NOT RECOMMENDED FOR PUBLICATION File Name: 17a0327n.06 No. 15-5442 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT DARRELL L. MYERS and LUCAS MYERS, Plaintiffs-Appellants,

v. AGRILOGIC INSURANCE SERVICES, LLC, and OCCIDENTAL FIRE & CASUALTY INSURANCE CO. OF NORTH CAROLINA, Defendants-Appellees. ) ) ) ) ) ) ) ) ) ) ) ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF KENTUCKY

BEFORE: BOGGS, WHITE, a nd DONALD, Circuit Judges. HELENE N. WHITE, Circuit Judge. Darrell and Lucas Myers, Kentucky farmers, brought this action against AgriL ogic Insurance Services , their crop insurer, 1 alleging breach of contract and a violati on of Kentucky’s Unfair Claims Settlement Practices Act (UCSPA) after AgriLogic deni ed corn-crop damage claims. Defendants removed the case to federal district court a nd moved to dismiss for failure to state a claim. The district court c onstrued the motion as one for summary judgment and granted it, concluding that the contract clai m was untimely under the twelve-months-fromoccurrence limitations provision in the insuranc e contract, and that the Myerses presented insufficient evidence of malfeasance to satisf y the threshold inquiry for a USPCA claim

1 AgriLogic is the crop-insurance divi sion of Defendant O ccidental Fire & Casualty Insurance Co. of North Carolina, and provides certain administrative services in conjunction with crop insurance policies und erwritten by Occidental . PID 37/Affidavit of Travis Laine, AgriLogic’s Pr oduct Implementation Manager.No. 15-5442, Myers v. AgriLogic Insurance Services et al.

-2- under (UCSPA). After hearing argument in January 2016, we held this matter in abeyance pending final disposition of seve ral cases in the Kentucky state courts. 2 We affirm the dismissal of the breach-of-contra ct claim and reverse on the UCSPA claim.
I. Paragraph 16 of the parties’ insuran ce contract sets forth the twelve-month limitations provision at issue: You cannot bring suit or action against us unless you have complied with all of the policy provisions. If you do enter suit against us you must do so within 12 months of the occurrence ca using loss or damage . . . . PID 50 (Ins. Contract, General Provisions ¶ 16). Paragraph 17 provides: 17. Conformity to Statutes If any terms of this policy are in conflict with statutes of the state in which this policy is issued, the policy will conform to such statutes.
PID 50. Kentucky Revised Statute Annotated § 304.14-370 permits foreign insurers such as Defendants to limit the time in which an actio n may be brought agains t them as long as it is not less than one year from wh en a cause of action accrues: No conditions, stipulations, or agreements in a contract of insurance shall deprive the courts of this state of jurisdiction of actions against foreign insurers, or limit the time for commencing actions against such insurers to a period of less than one (1) year fr om the time when the cause of action accrues.

2 We held this matter in abeyance pending the Kentucky Supreme Court’s disposition of State Farm’s petition for discretionary review in Hensley v. State Farm Mutual Automobile Insurance Company , 2014-SC-551, which it had held in abeyance pending final disposition of State Farm Mutual Autom obile Insurance v. Riggs , 2013-SC555. After the Kentucky Supreme Court decided Riggs on March 17, 2016, 484 S.W.3d 724 (Ky. 2016), it remanded Hensley to the Court of Appeals for reconsideration in light of Riggs

. Hensley was decided on March 3, 2017. 2013-CA-6-MR, 2017 WL 837698 (not to be published).No. 15-5442, Myers v. AgriLogic Insurance Services et al.

-3- § 304.14-370. A. The Myerses’ claims are not clearly de lineated. With overlapping arguments, they challenge both the construction and the en forceability of the limitations provision. Relying on our statement in Smith v. Allstate Insurance Co ., 403 F.3d 401, 405 (6th Cir. 2005), that an otherwise valid limitations provis ion requiring suit with in one year of loss “may nonetheless be unenforceable if it did not allow the [policyholder] reasonable time to sue,” the Myerses first contend that re peated errors of AgriLogic’s independent adjuster precluded their filing a timely acti on. Relatedly, the Myerses argue that under the circumstances, they had no reason to believe that their claim would be denied until the actual denial, that the limitations period should be tolled, and th at their cause of action did not accrue until the claim was deni ed on May 9, 2013, as on ly then were they aggrieved. The district court agreed with Defendants that the twelve-month limitations provision is valid and enforceable: [T]he Court considers the impact of the application of the one-year limitations period in light of the undisput ed facts–that (1) the subject claim arises from wind damage to Plainti ffs’ corn crops on July 25, 2012, (2) the claim was denied on May 9, 2013, and (3) they filed suit on May 7, 2014. This matter was filed out of time if the Court calculates the limitations period from the date of the wind damage , which is the only loss averred in this action. As the contract’s own te rms bar the suit . . . , the Court will dismiss Plaintiffs’ claim for breach of contract and enter judgment in favor of Defendants.
PID 133. The district court also rejected the Myer ses’ argument that they did not have a reasonable time within which to retain c ounsel and file suit between May 9, 2013, whenNo. 15-5442, Myers v. AgriLogic Insurance Services et al.

