Transportation Insurance Co. v. Womack

• Court: Supreme Court of Virginia
• Decided: November 1, 2012
• Docket: 112283
• Status: Published

Opinion

PRESENT: All the Justices

TRANSPORTATION INSURANCE COMPANY OPINION BY v. Record No. 112283 JUSTICE LEROY F. MILLETTE, JR. November 1, 2012 SHEILA WOMACK

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND Margaret P. Spencer, Judge

In this appeal we determine that the circuit court erred

in extending summary judgment entered against a defendant

motorist to likewise bind the underinsured motorist (UIM)

insurance carrier. Despite the UIM carrier's reliance on the

defendant and her liability insurer to mount a defense, the UIM

insurance carrier retains its own right to defend in the event

that the interests of the UIM insurance carrier and the

defendant or her liability insurer diverge.

I. Facts and Proceedings

Sheila Womack filed suit against Jerrene V. Yeoman to

recover four million dollars for injuries sustained from a car

accident allegedly caused by the negligent driving of Yeoman.

A copy of the complaint was served on Transportation Insurance

Company (Transportation), Womack's UIM carrier, which is a

prerequisite under Code § 38.2-2206(F) for Womack to take

advantage of the policy's UIM provisions.

Both Yeoman, represented by her liability insurance

carrier, Government Employees Insurance Company (GEICO), and Transportation filed answers to the complaint in their own

names. Yeoman denied all allegations of negligence and

asserted an intent to plead affirmative defenses, including a

claim of contributory negligence. Transportation similarly

denied all allegations of negligence, reserved the "right to

defend this case in its own name or in the name of the

Defendant as permitted by statute," and pled all affirmative

defenses that would be supported by evidence. Transportation

asked that Yeoman's "liability insurance carrier . . . plead

and prove the[] affirmative defenses."

Following the filing of Yeoman's and Transportation's

answers, Yeoman proceeded to file all motions for the defense

and answer all motions filed by Womack. Transportation

remained silent. In the midst of the developing litigation,

Yeoman filed a voluntary petition under Chapter 7 of the

Bankruptcy Code in the United States Bankruptcy Court for the

Eastern District of Virginia. As a result, the tort

proceedings were stayed until the conclusion of the bankruptcy

action.

In Yeoman's bankruptcy petition, fifteen million dollars

of debt surrounding the tort litigation was listed with no

indication in the provided columns of the schedules of debt

that the claim was either disputed or contingent. The

schedules listed claims of five million dollars each owed to

2 Womack, GEICO, and Transportation. Based on these signed

statements, discharge under Chapter 7 of the Bankruptcy Code

was granted. The stay was subsequently lifted with

instructions that "the movant . . . not enforce the recovery or

judgment against the debtor in personam, the property of the

debtor, or property of the estate."

Based on Yeoman's designation of the debt arising from the

tort action in her Chapter 7 bankruptcy proceedings as

uncontested, and the subsequent discharge in bankruptcy, Womack

made a motion for summary judgment. The motion was heard in

the Circuit Court of the City of Richmond, where counsel for

Womack, Yeoman, and Transportation were all present. Womack

based her motion on claims that Yeoman would approbate and

reprobate and violate the doctrine of judicial estoppel if she

were permitted to continue to deny liability in the tort action

after admitting liability in bankruptcy court.

In response, Yeoman claimed that the omission of language

indicating that the liability claims were disputed or contested

was an inadvertent error that caused no prejudice to Womack,

thereby precluding summary judgment based upon approbating and

reprobating or judicial estoppel. Transportation filed a

response noting its support of Yeoman's defense. During oral

argument, Transportation objected to the suggestion that the

UIM carrier should also be bound by the bankruptcy proceeding,

3 contending that it had no knowledge of the details of, and was

not a party to, the Chapter 7 bankruptcy proceeding.

The circuit court granted Womack's motion for summary

judgment on the ground that a continued denial of liability by

Yeoman would constitute impermissible approbating and

reprobating. The court was not clear, however, as to whether

Transportation was also subject to the ruling. Transportation

filed a motion to reconsider, asking that it be able to defend

its interests as the UIM carrier. The court denied the motion,

explaining that Transportation had relinquished its rights to

put forth a defense by filing an answer that relied on the

defendant's liability insurance carrier to assert its

affirmative defenses, and that "defendant and her liability

insurance carrier admitted liability." Transportation now

appeals the judgment.

