Elmore v. State Farm Mut. Auto. Ins. Co
In Elmore v. State Farm Mut. Auto. Ins. Co., 202 W. Va. 430, 438, 504 S.E.2d 893, 901 (1998), the Court rejected the argument that a third-party could assert a claim for breach of fiduciary duty against a tortfeasor's insurer finding that "clearly the insurance contract here was not made for the sole benefit of the plaintiff."
In that case, Chester Workman drove his vehicle across the center line and collided with a vehicle operated by Michael Elmore. Elmore's pregnant wife and unborn child were killed. He and his three-year-old son were injured.
Three passengers in the Workman vehicle were injured and Chester Workman was killed in the accident.
Workman was insured by State Farm under a liability insurance policy with limits of $ 100,000 per person and $ 300,000 per occurrence.
Elmore was insured by Allstate under a policy of underinsured motorist coverage.
State Farm's insurance adjuster contacted Elmore regarding his claims and informed him that he would not receive the entire policy limit of $ 300,000 because $ 100,000 was being retained to settle the claims of the passengers in the Workman vehicle. State Farm drafted releases which were presented to Elmore.
At that time, Elmore informed the adjuster that he would like to retain an attorney. The adjuster advised him that he did not need an attorney and told him that he would receive the maximum amount available to him under the policy.
Elmore subsequently entered into a settlement and release, pro se, for the amount of $ 200,000. He did not know that State Farm had previously paid only $ 57,500 to settle the claims of the occupants of the Workman vehicle.
Elmore then contacted his insurer, Allstate, concerning underinsurance coverage (UIM). Allstate refused to admit or deny his claim for approximately two years. Elmore subsequently hired an attorney and filed suit against the Estate of Chester Workman, State Farm, and Allstate.
After the lawsuit was filed, Allstate claimed it was denying UIM coverage because the State Farm policy limits were not exhausted. State Farm then agreed to rescind the releases and paid Elmore the remaining $ 42,500 available under the Workman policy.
Four years after filing the first lawsuit, Elmore instituted a second legal action against State Farm, Allstate, and the agents of both companies. The complaint alleged, inter alia, that State Farm breached its fiduciary duty and an implied covenant of good faith and fair dealing that was owed to Elmore as a third-party claimant.
The circuit court certified the following question:
Whether, under West Virginia law, there is a legally cognizable cause of action by a third-party claimant against an insurance carrier for common law breach of fiduciary duty and for common law breach of the implied covenant of good faith and fair dealing (common law bad faith).
The Court answered the certified question in the negative and held that "a third party has no cause of action against an insurance carrier for common law breach of the implied covenant of good faith and fair dealing or for common law breach of fiduciary duty." Syllabus, id.