On June 5, the United States Circuit Court of Appeals for the Fourth Circuit issued an unpublished opinion that provides a blueprint to insurance companies for handling bad faith claims.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
- The Fourth Circuit upheld the district court’s ruling on the Hayseeds damages claim for a couple of key reasons:
- The court found the Sellmans were not entitled to damages since Safeco had made multiple attempts to contact them to settle the claim, which was promptly paid. The court noted that insurers are allowed “some time” to investigate claims, and Safeco acted promptly.
- The Sellmans failed to show the necessity of retaining an attorney, as Safeco had contacted them multiple times before they hired counsel, and there was no evidence the attorney had to perform additional legal work due to any delay by Safeco.
- The district court properly excluded the Sellmans’ proposed insurance expert. Although the expert had an Ohio bar license and claims experience, the court noted that under state and federal precedent, general insurance claims experience does not qualify someone to testify on West Virginia insurance claims. Additionally, the Sellmans’ expert intended to testify as to the applicable law governing Safeco’s conduct and opine on legal conclusions. Under existing state and federal precedent, however, experts are generally not permitted to offer opinions regarding legal conclusions or questions of law. The Sellmans’ expert was not licensed in West Virginia, had not worked as a claims representative for many years, and was barred from testifying as to legal conclusions or questions.
- The Fourth Circuit held that the admission of the testimony of Safeco’s two experts was proper. Safeco’s insurance expert had a West Virginia law license, had prior experience with property damage and bad faith claims, and had previously been admitted as an expert in prior West Virginia cases. The testimony of Safeco’s engineering expert was admissible, as it directly related to issues that the Sellmans had raised at trial.
- The District Court’s denial of the Sellmans’ motion for a new trial, which was based on the various evidentiary rulings above, was proper because the District Court’s rulings were appropriate.
If you have any questions about this opinion, please contact the authors or a member of Steptoe & Johnson’s Litigation Team.
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