-4- AgriLogic denied their claims, and July 25, 2013, twelve months af ter their co rn crops were damaged: Plaintiffs argue that the one month [s ic 2 1⁄2 month] period which remained after the denial of their claim in wh ich to bring suit hardly provided them with a reasonable time in which to hire counsel, investigate, and file suit, relying on Dunn v. Gordon Food Servs. , 780 F. Supp. 2d 570, 573 (E.D. Ky. 2013). They suggest that the contra ctual limitations period should have been tolled during Defendants’ investigation, but they provide no legal authority to support this conclu sion. Absent some reason to suppose that Kentucky courts would embrace su ch a rule, the Court rejects this argument. PID 132-33.
B. We review de novo the distri ct court’s grant of summa ry judgment, assessing the evidence, facts, and inferences therefrom in the light most favorable to the nonmoving party. Bazzi v. City of Dearborn , 658 F.3d 598, 602 (6th Cir. 2011). In this diversity action, we apply fede ral procedural law, Hanna v. Plumer , 380 U.S. 460, 465 (1965), and the substantive law of the forum state, Kentucky, see, e.g., Garden City Osteopathic Hosp. v. HBE Corp. , 55 F.3d 1126, 1130 (6th Cir. 1995). Under Kentucky law, the elements of a breach-of-contract claim are: (1) the existence of a valid contract; (2) breach of the contract; and (3) damages or loss caused by the breach. Metro Louisville/Jefferson City Gov't v. Abma , 326 S.W.3d 1, 8 (Ky. Ct. App. 2009). Kentucky courts ha ve upheld as valid and enfo rceable shortened insurancecontract limitations provisions that run from the date of occurrence/damage like the one at issue here. In Edmondson v. Pennsylvania National Mutual Casualty Insurance Co. , 781 S.W.2d 753, 756 (Ky. 1989), which involved a commercial fire-insurance policy with a one-year-from-occurrence limitations provision, the Kentucky Supreme CourtNo. 15-5442, Myers v. AgriLogic Insurance Services et al.

-5- observed, “We have previously recognized the validity of insurance contract provisions requiring as a condition to sue that the act ion must be ‘commenced within the time specified by the policy-contract,’” quoting Stansbury v. Smith , 424 S.W.2d 571, 572 (Ky. Ct. App. 1968). And in Ashland Finance Co. v. Hartford Accident & Indemnity Co. , 474 S.W.2d 364 (Ky. 1971), in which the plainti ff insured procured from the defendant insurer a blanket bond covering losses from dis honest or fraudulent acts of employees or from robbery, burglary, or larceny by stra ngers, the Kentucky Supreme Court noted, The provision of the bond here in que stion is clear and unambiguous; it says that suit must be brought within one year after discovery of the loss. We can find no valid basis for pron ouncing that it does not mean what it plainly says. And even if fairness we re the test we see nothing unfair in including some no-suit time in the ove rall period allowed for bringing suit. Id

. at 366. Years later, this court applied Edmondson and Ashland Finance in Smith v. Allstate , supra p.3 , to the insureds’ action under thei r homeowner and landlord policies for breach of contract and bad-faith denial of their fire claim. This court held that a limitations provision requiring claimants to file suit within one year after the inception of loss or damage was not inc onsistent with § 304.14-370: Allstate, as might be expected, conte nds that the Smiths’ cause of action accrued on the date of the fire. But th ere is a long line of Kentucky cases holding in a variety of contexts that a cause of action does not accrue until the plaintiff has the right to institute and maintain a suit. See Philpot v. Stacy , 371 S.W.2d 11, 13 (Ky. 1963); Forwood v. City of Louisville , 283 Ky. 208, 140 S.W.2d 1048, 1051 (1940); Carter v. Harlan Hospital Association , 265 Ky. 452, 97 S.W.2d 9, 10 (1936). And under the insurance contracts at issue here, th e Smiths had no right to sue Allstate prior to “full compliance with all po licy terms.” We understand this to mean that the Smiths could not sue until they had taken each of the steps required of them under the policies—fu rnishing proof-of-loss statements, e.g. , and submitting to examination under oath. If cases such as Philpot , Forwood , and Carter are controlling in the insu rance context, therefore, the Smiths’ cause of action could not ha ve accrued on the date of the fire.No. 15-5442, Myers v. AgriLogic Insurance Services et al.

