Insur­ance com­pa­nies have been urg­ing the West Vir­ginia Leg­is­la­ture to pass leg­is­la­tion to over­turn the West Vir­ginia Supreme Court’s deci­sion in Michael v. Appalachi­an Heat­ing, LLC, 701 S.E.2d 116 (June 11, 2010). In Michael, the West Vir­ginia Supreme Court held that the West Vir­ginia Human Rights Act pro­hib­it­ed dis­crim­i­na­tion by an insur­ance com­pa­ny in set­tling claims cov­ered by an insur­ance policy.

The Michael Decision

Gen­er­al­ly, the Human Rights Act pro­hibits dis­crim­i­na­tion (1) in the work­place, (2) in places of pub­lic accom­mo­da­tion (like hotels, shop­ping cen­ters), and (3) in con­nec­tion with trans­ac­tions involv­ing hous­ing and real estate (like rent­ing apart­ments and buy­ing houses).

But at issue in Michael was sec­tion 5–11‑9(7) of the Human Rights Act, which was not lim­it­ed to those three cat­e­gories of activ­i­ty. Here is the rel­e­vant lan­guage in sec­tion 5–11‑9(7)(A);

It shall be an unlaw­ful dis­crim­i­na­to­ry prac­tice [based on race, reli­gion, col­or, nation­al ori­gin, ances­try, sex, age, and disability] …

(7) For any per­son, employ­er, employ­ment agency, labor orga­ni­za­tion, own­er, real estate bro­ker, real estate sales­man or finan­cial insti­tu­tion to:

(A) Engage in [1] any form of threats or reprisal, or to [2] engage in, or hire, or con­spire with oth­ers to com­mit acts or activ­i­ties of any nature, the pur­pose of which is to harass, degrade, embar­rass or cause phys­i­cal harm or eco­nom­ic loss or [3] to aid, abet, incite, com­pel or coerce any per­son to engage in any of the unlaw­ful dis­crim­i­na­to­ry prac­tices defined in this section .…

In sub­part (7)(A) above I have brack­et­ed the three spe­cif­ic caus­es of action (legal the­o­ries) which the Supreme Court said are dis­cernible in sub­part (7)(A). I have also bold­ed the sec­ond cause of action, which was the key cause of action at issue in the Michael case.

In sub­part 7 above, I have also bold­ed “per­son” because sec­tion 5–11‑3(a) defines “per­son” as “one or more indi­vid­u­als, part­ner­ships, asso­ci­a­tions, orga­ni­za­tions, cor­po­ra­tions, labor orga­ni­za­tions, coop­er­a­tives, etc.” In oth­er words, “per­sons” under the Act means real human beings and just about any type of busi­ness or labor orga­ni­za­tion, includ­ing a cor­po­ra­tion. The insur­ance com­pa­ny (State Auto Insur­ance Com­pa­ny) in issue in Michael was a cor­po­ra­tion, so it was a “per­son” cov­ered by the Act.

So, in light of the fact that in the Michael case race dis­crim­i­na­tion was being alleged, I will restate here the key lan­guage in sec­tion 5–11‑9(7)(A), with some explana­to­ry infor­ma­tion in brackets:

It shall be an unlaw­ful dis­crim­i­na­to­ry prac­tice [based on race] …  For any per­son [includ­ing cor­po­ra­tions] … to engage in, or hire, or con­spire with oth­ers to com­mit acts or activ­i­ties of any nature, the pur­pose of which is to harass, degrade, embar­rass or cause phys­i­cal harm or eco­nom­ic loss.…

The key thing for under­stand­ing the Michael hold­ing is that there is noth­ing in 5–11‑9(7)(A) which lim­its the pro­hib­it­ed dis­crim­i­na­tion to the set­tings of employ­ment, pub­lic accom­mo­da­tions, and real estate/housing.

And that is what the West Vir­ginia Supreme Court held in Michael–that this pro­vi­sion is not lim­it­ed to those three area, and that this pro­vi­sion pro­hibits dis­crim­i­na­tion in a broad array of set­tings, includ­ing where an insur­ance com­pa­ny is set­tling a prop­er­ty dam­age claim.

