West Virginia Counties Group v. Great Cacapon Volunteer Fire Department, Inc. ( 2020 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2020 Term
_______________ FILED
November 4, 2020
released at 3:00 p.m.
No. 19-0103 EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
_______________ OF WEST VIRGINIA
WEST VIRGINIA COUNTIES GROUP
SELF-INSURANCE RISK POOL, INC.,
Petitioner
v.
GREAT CACAPON VOLUNTEER FIRE DEPARTMENT, INC.,
Respondent
____________________________________________________________
Appeal from the Circuit Court of Morgan County
The Honorable Steven Redding, Judge
Case No. CC-33-2018-C-24
AFFIRMED
____________________________________________________________
Submitted: September 23, 2020
Filed: November 4, 2020
Charles R. Bailey, Esq. Timothy R. Linkous, Esq.
Adam K. Strider, Esq. Margaret L. Miner, Esq.
BAILEY & WYANT, PLLC Linkous Law, PLLC
Charleston, West Virginia Morgantown, West Virginia
James W. Marshall, III, Esq. Counsel for Respondent
BAILEY & WYANT, PLLC
Martinsburg, West Virginia
Counsel for Petitioner
JUSTICE WALKER delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “Appellate review of a circuit court’s order granting a motion to
dismiss a complaint is de novo.” Syllabus Point 2, State ex rel. McGraw v. Scott Runyan
Pontiac-Buick, Inc., 194 W. Va. 770, 461 S.E.2d 516 (1995).
2. “Where the issue on an appeal from the circuit court is clearly a
question of law or involving an interpretation of a statute, we apply a de novo standard of
review.” Syllabus Point 1, Chrystal R.M. v. Charlie A.L., 194 W. Va. 138, 459 S.E.2d 415(1995).
i
WALKER, Justice:
A fire in 2016 destroyed the building where Respondent Great Cacapon
Volunteer Fire Department, Inc., (VFD) was housed. The owner of the building, the
Morgan County Commission (Commission), was reimbursed for the loss by Petitioner
West Virginia Counties Group Self-Insurance Risk Pool, Inc. (WVCoRP). Seeking to
recover the funds it expended, WVCoRP sued the VFD and other parties whose negligence
it claims caused the fire, and in the process invoked a contractual right to subrogation. The
Circuit Court of Morgan County determined that WVCoRP’s suit against VFD was barred
by West Virginia Code § 29-12A-13(c)(1986), which prohibits claims against political
subdivisions made under a right of subrogation. On appeal, WVCoRP contends that § 29-
12A-13(c) does not apply because (a) its claims against the VFD are something other than
the subrogation prohibited under that code provision; and (b) WVCoRP is exempt by
legislative rule from insurance laws of this State. We disagree. First, WVCoRP’s claims
clearly spring from its coverage contract with the Commission and fall within any plain
meaning of subrogation. Second, we find that West Virginia Code § 29-12A-13(c) is not
an insurance law of this state from which WVCoRP is exempt. So, we affirm the circuit
court’s dismissal of WVCoRP’s claims against VFD.
I. FACTUAL AND PROCEDURAL BACKGROUND
On July 5, 2016, a fire destroyed the building housing the VFD. The owner
of the building, the Commission, had previously entered into an insurance contract with
1
WVCoRP, which covered the loss. The Commission was reimbursed $613,179.27 for the
fire damage by WVCoRP. “[A]s the subrogee of” the Commission, WVCoRP sued the
VFD, Emergency Vehicle Specialist, Inc. and two other entities to recover the funds
expended for covering the loss. 1 In its original complaint, 2 WVCoRP stated that it had
made payments under the insurance policy to reimburse the Commission for its loss, and
that pursuant to other terms of the policy, WVCoRP had the right to subrogation for those
payments.
WVCoRP then filed an amended complaint, adding the Commission as a
Plaintiff and removing the subrogee designation. The amended complaint contains the
same general factual allegations as to VFD and Emergency Vehicle Specialists, Inc., 3 with
the exception that the previously styled “insurance policy” is dubbed a “coverage contract.”
But, WVCoRP still alleged that “[p]ursuant to WVCoRP’s Coverage Contract with the
1
In its complaint, WVCoRP alleged that the fire originated in the electrical
components of a brush truck, and the external electric attachments to those components.
WVCoRP alleged that the vehicle had a history of electrical malfunctions and had become
a fire hazard when it had been recently converted from a 24 volt battery usage to a 12 volt
battery usage by Emergency Vehicle Specialist, Inc. WVCoRP alleged that Emergency
Vehicle Specialist, Inc.’s personnel were negligent in performing the battery usage
conversion, and that VFD was negligent in leaving a vehicle with a history of malfunction
unattended while charging. Napa, Inc. and Schumacher Electric Corporation were also
made defendants for selling and manufacturing the battery charger, respectively.