II. Analysis

A. Standard of Review

Although the circuit court did not explicitly include

Transportation when it granted Womack's motion for summary

judgment, the subsequent denial of Transportation's motion to

reconsider and refusal to permit it to defend its interests as

the UIM carrier clearly establish Transportation as a party

subject to the summary judgment ruling. As this appeal arises

from the grant of a motion for summary judgment against

4 Transportation and Yeoman, we will review "the application of

law to undisputed fact de novo." St. Joe Co. v. Norfolk

Redevelopment & Hous. Auth., 283 Va. 403, 407, 722 S.E.2d 622,

625 (2012).

B. Right to Defend

Code § 38.2-2206(F) provides that when an insured

plaintiff brings suit against a uninsured motorist (UM) or a

UIM and intends to make a claim for recovery from the insurer,

the UM or UIM insurance carrier will "have the right to file

pleadings and take other action allowable by law in the name of

the owner or operator of the uninsured or underinsured motor

vehicle or in its own name." It is therefore undisputed that a

UIM insurance carrier has a statutory right to defend its

interests in a tort action between the insured plaintiff and

the underinsured defendant.

It is also undisputed that the UIM insurance carrier's

right to defend is not tied to the actions of the underinsured

defendant, but rather "each is entitled to control his or its

own action but not the actions of the other." State Farm Mut.

Auto. Ins. Co. v. Cuffee, 248 Va. 11, 14, 444 S.E.2d 720, 722

(1994). When we first discussed this issue in Cuffee, we held

that an uninsured defendant's admission of liability for a car

accident did not bind the UM carrier to the admission, thereby

allowing the carrier to assert its own defense as to liability

5 and damages. Id. at 14-15, 444 S.E.2d at 722. One year later

in State Farm Mut. Auto. Ins. Co. v. Beng, 249 Va. 165, 169,

455 S.E.2d 2, 4 (1995), we found a confession of judgment

"indistinguishable" from an admission of liability. The

confession of judgment was entered by the underinsured

defendant for an amount $15,000 greater than was covered under

his liability insurance coverage. Id. at 167, 455 S.E.2d at 3.

Even though it did not wish to contest liability, the UIM

insurance carrier sought to continue its defense with regards

to damages. Id. Because it was denied its right to proceed,

we reversed. Id. at 171, 455 S.E.2d at 5. Whether an

admission of liability or a confession of judgment, a UM or a

UIM, a denial of the right to defend against liability or

simply to contest damages, the effect of "deny[ing] the insurer

the rights granted by Code § 38.2-2206(F)" remains the same.

Id. at 169, 455 S.E.2d at 4.

Womack argues that the facts of this case are different.

Unlike in Cuffee and Beng, in which the circuit court

completely foreclosed the UM or UIM insurance carriers from

defending the tort claims following the defendant's admission

of liability or confession of judgment, Womack claims that

Transportation voluntarily relinquished its right to defend in

its own name to Yeoman and her liability insurance company.

6 Transportation allegedly did so in its answer, which stated

that:

Transportation Insurance Company hereby pleads and avers any and all affirmative defenses required by law to be [pled] and which are supported by the discovery or evidence, such as the lack of negligence on the part of the Defendant, the negligence of third parties over whom the defendant exercised no control or right to control, contributory negligence, assumption of the risk, sudden emergency, unavoidable accident, Act of God, failure to mitigate damages, existence of pre-existing conditions, and the statute of limitations. Transportation Insurance Company calls on the Defendant and her liability insurance carrier to plead and prove these affirmative defenses.

After filing its answer, Transportation did not participate

again in its own name until filing a response to the motion for

summary judgment, when it once more adopted the defense

asserted by Yeoman. Womack contends that Transportation, based

on its consistent reliance on Yeoman and her liability insurer,

fully exercised its rights by turning the defense over to

Yeoman in its entirety.

Transportation denies handing its right to defend over to

Yeoman. As in Cuffee and Beng, Transportation filed an answer

in its own name as permitted under Code § 38.2-2206(F). The

wording of its answer did not merely "call upon the Defendant

and her liability insurance carrier to plead and prove . . .

affirmative defenses," but also specifically denied liability

and asserted several affirmative defenses. Transportation

7 describes the "call" for Yeoman to prove these defenses as a

demand that Yeoman act on the affirmative defenses rather than

a relinquishment of all responsibility for the defense. It

claims that a liability insurance carrier has a non-delegable

duty to defend the insured, and that by asking the liability

insurer to assert affirmative defenses Transportation was

merely asking the liability insurer to fulfill its statutory

requirement to defend.

