Background
Bristol Springs Custom Homes, LLC notified its commercial general liability insurer, Colony Insurance Co., after homeowners sued Bristol over allegedly defective construction. Colony provided defense counsel under a reservation of rights because some allegations might not be covered. Before trial, the homeowners reduced their settlement demand to $150,000 if Bristol dismissed its $100,000 counterclaim, but Bristol refused. A jury later awarded the homeowners $325,000 and rejected Bristol’s counterclaims.
After trial, negotiations continued, but the homeowners required Bristol to abandon its post-trial motion and appeal rights. Bristol then filed for bankruptcy, placing those rights under the bankruptcy court’s control and complicating Colony’s ability to settle. Colony repeatedly sought Bristol’s input about proceeding, eventually agreed to pay the homeowners’ $385,000 demand subject to bankruptcy-court approval, and completed the settlement. Bristol nevertheless pursued contract and bad-faith claims against Colony and claims administrator Argo Group US, Inc. The district court entered summary judgment for the defendants on all claims.
The Court’s Holding
The Fourth Circuit affirmed summary judgment on Bristol’s claim for damages under Hayseeds v. State Farm Fire & Casualty. Even assuming the Hayseeds doctrine could apply, Bristol failed to produce evidence that its attorneys’ services were necessary to obtain the settlement. The fact that Colony increased its offers after Bristol sued was insufficient by itself to show that the settlement would not have occurred but for counsel’s work.
The court emphasized that Bristol had refused to abandon its counterclaim before trial, filed for bankruptcy after trial, and then failed to respond meaningfully to Colony’s repeated requests for guidance about negotiations. The record also contained no clear demand by Bristol that Colony pay a specified amount or accept the homeowners’ demand. On those facts, no reasonable jury could find the required necessity.
The court also affirmed rejection of Bristol’s statutory claims under the West Virginia Unfair Trade Practices Act, adopting the district court’s reasoning that the cited provisions did not support the insured’s claims against its insurer. It dismissed the insurers’ cross-appeal—which sought a ruling that Hayseeds never applies to third-party insurance claims—as unnecessary because it merely offered an alternative ground for affirming a judgment already favorable to them.
Key Takeaways
- An insured seeking Hayseeds damages must show that its attorney’s services were necessary to obtain payment, not merely that settlement followed the filing of a lawsuit.
- An insured’s refusal or failure to participate meaningfully in settlement negotiations can defeat the required showing that counsel caused the settlement.
- The Fourth Circuit left unresolved whether Hayseeds damages are categorically available for third-party insurance claims.
- A prevailing party generally may not cross-appeal solely to defend its favorable judgment on an alternative legal theory.
Why It Matters
The unpublished decision underscores the evidentiary burden facing West Virginia insureds who seek extra-contractual Hayseeds damages. A temporal link between litigation and an insurer’s increased settlement offer is not enough; the insured needs evidence that counsel’s efforts were actually necessary to secure payment.
The opinion also highlights the practical importance of making a clear settlement demand and cooperating with an insurer when bankruptcy or retained claims complicate the insured’s ability to release rights. Because the court avoided deciding whether Hayseeds applies to third-party claims at all, that broader issue remains open.