Fourth Circuit Reaffirms Necessary Prerequisites for Claiming Hayseeds Damages and Offers Guidance on Admissibility of Experts

By: Michelle E. Gaston, Justin M. Wilson

Published: June 21, 2024

On June 5, the United States Circuit Court of Appeals for the Fourth Circuit issued an unpublished opinion that provides a blueprint to insurance companies for handling bad faith claims. The Fourth Circuit held in Sellman v. Safeco Insurance Company of America that (1) the plaintiffs, the Sellmans, were not entitled to recover their Hayseeds damages; (2) the district court did not err in excluding the testimony of the Sellmans’ proffered insurance expert; (3) the district court properly admitted the testimony of Safeco’s insurance and engineering experts; and (4) the district court did not err in denying the Sellmans’ motion for a new trial.

On October 19, 2020, the Sellmans’ home was damaged by an intoxicated driver. At the time of the accident, the Sellmans’ home was insured by Safeco, and the following day the Sellmans filed a claim for property damage with the insurance company and the carrier sent an engineer and adjuster to the home to inspect the damage.

In November of the same year, Safeco communicated with the Sellmans to review its findings on the coverage claim. A dispute between the parties arose because the Sellmans disagreed with Safeco’s findings following its inspection. The Sellmans then retained their own contractor to examine the damage, and the parties agreed that the interior fixtures of the Sellmans’ home would need to be removed before the full extent of the damage could be assessed. Consequently, Safeco adjusted the Sellmans’ claim in two parts: First, Safeco issued a payment of $49,500.64 on November 17 for all of the Sellmans’ “known damages,” and second, Safeco would adjust the claim for “unknown damages” once it had more information.

In the first four months of 2021, Safeco contacted the Sellmans many times on the status of their home repairs, without response. The Sellmans finally responded with additional estimates between April 21 and May 17. Approximately one week later, Safeco informed the Sellmans that it wanted to perform a new home inspection based on the new estimates.

In response, the Sellmans retained an attorney who sent a letter to Safeco demanding payment in the amount of $251,540 and a scheduled time for a reinspection. A reinspection of the property led to Safeco requesting clarification on the financial amount listed in the attorney’s demand letter, and after an updated estimate from the Sellmans’ contractor, Safeco agreed to pay the full demanded amount of $251,540 plus $14,263.03 in moving and packing expenses. In August 2021, Safeco stated within its claim file that the Sellmans had retained an attorney and that “a business decision” was made to settle the claim based on the updated estimate as a final settlement.

Despite being paid the full amount of their demand, the Sellmans filed suit against Safeco on October 7, 2021, alleging the company had breached the implied covenant of good faith and fair dealing, had violated the West Virginia Unfair Claims Settlement Practices Act, and they asserted a claim for Hayseeds damages.

The district court granted partial summary judgment to Safeco on the issue of Hayseeds damages and the jury returned a verdict for Safeco on the remaining causes of action. At trial, the district court had made several key evidentiary rulings which included the exclusion of the Sellmans’ proposed insurance expert and the admission of Safeco’s insurance and engineering experts. Finally, the Sellmans made a motion for a new trial, which the district court denied.

The Sellmans then appealed to the Fourth Circuit, seeking a reversal on the district court’s rulings on four issues:

1. The grant of summary judgment as to Hayseeds damages
2. The exclusion of their insurance expert
3. The admission of Safeco’s experts
4. The denial of their motion for a new trial. The Fourth Circuit affirmed the district court’s rulings on all in favor of Safeco

If you have any questions about this opinion, please contact the authors or a member of Steptoe & Johnson’s Litigation Team.

Stay informed. Sign up for our mailing lists.

Stay Informed

All of our news and resources are shared electronically. Select your preferred list(s) below.(Required)