Mutafis v. Erie Insurance Exchange

Citations: 174 W. Va. 660; 328 S.E.2d 675; 1985 W. Va. LEXIS 518Docket: No. CC943

Court: West Virginia Supreme Court; March 27, 1985; West Virginia; State Supreme Court

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In the summer of 1979, a series of car thefts and arsons occurred in Clarksburg. On May 27, Betty J. Mutafis reported her car stolen to Erie Insurance Exchange, which was investigated by adjuster Richard Kimble. The vehicle was later found stripped and burned, leading Erie to compensate Mutafis per her insurance policy. Three weeks later, Vincent Oliverio reported his car stolen, also investigated by Kimble, but faced significant delays in payment. Kimble informed Oliverio that Erie was "investigating your involvement" with the theft; once Oliverio’s innocence was established, Erie paid his claim.

Indignant over the treatment he received, Oliverio sued Erie, claiming libel, slander, and improper conduct by Kimble. During pre-trial discovery, a confidential memorandum from Kimble’s supervisor, Glenn W. LaQue, surfaced. It referenced a file associated with the mafia, which Oliverio’s counsel linked to Mutafis. Despite sealing the court records, Mutafis learned about the trial through a newspaper and deduced the reference was to her. After the trial, Oliverio confirmed this with her, prompting Mutafis to seek legal counsel.

She subsequently filed a lawsuit against Erie in the U.S. District Court, alleging five claims: intentional infliction of emotional distress, libel and slander, use of insulting words, improper claims handling, and breach of fiduciary duty. The jury awarded Mutafis $15,000 in compensatory and $20,000 in punitive damages, finding Erie in violation of the West Virginia Unfair Trade Practices Act. The District Court’s memorandum opinion noted that Mutafis could have potentially succeeded on her libel claim had her legal team approached the case differently.

The United States Circuit Court of Appeals for the Fourth Circuit, on July 2, 1984, certified three legal questions to the West Virginia Supreme Court concerning a case involving Erie. The questions include: 1) whether Erie's actions violated specific provisions of the West Virginia Code; 2) if so, whether West Virginia law allows a private cause of action against Erie; and 3) if both prior questions are affirmative, whether the common law defense of qualified privilege is applicable. The certified questions arise from a district court opinion, which must be assumed correct in terms of factual findings, as the West Virginia court is only tasked with addressing legal questions. 

The district court's opinion highlighted that the jury's verdict was supported by evidence, particularly the testimonies of Richard Kimble and Wayne LaQue, both employees of Erie. Kimble, a claims adjuster, stated he did not author the controversial August 7, 1979, memorandum linking the Plaintiff to the Mafia but provided some information for it. LaQue, the appraiser who wrote the memorandum, initially claimed that all information, including the erroneous Mafia association, was supplied by Kimble. However, he later expressed uncertainty regarding the specifics of what Kimble had communicated. LaQue explained that the mention of the Mafia was influenced by the location where the Plaintiff's car was found, which he described ambiguously as a "bad area," later contradicting himself about the meaning of this term and admitting ignorance of the Plaintiff's actual residence.

Testimony from Kimble and LaQue reveals significant credibility issues and establishes that they had no factual basis for alleging the Plaintiff's connection to the Mafia. This supported the jury's conclusion that Erie’s employees knowingly included false information in the Plaintiff’s file. Their actions also warranted punitive damages based on intentional, reckless, and willful misconduct. The document addresses two related certified questions regarding violations of W.Va. Code, 33-11-4(3) and (5), 1974. 

Subsection (3) prohibits making or circulating false or maliciously critical statements about an individual’s financial condition, while subsection (5) prevents the filing of knowingly false statements regarding a person's financial status. Assertions of Mafia associations are deemed derogatory and maliciously critical, constituting violations of both subsections. However, the existence of common law privileges may negate liability under these statutes. The resolution of privilege in this case is guided by precedent from Mauck v. City of Martinsburg, which recognized that a qualified privilege exists when statements are made in good faith, concerning a matter of interest, and shared only with those having a legitimate interest.

W.Va. Code § 33-11-4(3) and (5) (1974) does not impose absolute liability for false statements regarding a person's financial condition as the legislature likely intended to avoid overly restricting necessary business communications. The statute must be interpreted in conjunction with common law defamation principles to properly balance free speech and victims' rights. In this case, Mr. LaQue's statement about Mrs. Mutafis’ alleged Mafia connections was made with willful disregard for the truth, as he admitted having no basis for the claim. This lack of a recognized privilege under West Virginia defamation law supports the jury’s finding that false information was knowingly placed in the plaintiff’s file. 

Additionally, regarding the existence of a private cause of action under the Unfair Trade Practices Act, the guidelines established in Hurley v. Allied Chemical Corp. were applied. The criteria confirm that a private cause of action exists, as Mrs. Mutafis falls within the class intended to be protected by the statute, legislative intent supports enforcement through private action, and such enforcement aligns with the statute's purpose without infringing on federal jurisdiction. Consequently, the court affirms that a private cause of action is available for violations of W.Va. Code § 33-11-4(3) and (5) (1974).