2
The original complaint was filed, but not served.
Petitioner does not pursue the claims against Napa, Inc. and Schumacher Electric
3
Corporation in the amended complaint.
2
Commission, WVCoRP has the right to subrogation for payments made by WVCoRP to
the Commission.”
VFD filed a motion to dismiss the amended complaint pursuant to West
Virginia Code § 29-12A-13(c), which is a provision of the Governmental Tort Claims Act
(GTCA), 4 that immunizes political subdivisions from subrogation claims. 5 WVCoRP
argued that it was not pursuing a subrogation claim, and that even if it were, WVCoRP, as
a self-insurance risk pool, is exempt from “insurance laws of this State” and therefore not
subject to the prohibition in West Virginia Code § 29-12A-13(c). The circuit court granted
VFD’s motion to dismiss, and this appeal followed.
4
W. Va. Code §§ 29-12A-1 to -18.
5
The GTCA defines “political subdivision” as
any county commission, municipality and county board of education; any
separate corporation or instrumentality established by one or more counties
or municipalities, as permitted by law; any instrumentality supported in most
part by municipalities; any public body charged by law with the performance
of a government function and whose jurisdiction is coextensive with one or
more counties, cities or towns; a combined city- county health department
created pursuant to article two, chapter sixteen of this code; public service
districts; and other instrumentalities including, but not limited to, volunteer
fire departments and emergency service organizations as recognized by an
appropriate public body and authorized by law to perform a government
function: Provided, That hospitals of a political subdivision and their
employees are expressly excluded from the provisions of this article.
W. Va. Code § 29-12A-3(c). The parties do not dispute that VFD satisfies that definition.
3
II. STANDARD OF REVIEW
Our review of WVCoRP’s appeal is plenary: “[a]ppellate review of a circuit
court’s order granting a motion to dismiss a complaint is de novo.” 6 As far as our review
requires us to examine the GTCA, we have held that “[w]here the issue on an appeal from
the circuit court is clearly a question of law or involving an interpretation of a statute, we
apply a de novo standard of review.” 7
III. DISCUSSION
In this appeal, we focus on WVCoRP’s claim that VFD’s negligence caused
the loss of the building owned by the Commission. 8 The circuit court determined that
WVCoRP was proceeding under a right of subrogation, and subrogation claims are barred
by West Virginia Code § 29-12A-13(c). On appeal, WVCoRP argues that it is not
proceeding under a right of subrogation and that even if it were, that code provision is an
insurance law of this State from which it is exempt under West Virginia Code of State
Rules § 114-65-3.3.
6
Syl. Pt. 2, State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc., 194 W. Va.
770, 461 S.E.2d 516 (1995).
7
Syl Pt. 1, Chrystal R.M. v. Charlie A.L., 194 W. Va. 138, 459 S.E.2d 415 (1995).
8
WVCoRP’s claim against Emergency Vehicle Specialist, Inc. is not at issue in this
appeal.
4
In addressing WVCoRP’s first contention that it is not proceeding under a
right of subrogation, we begin with a review of West Virginia Code § 29-12A-13(c). That
provision of the GTCA states “[a]ll actions filed against a political subdivision shall be
filed in the name of the real party or parties in interest and in no event may any claim be
presented or recovery be had under the right of subrogation.” 9 It is undisputed that VFD
is a political subdivision as defined by the GTCA, and it is undisputed that subrogation
claims are barred against political subdivisions. So, the controversy centers on whether
WVCoRP is proceeding under a right of subrogation as that term is used in the statute.
WVCoRP first argues that its claim does not fit into the definition of a
subrogation claim as contemplated by West Virginia Code § 29-12A-13(c) because
WVCoRP is a risk pool and does not operate like an insurance company. So, a claim by
the administrator of a self-insurance risk pool does not meet the definition of a “subrogation
claim.” It contended below that the “right of subrogation” contained in the WVCoRP
Coverage Contract with the Commission is a “colloquial and technically inaccurate use of
the phrase,” and contends before this Court that it is “either shorthand for a process without
commonly-utilized legal terminology, or is simply inartfully applied . . . .” In other words,
although the Coverage Contract provides for subrogation, WVCoRP argues that the claim
is not, in fact, one for “true” subrogation as contemplated by § 29-12A-13(c).
9
Emphasis added.
