Court Opinion

ID: 9927184
Source: CourtListenerOpinion
Date Created: 2024-01-26 15:05:24.188284+00
Date Added: 2024-06-11T09:24:04.215470
License: Public Domain

RENDERED: JANUARY 19, 2024; 10:00 A.M.
                       NOT TO BE PUBLISHED

               Commonwealth of Kentucky
                        Court of Appeals
                           NO. 2022-CA-0840-MR

BETTY BALDWIN                                                    APPELLANT

               APPEAL FROM CALLOWAY CIRCUIT COURT
v.              HONORABLE JAMES T. JAMESON, JUDGE
                       ACTION NO. 20-CI-00092

KENTUCKY NATIONAL
INSURANCE COMPANY; AND
HOLTON, MELUGIN AND
HAVERSTOCK INSURANCE
AGENCY, INC., D/B/A
HAVERSTOCK INSURANCE
AGENCY, INC.                                                     APPELLEES

                              OPINION
               AFFIRMING IN PART, REVERSING IN PART,
                         AND REMANDING

                                ** ** ** ** **

BEFORE: CALDWELL, JONES, AND TAYLOR, JUDGES.

TAYLOR, JUDGE: Betty Baldwin brings this appeal from a June 21, 2022,

summary judgment of the Calloway Circuit Court in favor of Kentucky National

Insurance Agency (KNIC) and Holton, Melugin, and Haverstock Insurance
Agency, Inc., d/b/a Haverstock Insurance Agency, Inc. (Haverstock). We affirm in

part, reverse in part, and remand.

             This appeal involves the denial of insurance coverage to Baldwin

relating to the total loss of her home by fire in October of 2019. The circuit court

summarized the facts as follows:

            1.      It is undisputed that Betty Baldwin, hereinafter
                   “Baldwin,” incurred a fire loss in 1994. Baldwin
                   received approximately $90,000 in insurance
                   proceeds as a result of that fire. Baldwin rebuilt the
                   existing structure damaged by fire. The new
                   structure was a two-story home. Baldwin lived in
                   this home until October 13, 2019.

            2.     On or about 2012, according to Baldwin’s
                   Complaint in Calloway 20-CI-00120, Baldwin
                   purchased homeowner insurance for the above-
                   described home from American Commerce through
                   Holton, Melugin and Haverstock Insurance
                   Agency, Inc., d/b/a Haverstock Insurance Agency
                   Inc., hereinafter “Haverstock.” Specifically,
                   Baldwin interacted with Van Haverstock.

            3.     Van Haverstock is an agent for multiple insurance
                   companies, including American Commerce and
                   Kentucky National Insurance Company.

            4.     Prior to procuring insurance through American
                   Commerce, Baldwin called [Van] Haverstock due
                   to her relationship with Haverstock’s brother, Gary
                   Haverstock. Shortly after the initial call, [Van]
                   Haverstock went to Baldwin’s home and performed
                   an inspection of the premises. Baldwin’s brother,
                   Jerry Davidson, was the only individual present at
                   the home during the inspection. Neither Baldwin
                   nor her husband were present.

                                         -2-
5.   Defendant had homeowner insurance from
     American Commerce until approximately
     November of 2017.

6.   On or about 2017, Baldwin called [Van]
     Haverstock. Baldwin asked Haverstock to look into
     cheaper options for homeowner insurance. [Van]
     Haverstock did not perform any inspections or
     present questions to Baldwin regarding a new
     application for homeowner insurance.

7.   On or about November 21, 2017, Baldwin received
     a phone call from “Betsy” at Haverstock. Betsy
     advised Baldwin that she needed to come to the
     office and sign her application. On November 21,
     2017, Baldwin appeared at Haverstock’s office to
     sign the application. The secretary presented the
     application for homeowner’s insurance to Baldwin
     in the reception area of the office. The secretary
     instructed Baldwin on where her signature was
     needed. Without reading, Baldwin signed the
     application. The application was dated November
     21, 2017. Baldwin was not denied an opportunity
     to review the application before signing.

