Court Opinion

ID: 5125448
Source: CourtListenerOpinion
Date Created: 2021-11-12 15:08:08.179401+00
Date Added: 2024-06-11T08:22:50.999703
License: Public Domain

RENDERED: NOVEMBER 5, 2021; 10:00 A.M.
                           TO BE PUBLISHED

                  Commonwealth of Kentucky
                             Court of Appeals

                                 NO. 2020-CA-0065-MR

JOHNNY MCCOY AND MICHELLE
MCCOY                                                                      APPELLANTS

                  APPEAL FROM MARTIN CIRCUIT COURT
v.               HONORABLE JOHN DAVID PRESTON, JUDGE
                        ACTION NO. 19-CI-00145

JENNIFER LYNN HORN,
EXECUTRIX OF THE ESTATE OF
JACKIE JORDAN                                                                  APPELLEE

                                        OPINION
                                       AFFIRMING

                                      ** ** ** ** **

BEFORE: ACREE, McNEILL, AND L. THOMPSON, JUDGES.

McNEILL, JUDGE: Johnny and Michelle McCoy (“McCoys”) appeal from an

order of the Martin Circuit Court granting summary judgment in favor of Jackie

Jordan1 (“Jordan”), finding the McCoys, who held remainder interests in a home

1
 Sadly, Jordan died on December 31, 2019. Jennifer Lynn Horn, Executrix of the Estate of
Jackie Jordan, was substituted as the party-appellee on August 31, 2020.
destroyed by fire, are not entitled to any of the insurance proceeds. Finding no

error, we affirm.

               On January 25, 2017, Jordan conveyed a remainder interest in certain

real property, including a home, to the McCoys. However, Jordan retained a life

estate in the real property and continued to live in the home. He purchased an

insurance policy on the home and its contents, paid the premiums, and was the sole

insured. On October 28, 2018, the home was destroyed by fire.

               Following the fire, Jordan filed a petition for declaration of rights2 in

Martin Circuit Court arguing he was the sole beneficiary of the insurance proceeds.

The McCoys answered the petition and filed a counterclaim, asserting that, as

remaindermen, they were entitled to a share of the proceeds. Subsequently, both

parties moved for summary judgment on the issue. On December 19, 2019, the

circuit court entered an order granting Jordan’s motion for summary judgment and

denying the McCoys’ motion. This appeal followed.

               “The standard of review on appeal of a summary judgment is whether

the trial court correctly found that there were no genuine issues as to any material

fact and that the moving party was entitled to judgment as a matter of law.” Scifres

2
 Jordan subsequently filed an amended petition for declaration of rights to correct an error in the
original petition’s caption.

                                                -2-
v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996) (citing CR3 56.03). “The record

must be viewed in a light most favorable to the party opposing the motion for

summary judgment and all doubts are to be resolved in his favor.” Steelvest, Inc. v.

Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). “Because

summary judgment involves only legal questions and the existence of any disputed

material issues of fact, an appellate court need not defer to the trial court’s decision

and will review the issue de novo.” Lewis v. B & R Corporation, 56 S.W.3d 432,

436 (Ky. App. 2001).

                Kentucky follows the majority rule which holds that a “life tenant is

not bound to keep the premises insured for the benefit of the remainder-man. Each

can insure his own interest, but, in the absence of any stipulation or agreement,

neither has any claim upon the proceeds of the other’s policy . . . .” Spalding v.

Miller, 103 Ky. 405, 45 S.W. 462, 464 (1898).4 The reasoning behind this view is

that “[t]he contract of insurance is a personal contract, and inures to the benefit of

the party with whom it is made, and by whom the premiums are paid. It is a

contract of indemnity against loss. The sum paid is in no proper or just sense the

proceeds of the property.” Id. (internal quotation marks and citations omitted).

3
    Kentucky Rules of Civil Procedure.
4
 Although Spalding is not recent, it appears to still be the law in a majority of jurisdictions and
has not been overruled in Kentucky.

                                                -3-
             In contrast, the minority rule holds that based upon the life tenant’s

relationship as an implied or quasi-trustee for the remainderman, “in case of the

total destruction of the insured property, the fund from the insurance policy thereon

is substituted for the property, and the life tenant will be entitled to the interest for

life, and the fund after life tenant’s death will be payable to the remainder-men[.]”

Green v. Green, 50 S.C. 514, 27 S.E. 952, 959 (1897).

             For whatever reason, the McCoys’ appellate brief fails to cite the

relevant Kentucky precedent. Instead, they note that, like states holding the

minority view, Kentucky has recognized that a life tenant is a quasi-trustee for the

remainderman, citing Superior Oil Corporation v. Alcorn, 242 Ky. 814, 47 S.W.2d

973, 987 (1930), as modified on denial of reh’g (May 8, 1931) (citation omitted)

(“The vast majority of the courts hold that a life tenant is a trustee for the

remainderman . . . but we think it better to call him a quasi trustee.”).