5
WVCoRP offers two plausible definitions of “subrogation” under this code
provision: (1) “[t]he principle under which an insurer that has paid a loss under an insurance
policy is entitled to all the rights and remedies belonging to the insured against a third party
with respect to any loss covered by the policy[;]” or (2) “[t]he substitution of one party for
another whose debt the party pays, entitling the paying party to rights, remedies, or
securities that would otherwise belong to the debtor.” 10 These definitions, according to
WVCoRP, are “true” subrogation. It argues that the first definition is inapplicable because
a risk pool is not an insurance company, and the Coverage Contract is not an insurance
policy. 11 WVCoRP also finds the second definition inapplicable: it contends that it is not
making a claim for subrogation because a payment from a self-insurance fund to cover the
loss of one of the fund’s members is not a payment of the debt of another.
Here, the Legislature has not altered or qualified the term “subrogation.” We
have discussed that “[a]bsent a clearly expressed legislative intent requiring otherwise,
‘subrogated’ is to be given its usual, ordinary meaning.” 12 And, “[i]n its normal sense,
subrogation gives the payor a right to collect what it has paid from the party who caused
10
BLACK’S LAW DICTIONARY (9th ed. 2009).
11
See W. Va. C.S.R. § 114-65-3.3 (“A pool is not an insurance company, its
operation does not constitute the transaction of insurance, and it is not subject to the
insurance laws of this State unless otherwise specifically stated herein.”)
12
Kittle v. Icard, 185 W. Va. 126, 130, 405 S.E.2d 456, 460 (1991) (citing White v.
Sutherland, 585 P.2d 331, 334 (N.M. 1978)), superseded by statute on other grounds as
stated in In re E.B., 229 W. Va. 435, 729 S.E.2d 270 (2012).
6
the damage.” 13 Further, in examining this very statute, we have explained that “[t]he
general term ‘subrogation’ used in W. Va. Code § 29-12A-13(c) [1986] implicates diverse
circumstances whereby one party may acquire or exercise rights derived from another
party’s rights – such as sureties, codebtors, purchasers, persons paying debts of strangers,
creditors, and officers.” 14 That list, of course, is not exhaustive.
Importantly, the plain language of West Virginia Code § 29-12A-13(c)
applies to all subrogation claims, not just those arising in the insurance context. The statute
likewise does not except risk pools, generally, or risk pools comprised of member political
subdivisions, specifically. WVCoRP cannot avoid the characterization of its claim as
subrogation by avoiding the term “insurance” because subrogation, generally, is not an
exclusively insurance concept, and “subrogation” has not been modified under West
Virginia Code § 29-12A-13(c) to limit its applicability to the insurance context. For that
reason, WVCoRP’s argument that its claim does not fit one for subrogation on the grounds
that it is not an insurance company and its operation does not constitute the conduct of
insurance is ill-taken.
WVCoRP argues it is plain that subrogation is not afoot if one only considers
whose money paid the claim. WVCoRP does not expend its own funds to cover member
13
Id.
14
Foster v. City of Keyser, 202 W. Va. 1, 501 S.E.2d 165 (1997) (citing 18 Michie’s
Jurisprudence, “Subrogation” Sections II. 6-36) (emphasis added).
7
losses; rather, the funds expended from the pool are made up entirely of member
contributions. So, because WVCoRP itself does not pay the debt of another but only
administers the payment of pool funds, it concludes that the claim to recover those funds
is not “true” subrogation. We note again, however, that West Virginia Code § 29-12A-
13(c) bars all subrogation claims and the Legislature has not placed any qualifier on that
term. And, while WVCoRP has argued at length that its claim is not subrogation, it has
not provided us a legally cognizable alternative theory of recovery. That is, if WVCoRP’s
claim is not subrogation, what is it?
In this respect, WVCoRP cannot see the forest for the trees, as made clear by
the general definition of subrogation incorporated by Black’s Law Dictionary:
[s]ubrogation simply means substitution of one person for
another; that is, one person is allowed to stand in the shoes of
another and assert that person’s rights against the defendant.
Factually, the case arises because, for some justifiable reason,
the subrogation plaintiff has paid a debt owed by the
defendant.[15]
To put that definition into factual perspective, the basis of WVCoRP’s claim is that risk
pool funds were expended to pay for the loss of the building that should have been paid by
VFD on account of VFD’s negligence. VFD owed WVCoRP no duty of care; so WVCoRP
could not state a claim for negligence against VFD in its own name. But, because
WVCoRP’s Coverage Contract with the Commission provides WVCoRP with a right of
BLACK’S LAW DICTIONARY (11th ed. 2019), subrogation (quoting 1 Dan B.
15
Dobbs, Law of Remedies § 4.3(4), at 604 (2d ed. 1993))
8
subrogation, WVCoRP had a cause of action against VFD to recover the risk pool funds
paid out to the Commission because the Commission had a cause of action against VFD.
