-party status. Indeed, the West Virginia rules state that a first-party claimant or insured include an individual who asserts a right to payment under a policy or contract arising out of a loss covered by such policy. Therefore, the court concluded, where an auto policy includes within the definition of an insured person “any other person while occupying a covered vehicle,” a guest passenger is a first-party insured under the medical payments section of the policy.

Dorsey could pursue her common law and Unfair Trade Practices Act claims against Progressive. The order of the circuit court was reversed, and the case remanded.

The case number is 12-1254.

Attorneys: David A. Jividen, Esq. (Jividen Law Offices, P.L.L.C.) for Johanna Dorsey. E. Kay Fuller, Esq. (Martin & Seibert, L.C.) for Progressive Classic Insurance Co.

Companies: Progressive Classic Insurance Co.

Cases: StateUnfairTradePractices WestVirginiaNews