An insurer’s move to pay off a mortgage while denying a fire loss claim has landed it in a legal bind with direct implications for claims professionals and policy handlers.
On June 13, 2025, the Intermediate Court of Appeals of West Virginia issued a mixed ruling in the case of Tammy and Michael Wratchford v. Erie Insurance Property & Casualty Company, remanding the matter for further review on whether the plaintiffs were entitled to attorney’s fees and whether Erie should receive credit for a six-figure mortgage payment it made on the property.
The dispute began after a February 20, 2017, house fire at the Wratchfords’ home in Moorefield, West Virginia. Although the local fire department initially found the fire unintentional, Erie’s retained expert and the West Virginia State Fire Marshal’s Office later concluded it was incendiary. Erie denied the Wratchfords’ insurance claim, relying on policy exclusions including for intentional acts, concealment, fraud and misrepresentation, and failure to cooperate during investigation.
Despite the denial, Erie paid $168,723.90 in September 2017 to Summit Community Bank - the couple’s mortgage lender - covering the full mortgage balance. On February 13, 2018, the Wratchfords filed suit against Erie and other parties, later adding the West Virginia State Fire Marshal’s Office. Their claims included breach of contract, negligence, intentional infliction of emotional distress, civil conspiracy, and violations of the West Virginia Unfair Trade Practices Act (UTPA).
A sixteen-day jury trial in May 2023 resulted in a partial win for the Wratchfords. The jury found that Erie breached its insurance policy and awarded $687,742.57 in contractual damages, which included $590,542.57 for dwelling coverage, $90,000 for personal property, and $7,200 in rental expenses. The jury also awarded $40,800 in additional rental expenses and $58,991.50 in attorney’s fees related to the criminal defense of Ms. Wratchford—bringing the total award to $787,534.07.
However, the jury rejected all other claims. It found no violations of the UTPA, no tort liability, and no grounds for emotional distress damages. The court entered judgment on March 18, 2024.
Post-trial, the Wratchfords asked the circuit court to find they had “substantially prevailed” in the case, which would entitle them to additional damages and attorney’s fees under West Virginia’s Hayseeds precedent. The court denied the motion, citing their $7,000,000 settlement demand and finding the verdict amount represented less than nine percent of that figure.
The appellate court reversed that decision, finding the lower court improperly ignored pre-litigation settlement negotiations. Citing Miller v. Fluharty, the appeals court directed the trial court to review the full negotiation history “as a whole from the time of the insured event to the final payment of the insurance proceeds.”
Erie separately challenged the circuit court’s denial of its motion to reduce the damages award by the amount paid to Summit Community Bank. The trial court had ruled Erie failed to preserve the issue under West Virginia Code §§ 56-5-4 and 56-5-5. The appellate court disagreed, finding those statutes inapplicable and confirming that the mortgage payment was both disclosed and supported by the policy’s Mortgage Clause.
That clause, found in the “RIGHTS AND DUTIES – CONDITIONS – SECTION I” of Erie’s policy, states that: “Loss under Dwelling Coverage or Other Structures Coverage shall be payable to mortgagees named on the Declarations, to the extent of their interest...” and gives Erie the right to satisfy the mortgage and receive full transfer of the debt.
The appellate court concluded that Erie’s defense of payment, along with references in both pleadings and trial testimony, was enough to preserve the set-off issue. It reversed the trial court’s ruling and remanded for a determination of whether Erie is entitled to credit for the $168,723.90 mortgage payment.
It also remanded for a determination of whether the Wratchfords had substantially prevailed, and if so, whether they should receive attorney’s fees and expenses.
The court upheld the denial of prejudgment interest on contractual damages, citing the plaintiffs’ failure to submit the question to the jury as required by West Virginia Code § 56-6-27 and Miller v. Wesbanco Bank, Inc.
For insurance professionals, the ruling underscores the need to track claim-related payments—particularly to mortgagees—and ensure policy provisions and legal defenses are clearly presented. It also serves as a reminder that negotiation history, not just post-litigation demands, can influence exposure under fee-shifting doctrines like Hayseeds.
The case is now back before the circuit court in Hardy County for further proceedings on the set-off and attorney’s fees issues.