8.   According to Baldwin in her deposition on
     September 14, 2021, two of the answers provided
     on the application were incorrect at the time of
     signing. Baldwin indicated in Question 28 that she
     did not specifically have a German Shepperd [sic].
     Further, Baldwin in Question 32 indicated that she
     had never had a prior fire loss. See Attached
     Kentucky Homeowners Application.

9.   Sometime after signing the Kentucky Homeowner
     Application, Baldwin purchased a homeowner
     insurance policy through Kentucky National
     Insurance Company.

                          -3-
            10.   On October 13, 2019, a fire occurred and resulted
                  in a total loss of the above-described home.

            11.   On March 5, 2020, after denying Baldwin’s
                  coverage, Kentucky National Insurance Company
                  (hereinafter “KNI”) filed a Complaint for
                  Declaration of Rights and Monetary Damages
                  arising from the house fire on October 13, 2019.

            12.   On March 26, 2020, Baldwin answered KNI’s
                  complaint and filed her own counterclaims.

            13.   On March 26, 2020, Baldwin filed a separate action
                  (Calloway Circuit 20-CI-00120) against
                  Haverstock. Baldwin claimed that Haverstock was
                  liable for the damages incurred by Baldwin which
                  were caused by the representations of [Van]
                  Haverstock.

            14.   On June 18, 2020, this case was consolidated with
                  20-CI-00120. Third-Party Defendant, Holton,
                  Melugin and Haverstock Insurance Agency, Inc.,
                  d/b/a Haverstock Insurance Agency, Inc., was
                  joined because of the similarity in basic facts and
                  circumstances.

Order on Summary Judgment at 1-3.

            On March 10, 2022, KNIC filed a motion for summary judgment.

KNIC alleged that Baldwin signed the application for insurance with KNIC and

that the application contained two misrepresentations. According to KNIC,

Baldwin answered in the negative as to whether she had any fire losses in the past

and as to whether she owned a German Shepherd dog; however, KNIC pointed out

that Baldwin had a prior fire loss to her home in 1994 and owned a German

                                        -4-
Shepherd dog.1 Because of these misrepresentations in the application, KNIC

maintained that it was permitted to rescind the homeowner’s insurance policy

pursuant to Kentucky Revised Statutes (KRS) 304.14-110 and Hornback v.

Bankers Life Insurance Company, 176 S.W.3d 699 (Ky. App. 2005). Haverstock

joined in KNIC’s motion for summary judgment and sought summary judgment in

its favor.

              Baldwin filed a response and argued that she did not make the

misrepresentations in the application. Rather, Baldwin asserted that Van

Haverstock or an employee under his direction completed the application, and she

merely signed same without reading it. Baldwin also alleged that Van Haverstock

knew that her prior home was destroyed by fire and that she owned a German

Shepherd dog but negligently completed the application. As Van Haverstock was

an agent of KNIC, Baldwin maintains that KNIC was estopped from rescinding

coverage and/or that Haverstock was liable for Van Haverstock’s negligence.

              On June 21, 2022, the circuit court rendered summary judgment in

favor of KNIC and Haverstock. In so doing, the circuit court reasoned:

                  Plaintiff, in their renewed and second motion for
              summary judgment, argues that Hornback v. Bankers

1
 The record reflects that due to the 1994 fire loss, Betty Baldwin’s insurance company paid
$90,000 on the claim. Additionally, the parties acknowledged at oral argument that the dog was
not involved in causing the fire. Thus, the representation regarding the dog was not material to
Baldwin’s fire loss claim in 2019.

                                              -5-
Life Insurance Company, 176 S.W.3d 699 (Ky. Ct. App.
2005) is controlling in the matter sub judice based on the
facts and circumstances presented supra. This Court
agrees. . . .

        The application process in Hornback is similar to
the application process in the matter sub judice, though
not identical. However, the outcome remains the same.
In Hornback, Garrett, an employee of AMI and an agent
of the insurer, renewed the application with the
Hornbacks. The employee read the questions and
completed the application based on the answers they
supplied. After completing the application, the employee
asked the Hornbacks to sign it. The Hornbacks
testified that they were hurried and did not read the
application before singing it. The Hornbacks
further acknowledged that no one prevented them from
either reading the form or filling out the answers
themselves.

