American States Insurance v. Barbara Surbaugh

Opinion

No. 11-1186 – American States Insurance Company v. Barbara Surbaugh, Administrator of the Estate of Gerald Kirchner FILED July 16, 2013

RORY L. PERRY II, CLERK

SUPREME COURT OF APPEALS

OF WEST VIRGINIA

Benjamin, Chief Justice, concurring:

Although I agree that this case must be reversed and remanded, I believe

the majority has applied the incorrect analysis for deciding the case.

Factually, this case is the fraternal twin sister of a case recently decided by

this Court, New Hampshire Ins. Co. v. RRK, Inc., 230 W. Va. 52, 736 S.E.2d 52 (2012);

the cases are remarkably similar, though not identical. In New Hampshire, the insured,

RRK, Inc. (“RRK”), sought insurance to cover damage to a barge and two docks on the

Ohio River. RRK ultimately purchased insurance from New Hampshire Insurance

Company (“New Hampshire”), but RRK dealt solely with an agent of New Hampshire

during the negotiations and the sale. Prior to agreeing to purchase insurance from New

Hampshire, RRK requested a copy of coverage forms for the proposed policy. In reply,

the agent faxed a 17-page document which stated, “Per our phone conversation of this

morning, attached you will find the coverage forms you requested.”

After purchasing the insurance, New Hampshire mailed a copy of the

insurance policy to RRK. RRK representatives testified that they did not read this policy,

nor the renewal policy sent one year later. Two years after purchasing the insurance, the

barge sank. New Hampshire denied RRK’s claim for damages, arguing that a wear-and­

tear exclusion appearing at the top of the first substantive page of the policy excluded

coverage of the barge. While the mailed policy did contain a wear-and-tear exclusion, the

17-page faxed document did not.

The pertinent facts of the case at bar are parallel to those of New

Hampshire. Here, Mr. Grimmett sought insurance to cover his sporting goods store. He

ultimately purchased insurance from American States Insurance Company (“American

States”), but he dealt solely with an agent of American States during the negotiations and

the sale. Prior to purchasing the insurance, Mr. Grimmett and the agent discussed the

coverage to be provided by the policy in three separate phone conversations, each lasting

approximately 10 minutes. Additionally, the agent sent to Mr. Grimmett a 1-page sales

offer proposal.

After purchasing the insurance, American States mailed a copy of the

insurance policy to Mr. Grimmett. Mr. Grimmett testified that he did not read this policy,

nor the renewal policy sent one year later. Two years after purchasing the insurance, one

of his employees accidently shot and killed another employee. When the estate of the

deceased employee attempted to collect under the policy, American States refused,

arguing that an exclusion appearing on the first substantive page of the policy excluded

coverage for the accident. While the mailed policy did contain the exclusion, Mr.

Grimmett and the agent never discussed exclusions to the contract, and no exclusions

appeared on the 1-page sales offer proposal.

In this case, the majority hinged its analysis on whether the exclusion at

issue was adequately disclosed to Mr. Grimmett. Undoubtedly, it was disclosed; the

policy was mailed to Mr. Grimmett, and it was placed in the policy in such a way as to

bring it to the attention of the insured. The majority completely overlooked the real issue,

which was also the primary issue in New Hampshire: whether, based on the

representations of the insurance company, the insured had a reasonable expectation that

the exclusion at issue was part of the contract.

The doctrine of reasonable expectations1 comes into play when there is a

discrepancy between the materials provided prior to the purchase of an insurance policy

and the policy that is actually issued. Here, Ms. Surbaugh argues that because the phone

calls between Mr. Grimmett and the agent along with the 1-page sales offer did not

include discussion of exclusions, Mr. Grimmett could not have reasonably expected that

the exclusion at issue would be part of the contract. This argument is strikingly similar to

that proposed in New Hampshire. The difference in the proper outcomes in these cases,

though, is through the application of the law to the facts.

1 “With respect to insurance contracts, the doctrine of reasonable expectations is that the objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though a painstaking study of the policy provisions would have negated those expectations.” Syl. pt. 8, Nat’l Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W. Va. 734, 356 S.E.2d 488 (1987), overruled on other grounds by Potesta v. U.S. Fid. & Guar. Co., 202 W. Va. 308, 504 S.E.2d 135 (1998). 3

In New Hampshire, we found that “[t]o support summary judgment under the

doctrine [of reasonable expectations], a court must find that the insured had an objectively

reasonable expectation of coverage under the insurance contract.” Because of the

discrepancy between the pre-sale representations of coverage—the phone conversations and

the “coverage forms” requested by RRK—and the post-sale representations of coverage, we

decided that a substantial question of fact existed which warranted remanding the case to

the circuit court so that the issue could be decided by a fact finder. The present case is

different in that the circuit court should have found that the short series of 10-minute

phone calls and the 1-page sales offer could not objectively have lead Mr. Grimmett to

believe that the multi-page policy he received in the mail encapsulated only what was

discussed in the phone calls and the sales offer.

In footnote 13 of the opinion in the case sub judice, the majority attempts to

distinguish the two cases by stating that the case at bar “does not involve a conflict

between a draft of the policy coverage forms and the policy itself.” The phone calls and

the 1-page sales offer in this case are parallel to the phone calls and 17-page faxed

document in New Hampshire. The “conflict” described by the majority is identical to

both scenarios; the pre-purchase documents and representations in both cases did not

contain the disputed exclusions while the mailed policies did.

For the reasons stated above, I concur.