Newsletter: Vol. 53 September 12, 2014

Vol. 53 September 12, 2014

An Insurance Industry Newsletter of Recent Issues and Opinions in Virginia Law


Six workers pile into a truck, two in the cab and four in the bed. They are only going a few blocks to a job site. However, along the way an oncoming driver falls asleep and drifts into the wrong lane striking the truck and sending it into a ditch. The car driver sustains a serious head injury, the two men in the truck cab are jostled about but not seriously injured while the men in the back are thrown from the truck and sustain fractured limbs as well as head trauma. All of the parties file claims against the insurance carrier. The insurance policy’s liability coverage limit is $50,000 per person and $100,000.00 per occurrence. The sum of the claims far exceeds this amount. How does the insurance carrier make payments and juggle the claims so as to be fair and not be accused of acting in bad faith?

If any claimant files suit and is the first to receive a judgment, that claimant may claim as much insurance money as available, to include settlement checks intended for other claimants. However, if the case is filed in federal court, both the federal interpleader act and the interpleader rule may apply. In part, the interpleader act gives district courts original jurisdiction in cases involving claims in excess of $500 where two or more claimants are asserting entitlement to same funds. The federal interpleader rule states that when cases expose a plaintiff to multiple liabilities, the cases may be joined and the defendants required to interplead. The use of interpleader eliminates long and vicious litigation among the claimants and brings all parties to the table to create a fairer outcome for all.

Virginia has enacted an interpleader statute based on the federal model, including the ability of the trial court to restrain litigations. However, the courts have been reluctant to use this authority in tort matters that do not involve wrongful death, infant claims or competing judgments. In both wrongful death and infant claims, the court feels the necessity to take jurisdiction over both the claimants and insurance funds in order to assure the fairness of the settlement. In the few cases involving interpleader that did not involve wrongful death or infant claims, the results are mixed. For example, in Board of Supervisors of Fairfax County v. Peterson, 19 Va. Cir 57, 1989 Va. Cir. Lexis 380 (1989), a case which involved multiple breach of contract claims stemming from a variety of causes on a construction project and $102,000 in proceeds from a letter of credit for the project, the Circuit Court rejected the use of interpleader and referred the case back to the trial court. The trial court found that the multiple suits could best proceed by adding the plaintiff of three of the suits to the one remaining. In the case of Maryland Casualty v. Gallahue, 29 Va. Cir. 359, 1992 Va. Cir. Lexis 36 (1992), the court asserted that in this case, the law required that the two cases proceed to judgment and “ if the judgments are enforced against the insurance policy funds, there will be a determination of the bill of interpleader as to how the funds should be disbursed.” In this case the interpleader additionally requested that the tort liability for all claims be limited to the amount of coverage available. Royal Surplus v. Nichols; State Farm v. Nichols, 49 Va. Cir. Ct. 306, 308, 1999 Va. Cir. Lexis 329, at *5, involved seven decedent estates along with two surviving claimants and seven auto insurers with varying coverages. The trial court decided to retain authority in this matter and allowed each party to choose a method for evaluating its claim, jury trial, bench trial or arbitration. A private arbitration ensued with the resulting tort values being reported to the court which then distributed the liability insurance money equitably. The appeal that was filed with the Supreme Court of Virginia was refused.

Two other considerations in potential interpleader cases are Virginia’s Collateral Source Rule and the possibility of only settling with some claimants. In many cases, one or more claimants may have underinsurance coverage, should this affect the distribution of liability carrier funds? Other claimants, without such a resource, may feel that their recovery, in order to be totally equitable, should be higher than that of the UI insured. Should the UI carrier waive its right of subrogation and make a voluntary settlement contribution? Should some claimants receive less merely because they have UI coverage? These questions are considerations in interpleader cases. Virginia has no case law relating to an insurer settling with fewer than all the claimants in a case and the insurer had the right to settle cases as claims are presented without informing all other claimants of the reduction in available liability coverage. The carrier’s only obligation to inform is toward it’s insured. The insurer can only be accused of bad faith if it acts in a way that furthers its own interests with disregard for the financial interests of its insured.

This investigation of multiple claimants and the use of interpleader leads to the following recommendations where multiple claims are involved:

Complicated cases require experience, do not assign them to inexperienced personnel.

Thoroughly investigate all claims even when they exceed the liability limit so as not to create the appearance of placing the insurer’s interests ahead of it’s insured and a allowing the possibility of a bad faith finding.

  • Collect all possible evidence on liability, damages and their reasonable inferences before considering settlement.
  • Only make settlement decisions after all possible claims have been presented.
  • Consistently keep the insured appraised of the progress of the case.
  • Consult with and document discussions with the insured and the insured’s personal counsel if liability coverage is insufficient for a claim and there is disagreement on allocation of funds.

Cases involving multiple claimants who have been injured can be extremely combative with a race to be the first to acquire judgment. Interpleader, if available, can bring the parties to the table and result in a more fair and equitable distribution of limited resources.


Temple v. Mary Washington Hosp. 09/12/2014 Discovery rulings made by the circuit court in an action that was subsequently nonsuited cannot be reviewed on this appeal. An order entered when the action was refiled, stating that all discovery in the prior action “is hereby incorporated into the instant action," did not incorporate the motions, objections, or rulings made by the trial court in the prior nonsuited action. Consequently, those rulings cannot be challenged in this appeal from judgment in the second action. The judgment of the circuit court is affirmed.

Kohn v. Marquis 09/12/2014 In an action for the wrongful death of a police recruit injured by blows to the head during training at a police academy, the circuit court did not err in granting summary judgment for the defendants on a plea in bar and dismissing the action. The facts showed that decedent suffered an injury that appeared suddenly at a particular time and place, was caused by an identifiable incident or sudden precipitating event, and resulted in an obvious mechanical or structural change in the decedent’s body. Even if there were prior injuries sustained during decedent’s preceding three months of training, the injuries on the day he collapsed and fell into a coma contributed to his death and established an injury by accident compensable under the Virginia Workers’ Compensation Act. Accordingly, the circuit court did not err in granting summary judgment on the plea in bar and in holding that the exclusivity provision of the Act, Code § 65.2-307(A), bars this action. The judgment is affirmed.

1 The information for this article was taken from “The Dilemma of Multiple Claimants and Insufficient Insurance Coverage”, an article written by Mark A. Pachucki, chair of the Policy Coverage Section of the Virginia Association of Defense Attorneys, appearing in the Journal of Civil Litigation, Vol. XXVI, No. 2 (Summer 2014).

2 Federal Interpleader Act §1335. Interpleader, (a) (1)

3 Federal Rule Interpleader, Rule 22. Interpleader (a)(1) Grounds



This newsletter is intended to provide information of general interest to industry professionals. It is not intended to offer legal advice about specific situations or problems. Sinnott, Nuckols & Logan, P.C. does not intend to create an attorney-client relationship by offering this information, and anyone’s review of the information shall not be deemed to create such a relationship. You should consult a Sinnott Nuckols & Logan, P.C. attorney if you have a legal matter requiring attention. Nothing on or in this material creates an express or implied contract. If you have questions or comments regarding this newsletter, please contact: Kevin Logan (804) 893- 3855,

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