-6- We are not persuaded that the Philpot line of cases is controlling here. None of those cases involved Ky. Rev. St. § 304.14–370, and Kentucky courts have repeatedly enforced insu rance contract provisions under which the time for suit began to run before the insured had a right to sue.

. . . . We see nothing unreasonable about an effective limitations period of six months . . . . Mr. and Mrs. Smith advance two reasons why, in their submission, the limitations provision woul d not bar their claim even if the provision was legally valid. First, the Smiths argue that a limitations period in an insurance cont ract should be tolled from the time the insurer receives notice of a loss until the time it refuses to pay. This argument is not supported by Kentucky case law. As we have seen, Kentucky’s highest court, in Ashland Finance and Edmondson , and its intermediate appellate court, in Webb and Hale , have given effect to limitations periods expiring one year after the insured’s loss (or discovery of the loss). Neither these cases nor any other Kentucky case of which we are aware suggest that the limitations period can be tolled until the denial of the insured’s claim. Absent some reas on to suppose that the Kentucky courts would embrace such a rule, we must reject the Smiths’ argument. Smith v. Allstate Ins. Co. , 403 F.3d at 405–06. C. A deviation from this line of cases involving § 304.14-370 came in the form of Hensley v. State Farm Mutual Automobile Insurance Co. , No. 2013-CA-006, 2014 WL 3973115 (Ky. Ct. App. Aug. 15, 2014). At issue in Hensley was when an uninsuredmotorist (UIM) claim accrued and whether a cause of action can accrue by agreement, i.e., as part of an insurance co ntract, before the cause of acti on is ripe under the law. The Hensley court held that the term “accrues” in § 304.14-370, which is undefined in Kentucky’s Insurance Code, had a distinct and defined meaning under the law in 1970 when the General Assembly enacted § 304.14- 370, i.e., that a cause of action accrued only when each element giving rise to the cause of action had come to fruition; that is, a cause of action cannot “accrue ” by agreement before it ripens under the law. 2014 WL 3973115, at *10-11, motion for discretionary review held in abeyance pendingNo. 15-5442, Myers v. AgriLogic Insurance Services et al.

-7- disposition of State Farm Auto. Ins. Co. v. Riggs , No. 2013-SC-555. Thus Hensley’s claim did not accrue until State Farm denied her claim for UIM benefits. Id . at *12 (“[T]he insured’s UIM claim does not accrue at the time of the accident or injury, but rather at the time the insured and the insurer disagree as to either the applicability or amount of UIM coverage under the policy.”) The Kentucky Supreme Court issued State Farm Mutual Automobile Insurance Co. v. Riggs , 484 S.W.3d 724 (Ky. 2016), on Ma rch 17, 2016. The issue in Riggs , which involved an underinsured-motorist-benefits cl aim, was whether the two-year-from-injury (or from last basic reparations benefit paid, whichever is later) limitations provision in the parties’ insurance contract was reasonable. The Kentucky Court of Appeals in a 2-to-1 decision held the contractual-limitations provision unreasonable because it may require an insured to sue the UIM carrier before knowing whether the tortfeasor is underinsured; the court determined that the fifteen-year statute of limitations for general contract actions applied. Id. at 726. The Supreme Court reversed and reinstat ed the trial court’s judgment, holding that the two-year contractual limitations pe riod was reasonable and thus enforceable:In the instant case, State Farm linked Riggs’s UIM coverage to the tortclaim time limitation found in the [K entucky Motor Vehicle Reparations Act] KMVRA, KRS 304.39-230( 6). That statute requi res a tort action to “be commenced not later than two (2) years after the injury or death, or the last basic or added reparation pa yment made by any reparation obligor, whichever later occurs.” This is th e exact language used by State Farm in the UIM portion of Riggs’s policy. We are unable to find this limitation unreasonable. Consistent with the principles listed above, pr oviding the insured with the same time as a tort claim (perhaps longer depending on the duration of payments) does not require an insured to sue his own insurer before filing suit against the tortfeasor, nor does it requi re an insured to sue his own insurer beforeNo. 15-5442, Myers v. AgriLogic Insurance Services et al.

