Court Opinion

ID: 9961637
Source: CourtListenerOpinion
Date Created: 2024-04-19 14:07:56.703976+00
Date Added: 2024-06-11T08:21:15.689867
License: Public Domain

RENDERED: APRIL 12, 2024; 10:00 A.M.
                       NOT TO BE PUBLISHED

               Commonwealth of Kentucky
                        Court of Appeals

                           NO. 2023-CA-0485-MR

CECIL WAYNE BARNETT AND
SALLY LOUISE BARNETT                                          APPELLANTS

               APPEAL FROM HOPKINS CIRCUIT COURT
v.          HONORABLE CHRISTOPHER B. OGLESBY, JUDGE
                      ACTION NO. 21-CI-00293

KENTUCKY FARM BUREAU
MUTUAL INSURANCE COMPANY                                        APPELLEES

                                 OPINION
                                AFFIRMING

                                ** ** ** ** **

BEFORE: EASTON, KAREM, AND TAYLOR, JUDGES.

KAREM, JUDGE: Cecil Wayne Barnett and Sally Louise Barnett appeal from a

Hopkins Circuit Court order granting summary judgment to Kentucky Farm

Bureau Mutual Insurance Company (“KFB”). At issue is whether their bad faith

claim under the Kentucky Unfair Claims Settlement Practices Act (“UCSPA”),
Kentucky Revised Statutes (KRS) 304.12-230, was untimely or without merit as a

matter of law. Upon careful review, we affirm.

              FACTUAL AND PROCEDURAL BACKGROUND

            The Barnetts had insured their home in Madisonville with KFB since

2000. On July 30, 2018, they filed a claim alleging their house and property were

damaged by mine subsidence. It is undisputed that their homeowners’ policy with

KFB contained an endorsement covering this type of loss. KFB retained Bowser

Morner, Geotechnical Engineers, to investigate the Barnetts’ claim. Bowser

Morner’s resulting report was authored by a geologist and an engineer who opined

that the primary cause of the cracks observed in the Barnett residence was not

ground movement induced by a mine subsidence event.

            KFB sent the Barnetts a letter dated October 18, 2018, denying their

claim on the basis of the Bowser Morner report. According to statements by

KFB’s attorney at the hearing, KFB would have had no monetary interest in

denying the Barnetts’ claim because the Kentucky Mine Subsidence Fund

reimburses insurance companies for mine subsidence damages. See KRS 304.44-

020 and KRS 304.44-050.

            The Barnetts did not pursue the matter further until, approximately

two and one-half years later, on April 14, 2021, they filed a complaint in Hopkins

Circuit Court alleging that KFB had arbitrarily refused to compensate them for the

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damage to their residence. The complaint also alleged that KFB’s refusal to pay

the claim constituted bad faith and violated the UCSPA.

             KFB moved for summary judgment on the grounds that the Barnetts’

complaint was untimely filed under a limitations clause found in their

homeowners’ policy, which states: “Suit Against Us. No action can be brought

unless the policy provisions have been complied with and the action is started

within one year after the date of loss.” KFB argued that the Barnetts’ contractual

claims had to be dismissed for failure to bring suit within one year of the alleged

mine subsidence reported on July 30, 2018. It further argued that the plaintiffs

could not satisfy the prerequisites of a bad faith claim under the UCSPA, the first

prong of which requires proof that the insurer was obligated to pay the claim under

the terms of the policy. KFB contended that it was not obligated to pay the

underlying claim both because it was not timely filed and because the experts had

opined the damages to the Barnetts’ home were not caused by mine subsidence.

             The Barnetts responded that the appropriate limitations period for

UCSPA claims was five years and that the one-year limitations period was

contrary to public policy as an attempt to dilute and diminish the protections of the

UCSPA.

             Following a hearing, the circuit court entered an order granting

summary judgment to KFB. This appeal by the Barnetts followed.

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                            STANDARD OF REVIEW

             In reviewing a grant of summary judgment, our inquiry focuses on

“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 v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996); Kentucky Rules of

Civil Procedure (“CR”) 56.03. The trial court is required to view the record “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).

             The circuit court’s order granting summary judgment does not state

the specific basis for its decision. We “will review the issue de novo because only

legal questions and no factual findings are involved.” Hallahan v. The Courier-

Journal, 138 S.W.3d 699, 705 (Ky. App. 2004).

                                     ANALYSIS

             On appeal, the Barnetts’ arguments address only the dismissal of their

claims of bad faith under the UCSPA. They proceed on the assumption that the

circuit court granted summary judgment by applying the one-year limitations

period found in their policy to bar these claims. They contend that UCSPA claims

are subject to the five-year limitations period found in KRS 413.120(2) and that the

circuit court’s decision was contrary to the public policy underlying the UCSPA.

