Opinion
Civil Action Nos. 5:98CV00092, 5:99CV00029
September 1, 2000
James Wingate Barkley, Elizabeth M. Ayyildiz, Morin Barkley, Charlottesville, Va, for Erie Insurance Exchange, plaintiff.
Dexter Brock Green, Jones Green, Charlottesville, Va, for Catherine Clover, consolidated plaintiff.
Richard Mudd, Alexandria, Va, for Catherine Clover, consolidated plaintiff.
Dexter Brock Green, Jones Green, Charlottesville, Va, for Catherine Clover, defendant.
Richard Mudd, Alexandria, Va, for Catherine Clover, defendant.
Catherine Clover, [Pro Se], Silver Spring, Md, for Herself.
James Wingate Barkley, Morin Barkley, Charlottesville, Va, for Erie Insurance Exchange, Erie Insurance Group, Erie Insurance Company, consolidated defendant.
ORDER
Before the court is the report and recommendation of Magistrate Judge B. Waugh Crigler and the parties' objections and responses thereto. For the reasons stated in the accompanying memorandum opinion, the report and recommendation shall be adopted in part and rejected in part. It is accordingly this day as follows:
ADJUDGED ORDERED AND DECREED
(1) Magistrate Judge Crigler's August 24, 1999 Report and Recommendation shall be, and hereby is, ADOPTED in part and REJECTED in part.
(2) Magistrate Judge Crigler's August 24, 1999 Order striking Clover's July 30, 1999 Supplemental Memorandum shall be, and hereby is, AFFIRMED.
(3) Magistrate Judge Crigler's June 17, 1999 Order deeming admitted all matters contained in Erie's February 11, 1999 requests for admission shall be, and hereby is, AFFIRMED.
(4) Clover's January 25, 1999 Motion to Dismiss and/or For Summary Judgment in Civil Action No. 5:98CV00092 shall be, and hereby is, GRANTED Summary Judgment. Accordingly, Clover's Motion to Dismiss shall be, and hereby is, DENIED as moot.
(5) Erie's February 11, 1999 Cross Motion for Summary Judgment in Civil Action No. 5:98CV00092 shall be, and hereby is, DENIED.
(6) Erie's Motion to Dismiss Counts II, III, and the prayer for punitive damages in Civil Action No. 5:99CV00029 shall be, and hereby is, GRANTED.
The Clerk of Court hereby is directed to send a certified copy of this Order to all counsel of record and Magistrate Judge Crigler.
MEMORANDUM OPINION
Before the court is Magistrate Judge B. Waugh Crigler's report and recommendation, proposing resolution of outstanding motions in the consolidated action of 5:98CV00092 and 5:99CV00029. Also before the court are the parties' objections and responses to the report and recommendation.
I.
Although the court and the parties are intimately familiar with the facts of this case, a truncated review of the protracted history of this matter is appropriate. Erie Insurance Group is allegedly a fictitious trade name for several entities, including Erie Insurance Exchange and Erie Insurance Company ("the Erie entities" hereinafter will refer to the Group, the Exchange and the Company). Apparently, Erie Insurance Exchange ("Erie") issued a homeowner's insurance policy ("the policy" or "the contract") to Catherine Clover, effective December 15, 1995 through December 15, 1996. The names of all three Erie entities appear repeatedly on the face of the policy. By February 10, 1996, Ms. Clover had discovered damage to her roof, apparently from a storm and promptly notified Erie of the damage. On February 10, 1998, Clover filed suit in state court against Erie Insurance Company and Erie Insurance Group for payment covering the roof damage ("the first action"). The first action was removed to the Eastern District of Virginia and, prior to the hearing on the defendants' motion for transfer of venue to the Western District, Clover voluntarily dismissed the first action on April 24, 1998, pursuant to Fed.R.Civ.P. 41(a).
On October 23, 1998, Clover refiled suit against Erie Insurance Company and Erie Insurance Group in state court ("second action"). Clover's second action also named Erie as a defendant. On December 15, 1998, Erie filed an action in the Western District of Virginia seeking a declaratory judgment that Clover could no longer bring any suit against Erie for damages under the policy related to the roof ("declaratory judgment action"). The grounds for declaratory judgment, as alleged by Erie in its complaint, are that (1) Clover did not comply with the terms of the policy, (2) Clover did not timely file suit against Erie within the two year contractual period of limitations because she named the wrong entities in her first suit (Erie Insurance Company and Erie Insurance Group), and (3) Clover had not refiled suit against Erie Insurance Company or Erie Insurance Group.
