West Virginia Operating With Tort Reform Concerns

Like many other parts of the country, West Virginia is looking to answers to improve tort reform in the state.

Recently, Insurance Journal Southeast spoke with Randy Cox, American Insurance Association West Virginia Counsel. Cox looks at how the state has tried to correct the problem, where it originated, the impact of trial lawyers, and how agents and companies are feeling the pinch of doing business there.

Insurance Journal: What strides has the West Virginia Legislature made ultimately to address the problem and what more needs to be done as we go into 2004?

Randy Cox: During the last two years, the West Virginia Legislature has passed legislation to reform a near-bankrupt workers’ compensation system and enacted major medical malpractice reform to address the concerns of the health care provider community. In addition, West Virginia enacted venue legislation (which was the cornerstone of AIA’s asbestos efforts in West Virginia in 2003) which severely limited the rights of out of state plaintiffs to pursue claims for damages in West Virginia. Nevertheless, there is much more that needs to be done. The West Virginia Legislature now needs to adopt the same reforms for the business community as it adopted for the health care community. Such reforms include the elimination of joint and several liability and third-party bad faith claims under the Unfair Trade Practices Act, collateral source legislation, and passage of legislation to establish a fraud unit to deal with insurance fraud within West Virginia.

IJ: How and when did this problem get started and who is to ultimately blame?

Cox: Many of our problems have their origin with the West Virginia Supreme Court. The West Virginia Supreme Court continues to be one of the greatest challenges facing tort reform in the state. The court is comprised of five justices who are elected in bipartisan elections to 12-year terms. The elections have generally been partisan, with business interests and labor/trial lawyers heavily funding the campaigns of their respective candidates. As evidenced by the recent findings of ATRA and the Defense Trial Counsel of West Virginia, the court’s liberality is one of the leading factors for the state developing a reputation as one of the most popular places in the country to file class action and other tort lawsuits. The Supreme Court is responsible for one of the most aggressive medical monitoring standards in the entire country. Bower v. Westinghouse, 522 S.E. 2d 424 (W. Va. 1999), held that a plaintiff could bring a claim for “medical monitoring” if wrongfully exposed to an injurious or toxic substance but was otherwise asymptomatic. This decision has generated a number of lawsuits, and is viewed as a very large problem for businesses in West Virginia. An effort to overturn the decision with legislation failed in 2003. West Virginia has become a relatively plaintiff-friendly jurisdiction. Examples include the various mass tort consolidation cases which have forced defendants to settle with huge numbers of plaintiffs rather than facing the prospect of punitive damage multipliers decided in the first phase of trial (see below). As indicated above, there have been promising developments, including the enactment in 2003 of a venue-reform bill which, if ultimately upheld, will limit the ability of out-of-state plaintiffs to pursue claims for damages in West Virginia; the adoption of a new asbestos case management order that tries smaller clusters (up to 20 claimants) of mesothelioma plaintiffs over a staggered period of time and allows defendants to obtain discovery; the adoption of workers’ compensation reform; and the adoption of medical malpractice reform.

IJ: Have trial lawyers looked at West Virginia as a potential money target?

Cox: Yes. This is most readily seen in the areas of asbestos litigation and lawsuits brought by railroad employees against their employer. The West Virginia Venue Law (SB 213), which was the cornerstone of AIA’s asbestos efforts in the state in 2003, was signed by Democratic Governor Bob Wise in April and went into effect on July 4. As a statement of proof regarding how effective this new law will be, CSX, the state’s sixth- largest private employer, announced the week before the law was signed that about 1,500 cases were filed against CSX Transportation, its rail operating unit, just days before the new venue law took effect in West Virginia. The company said that the vast majority of the claims involve people who never lived or worked in West Virginia and could have been dismissed and required to have been heard in states that have some relationship to the claim, if they had been filed after July 4, the effective date of the new law. Another recent and notorious case involved a consolidated trial of 8,600 plaintiffs. An attempt to get the U.S. Supreme Court to block the trial failed. This caused defendants to settle large inventories of cases, many considered non-meritorious, rather than face a mass trial. Defendants first attempted to challenge the consolidation through the West Virginia Supreme Court. In State ex rel Allman v. MacQueen, 551 S.E. 2d 369 (W. Va. 2001) and State ex rel Mobil Corporation v. Gaughan, 563 S.E. 2d 419 (W. Va. 2002), the state Supreme Court upheld the constitutionality of the consolidation of asbestos cases for purposes of resolution. The case was appealed to the United States Supreme Court, but was not accepted, thereby upholding the apparent constitutionality of the process put in place by the West Virginia Supreme Court of Appeals. Only one defendant, Union Carbide, stayed in the case after the Supreme Court refused the case and is now appealing the judgment against it. Finally, West Virginia was again the subject of national attention in Norfolk and Western Railroad v. Ayers, where a jury awarded $4.9 million to six former employees, all of whom had been exposed to asbestos, who claimed damages for “fear of cancer.” The verdict ultimately was upheld by the U.S. Supreme Court. Despite aberrations such as Ayers, as a general rule, compensation values in West Virginia are probably lower than the national average.

IJ: How have insurance companies and the independent agent been impacted by the problems in West Virginia?

Cox: Doctrines allowing third party bad faith suits against insurers have had a negative impact on insurance liability costs and premiums in every state. Such doctrines encourage the filing of marginal and inflated injury claims in auto insurance. In the context of commercial claims and the contentious issue of asbestos, third-party bad faith cases have a debilitating impact on liability insurance consumers, jobs, and the overall economy; then further reduce dollars available to compensate the most seriously ill victims. West Virginia is among several states where courts have adopted some version of a doctrine permitting third party bad faith suits. Bad faith suits not only hurt the state’s economy and impact the availability of insurance coverage, but also endanger compensation to seriously ill claimants. Another problem that insurers are faced with in West Virginia is lock-in laws. Agents are losing insurers to write for because companies are reluctant to offer insurance in the state. Finally, the lack of an effective insurance fraud unit has limited the ability of the state to investigate and prosecute insurance fraud.

Topics Lawsuits USA Fraud Legislation Claims Virginia West Virginia