On March 10, 2014, the United States Court of Appeals for the Fourth Circuit released a published opinion in Kenney v. The Independent Order of Foresters, No. 13-1788, which affirmed again that, under West Virginia state law, actions pursuant to the West Virginia Unfair Trade Practices Act (WVUTPA) sound in tort and not in contract. The Court further clarified the law for district courts that the cause of action at issue arose not from the terms of the Virginia-issued policy but from the company’s handling of the subsequently filed death claim in West Virginia. Consequently, the district court’s dismissal of the claim in reliance upon Virginia law (which does not recognize a private cause of action arising from the handling of an insurance claim) was deemed reversible error.
The Kenney decision arose from a dispute over the amount of life insurance proceeds that were available following the death of the policyholder in West Virginia in 2011. The policy was originally issued to Ronald Kenney in Virginia in 1984, but Mr. Kenney had been living in West Virginia for eight years at the time of his death in 2011. The policy contained a choice-of-law provision stating that the laws of the State where the certificate is delivered shall govern the rights or obligations of anyone claiming under the certificate. During the course of the litigation over whether the policy limits were $130,000 or $80,000, the Independent Order of Foresters (IOF) ultimately conceded and paid the higher limits. IOF was subsequently sued for additional damages as a result of allegedly engaging in an unlawful settlement practice prohibited by the WVUTPA. The district court granted IOF’s motion to dismiss, and Mrs. Kenney appealed.
The Kenney Court first determined that the claim before it and the damages sought did not directly involve the IOF policy terms or benefits (which had already been paid) but rather IOF’s allegedly unlawful handling of the claim. Thus, the Court reasoned that the action sounded in tort – as opposed to contract – because the action was focused on whether IOF breached legal duties imposed upon it by the WVUTPA during its handling of Mrs. Kenney’s claim.
The Court next determined whether West Virginia or Virginia law applied to the WVUTPA claim. In making this determination, the Court recognized that West Virginia has applied both the lex loci delicti approach and the Restatement (Second) of Conflict of Laws (Restatement) when resolving choice-of-law disputes in tort claims. Finding it unnecessary to decide which approach should apply under the facts of this case (and leaving that decision to West Virginia state courts), the Fourth Circuit believed the outcome under both was the same – that West Virginia law applies to Mrs. Kenney’s WVUTPA claim against IOF.
Applying the lex loci delicti approach, which focuses on the law of the place where the wrong occurred, the Court found that Mrs. Kenney resided in West Virginia when she filed her claim for benefits, when she pursued her causes of action against IOF, and when IOF paid the claim. Thus, the Court concluded that any harm caused to her by IOF’s handling of her claim (such as annoyance, inconvenience, and attorney fees) occurred in West Virginia.
Applying the Restatement, the Court focused its attention on the law of the state with the most significant relationship to the occurrence (claim handling) and the parties. This required the Court to look at where the injury occurred, where the conduct causing the injury occurred, the location of the parties, and where the relationship of the parties is centered. Ultimately, the Court found primary ties to West Virginia and none to Virginia: any injury to Mrs. Kenney occurred in West Virginia; IOF’s adjusting of Mrs. Kenney’s claim originated mostly from its headquarters in Canada; Mrs. Kenney is a West Virginia resident and IOF is headquartered in Canada; and the relationship between Mrs. Kenney and IOF is centered in West Virginia where the claim was made and disputed. From there, the Court weighed policy considerations under the Restatement and acknowledged that Virginia, unlike West Virginia, does not recognize a private cause of action in tort arising from the handling of an insurance claim. Thus, Virginia law should not apply given its lack of connection to the claim at issue and its failure to protect a West Virginia citizen such as Mrs. Kenney.
The Fourth Circuit reversed the district court’s dismissal of the case and remanded the case for further proceedings. The Fourth Circuit concluded that West Virginia law and the WVUTPA will now govern Mrs. Kenney’s claims.