Clover responded to Erie's complaint in the declaratory judgment action on January 25, 1999 with a motion to dismiss and/or motion for summary judgment accompanied with evidence that, contrary to Erie's allegations, she had in fact named Erie in a suit and had refiled against the other two Eries. Because matters outside the pleadings are considered, Clover's motion will be considered for summary judgment under Federal Rule of Civil Procedure 56, not for Rule 12(b) dismissal. See Fed.R.Civ.P. 12(b). Erie responded and filed a cross-motion for summary judgment on February 11, 1999. Erie supported its motion for summary judgment with allegations that Clover's claim under the policy is time-barred, thereby relieving Erie of any obligation under the policy with respect to the roof collapse. Thus, there are pending motions by both parties for summary judgment in the declaratory judgment action.
Erie removed Clover's second action to the Eastern District of Virginia and sought dismissal of certain counts or transfer. On April 29, 1999, the second action was transferred to this court and consolidated with Erie's pending declaratory judgment action. At the time the second action was transferred to this court, there was a pending 12(b)(6) motion by Erie to dismiss Count II ("Bad Faith") and the prayer for punitive damages associated thereto, and Count III ("Failure to Investigate"). Thus, in addition to the cross motions for summary judgment on the declaratory judgment action, there is a pending motion to dismiss several claims in the second action. However, there is no motion by Erie to dismiss Count I ("Breach of Contract") of the second action.
II.
The consolidated action was referred by this court to the Magistrate Judge for handling of non-dispositive pretrial matters and a report and recommendation on dispositive issues. The Magistrate Judge, submitted his report and recommendation ("RR") to the court on August 24, 1999, which included recommended disposition on the aforementioned motions. The only outstanding motion is one for sanctions, on which the Magistrate Judge has postponed a determination on the merits pending the decision of this court on the dispositive issues.
In the RR, the Magistrate Judge recommended that Erie's motion for summary judgment in its declaratory judgment action be granted and that Clover's second action be dismissed in its entirety, both on the grounds that Clover's claims against Erie are time-barred. Furthermore, the RR explained why, in separate orders, the Magistrate Judge struck Clover's July 30, 1999 Supplemental Memorandum in Opposition to Erie's motion for summary judgment and granted Erie's motion to deem admitted Erie's Requests for Admission. In the event that the court does not grant the dispositive motions in Erie's favor, the Magistrate recommends granting Erie's motion to dismiss Counts II, III, and the prayer for punitive damages in Clover's second action.
III.
Pursuant to 28 U.S.C. § 636(b)(1)(C), the court shall make a de novo determination of all portions of the recommendation to which objections were made. Clover objects to all findings of fact and conclusions of law in the RR, specifically: (1) striking and thereby not considering her July 30, 1999 supplemental memorandum in opposition to Erie's motion for summary judgment, (2) deeming admitted Erie's requests for Admissions, (3) granting summary judgment to Erie in the second state action and (4) striking Count II and Clover's prayer for punitive damages.
A.
Permission for Clover to file a supplemental memorandum of law in opposition to Erie's motion to dismiss the second action was granted by an oral order of the Magistrate Judge at the June 10, 1999 hearing. At the same hearing, counsel for Clover was permitted to withdraw, over Erie's objections. Consequently, the Magistrate Judge placed limitations on how the case would proceed, granting Clover a brief period to obtain new counsel and including strict parameters for the supplemental memorandum and response thereto. The oral order was memorialized in a written order entered June 17, 1999, which stated, "Substitute counsel shall have until July 30, 1999 to supplement Clover's brief in opposition to dismissal with any new decisional authority related to issues already addressed by the parties. . .the motions then will be decided without oral argument." (Emphasis added). The language of the written order, as well as the clear oral instruction at the June 10 hearing, instructed Clover that the purpose of the supplemental brief was to allow new counsel to cite any authority that previous counsel did not recognize: this was not an opportunity to introduce new factual arguments into the case. (RR at 4). The court agrees with the analysis of the Magistrate Judge and his decision to grant Erie's motion to strike the supplemental briefing for not being in conformity with the Magistrate's Order.
