The state's Unfair Trade Practices Act prohibits any "person" from engaging in an unfair method of competition or an unfair and deceptive act or practice in the business of insurance. Under W.Va. Code § 33-11-2(a) (1974) the definition of the term “person” includes:
any individual, company, insurer, association, organization, society, reciprocal, business trust, corporation, or any other legal entity, including agents and brokers. "Person" also includes hospital service corporations, medical service corporations and dental service corporations as defined in article twenty-four [§§ 33-24-1 et seq.] of this chapter, and health care corporations as defined in article twenty-five [§§ 33-25-1 et seq.] of this chapter.
Justice Maynard, writing from the majority, found this decision to be a no-brainer. The legislature clearly intended for individuals to be liable under the act by defining "person" as it did. But liable to whom?
Although the legislature may have intended for individuals to be held liable under the UTPA, it never, in the opinion of many, intended to create a direct private cause of action for third-party bad faith. The purpose of the UTPA "is to regulate trade practices in the business of insurance . . . by defining, or providing for the determination of, all such practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined." W.Va. Code § 33-11-1 (1974). As the argument goes, the State Insurance Commissioner was to enforce the act administratively, not private persons.
As the majority notes in footnote 10 of the decision,
Unlike West Virginia, the majority of states do not recognize a right to bring a private cause of action under their unfair claim settlement practices statutes. According to Stephen S. Ashley, in Bad Faith Actions: Liability and Damages § 9:03, pp. 9-9 - 10 (1997), “[t]hough a few states have agreed with the conclusion that the unfair claims settlement practices statutes support private claims, most have rejected private causes of action.” (Footnote omitted). Information promulgated by the National Association of Insurance Commissioners indicates that twelve states permit first-party private causes of action under either their Unfair Trade Practices or Unfair Claims Settlement Practices statutes. It appears that seven of these states do so because of the express provisions of their statutes, while five of the states do so by judicial interpretation. See NAIC's Compendium of State Laws on Insurance Topics, “Private Rights of Action For Unfair Claims Settlement Practices” (2002).As much as I dislike the outcome of the case, I must say the decision is correct. It serves to re-emphasize the need to repeal, by legislation (not judicial fiat), the private third-party "bad faith" cause of action created in Jenkins v. J.C. Penney Cas. Ins. Co., 167 W.Va. 597, 280 S.E.2d 252 (1981), overruled on other grounds by State ex rel. State Farm Fire & Cas. Co. v. Madden, 192 W.Va. 155, 451 S.E.2d 721 (1994).
I am certain the next target will be private law firms who work for the insurance companies and engage in "bad faith" settlement tactics. However, the liability of these folks will not be as clear. The attorneys (who are not employees of insurance companies) are not persons "engaging... in the business of insurance" as contemplated by the Act. But just in case, the legislature ought to do something to reverse Jenkins before the question is posed to the Supreme Court of Appeals. As the next post indicates, the Court's does not always reliably interpret statutes as they are written.