       In the matter sub judice, some conversations were
had between Baldwin and [Van] Haverstock. These
conversations were held telephonically. [Van]
Haverstock, on one occasion, visited and inspected the
premises. [Van] Haverstock, after the inspection,
completed an application for homeowner’s insurance
through American Commerce in approximately 2012.
Baldwin eventually purchased a policy through American
Commerce. A few years later, in 2017, Baldwin sought a
new, cheaper policy. The record reflects that Haverstock
used information from Baldwin’s prior application for
American Commerce to complete the new application for
Plaintiff, Kentucky National Insurance Company. At no
point, as the record reflects, did Haverstock direct new
questions to Baldwin regarding her new policy. Once
instructed to appear at Haverstock’s office to sign the
application, Baldwin complied. Baldwin was not
precluded from reviewing the application or altering
answers contained therein. Most importantly, Baldwin
did not correct the answers provided in Questions 28 and

                           -6-
32 – i.e., German Shepherd ownership and prior fire
losses.
       ....

       Dating back to at least 1945, Kentucky Courts
have long held that the statements written in applications
for insurance coverage by a local agent, signed [by] the
applicant without reading the contents therein, were
actually or constructively known to the applicant and that
“she may not thereafter repudiate the answers in the
application and recover on the policy.” Commonwealth
Life Ins. Co. v. Bruner, 299 Ky. 335, 185 S.W. 2d 408
(1945). See also Reserve Life Ins. Co. v. Thomas, 310
S.W. 2d 267, 269-70 (Ky. 1958). Here, it is undisputed
that Baldwin did not read the application before signing
it. Immediately above Baldwin’s Signature is the
following language:

“I have read the entire application and I warrant that to
the best of my knowledge and belief all of the statements
made herein are true. I understand that this application is
part of my policy contract. I understand if any check or
credit card offered in payment is not honored by my bank
or credit card company, the Company shall be deemed
not to have accepted the check or credit card, and the
policy shall be deemed void from inception and I will be
charged a processing fee.”

Thus, Baldwin by affixing her signature to the document,
represented to Kentucky National Insurance Company
that all statements were true. Baldwin represented to
Kentucky National Insurance Company that she did not
own a German Shepherd, a prohibited dog breed.
Further, Baldwin represented that she had no prior fire
losses. In fact, it is undisputed that Baldwin received
approximately $90,000.00 in insurance proceeds
following a fire in 1994. Therefore, it is impossible for
this Court to conclude anything other than that Baldwin
made misrepresentations that were material to the
insurer’s acceptance of the risk and that there is no

                            -7-
            genuine issue of material fact in this regard. Thus, it
            would be impossible for Baldwin to produce evidence at
            trial that would result in a judgment in her favor. This
            Court concludes that Kentucky National Insurance
            Company is entitled to judgment, as a matter of law.

            Baldwin filed an original action against Haverstock for
            damages, in excess of the minimum jurisdictional limits
            of this Court, sustained by reason of the failure of
            Haverstock to properly and correctly answer the
            questions in the application for insurance with Kentucky
            National Insurance Company. The Court concludes that
            Hornback, again, is controlling. . . . There is no dispute
            in both matters that an agent or an employee of the agent
            for the insurer filled out the application in its entirety. In
            both instances, the insureds never read the application.
            Further, the insureds in both matters were not prevented
            from reading the application and making alterations. The
            Court in Hornback concluded, “as a matter of law, that
            the Hornbacks adopted and were responsible for the
            answers when they signed the application. Thus,
            regardless of what disclosures were made to Garrett, the
            responsibility for the answers rests solely with the
            Hornbacks. Under these circumstances, Garrett and AMI
            were, as a matter of law, entitled to a judgment in their
            favor.” Id. at 704. Thus, this Court can only conclude
            that, when renewing the record in a light most favorable
            to Baldwin, there is no genuine issue of material fact,
            and, as a matter of law, Haverstock is entitled to a
            judgment in his favor because it would be impossible for
            Baldwin to produce evidence at trial that would produce
            a judgment in her favor.