Furthermore, the court recognizes the authority of the Magistrate to decide non-dispositive pretrial matters as authorized by 28 U.S.C. § 636(b)(1)(A)-(B) and conferred by order of this court. Accordingly, the court only reviews pretrial orders of the Magistrate Judge if they are clearly erroneous or contrary to law. See 28 U.S.C. § 636(b)(1)(A). In order for this court to reverse the Magistrate's order striking the supplemental memorandum, Clover would have to establish that the Magistrate acted in clear error or contrary to law. The court finds the Magistrate Judge neither committed clear error nor acted contrary to the law. The court affirms, to the extent it has the authority to do so, the Magistrate's order striking Clover's July 30, 1999 supplemental briefing.
B.
As explained above, the Magistrate Judge's orders on pretrial matters will be reviewed for clear error or error of law. In the June 17, 1999 order memorializing the oral orders of the June 10 hearing, the Magistrate Judge granted Erie's motion to deem admitted Requests for Admission Erie had served in February 1999, to which Clover never responded. Federal Rule of Civil Procedure 36(a) states that requests for admissions not responded to in thirty days are admitted. The court also notes for the record that Clover never provided a reason for not answering the requests for admission, making the court that much less inclined to reverse a decision to deem said requests admitted. Accordingly, the court finds it was proper for the Magistrate to deem admitted Erie's requests for admission a full four months after the requests had been served and received no response
C.
The insurance policy issued to Clover included a clause limiting the period during which a suit against Erie could be brought to within two years after the loss or damage occurs. Pursuant to the deemed admissions, the loss or damage occurred by February 10, 1996, so the last day to bring suit against Erie was February 10, 1998. Although Erie extended this date until June 1, 1998, Clover timely filed the first action on February 10, 1998. On April 24, 1998, Clover voluntary dismissed the first action and then refiled on October 23, 1998. In filing the second lawsuit after the June 1, 1998 extended deadline for suits against Erie under the policy, Clover availed herself of the six month tolling provision of Va. Code Ann § 8.01-229(E)(3) (Michie 1950), which states in pertinent part:
If a plaintiff suffers a voluntary nonsuit . . .the statute of limitations with respect to such action shall be tolled by the commencement of the nonsuited action, and the plaintiff may recommence his action within six months from the date of the order entered by the court, or within the original period of limitation. . .whichever period is longer. This tolling provision shall apply irrespective of whether the action is originally filed in a federal or a state court and recommenced in any other court, and shall apply to all actions irrespective of whether they arise under common law or statute.
1.
Erie contends and the Magistrate Judge agrees that, pursuant to Massie v. Blue Cross and Blue Shield of Virginia, 500 S.E.2d 509 (Va. 1998), Clover cannot benefit from the statutory tolling provisions because the period of limitations in this case is contractual. Although the Magistrate Judge recognized that the two year period of limitations in the policy was mandated by statute, see Va. Code Ann. § 38.2-2105 (Michie 1950), he held that "these statutorily required periods of limitation are not subject to the general tolling provisions of Virginia law and they, alone, will control the rights of the parties if suit is filed." (RR at 6) (citations omitted). The court reads Massie to require a different result.In Massie, the Virginia Supreme Court concluded that "Code § 8.01-229(E)(3) does not apply to a contractual period of limitations." 500 S.E.2d at 511. In Massie, the parties contracted to a twelve month period of limitations, pursuant to Virginia law which allows parties to contract to periods of limitation shorter than the statutory limitations periods. See id. at 511. If Massie's contract had not included its twelve month period of limitations, the Virginia Code's five year statute of limitations for contract would have been applicable. See id. at 511n.2. Accordingly, the Virginia Supreme Court held, "By agreeing to a period of limitations different from the statutory period, the parties chose to exclude the operation of the statute of limitations and, in doing so, also excluded its exceptions." Id. at 511. By contrast, Clover and Erie did not contract to a period of limitations shorter than the statutory period.