Transportation also rejects Womack's assertion that it

ceded its defense in its response to the motion for summary

judgment. Transportation contends that as Yeoman was the only

party included in Womack's motion for summary judgment,

Transportation had no reason at that time to argue for its own

right to defend the case. According to Transportation,

regardless of the outcome of the summary judgment motion, it

retained the right under the statute and case law to defend its

interest as a UIM carrier.

We agree with Transportation. In reviewing

Transportation's answer in its entirety, it is clear that

Transportation retained its right to defend should Yeoman or

her liability insurance carrier later abandon their own defense

of the case. This is evidenced by Transportation's decision to

file an answer in its own name, reserving "the right to defend

th[e] case in its own name or in the name of the Defendant as

8 permitted by statute." Transportation went on to deny

allegations included in Womack's complaint and assert specific

affirmative defenses that it demanded the liability insurer

assert in the course of litigation.

In relying upon Yeoman's liability insurance carrier to

defend the case, Transportation did not relinquish its right to

conduct its own defense if the interests of the parties

diverged. As long as it was in the interest of Yeoman, her

liability insurance carrier and Transportation to actively

defend against Womack's claim as to liability and damages,

there was no reason for Transportation to mount a separate

defense. Only when the interests of the parties diverged, as

when Yeoman found it in her interest to file for bankruptcy,

was it in Transportation's interest to mount a separate

defense.

The circuit court's decision to encompass the UIM

insurance carrier in its grant of summary judgment against

Yeoman is a result we rejected in Cuffee and Beng. As in

Cuffee and Beng, Transportation participated in the litigation

when it filed an answer in its own name in which it denied the

defendant's negligence. Beng, 249 Va. at 167, 455 S.E.2d at 3;

Cuffee, 248 Va. at 12, 444 S.E.2d at 721. Thus, Transportation

was subsequently precluded from exercising its statutory right

to defend when it was subjected to summary judgment based

9 solely on the defendant's own attempts to approbate and

reprobate, just as the UM and UIM insurance carriers in Cuffee

and Beng were improperly prohibited from asserting a defense

based on the defendant's admission of liability or confession

of judgment. Beng, 249 Va. at 167, 455 S.E.2d at 3; Cuffee,

248 Va. at 15, 444 S.E.2d at 722. That the judgment at hand

was based on approbating and reprobating rather than an

admission of liability, as in Cuffee, or a confession of

judgment, as in Beng, warrants no alteration to our analysis.

Transportation retained a right to defend under Code § 38.2-

2206(F) just as the UM and UIM insurance carriers have in

previous cases before the Court. Having been denied its right

to continue in its own defense, summary judgment against

Transportation must therefore be reversed and the case remanded

to allow Transportation to assert the defense it was denied.

In reversing summary judgment as to Transportation, we

must necessarily reverse the summary judgment entered against

Yeoman under the controlling precedent of Cuffee and Beng. As

in Beng, one solution to the impact of Yeoman's admission would

be for the circuit court to find the defendant's actions worthy

of an entry of judgment against her, but "refrain from entering

judgment thereon until after the issues raised by [the UIM

carrier] have been litigated." Beng, 249 Va. at 170-71, 455

S.E.2d at 5. This is, however, merely one avenue for

10 resolution. We continue to follow our dispositions in Cuffee

and Beng in leaving the best means of resolving the conflict

between the defendant's right to control her case, including

the right to admit liability, and the UIM carrier's right to

defend its interests to the "ingenuity of the trial courts,"

which will best be able to "fashion workable solutions to

problem cases." Cuffee, 248 Va. at 14, 444 S.E.2d at 722; see

also Beng, 249 Va. at 170, 455 S.E.2d at 5.

III. Conclusion

For the aforementioned reasons, we will reverse the

circuit court's award of summary judgment in favor of Womack

and remand the case to allow Transportation to present a

defense, as permitted by Code § 38.2-2206(F) and our holdings

in Cuffee and Beng.

Reversed and remanded.