Order on Summary Judgment at 4-7. The circuit court also awarded KNIC “costs,

fees, expenses and attorney’s fees.” Order on Summary Judgment at 8. This

appeal follows.

                                         -8-
              To begin, summary judgment is proper where there exists no material

issue of fact and movant is entitled to judgment as a matter of law. Steelvest, Inc.

v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). All facts and

inferences therefrom are to be viewed in a light most favorable to the nonmoving

party. Seiller Waterman, LLC v. Bardstown Cap. Corp., 643 S.W.3d 68, 74 (Ky.

2022). Additionally, this Court’s review of a summary judgment is always de

novo. Id. at 74; Cunningham v. Kroger Ltd. P’ship I, 651 S.W.3d 199, 202 (Ky.

App. 2022).

              Baldwin asserts that the circuit court erred by rendering summary

judgment in favor of KNIC. In particular, Baldwin argues that KNIC was estopped

from denying coverage and rescinding her homeowner’s insurance policy.

According to Baldwin, Van Haverstock or an employee under his direction filled

out the application in its entirety, and she merely signed the application after being

contacted to do so. Baldwin asserts that Van Haverstock or his employee

incorrectly answered the questions in the application despite knowing that she

owned a German Shepherd dog and that she had previously sustained a major fire

to her home. Baldwin claims that Van Haverstock was KNIC’s agent, and KNIC

should be estopped from rescinding her homeowner’s insurance policy.

              In a strikingly similar case in 2005, this Court recognized that an

applicant who signs an insurance application is on constructive notice of its

                                          -9-
contents and is singularly responsible for the information contained therein.

Hornback, 176 S.W.3d at 704. Therein, the Court held:

                     The court faced a similar situation in
             Commonwealth Life Ins. Co. v. Bruner, 299 Ky. 335, 185
             S.W.2d 408 (1945). Therein, the applicant on a life
             insurance policy made false statements material to the
             risk in the application. Upon her son’s death, the
             applicant sought to recover under the policy. While it
             was clear that the answers given by the applicant in the
             application were false, the applicant claimed that she did
             not read it before signing it. Nevertheless, the court held
             that the statements written in the application by the local
             agent were actually or constructively known to the
             applicant and that “she may not thereafter repudiate the
             answers in the application and recover on the policy.”
             Id. at 410. See also Reserve Life Ins. Co. v. Thomas, 310
             S.W.2d 267, 269-70 (Ky. 1958). In short, whether they
             read the application or not, the Hornbacks are held to
             have actual or constructive knowledge of its contents.
             Further, by signing the application, the Hornbacks
             adopted the answers as their own.

Hornback, 176 S.W.3d at 704.

             Baldwin believes that Hornback, 176 S.W.3d 699 is distinguishable

from the case at hand; however, we do not read Hornback so narrowly. Hornback

is clear that an applicant is, as a matter of law, responsible for the answers, correct

or incorrect, in an insurance application when he or she signs their name. Id. It

matters not whether the applicant or the insurance agent filled out the application.

We, thus, reject Baldwin’s contention that KNIC should be estopped from denying

coverage and rescinding the policy.

                                         -10-
             Baldwin next contends that the incorrect answers in the homeowner’s

insurance application were not material per KRS 304.14-110(2), and as such,

KNIC could not rescind the homeowner’s insurance policy. Baldwin asserts that

her prior fire loss occurred some 23 years before she signed the application for

homeowner’s insurance with KNIC. Baldwin points out “that C.L.U.E.

(Comprehensive Loss Underwriting Exchange), the Nationwide database used by

insurance companies to determine previous losses, only goes back” approximately

seven years. Baldwin’s Brief at 6. Additionally, Baldwin maintains that American

Commerce Insurance, her previous homeowner’s insurance company, only

inquired about any loss over the last five years. To be material under KRS 304.14-

110(2), Baldwin claims that KNIC had to demonstrate that acting reasonably and

in accordance with the usual industry practice, it would have not issued insurance

coverage. In this instance, Baldwin asserts that the incorrect answers in the

application were not material per KRS 304.14-110(2).