The policy in the instant matter covered property in Virginia and insured against the peril of fire, it was therefore required to include the mandatory provisions enumerated in Code § 38.2- 2105. See Va. Code § 38.2-2100 (Michie 1950); Hitt Contracting, Inc. v. Industrial Risk Insurers, 516 S.E.2d 216, 217 (Va. 1999). As the Virginia Supreme court stated in Ramsey v. Home Insurance Co., 125 S.E.2d 201, 204 (Va. 1962), "The limitation involved in the present case is not in the language of the insurance company. It is in the language of the General Assembly and expressed in words which the statute requires to be inserted in the policy, word for word, line for line, number for number." Cited in Hitt, 516 S.E.2d at 219. The statute referred to in Ramsey is the 1962 equivalent of what is now § 38.2-2105. Accordingly, the Virginia Supreme Court has recognized that when the language of § 38.2-2105 is inserted into an insurance policy, it is in no way done at the discretion of the parties but rather by the mandate of the General Assembly. To consider the § 38.2-2105 statute of limitations as contractual rather than statutory, merely because of its presence in a contract — which is required by the statute — would be a legal fiction. Unlike most contractual periods of limitations where the parties agree to periods shorter than statutory periods of limitations, contractual clauses inserted pursuant to the mandate of § 38.2-2105 are essentially statutes of limitations. Where the statutory period of limitations is in effect, not by choice of the parties but by legislative mandate, the statutory exceptions to that period of limitations must also apply.
The Eastern District of Virginia came to a contrary conclusion in Bilicki v. Windsor-Mount Joy Mutual Ins. Co., holding "In accord with Ramsey, the Court finds that the statutorily required contractual limitations period for insurance suits should not be subject to the general tolling provisions." 954 F. Supp. 129, 131 (E.D. Va 1996) (citing Ramsey for the proposition that the contractual provision "mean[s] what it says"). The Eastern District based its holding on the fact that, given the breadth and detail of the Virginia Insurance statutes, if the General Assembly wanted tolling provisions to apply, it would have so stated. See id. at 131-32 (comparing Virginia insurance law to its wrongful death statute, which specifically enacts a tolling provision). While this may be possible, it is also fair to presume that, where the statutory requirements of the Virginia Code apply with equal weight to the insurance laws, the Assembly saw no reason to repeat applicable statutes, such as the tolling provision of § 8.01-229(E)(3). The Eastern District's example in Bilicki of the explicit tolling provision for the wrongful death statute as bearing § 38.2-2105's silence on tolling is unpersuasive because the wrongful death statute's tolling provision, § 8.01-244(B), differs from the otherwise applicable general tolling provision of § 8.01-229(B). The Assembly only needed a special tolling provision for the wrongful death statue because the legislature intended something other than the general tolling provision to apply. The Assembly's decision not to include a special tolling provision for § 38.2-2105 further supports this court's view that the general tolling provisions for statutes of limitations was intended to apply.
Furthermore, some Virginia Circuit Court cases support this court's conclusion that the statutorily required two year periods of limitations under § 38.2-2105 are not absolute. See Buhrman Sons, Inc. v. Underwriters at Lloyds, No. LS-1293-1, 1991 WL 835138 (Va.Cir.Ct. Aug. 19, 1991) (holding that § 8.01-229(E)(3) acts to toll limitations periods under § 38.2-2105, but not under Buhrman's particular set of facts); Estate of Souder v. Dennison, Ch. No. 10920, 1988 WL 619228 (Va.Cir.Ct. May 17, 1988) (extending policy period of limitation under § 38.2-2105 pursuant to doctrine of mistake). And finally, this court has the benefit of Massie, a case which had not yet been decided when the Eastern District ruled on Bilicki. Massie does not go so far as Bilicki to say that the tolling provision does not apply at all statutorily required limitations periods in insurance contracts, and this court, charged with applying Virginia law in this case, also declines to make that leap. While the Western District is not required to follow the precedent of the Eastern District, the undersigned does not take lightly the opinions of his brethren. However, for the reasons set forth in the discussion above, the court respectfully declines to follow the holding of Bilicki and the relevant recommendation of the Magistrate Judge, instead finding the general tolling provisions of § 8.01-229(E)(3) applicable to the statutorily mandated two-year period of limitations in the policy Erie issued to Clover.
2.
