Court Opinion

ID: 9400221
Source: CourtListenerOpinion
Date Created: 2023-06-07 19:02:04.930967+00
Date Added: 2024-06-11T17:19:43.111891
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                                File Name: 23a0260n.06

                                          Case No. 22-5828

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT
                                                                               FILED
                                                                          Jun 07, 2023
                                                                      DEBORAH S. HUNT, Clerk
                                                      )
WORLD HERITAGE ANIMAL GENOMIC
                                                      )
RESOURCES, INC.,                                             ON APPEAL FROM THE
                                                      )
       Plaintiff,                                     )      UNITED STATES DISTRICT
                                                      )      COURT FOR THE EASTERN
LUCINDA CHRISTIAN,                                    )      DISTRICT OF KENTUCKY

       Plaintiff-Appellant,                           )
                                                      )                            OPINION

v.                                                    )
                                                      )
LAURA WRIGHT,                                         )
                                                      )
       Defendant,                                     )
                                                      )
GEICO INDEMNITY COMPANY,                              )
       Defendant-Appellee.                            )

Before: KETHLEDGE, STRANCH, and MATHIS, Circuit Judges.

       MATHIS, Circuit Judge. Lucinda Christian appeals the district court’s grant of summary

judgment to GEICO Indemnity Company on her common-law and statutory bad-faith claims. For

the reasons set forth below, we affirm.

                                                 I.

       On March 31, 2017, Lucinda Christian was involved in an automobile accident with Laura

Wright. Wright caused the accident. At the time, Christian was driving a truck owned by World
Case No. 22-5828, World Heritage Animal Genomic Resources, Inc., et al. v. Wright, et al.

Heritage Animal Genomic Resources, Inc. (“WHAGR”). Wright was driving a car owned by her

grandparents. The Hartford insured Wright’s vehicle for up to $100,000 per person for bodily

injury liability. GEICO also personally insured Wright for up to $25,000 per person for bodily

injury liability. Under the circumstances of this accident, Hartford served as the primary insurer

and GEICO was the excess insurer.

       In January 2018, Hartford settled with Christian and paid out its policy’s maximum

coverage of $100,000. Later that year, GEICO offered, and Christian accepted, a policy-limits

payout from GEICO in the amount of $25,000.

       In March 2019, Christian and WHAGR sued Wright and GEICO in Kentucky state court

alleging common-law negligence and statutory negligence (against Wright), and statutory bad faith

and common-law bad faith (against GEICO). Wright and GEICO removed the case to federal

court. Christian and WHAGR voluntarily dismissed their claims against Wright. Thereafter,

GEICO moved for summary judgment on Christian and WHAGR’s bad-faith claims. The district

court granted GEICO summary judgment, finding there were no genuine disputes of material fact

because no reasonable jury could find that GEICO acted in bad faith in settling Christian’s claim.

Christian timely appealed. WHAGR did not appeal the adverse decision.

                                               II.

       We review a district court’s grant of summary judgment de novo. See Thacker v. Ethicon,

Inc., 47 F.4th 451, 458 (6th Cir. 2022). Summary judgment is proper “if the movant shows that

there is no genuine dispute as to any material fact and the movant is entitled to judgment as a

matter of law.” Fed. R. Civ. P. 56(a).

       This is a diversity case, and the parties agree that Kentucky substantive law applies. See

Wilton Corp. v. Ashland Castings Corp., 188 F.3d 670, 673 n.2 (6th Cir. 1999) (observing that we

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Case No. 22-5828, World Heritage Animal Genomic Resources, Inc., et al. v. Wright, et al.

need not conduct a choice-of-law inquiry when there is no dispute on the applicable substantive

law).

                                                 III.

        In Kentucky, insurers must act in good faith when determining whether they are obligated

to pay claimants. Mosley v. Arch Specialty Ins. Co., 626 S.W.3d 579, 584 (Ky. 2021); see also

Knotts v. Zurich Ins. Co., 197 S.W.3d 512, 515 (Ky. 2006) (opining that Kentucky law “imposes

what is generally known as the duty of good faith and fair dealing owed by an insurer to an insured

or to another person bringing a claim under an insurance policy”). Kentucky recognizes four

categories of bad-faith claims against insurers: (1) common-law third-party bad faith; (2) common-

law first-party bad faith; (3) statutory bad faith under the Kentucky Consumer Protection Act; and

(4) statutory bad faith under the Kentucky Unfair Claims Settlement Practices Act (“KUCSPA”),

Ky. Rev. Stat. Ann. § 304.12-230. Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 526–27 (6th

Cir. 2006) (citations omitted).

        For all four categories of bad-faith claims, a plaintiff must satisfy three requirements:

               (1) the insurer must be obligated to pay the insured’s claim under
               the terms of the policy; (2) the insurer must lack a reasonable basis
               in law or fact for denying the claim; and (3) it must be shown that
               the insurer either knew there was no reasonable basis for denying
               the claim or acted with reckless disregard for whether such a basis
               existed.

Mosley, 626 S.W.3d at 584 (citing Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993)). If a

claimant cannot prove these three elements, the bad-faith claim fails as a matter of law. Id.

Plaintiffs seeking to recover on a bad-faith claim must satisfy “a tall burden of proof.” Hollaway

v. Direct Gen. Ins. Co. of Miss., Inc., 497 S.W.3d 733, 737 (Ky. 2016). Relevant here, KUCSPA

prohibits insurers from “[n]ot attempting in good faith to effectuate prompt, fair and equitable

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Case No. 22-5828, World Heritage Animal Genomic Resources, Inc., et al. v. Wright, et al.

settlements of claims in which liability has become reasonably clear.” Ky. Rev. Stat. Ann. §

304.12-230(6).

       Christian brings a common-law third-party bad-faith claim and a KUCSPA statutory bad-

faith claim against GEICO. Specifically, Christian alleges GEICO acted in bad faith by falsely

denying having received her medical records and other information related to her claim, thus acting

fraudulently to obtain a more favorable settlement and delaying payment on her claim until

November 2018.

       The parties dispute the events that occurred in the months following the accident. Christian

asserts that she sent her medical records by mail to GEICO in December 2017. Further, she claims

to have mailed GEICO five letters beginning in December 2017 demanding that GEICO pay her

the policy limits of $25,000 to address her damages from the accident. Also, Christian contends

that Michelle Davis-Berry, the Hartford claims adjuster, either mailed or faxed an additional copy

of her medical records to GEICO in December 2017 or January 2018 after settling Christian’s

claim for policy limits under the Hartford policy.

       GEICO denies having received Christian’s medical records before October 2018 or any of

Christian’s demand letters. Rather, GEICO contends that after Christian’s attorney informed it in

2017 about the accident and that Hartford was the primary insurer, it received no further

information about Christian’s claim until August 2018. GEICO further asserts that after it received

Christian’s medical records in October 2018, it settled Christian’s claim for policy limits in

November 2018.

       As a threshold matter, we will not consider Christian’s demand letters as substantive

evidence. Christian did not produce the demand letters during discovery. The demand letters were

not produced in Christian’s initial disclosures where she was obligated to disclose “all documents

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Case No. 22-5828, World Heritage Animal Genomic Resources, Inc., et al. v. Wright, et al.

. . . that the disclosing party has in its possession, custody, or control and may use to support its

claims or defenses, unless the use would be solely for impeachment[.]” Fed. R. Civ. P. 26(a)(1)(ii).

Christian also did not disclose the letters in response to interrogatories requesting each of the

settlement demands Christian or her legal counsel made to GEICO. Instead, she produced them

for the first time after discovery closed.

       GEICO moved to exclude the letters, arguing that because the letters were not produced in

discovery, they should not be admitted as evidence. In response to the motion to exclude the

letters, Christian argued that she intentionally withheld the letters and only intended to use them

for impeachment purposes. And impeachment evidence cannot be used “to support [the plaintiff’s]

case at the summary judgment stage.” Santos v. Murdock, 243 F.3d 681, 684 (2d Cir. 2001). Thus,

like the district court, we will not consider the demand letters as substantive evidence.

       Because GEICO was the excess carrier, its obligation to pay Christian on her insurance

claim arose, at the earliest, when Hartford paid out its policy limits to Christian in January 2018.

For the sake of argument, we will assume that GEICO learned of Christian’s settlement of her

insurance claim with Hartford in January 2018 and that it received Christian’s medical records

around that same time. We will further assume that Christian can satisfy the first two elements of

her bad-faith claims. Christian’s claims still fail because she cannot, as a matter of law, meet her

“tall burden” of proving the third element of her bad-faith claims—that GEICO “knew there was

no reasonable basis for denying the claim or acted with reckless disregard for whether such a basis

existed.” Mosley, 626 S.W.3d at 584; Hollaway, 497 S.W.3d at 737.

       To satisfy the third element of a bad-faith claim, a plaintiff must show “that the insurance

company’s conduct was outrageous and caused the plaintiff actual damage.” Mosley, 626 S.W.3d

at 588 (citing Messer v. Universal Underwriters Ins. Co., 598 S.W.3d 578, 592 (Ky. 2019)). “The

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Case No. 22-5828, World Heritage Animal Genomic Resources, Inc., et al. v. Wright, et al.

alleged conduct must go beyond negligence and justify the imposition of punitive damages.” Id.

(citing Wittmer, 864 S.W.2d at 890). “This means there must be sufficient evidence of intentional

conduct or reckless disregard of the rights of an insured or claimant to warrant submitting the right

to award punitive damages to the jury.” Wittmer, 864 S.W.2d at 890. Plaintiffs who cannot

produce evidence of “punitive conduct” cannot succeed on their bad-faith claim as a matter of law.

Hollaway, 497 S.W.3d at 739. Further, it is settled law that “mere delay in settlement does not

rise to bad-faith conduct.” Mosley, 626 S.W.3d at 588–89 (citing Zurich Ins. Co. v. Mitchell, 712

S.W.2d 340 (Ky. 1986)).

       There is no evidence in the record indicating that GEICO engaged in outrageous or punitive

conduct. GEICO settled Christian’s claim ten months after Christian settled with Hartford. And

when GEICO made a settlement offer to Christian, it offered policy limits.

       Christian argues that GEICO acted in bad faith by lying about not receiving her medical

records and delaying paying her claim. Christian has not presented any evidence that GEICO’s

failure to respond to Christian after allegedly receiving her medical records in or about January

2018 was intentional or anything beyond mere negligence. See Hollaway, 497 S.W.3d at 739

(holding that where a claimant “fails to offer any proof of any intentional misconduct, instead

suggesting that the [claim and settlement] process was a matter of interpretation, better fit for jury

determination[,]” summary judgment is appropriate). She has also failed to present any evidence

that GEICO’s conduct was part of a scheme to deter her from pursuing her claim or that GEICO

repeatedly requested unnecessary information. See Rawe, 462 F.3d at 533 (holding that where

there were lengthy delays in addition to repeated requests for documentation that had previously

been provided, the insurer’s conduct could potentially amount to bad faith). And though, GEICO

substantially delayed in settling Christian’s claim, that delay alone is insufficient to establish bad

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Case No. 22-5828, World Heritage Animal Genomic Resources, Inc., et al. v. Wright, et al.

faith under Kentucky law. See Mosley, 626 S.W.3d at 588–89; see also Motorists Mut. Ins. Co. v.

Glass, 996 S.W.2d 437, 452 (Ky. 1997) (“[M]ere delay in payment does not amount to outrageous

conduct absent some affirmative act of harassment or deception.”).

       GEICO’s conduct was not outrageous, nor does it merit punitive damages. Thus, even if

GEICO received Christian’s medical records in January 2018 and delayed settling the claim until

November 2018, this conduct alone does not constitute bad faith. And Christian has failed to

identify any acts of harassment or deception by GEICO. See id. The district court therefore did

not err in granting summary judgment to GEICO.

                                              IV.

       For these reasons, we AFFIRM the district court’s order granting GEICO’s motion for

summary judgment.

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