Key Points

  • The Supreme Court of Appeals of West Virginia held that a policy provision requiring an underinsured owner's or operator's liability to arise out of the ownership, maintenance or use of the underinsured vehicle is more restrictive than W. Va. Code § 33-6-31(b) and void as against public policy to that extent.
  • The at-fault driver's ownership of an uninvolved, Erie-insured vehicle made that vehicle an underinsured motor vehicle under the statute, so UIM coverage is available to the passenger's estate under her Milbank policy.
  • The court reversed the Intermediate Court of Appeals and remanded for reinstatement of the circuit court's summary judgment for the estate on coverage.
  • A Rule 54(b)-certified declaratory judgment on insurance coverage was properly reviewable even though breach-of-contract, unfair-claims-practices and bad-faith counterclaims and damages remain pending.
  • Chief Justice Bunn and Justice Trump dissented and reserved the right to file dissenting opinions.

West Virginia's highest court on Nov. 13 struck down an auto policy clause that ties underinsured motorist coverage to the vehicle involved in a crash. The ruling lets a wrong-way crash victim's estate seek those benefits based on the at-fault driver's own, uninvolved car. Underinsured motorist coverage, known as UIM, pays a policyholder's losses when an at-fault driver's liability insurance falls short.

The Supreme Court of Appeals of West Virginia reversed the state's Intermediate Court of Appeals, which had ruled for Milbank Insurance Co. Justice Flanigan wrote for the majority. Chief Justice Bunn and Justice Trump dissented and reserved the right to file dissenting opinions.

In a new syllabus point, the court ruled that a policy provision requiring the at-fault owner's or operator's "liability" to arise out of the ownership, maintenance or use of the underinsured vehicle is more restrictive than the state's UIM statute. Such a provision "is void as against public policy and unenforceable to that extent," the court held. The court also ruled that the trial court's coverage judgment was properly certified for immediate appeal even though bad-faith counterclaims and damages remain unresolved.

On Nov. 23, 2019, Caleb Ratcliffe drove Sierra Mattson's Hyundai Accent, with her permission, the wrong way on Ohio State Route 7 and collided head-on with another car. Five people died, including Ratcliffe and Mattson, a Wheeling resident riding in the front passenger seat. The court wrote that the crash "was undoubtedly Mr. Ratcliffe's fault."

Milbank insured Mattson's car. Erie Insurance Property and Casualty Co. insured a separate vehicle that Ratcliffe owned, which was not involved in the crash. Each policy carried liability limits of $100,000 per person and $300,000 per accident. Both insurers tendered their limits to be split among the claimants, and Mattson's estate received $120,000, an amount it contends did not cover her damages.

The estate then sought UIM benefits under Mattson's Milbank policy, treating Ratcliffe's Erie-insured car as the underinsured vehicle. Milbank denied the claim and in October 2020 sued in Ohio County Circuit Court for a declaration that it owed no UIM coverage. The estate counterclaimed for breach of contract, unfair settlement practices and bad faith.

The circuit court granted summary judgment to the estate in April 2023, finding no policy language requiring the underinsured vehicle to be involved in the accident. The intermediate court reversed in 2024, relying on the policy's UIM endorsement, which says "The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use" of the underinsured vehicle.

The state's UIM statute, W. Va. Code § 33-6-31(b), defines an underinsured motor vehicle as one "with respect to the ownership, operation or use of which there is liability insurance applicable at the time of the accident" but with limits below the insured's own UIM limits, or reduced below them by payments to others hurt in the crash. Milbank argued that its endorsement was consistent with that definition and that the "only liability Mr. Ratcliffe has to the Estate relates to his operation of Ms. Mattson's vehicle," not to his ownership of his own car.

Justice Flanigan rejected that reading. "The flaw in Milbank's argument is that it treats the policy's UIM endorsement and West Virginia Code § 33-6-31(b) as coextensive. They are not," the opinion said. "The policy endorsement is subservient to West Virginia law and must comply with our UIM insurance statute."

The majority found that the endorsement "plainly conditions UIM coverage on the involvement of the underinsured vehicle," while the statute requires only applicable liability insurance. In a footnote, the majority wrote that UIM coverage under the statute "is person oriented, not vehicle oriented." Applying the statute, the court concluded that Ratcliffe's car qualified as an underinsured motor vehicle because he owned it and its Erie coverage proved insufficient.

A majority footnote summarized the dissenters' position: Ratcliffe's Erie policy applied to the crash because Erie had contracted to cover him, not because he owned his car. The majority answered that his liability insurance "was made 'applicable' through his 'ownership,' plain and simple." "The dissenters would have us ignore West Virginia Code § 33-6-31(b)'s clear directive," Justice Flanigan wrote.

The estate had also argued that Milbank's appeal to the intermediate court was premature because no damages had been awarded on its counterclaims. Rule 54(b) of the West Virginia Rules of Civil Procedure allows a trial court to enter final judgment on fewer than all claims in a case. The justices upheld the circuit court's Rule 54(b) certification because Milbank's complaint, its entire claim against the estate, sought only a ruling on coverage. "The presence or absence of damages resulting from a separate cause of action premised, in whole or in part, upon the outcome of the declaratory judgment does not undermine the finality and reviewability of the declaratory judgment ruling itself," the court wrote.

The court distinguished its 2024 decision in National Union Fire Insurance Co. of Pittsburgh, Pa. v. Westlake Chemical Corp., where coverage turned on unresolved causation questions, and wrote that "no blanket rule renders declaratory judgments involving insurance coverage reviewable per se under Rule 54(b)." The court also agreed with the intermediate court that Milbank failed to preserve its argument, first raised on appeal, that the policy's duplicate payment provision barred coverage.

Lawyers for the estate included James G. Bordas III of Bordas & Bordas PLLC. Milbank was represented by William M. Harter of Frost Brown Todd LLP.

The case returns to the Ohio County Circuit Court, which must reinstate its summary judgment for the estate on coverage. The estate's damages remain to be litigated, as do its stayed counterclaims, including its claim that defective UIM selection forms entitle it to coverage equal to the policy's liability limits rather than the $25,000 per-person UIM limit.