-8- discovering whether or not the tort-f easor is in fact an [underinsured] motorist. Riggs , 484 S.W.3d at 726–31. Riggs did not address when a cause of action accrues under § 304.14-370.
D. Having decided Riggs , the Kentucky Supreme Court remanded Hensley to the Court of Appeals for further consideration in light of Riggs . On remand, the court held the two-year contractual-limitation period enforceable, rejected Hensley’s accrual argument as impliedly rejected in Riggs , and affirmed the trial court’s grant of summary judgment to State Farm:
In Riggs , supra , our Supreme Court consider ed the same policy language at issue in this case. Noting that the insured agreed to the shorter limitations period set forth in the po licy, the Court held that two years from the date of the accident was not an unreasonably short period of time for the insurer to require a claim fo r UIM benefits to be brought by the insured. [W]e are not so much concer ned with whether a UIM claim should be labeled a tort clai m or a contract claim as whether State Farm and Riggs have contracted for a UIM claim limitation that accomplishes the policy and purpose of UIM coverage in a reasona ble way. It is difficult to condemn State Farm’s provision as unreasonable because, at its simplest, it encourages the prompt presentation of all the potential insurance claims relating to a single accident and forces them to progress through the court system in a more cohesive way–a way that insurance claims have proceeded through our court system for decades. This is not contrary to pub lic policy–in fact, a strong argument could be made that it benefits the public. State Farm’s provision provides an insured w ith “the same rights as he would have had against an insured third party”–a result that is not at all unreasonable. Riggs , 484 S.W.3d at 731.No. 15-5442, Myers v. AgriLogic Insurance Services et al.

-9- We cannot reconcile Hensley’s arguments with the outcome reached by our Supreme Court in Riggs

. . . Therefore, in light of Riggs , supra , we affirm the Jefferson Circuit Court. Hensley , 2017 WL 837698, at *2. In a footnote, th e Kentucky Court of Appeals stated: While the arguments in this case centered more directly on accrual, which we addressed at length in our original opinion, the Supreme Court’s majority opinion in Riggs suggested by implication that the cause of action begins to accrue at the time of the ac cident, a different conclusion than the majority reached when we first cons idered this case. We believe any further consideration of that issue is best addressed by the Supreme Court, especially since the policy language at issue in this case is the same language the Supreme Court considered in Riggs. Id. at *2 n.4.
E. Albeit unpublished, the Kentucky Cour t of Appeals’ reversal in Hensley on remand from the Kentucky Supreme Court wei ghs strongly in favor of affirming the district court’s dismissal of the Myerses’ breach -of-contract claim. In particular, we rely on that court’s determination that Riggs , by implication, forecloses any argument that accrual may be tolled. Thus, we affirm the di strict court as to the breach-of-contract claim.No. 15-5442, Myers v. AgriLogic Insurance Services et al.

-10- II. Claim Under Kentucky’s Unfair Claims Settlement Practices Act 3
Defendants’ motion to dismiss asserted that under Smith v. Allstate Insurance Co. , 403 F.3d 401, 405 (6th Cir. 2005), the insuran ce contract’s twel ve-month limitations provision applied to the UCSPA claim as well, since the claim accrued on the date of loss and was not tolled. PID 28. The district court determined that it need not address this argument because the UCSPA clai m “fails as a matte r of law in light of the undisputed facts before the Court.” PID 133-34. We do not doubt that the district court would have been co rrect had discovery yielded only the facts before it when it dismisse d this claim. But the district court never allowed the Myerses to develop a case. Under these circumstances, we reverse the dismissal of the UCSPA claim a nd remand for further proceedings.

3 The UCSPA, Ky. Rev. Stat. Ann. § 304.12-230, provides in pertinent part: It is an unfair claims settlement practice for any person to commit or perform any of the following acts or omissions: (3) Failing to adopt and implement reasonable standards for the prompt investigation of claims aris ing under insurance policies;

. . . . (5) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statemen ts have been completed;

. . . . (14) Failing to promptly provide a r easonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement . . . .