West Virginians May Sue Insurers Under Human Rights Law

West Virginians can bring bad faith lawsuits against insurance companies under the state’s human rights act, the state Supreme Court of Appeals has ruled.

The ruling rejects the widely-held belief that the sole remedy for third-parties against insurers over bad faith claims is under the West Virginia Unfair Trade Practices Act (UTPA). Reforms to the UTPA passed in 2005 empowered the state insurance commissioner, not the courts, to hear such claims and award damages.

Insurers may ask the Legislature to override the ruling, according to Jill Bentz, president of the West Virginia Insurance Federation.

The state’s high court was asked to decide whether third-party suits may be brought under the human rights act in a case involving an African American family’s dispute with State Auto, over a settlement it offered on behalf of its insured, Appalachian Heating.

State Auto argued that the family was barred from bringing a human rights action by the UPTA, which it said provides the only method for bringing a third-party action against an insurance company based upon its settlement practices. State Auto said that the human rights suit could “open a flood of baseless litigation which the Legislature has already prohibited.”

But Chief Justice Robin Davis, writing for the majority, said that the human rights and unfair trade practices statutes fulfill different purposes, provide different remedies and are not in conflict.

The four African-American family members who brought this action lived in a public housing apartment. On Nov. 21, 2006, allegedly due to negligence on the part of Appalachian Heating, their apartment caught fire, resulting in a total loss of personal property and rendering the apartment temporarily uninhabitable.

State Auto settled the family members’ claims for $2,500, which the plaintiffs found inadequate. The family sued, alleging that State Auto failed to properly assess their loss and damages because of their race and because they lived in public housing. They claimed that the insurer refused to give them the “same opportunity and consideration when evaluating the plaintiffs’ fire loss claims it extends to those persons not of African American descendant and those who do not reside in public housing.”

The family argued that there is nothing in the UTPA act that grants insurance companies immunity from the human rights act.

In siding with the plaintiffs, the court said that the UTPA regulates insurance trade practices, while the Human Rights Act seeks to remedy discrimination, thus they “seek to remedy different harms and no conflict exists between them.”