In Michael, the plain­tiffs rent­ed an apart­ment. The own­ers of the apart­ment com­plex hired Appalachi­an Heat­ing to fix some “cli­mate con­trol units” in the apart­ments. A fire destroyed the plain­tiffs’ belong­ings in the apart­ment, and made the apart­ment tem­porar­i­ly unin­hab­it­able. The plain­tiffs claimed Appalachi­an Heat­ing had done a bad job and caused the fired, and made a claim to the insur­ance com­pa­ny for Appalachi­an Heat­ing. The insur­ance com­pa­ny for Appalachi­an Heat­ing, State Auto Insur­ance Com­pa­ny, set­tled the claim for prop­er­ty dam­age made by plain­tiffs. The plain­tiffs then filed suit against the insur­ance com­pa­ny, alleg­ing the insur­ance com­pa­ny dis­crim­i­nat­ed against the plain­tiffs because of their race, result­ing in an unrea­son­ably small pay­ment for the plain­tiffs’ prop­er­ty dam­age (their belong­ings in the apartment).

As a result of the Michael deci­sion, insur­ance com­pa­nies may be sued in set­tling claims if they alleged­ly dis­crim­i­nate on the basis of race or the oth­er pro­tect­ed char­ac­ter­is­tics in the Human Rights Act.

The Pending Bill to Overturn the Michael Decision

The insur­ance indus­try has there­fore lob­bied to over­turn the Michael deci­sion, and there is new leg­isla­tive activ­i­ty in that direction.

House Bill 3073 was intro­duced by Del­e­gates Per­ry, Hall, Hart­man, Mor­gan, R. Phillips, and Skaff on Feb­ru­ary 9, 2011, and it has been referred to the Judi­cia­ry Com­mit­tee. You can keep track of the sta­tus by going to the Bill Sta­tus page and typ­ing 3073 at the field “Enter Bill Number”.

House Bill 3073, if it becomes law, will over­turn Michael v. Appalachi­an Heat­ing, LLC, 701 S.E.2d 116 (June 11, 2010), and will lim­it sec­tion 5–11‑9(7)(A) of the West Vir­ginia Supreme Court to employ­ment, pub­lic accom­mo­da­tions, and hous­ing. In oth­er words, the pro­vi­sion can­not be used to sue insur­ance com­pa­nies in con­nec­tion with claims settlement.

Here is how House Bill 3073 would change the law, and the added lan­guage appears in under­lin­ing, and that under­lined lan­guage is what is intend­ed to over­rule the Michael deci­sion (and I have again brack­et­ed the three caus­es of action in sub­part (A)):

It shall be is an unlaw­ful dis­crim­i­na­to­ry practice …

(7) For any per­son, employ­er, employ­ment agency, labor orga­ni­za­tion, own­er, real estate bro­ker, real estate sales­man or finan­cial insti­tu­tion to:

(A) Engage in [1] any form of threats or reprisal, or to [2] engage in, or hire, or con­spire with oth­ers to com­mit acts or activ­i­ties of any nature that relate to equal oppor­tu­ni­ty for employ­ment, equal access to places of pub­lic accom­mo­da­tions, and equal oppor­tu­ni­ty in the sale, pur­chase, lease, rental, and financ­ing of hous­ing accom­mo­da­tions or real prop­er­ty, the pur­pose of which is to harass, degrade, embar­rass or cause phys­i­cal harm or eco­nom­ic loss or [3] to aid, abet, incite, com­pel or coerce any per­son to engage in any of the unlaw­ful dis­crim­i­na­to­ry prac­tices defined in this section;

So for the sec­ond cause of action in sub­part (A) the bill adds the under­lined lan­guage that makes it clear that the cause of action is lim­it­ed to employ­ment, pub­lic accom­mo­da­tions, and hous­ing. The insur­ance indus­try in set­tling claims is exclud­ed, so the race dis­crim­i­na­tion claim pressed in Michael would not be viable under the amend­ed language.

The bill is not yet law. It has been referred to the Judi­cia­ry Com­mit­tee, and will have to wind its way through the leg­isla­tive process.

I will soon be post­ing a more detailed arti­cle here on the Michael deci­sion and will add it to my chart of employ­ment deci­sions from the West Vir­ginia Supreme Court.

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Drew M. Capuder

Attorney at Capuder Fantasia PLLC

Publisher of Drew Capuder's Employment Law Blog. Lawyer with more than 30 years of experience, focusing on employment law, commercial litigation, and mediation. Extensive trial and appellate experience in state and federal courts. Call Drew at 304-333-5261.

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