Written by Barry Montgomery, Esq.
Edited by Janeen Koch, Esq.
The Virginia Supreme Court recently shot down two common arguments used by the plaintiff’s bar in first party insurance litigation. As discussed below, insurers in Virginia should keep both of these cases in mind when handling first party claims and litigation.
I. Policy Condition Limiting Time In Which The Insured Can Sue In Homeowners’/Fire Policies Is Not subject To Tolling
On September 17, 2015, the Virginia Supreme Court dispelled a common argument that the insurance policy condition requiring that a lawsuit be filed within 2 years of the date of loss is subject to a statutory “tolling” provision when a lawsuit is non-suited. In Allstate v. Ploutis, (Record No. 141536), Ploutis sued Allstate for breach of contract under a homeowners’ policy arising out of water damage to her house. Ploutis and Allstate could not agree on the costs of repairs and Ploutis sued for breach of contract. The policy contained a common condition that any lawsuit against the insurer must be filed within 2 years of the date of loss. Ploutis timely filed her lawsuit 1 year and 11 months after the date of loss. However, she later “nonsuited” the lawsuit and then re-filed within 6 months of the non-suit but more than two years after the date of loss–in violation of the 2 year limitation period found in the policy.[i]
Allstate filed a demurrer asking the court to dismiss the complaint. Plaintiff argued that the statutory “tolling” provision found in Virginia Code 8.01-229(E)(3) should apply to allow her 6 months to re-file the lawsuit in spite of the provision in the policy requiring the action to be filed within 2 years of the date of loss. Allstate argued that the tolling provision found in 8.01-229(E)(3), by its plain terms applies to statutes of limitations not the contractual limitation found in insurance policies. The trial court disagreed, reasoning that the second complaint filed by the plaintiff, more than two years after the date of loss, was merely a revival of the first lawsuit that was timely filed.
On appeal, the plaintiff argued that since Allstate’s policy incorporated the terms found in a statute, Virginia Code Section 38.2-2105 (commonly referred to as the “172 lines”), then the policy condition should be treated as a statute of limitations and the tolling provisions found in 8.10-229(E) should apply. This argument has found support in some trial courts and in at least one federal district court. (See Zaeno International, Inc. v. State Farm, 152 F.Supp.2d. 882 (E.D. Va. 2001). Consequently, this argument has been made at the trial court level since at least 2001.
However, the Supreme Court shot down Ploutis’ argument. The Court noted that the tolling provision of 8.01-229(E)(3) “means what it says” in that it only tolls a statute of limitations and has no effect on an insurance policy’s contractual limitations period requiring that suit be filed within 2 years of the date of loss. The court rejected the reasoning of the federal court in Zaeno and reaffirmed its decision in Massie v. Blue Cross & Blue Shield, 256 Va. 161 (1998) holding that the 8.01-229(E)(3) does not toll the contractual limitations period found in a health insurance policy.
This recent ruling by the Virginia Supreme Court should slam the door on future attempts by insureds to get around the contractual limitations period after they have taken a non-suit by claiming that the contract policy term should be treated as a statute of limitations.
II. There is No Right to Trial by Jury in a “Bad Faith” First Party Coverage Case
In another decision handed down on September 17, 2015, Virginia’s high court confirmed that there is no right to a trial by jury in “bad faith” cases filed pursuant to 38.2-209 of the Code of Virginia. In the case of REVI, LLC v. Chicago Title Insurance Co., Record No. 141562 (Va. 2015) the plaintiff sued its title insurance company for breach of contract and for acting in bad faith pursuant to 38.2-209 of the Code of Virginia. Code Section 38.2-209 applies to first party claims and allows a court to award an insured its attorney’s fees and costs in the event that an insured successfully proves that the insurer acted in bad faith in either denying coverage or failing to make payments due under a valid claim.
The original trial judge ruled that both the breach of contract and the bad faith issues would be decided by a jury. The case proceeded to a trial and the jury awarded $1.2M in damages for breach of contract. The jury also decided that the insurer acted in bad faith and awarded over $400,000.00 in attorney’s fees and costs. A different judge presided over the trial and allowed post-trial motions on the issue of whether the jury could award fees and costs for “bad faith.” The new trial judge decided that the issue of bad faith should not have been decided by a jury and that the insurer had not acted in bad faith—reversing the award of attorney’s fees and costs. The insured appealed.
The Virginia Supreme Court conducted an exhaustive analysis of the insured’s claim to a constitutional right to trial by jury. The Court also analyzed the predecessor to title 38.2 of the Code of Virginia (Section 38.1) and found that the legislature, in its use of the term “Court” in section 38.209, had never intended to confer a right to a trial by jury in such cases. There was only one dissent from the majority’s decision. The Court’s comprehensive analysis of the issue should put to rest any future arguments by insureds that they are entitled to a trial by jury on their claim for relief due to “bad faith” pursuant to section 38.1-209 of the Code.
(i) Virginia law allows a plaintiff the right to file one “nonsuit,” a voluntary dismissal of the Complaint, once as a matter of right. The plaintiff must refile the lawsuit within 6 months or within the original statute of limitations, whichever period is longer.