WVCoRP filed its complaint against VFD invoking that right of subrogation
to step into the shoes of the Commission and assume the Commission’s claims and
remedies against VFD. In its own words, WVCoRP “is contractually empowered to file
suit on its members’ behalf to recover self-insured funds from responsible parties.”
WVCoRP’s action is pursued under a contractual right of subrogation, and WVCoRP has
no cause of action against VFD to recover the funds WVCoRP “administered” to pay the
Commission’s loss but for that contractual right of subrogation. No matter the makeup of
the risk pool funds and WVCoRP’s role in administering the payment, WVCoRP is
stepping into the shoes of the Commission to recover funds expended on the Commission’s
behalf that it claims should have been paid by VFD, and so is proceeding under a right of
subrogation.
Whatever monikers it employs to disguise its claim as anything other than
subrogation to avoid application of West Virginia Code § 29-12A-13(c), WVCoRP’s cause
of action is derived from the right of subrogation and can only plausibly be pursued on that
theory. So, we conclude WVCoRP’s action to reimburse the risk pool for funds expended
to cover the loss is one such “diverse circumstance” of subrogation contemplated and
barred by West Virginia Code § 29-12A-13(c).
9
WVCoRP argues, alternatively, that even if its claim is one made under a
right of subrogation, it is not subject to West Virginia Code § 29-12A-13(c)’s prohibition
on subrogation against political subdivisions under West Virginia Code of State Rules §
114-65-3.3. That rule provides, “[a] pool is not an insurance company, its operation does
not constitute the transaction of insurance, and it is not subject to the insurance laws of this
State unless otherwise specifically stated herein.” The operative inquiry, then, is whether
West Virginia Code § 29-12A-13(c) is an insurance law of this State.
The GTCA acts to “limit liability of political subdivisions and provide
immunity to political subdivisions in certain instances and to regulate the costs and
coverage of insurance available to political subdivisions for such liability.” 16 So, because
the language of the GTCA’s purpose incorporates regulating the costs and coverage of
insurance, and because the Act places limitations on the terms of insurance contracts with
political subdivisions, WVCoRP argues that West Virginia Code § 29-12A-13 is clearly an
insurance law of this State. We disagree.
The stated purpose of the GTCA, first and foremost, is to limit liability for
political subdivisions so they can procure affordable coverage. The minimal interface the
GTCA has with the insurance industry is aimed at ensuring political subdivisions are able
to procure affordable coverage by both limiting liability and increasing oversight of
16
W. Va. Code § 29-12A-1.
10
insurance contracts. The GTCA does not mandate the means by which a political
subdivision is insured, nor does it dictate claims adjustment or resolution. Significantly,
the scope of Code of State Rules §§ 114-65-1 to -12 is to “set[] forth the procedural
requirements for the creation and regulatory oversight of self-insurance pools created to
insure workers’ compensation and civil liability risks of political subdivisions.” 17 It is
apparent that § 114-65-3.3 is aimed at ensuring that risk pools, as defined under the Rules,
are subject to regulation under those Rules as opposed to the regulations governing the
insurance industry generally. West Virginia Code § 29-12A-13(c) does not implicate any
regulatory oversight of the insurance industry; it pertains solely to a limitation on liability.
We decline to adopt so broad an interpretation of an “insurance law of this State” such that
this code provision limiting liability—and only limiting liability—falls under the purview
of § 114-65-3.3. Exempting risk pools from the GTCA prohibition on subrogation claims
would be inherently inconsistent with its purpose, not to mention its clear terms.
WVCoRP argues that public policy weighs in favor of interpreting the GTCA
as an insurance law of the state to permit its pool to subrogate under West Virginia Code §
29-12A-13(c) because it is comprised of political subdivisions. We acknowledge that in
this case, both parties are intended to benefit from application of the GTCA so as to limit
17
W. Va. C.S.R. § 114-65-1.1.
11
the financial exposure of political subdivisions. 18 But, WVCoRP’s proposed solution
ignores that political subdivisions that are not members of a pool would still be prohibited
under that code provision from proceeding against another political subdivision under a
right of subrogation. There is no sound reasoning to read into the GTCA an exception to
the bar on subrogation claims for a political subdivision that is a member of a risk pool,
and alternately apply the plain language of the statute to a political subdivision that is
privately or self-insured. WVCoRP’s argument is untenable given the Legislature’s plain
language that all claims against political subdivisions made under a right of subrogation
are barred.
IV. CONCLUSION
For the reasons set forth above, we affirm the January 3, 2019 order of the
Circuit Court of Morgan County.
Affirmed.
18
See Foster, 202 W. Va. at 22 n.18, 501 S.E.2d at 186 n.18 (“We do state that the
clear and sole purpose of [West Virginia Code § 29-12A-13(c)] is to provide financial
benefit to political subdivisions.”).
12