Academic journal article Journal of Risk and Insurance

Recent Court Decisions

Academic journal article Journal of Risk and Insurance

Recent Court Decisions

Article excerpt


Nationwide Mut. Ins. Co. v. Housing Opportunities Made Equal, Inc., 2000 Va. LEXIS 1 (Virginia Supreme Court--January 14, 2000) opinion withdrawn and rehearing granted, 2000 VA. LEXIS 56 (March 3, 2000)

The Virginia Supreme Court tossed out a punitive damages verdict that had startled the insurance industry--but did so based on the technicalities of standing doctrine rather than on the merits of the suit, which alleged discrimination in the availability of homeowners insurance. Subsequently, the court vacated its order and scheduled the matter for rehearing.

Housing Opportunities Made Equal, Inc. (HOME), a fair housing organization, sued Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company for alleged discriminatory practices in the marketing and sales of homeowners insurance to blacks in the Richmond, VA, area. HOME's case asserted that Nationwide had adopted an intentional strategy of avoiding black neighborhoods and black customers. At trial, HOME presented evidence of a marketing and advertising policy that could be construed as avoidance of sales to black customers and also produced evidence of bias in Nationwide's underwriting, pricing, location of agents, hiring policies, and training policies. HOME also used "testers"--agents for HOME who shopped for insurance and encountered barriers from Nationwide's agents. HOME argued that this conduct demonstrated race bias by Nationwide. A jury apparently agreed, awarding $500,000 in compensatory damages and $100 million in punitive damages to HOME.

HOME made claims under both Virginia common law and the state fair housing law. After the verdict, Nationwide appealed, arguing that HOME did not have standing to bring a lawsuit since HOME itself was not a policyholder or an applicant for insurance. The Virginia Supreme Court agreed and reversed the decision, eradicating the verdict against Nationwide.

Standing doctrine requires that a claimant have a tangible stake in the controversy so that there will be sufficient concrete adversity to facilitate adjudication. The standing doctrine is designed to avoid putting courts in the position of rendering advisory opinions and to limit the possibility of manufactured litigation.

Standing doctrine is most developed in the federal courts because Article III of the Constitution requires that the judicial power of the United States be limited to "cases or controversies." Federal courts are generally considered to be stricter about standing requirements than most state courts. Some states, most notably Massachusetts, expressly permit courts to issue advisory opinions before an injury actually materializes.

In both federal and state courts, much of the standing litigation involves claims against the government. In those cases separation of powers concerns generally prompt courts toward a stricter view of standing. The result is that the judiciary need not pass on executive or legislative branch conduct unless the case demands it and is not merely a vehicle for airing political grievances.

Virginia's common-law standing doctrine is, however, "more restrictive than its federal counterpart." See Nationwide v. HOME, 2000 Va. LEXIS at [21.sup.*], citing Nicholas v. Lawrence, 161 Va. 589, 171 S.E. 673 (1933) (to have standing, litigant "must show that he has an immediate, pecuniary and substantial interest in the litigation, and not a remote or indirect interest."). More recently, the Virginia high court had stated that a litigant must have a "direct interest" in the matter at issue and that

[i]t is not sufficient that the sole interest of the petitioner is to advance some perceived public right or to redress some anticipated public injury. The word "aggrieved" in a statute contemplates a substantial grievance and means a denial of some personal or property right. …

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