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WV Supreme Court Sets Aside Trial Court Verdict in Unfair Trade Practices Case

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On October 25, 2013, the Supreme Court of Appeals of West Virginia released its opinion in AIG Domestic Claims, Inc. v. Hess Oil Company, Inc. (No. 12-0719), setting aside an Unfair Trade Practices Act jury verdict rendered in favor of Hess Oil and against AIG in the amount of $5 million in compensatory damages and $53 million in punitive damages [reduced by remittitur to $25 million] on the grounds that the trial court had committed multiple errors, prejudicially affecting the jury verdict. Hess Oil’s unfair trade practices act claim arose out of a coverage dispute involving a claim for environmental remediation costs at one of Hess Oil’s underground storage tank systems.

Significantly, one of the errors raised by AIG on appeal was the trial court’s post-trial ruling which permitted the jury’s award of emotional damages sustained by the former shareholders of Hess Oil, a dissolved corporation. The trial court supported its decision to uphold the personal damages awarded to Hess Oil by relying on dicta in Hayseeds, Inc. v. State Farm Fire and Cas. Co., 177 W. Va. 323, 352 S.E.2d 73 (1986).

On appeal, the Supreme Court noted that without the evidence concerning the emotional damages the non-party former shareholders of Hess Oil had suffered, there would have been little or no evidence for the jury to consider. The Supreme Court thereafter adopted a new syllabus point, holding that “[a] dissolved corporation that is asserting a claim solely in its corporate name under authority of West Virginia Code § 31D-14-1405(b)(5) (2009) may not recover damages for the personal aggravation, annoyance, and inconvenience of its non-party former shareholders.” Accordingly, the Supreme Court found that the trial court erred in its determination that Hayseeds provided the necessary authority for an award of personal damages to a dissolved corporation for the aggravation, annoyance, and inconvenience of its former shareholders.

It should further be noted that the Supreme Court left open the issue of whether an active corporation may recover damages of a personal nature, noting that it was not necessary to resolve that matter given the facts of the case before it. The Supreme Court further suggested that if no clear demand for settlement was made by Hess Oil, then the case may fall outside the past rulings of the Supreme Court that permit recovery for an excess of policy limits.

Click here to read the full opinion.

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