             KRS 304.14-110 controls where a misrepresentation is made in an

insurance application. KRS 304.14-110 provides:

             All statements and descriptions in any application for an
             insurance policy or annuity contract, by or on behalf of
             the insured or annuitant, shall be deemed to be
             representations and not warranties. Misrepresentations,
             omissions, and incorrect statements shall not prevent a
             recovery under the policy or contract unless either:

             (1) Fraudulent; or

                                        -11-
             (2) Material either to the acceptance of the risk, or to the
               hazard assumed by the insurer; or

             (3) The insurer in good faith would either not have issued
               the policy or contract, or would not have issued it at
               the same premium rate, or would not have issued a
               policy or contract in as large an amount, or would not
               have provided coverage with respect to the hazard
               resulting in the loss, if the true facts had been made
               known to the insurer as required either by the
               application for the policy or contract or otherwise.
               This subsection shall not apply to applications taken
               for workers’ compensation insurance coverage.

Relevant to this appeal, under KRS 304.14-110(2), the insurer may rescind a policy

where the misrepresentation was “[m]aterial either to the acceptance of the risk, or

to the hazard assumed by the insurer[.]” An incorrect answer in the application is

considered material” if the insurer, “acting reasonably and naturally in accordance

with the usual practice of . . . insurance companies under similar circumstances,

would not have accepted the application . . . .” John Hancock Mut. Life Ins. Co. v.

Conway, 240 S.W.2d 644, 646 (Ky. 1951). And, under KRS 304.14-110(3), the

insurer may rescind an insurance policy where the insurer, acting in good faith,

would not have issued the policy, would not have issued it at the same premium, or

would not have covered the hazard causing the loss if the true facts were known to

the insurer. It must be pointed out that the insurance company is permitted to

rescind an insurance policy under subsection (1), (2), or (3) of KRS 304.14-110.

                                         -12-
             In this case, it is undisputed that Baldwin suffered a major fire loss to

her previous home in 1994 and was paid $90,000 by her homeowner’s insurance

company. It is also uncontroverted that in the insurance application with KNIC,

Baldwin was asked if she “ever had a fire loss,” and the answer was no.

             The record contains KNIC’s underwriting guidelines filed with the

Kentucky Department of Insurance. The guidelines provide that KNIC would not

have bound a homeowner’s insurance policy if the applicant had previously

incurred a total or major loss. A total or major loss was identified as “[r]isks with

a prior total fire loss or a major loss including any fire or theft loss in excess of

$5,000 or any other loss that is not weather or catastrophe related in excess of

$10,000 . . . .” In his depositional testimony, Gary Rogers, KNIC’s Vice-President

of underwriting, stated if an applicant for homeowner’s insurance had previously

incurred a major fire loss in excess of $10,000, KNIC would not issue a policy of

insurance. According to Rogers, it is KNIC’s customary and usual practice to not

issue homeowner’s insurance if the applicant previously suffered a major fire loss.

             Baldwin, however, failed to present any evidence disputing that it was

KNIC’s usual and customary practice not to issue a homeowner’s insurance policy

if there has been a prior major fire loss. See Blackstone Mining Co. v. Travelers

Ins. Co., 351 S.W.3d 193, 198 (Ky. 2010) (citing Lewis v. B&R Corp., 56 S.W.3d

432, 436 (Ky. App. 2001)) (holding that the moving party carries the initial burden

                                          -13-
of demonstrating that no genuine issue of material fact exists; thereafter, the

burden shifts to the nonmoving party to present some evidence showing there is a

genuine issue of material fact for trial). Based upon the above uncontroverted

facts, it is clear that KNIC, acting in good faith, would not have issued the

homeowner’s policy absent the misrepresentations in the application. Therefore,

we conclude that KNIC was permitted to rescind the homeowner’s policy of

insurance pursuant to KRS 304.14-110(3).2

              Baldwin also maintains that the circuit court erroneously rendered

summary judgment dismissing her negligence claim against Haverstock. Baldwin

claims Van Haverstock knew that she had a previous major fire loss to her home

and that she owned a German Shepherd dog. Despite such knowledge, Baldwin

asserts that Van Haverstock or an employee acting under his direction incorrectly

answered questions concerning same in the insurance application and was

negligent by doing so.