             They point to an exception to the majority rule that a remainderman is

not entitled to the insurance proceeds of a life tenant’s policy, when there is a

fiduciary relationship between the life tenant and the remainderman, and argue this

case falls within the exception because Kentucky courts have recognized that a life

tenant is a quasi-trustee for the remainderman.

             The McCoys cite two cases from other jurisdictions, Opha L. Keith

Estate ex rel. Buckland v. Keith, 647 S.E.2d 731 (W. Va. 2007) and Ellerbusch v.

                                           -4-
Myers, 683 N.E.2d 1352 (Ind. Ct. App. 1997), setting forth three recognized

exceptions to the majority rule that a remainderman does not have an interest in

insurance proceeds from the destruction of a life estate: (1) when the instrument

creating the estate expressly provides that the life tenant will insure the property

for the benefit of the remainderman; (2) when the life tenant and the remainderman

agree to this requirement; or (3) if a fiduciary relationship exists between the life

tenant and the remainderman. Buckland, 647 S.E.2d at 735; Ellerbusch, 683

N.E.2d at 1354.

               As an initial matter, it does not appear Kentucky has recognized this

exception to the majority rule.5 However, assuming its recognition, the standard

fiduciary relationship that exists between a life estate and a remainderman is not

the type contemplated by the exception. This is clear from the language of the

exception itself: “A life tenant must provide insurance for the benefit of the

remainderman . . . if a fiduciary relationship exists between the life tenant and the

remainderman apart from the incidents of the tenancy.” Ellerbusch, 683 N.E.2d at

1354 (emphasis added). Ellerbusch cited Clark v. Leverett, 159 Ga. 487, 126 S.E.

258, 259 (1924), for this proposition, a case where the life tenant had an express

5
  Our highest court recognized the first two above exceptions in Spalding, 45 S.W. at 464 (“In
the absence of anything that requires it in the instrument creating the estate, or of any agreement
to that effect on the part of the life tenant, we think that the life tenant is not bound to keep the
premises insured for the benefit of the remainder-man.”).

                                                 -5-
fiduciary obligation as the remainderman’s guardian. Thus, the exception is

premised on a fiduciary obligation beyond that generally associated with being a

life tenant.

               The Missouri Supreme Court recognized this distinction in Farmers’

Mutual Fire and Lightning Insurance Company v. Crowley, 354 Mo. 649, 190

S.W.2d 250 (1945), where it found inapplicable the exceptions to the general rule

that a remainderman is not entitled to the insurance proceeds from a policy taken

out by the life tenant for his own benefit. Under similar circumstances to ours, the

Missouri court has said:

                      In the case at bar, the will of Mary H. Crowley did
               not provide that respondent, the life tenant, should insure
               the property for the benefit of appellants, the
               remaindermen; no agreement by respondent to insure the
               property for appellants’ benefit was shown in evidence;
               respondent did not stand in any fiduciary relationship to
               the remaindermen other than the quasi trustee
               relationship of a life tenant; the respondent procured the
               contract of insurance in his own name as insured, and
               paid the assessments thereafter payable; and appellants
               were in no way parties to the contract of insurance.

Id. at 253 (emphasis added).

               Like Mary Crowley in Missouri, who owed no independent duties to

her remainderman, Jordan owed no express fiduciary obligation to the McCoys

beyond the quasi-trustee relationship of a life tenant. As such, even if Kentucky

recognized an exception to the majority rule where a fiduciary relationship exists

                                           -6-
between the life tenant and the remainderman apart from the incidents of the

tenancy, it would not be applicable in this case.

             Lastly, the McCoys argue that the majority rule is unfair and

“discriminates against the remaindermen who, after a loss, are left with nothing but

a smoldering heap of rubble to clean up.” However, as recognized in Ellerbusch,

683 N.E.2d at 1355, “[d]espite the apparent inequity of the rule, a remainderman

may protect his interest through an agreement with the life tenant that the latter

carry insurance for the remainderman’s benefit” and each party “can insure for

himself.” See also Saunders v. Armstrong, 22 Ky. L. Rptr. 1789, 61 S.W. 700, 700

(1901) (“The owner of the remainder or other interest may also have an insurance

on the same property to protect himself from loss.”).

             The McCoys could have entered into an agreement with Jordan to

insure the property for their benefit or obtained insurance on the property

themselves. While they contend they did “everything in their power to obtain

insurance” but were told by Farm Bureau, the company Jordan insured the property

through, that Farm Bureau could not double insure any structure, there is no

evidence the McCoys attempted to insure the property through any other company.

             Wherefore, the order of the Martin Circuit Court granting summary

judgment in favor of Jordan is affirmed.

                                           -7-
           ALL CONCUR.

BRIEF FOR APPELLANT:      BRIEF FOR APPELLEE:

Jaryd H. Crum             Eldred E. Adams, Jr.
Paintsville, Kentucky     Louisa, Kentucky

                         -8-