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However, we need not delve into the legitimacy of this argument as the issue of

whether they are able, as a matter of law, to state a claim under the USPCA is

dispositive of this appeal.

             A successful bad faith claim against an insurer, premised on common

law or the UCSPA, requires the plaintiff to prove the following three elements set

forth in Wittmer v. Jones, 864 S.W.2d 885 (Ky. 1993):

             (1) the insurer must be obligated to pay the 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.

Davidson v. American Freightways, Inc., 25 S.W.3d 94, 100 (Ky. 2000) (citing

Wittmer, 864 S.W.2d at 890).

             KFB argues that it is impossible for the Barnetts to meet the first

prong of the UCSPA claim because KFB was not contractually obligated to pay

their claim under the terms of the policy once the one-year limitations period had

passed. In other words, the Barnetts cannot meet the first prong of the Wittmer test

because their underlying claim for breach of the insurance contract is not viable as

untimely filed.

                                         -5-
             This argument has never been addressed by a Kentucky court,

although we note that it was rejected in an unpublished opinion of the federal

district court for the Eastern District of Kentucky to conclude that the plaintiffs’

bad faith claim was not necessarily barred even if their underlying breach of

contract claim was procedurally barred, because there was no finding that the

insurer was not obligated to pay the plaintiffs’ claim under the express provisions

of the policy. “A finding that the claim is now time barred does not preclude the

[plaintiffs] from arguing that [the insurer] indeed 1) had an obligation to pay the

claims under the terms of the policy; 2) denied the claim without a reasonable

basis; and 3) either knew there was no reasonable basis for denying the claim or

acted with reckless disregard for whether such a basis existed.” Barjuca v. State

Farm Fire and Cas. Co., No. 5:11-CV-380-JMH-REW, 2013 WL 6631999, at *9

(E.D. Ky. Dec. 17, 2013) (quoting Tennant v. Allstate Ins. Co., No. Civ.A. 04-54,

2006 WL 319046, at *8 (E.D. Ky. Feb. 10, 2006)).

             We need not resolve this thorny question because even if the Barnetts’

UCSPA claims were not time-barred, summary judgment was warranted because

they failed to meet the minimal evidentiary standard for stating a claim of bad

faith.

             The evidentiary threshold to state a claim for bad faith has been

described as “high indeed.” United Services Auto. Ass’n v. Bult, 183 S.W.3d 181,

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186 (Ky. App. 2003), as modified (Jun. 27, 2003). There is no such thing as

“technical violation” of the UCSPA. Id. (citation omitted). “Before the cause of

action [for bad faith] exists in the first place, there must be evidence sufficient to

warrant punitive damages[.]” Id. “This means there must be sufficient evidence of

intentional misconduct or reckless disregard of the rights of an insured or a

claimant to warrant submitting the right to award punitive damages to the jury.”

Id. (emphasis in original).

             Evidence must demonstrate that an insurer has engaged
             in outrageous conduct toward its insured. Furthermore,
             the conduct must be driven by evil motives or by an
             indifference to its insureds’ rights. . . . . Evidence of
             mere negligence or failure to pay a claim in timely
             fashion will not suffice to support a claim for bad faith.
             Inadvertence, sloppiness, or tardiness will not suffice;
             instead, the element of malice or flagrant malfeasance
             must be shown.

Id.
             The Barnetts have made no specific allegations of bad faith or how it

manifested itself in KFB’s behavior towards them. Their complaint tracks the

language of KRS 304.12-230, but they have not suggested how KFB’s reliance on

the Bowser Morner report to reject their claim was evidence of bad faith.

             “[A] party opposing a properly supported summary judgment motion

cannot defeat it without presenting at least some affirmative evidence showing that

there is a genuine issue of material fact for trial.” Steelvest, 807 S.W.2d at 482.

The Barnetts have failed to present any affirmative evidence of the type of conduct

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of KFB’s part that would meet this standard. The Bowser Morner report provided a reasonable b

that the company would have had no monetary interest in denying the claim. The

Barnetts have offered no evidence whatsoever that KFB acted with an evil motive

or with reckless indifference to their rights nor have they suggested where such

evidence may be found or what the nature of such evidence might be. They simply

have not met the evidentiary threshold to state a claim for bad faith under the

UCSPA.

             Because, at the outset, we find that the Barnetts failed to state a claim

for which relief can be granted, we need not analyze the application of any statute

of limitations. The circuit court was correct in granting KFB’s motion for

summary judgment.

                                  CONCLUSION

             For the foregoing reasons, the order granting summary judgment to

KFB is affirmed.

             ALL CONCUR.

BRIEF FOR APPELLANT:                      BRIEF FOR APPELLEE:

William M. Cox, Jr.                       Mike Moore
Madisonville, Kentucky                    Paducah, Kentucky

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