              Again, we view Hornback, 176 S.W.3d 699 as dispositive. In

Hornback, the Hornbacks contended that an agent of an insurance company acted

negligently and breached a fiduciary duty by incorrectly filling out the application

2
  Baldwin also maintains that the circuit court rendered summary judgment under subsection (2)
of Kentucky Revised Statutes 304.14-110, rather than subsection (3). Nonetheless, the law is
clear that we may affirm the circuit court upon any basis in the record, and our review of
summary judgment is de novo.

                                             -14-
of insurance by indicating that Hornback did not suffer from a disease of the heart.

Id. at 701. The Hornbacks alleged that they disclosed Hornback’s heart condition

to the agent. Id. In affirming the circuit court’s summary judgment in favor of the

agent, the Court of Appeals pointed out that the Hornbacks did not read the

application before signing it even though they were free to do so. Id. at 704. The

Court held that “as a matter of law, the Hornbacks adopted and were responsible

for the answers when they signed the application. Thus, regardless of what

disclosures were made [to the agent], the responsibility for the answers rests solely

with the Hornbacks.” Hornback, 173 S.W.3d at 704. The Court then concluded

that the insurance agent was entitled to summary judgment upon the negligence

claim and breach of fiduciary duty claim as a matter of law. Id.

             Likewise, in our case, Baldwin signed the insurance application

without reading it. Per Hornback, 173 S.W.3d at 704, Baldwin is solely

responsible for the answers in the application, and Haverstock was entitled to

summary judgment dismissing Baldwin’s claim of negligence. Absent any

allegation or evidence of fraud by Haverstock, we are duty bound to follow

Hornback and Bruner cited therein. Supreme Court Rule 1:030(8).

             Baldwin lastly argues that the circuit court erroneously awarded

attorney’s fees to KNIC. We agree.

                                        -15-
             In Kentucky, it is well-established that attorney’s fees are not awarded

to the prevailing party unless a statute or contractual provision specifically permits

recovery thereof. Bell v. Commonwealth, Cabinet for Health and Fam. Servs., 423

S.W.3d 742, 748 (Ky. 2014); AnyConnect U.S., LLC v. Williamsburg Place, LLC,

636 S.W.3d 556, 565 (Ky. App. 2021).

             In its summary judgment awarding KNIC attorney’s fees, the circuit

court did not cite to a statutory or contractual provision authorizing an award of

attorney’s fees to KNIC, and we are aware of none. Moreover, KNIC fails to

address its entitlement to attorney’s fees in its brief. Accordingly, we are of the

opinion that KNIC was not entitled to an award of attorney’s fees, and the circuit

court erred by awarding same in the summary judgment.

             To summarize, we are of the opinion that the circuit court properly

rendered summary judgment dismissing Baldwin’s claims against KNIC and

Haverstock but improperly awarded KNIC attorney’s fees.

             For the foregoing reasons, the summary judgment of the Calloway

Circuit Court is affirmed in part, reversed in part, and remanded for proceedings

consistent with this Opinion.

             CALDWELL, JUDGE, CONCURS.

             JONES, JUDGE, CONCURS IN RESULT ONLY.

                                         -16-
BRIEF FOR APPELLANT:     BRIEF AND ORAL ARGUMENT
                         FOR APPELLEE KENTUCKY
Robert L. Prince         NATIONAL INSURANCE
Benton, Kentucky         COMPANY:

ORAL ARGUMENT FOR        Ben E. Stewart
APPELLANT:               Paducah, Kentucky

Bethany Willcutt         BRIEF FOR APPELLEE HOLTON,
Benton, Kentucky         MELUGIN AND HAVERSTOCK
                         INSURANCE AGENCY, INC.,
                         D/B/A HAVERSTOCK INSURANCE
                         AGENCY, INC.:

                         Ben S. Fletcher, III
                         Hopkinsville, Kentucky

                       -17-