Erie also argues that Erie Exchange Group was not named in Clover's first suit on February 10, 1998, thereby precluding it from further suit under the two year statute of limitations. The court finds this argument unpersuasive because, based on the face of the insurance policy issued to Clover, Erie Insurance Group is an umbrella name that includes Erie Insurance Exchange. The front page of the insurance policy includes a logo with the caption "ERIE" followed, on the next line, with the words "ERIE INSURANCE GROUP." This same logo and the words Erie and Erie Insurance Group are repeated as the heading for the Extracoverage pages of the policy and on the signature page of the policy, followed by the address "Home Office, 100 Erie Insurance Place. . ." Apparently, "Home Office" refers to Erie Insurance Group, the only Erie entity named on the signature page. The signers to the policy on behalf of the insurer are the Secretary and Chairman of, apparently, Erie Insurance Group. Although Erie Insurance Exchange contends that Erie Insurance Group is a fictitious name, this does not change the fact that, on the face of the policy, it appears to be the umbrella name for the other Erie entities listed in the policy. Once Erie Insurance Group was named in the first suit, the collective Erie entities, including Erie Insurance Exchange, were on notice of their potential liability and/or need to defend themselves against Clover's actions. Clover's second action, permitted by the six month tolling provision as explained above, formally listed Erie Insurance Exchange as a defendant. Because both the first and second actions named Erie Insurance Group, the apparent umbrella name for both Erie Insurance Exchange and Erie Insurance Company, the second suit is valid under § 8.01-229(E)(3).
3.
Based on this court's findings, Clover had six months from the date of her April 24, 1998 non-suit to refile her action. See § 8.01-229(E)(3). Clover timely filed her second complaint against Erie in the Circuit Court of Alexandria on October 23, 1998. The Magistrate Judge found that Clover's suit was filed on October 27, 1998, creating a second theory for why that suit was time-barred. However, the stamp from the Clerk of Court for the Circuit Court of Alexandria clearly reads October 23, 1998 on the cover page of the complaint filed by Clover. The document filed on October 27 was the Notice of Motion for Judgment. However, the filing of the complaint commences a lawsuit, thereby preventing expiration of the limitations period. Accordingly, the court rejects the recommendation of the Magistrate Judge to grant Erie's motions for summary judgment in its declaratory judgment action. To the contrary, based on the court's findings that Clover's second action was timely filed, and that all substantive claims in Erie's declaratory judgment action are raised in Erie's answer to Clover's second action, the court grants Clover's motion for summary judgment in Erie's declaratory judgment action.
IV.
What remains is Erie's motion to dismiss Count II ("Bad Faith") and the prayer for punitive damages in connection thereto, and Count III ("Duty to Investigate") of Clover's second action. The Magistrate Judge recommended, if the court reached these issues, to grant Erie's motion to dismiss on both counts and the prayer for punitive damages. Clover only specifically objects to the recommendation as to Count II and the prayer for punitive damages. After careful review, the court finds that it is in full agreement with the report and recommendation with respect to Erie's motion to dismiss. The Fourth Circuit has interpreted Virginia Unfair Insurance Practices Act as creating no private right of action for insureds against their insurers in instances of first-party insurance claims. See AE Supply Co., Inc. v. Nationwide Mutual Fire Ins. Co., 798 F.2d 669, 673-678 (4th Cir. 1986). Ultimately, the Fourth Circuit rejected as a basis for punitive damages the insured's claim that the insurer acted in bad faith by refusing to honor the first-party insurance claim. See id. at 676. The Virginia cases Clover cites to support a contrary position to that taken by the Fourth Circuit are factually distinct, decided prior to AE, and generally unpersuasive. As far as this court can tell, the Virginia Supreme Court has not interpreted the Virginia Unfair Insurance Practices Act in a manner inconsistent with the Fourth Circuit's interpretation in AE. Pursuant to Fourth Circuit precedent, the court finds that Clover has no private right of action to bring bad faith claims against her insurer for what is essentially a breach of contract claim. Furthermore, the court agrees with the Magistrate Judge's analysis that Count III, Failure to Investigate, is duplicative of Count I, Breach of Contract. Any alleged duty to investigate would arise from the contract entered into by the parties. An alleged failure by Erie to perform this duty would fall under the breach of contract claim. Accordingly, the court adopts the analysis and recommendation of the Magistrate Judge with respect to this issue, and Erie's motion to dismiss Counts II, III, and the prayer for punitive damages shall be granted.
V.
For the foregoing reasons, Clover's motion for summary judgment as to Erie's declaratory judgment action shall be granted and Erie's motion to dismiss Counts II, III, and the prayer for punitive damages in Clover's second action shall be granted. Notwithstanding the pending motion for sanctions, the only pending claim that remains in these consolidated actions is Count I ("Breach of Contract") of Clover's second action.
An appropriate order shall this day enter.