Opinion
Civil Action No. 3:18-CV-354-CHB
08-03-2020
Melissa HOWARD, Plaintiff, v. AUTO-OWNERS INSURANCE COMPANY, Defendant.
David Lee Sage, II, Hummel Coan & Sage LLC, Louisville, KY, for Plaintiff. Melissa Howard, Eastview, KY, pro se. Christine D. Campbell, Deanna M. Tucker, Schiller Barnes Maloney PLLC, Louisville, KY, for Defendant.
David Lee Sage, II, Hummel Coan & Sage LLC, Louisville, KY, for Plaintiff.
Melissa Howard, Eastview, KY, pro se.
Christine D. Campbell, Deanna M. Tucker, Schiller Barnes Maloney PLLC, Louisville, KY, for Defendant.
ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT
CLARIA HORN BOOM, UNITED STATES DISTRICT COURT JUDGE This matter is before the Court on Defendant Auto-Owners Insurance Company's ("Auto-Owners") Motion for Summary Judgment [R. 32]. Plaintiff Melissa Howard did not file a response within the Court's extended deadline, and the Court declined to grant Plaintiff a further extension. For the reasons stated below, Auto-Owners’ Motion for Summary Judgment is granted as to Plaintiff's breach of contract claim and denied as to Plaintiff's unfair settlement practices claim.
As detailed in the record, Ms. Howard was originally represented by counsel, but she subsequently agreed to allow her counsel to withdraw from further representation in this matter. [R. 27] The Magistrate Judge granted the motion to withdraw and gave Plaintiff sixty days to engage new counsel. [R. 28] The Magistrate Judge then conducted a telephonic status conference, during which Plaintiff advised the Court that she would be proceeding pro se. [R. 31] As a result, the Magistrate Judge extended the deadline to file dispositive motions and directed the Clerk's Office to forward a copy of the Pro Se Handbook to Plaintiff. [Id. ] After the time had passed to respond to the Defendant's Motion for Summary Judgment, Plaintiff moved for an extension. [R. 33] The Court granted Plaintiff an additional thirty days to respond to the Defendant's dispositive motion. [R. 36] On the last day of the extended deadline, Plaintiff (through new counsel) moved for a second extension and to reopen discovery. [R. 38] The Court denied this motion because Plaintiff failed to demonstrate good cause and diligence. [R. 42] Accordingly, Defendant's Motion now stands properly submitted to the Court.
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I. Background
This case arises out of a fire at Ms. Howard's residence on or around January 25, 2017. Ms. Howard had a homeowner's policy providing coverage for fire loss with Auto-Owners as the insurer. The policy contained a provision limiting Ms. Howard's right to sue Auto-Owners: "We may not be sued unless there is full compliance with all the terms of this policy. Suit must be brought within one year after the loss or damage occurs. " [R. 32-2 Page ID #: 193 (emphasis added)] The policy defines "suit" as "a civil court proceeding in which damages because of bodily injury, property damage or personal injury to which this insurance applies are alleged." [Id. at Page ID #: 181] In other words, Plaintiff's policy prohibited her from suing Auto-Owners more than "one year after the loss or damage occurs." [Id. at Page ID #: 193]
It is undisputed that Plaintiff sued Auto-Owners nearly fifteen months after the fire loss. On April 16, 2018, she filed a Complaint in Hardin Circuit Court asserting claims for breach of contract (Count I) and violation of the Kentucky Unfair Claims Settlement Practices Act ("KUCSPA") (Count II). [R. 1-1 Page ID #: 5–8] Defendant moved to dismiss her Complaint for "lack of personal jurisdiction, insufficiency of process, and insufficiency of service of process." [Id. at Page ID #: 10] The following day, Plaintiff filed an Amended Complaint. [Id. at Page ID #: 20–23] She also filed a response to Defendant's Motion to Dismiss. [Id. at Page ID #: 24–29] In addition to responding to Defendant's arguments regarding insufficiency of service of process, Plaintiff also disputed that "the statute of limitations for filing the instant action expired on January 25, 2018." [Id. at Page ID #: 26] Oral arguments on Defendant's Motion to Dismiss were scheduled for June 5, 2018 [id. at Page ID #: 44], but Auto-Owners removed the action to this Court on June 4, 2018. [ R. 1 ] Defendant now moves for summary judgment, asserting that because the limitations period began to run on the date of the fire (January 25, 2017), both of Plaintiff's claims against Auto-Owners are barred by the one-year contractual limitations period. [R. 32]
II. Summary Judgment Standard
Summary judgment is proper where "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). When determining a motion for summary judgment, a court must construe the evidence and draw all reasonable inferences from the underlying facts in favor of the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Lindsay v. Yates , 578 F.3d 407, 414 (6th Cir. 2009). The court may not "weigh the evidence and determine the truth of the matter" at the summary judgment stage. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 265, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When, as here, the defendant moves for summary judgment, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Id. at 252, 106 S.Ct. 2505. The initial burden of establishing no genuine dispute of material fact rests with the moving party. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court "need consider only the cited materials, but it may consider other materials in the record." Fed. R. Civ. P. 56(c)(3). If the moving party satisfies this burden, the burden then shifts to the nonmoving party to produce "specific facts" showing a "genuine issue" for trial. Id. at 324, 106 S.Ct. 2548. Where "a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact," the Court may treat that fact as undisputed. Fed. R. Civ. P. 56(e).
A fact is "material" if the underlying substantive law identifies the fact as critical. Anderson , 477 U.S. at 248, 106 S.Ct. 2505. Thus, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Id. A "genuine" issue exists if "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id. at 249, 106 S.Ct. 2505.
III. Discussion
Plaintiff failed to file a response within the Court's extended deadline, instead filing another motion for extension. Pursuant to Local Rule 7.1(c), "[f]ailure to timely respond to a motion may be grounds for granting the motion." See also Humphrey v. U.S. Attorney Gen.’s Office , 279 F. App'x 328, 331 (6th Cir. 2008) (recognizing that a party's lack of response to a motion is grounds for the district court's grant of an unopposed motion to dismiss); Scott v. State of Tennessee , 878 F.2d 382, 1989 WL 72470, at *2 (6th Cir. 1989) (unpublished table decision) ("When a party fails to respond ..., the Sixth Circuit has held that the lack of response is grounds for the district court to assume opposition ... is waived ..."). Nevertheless, the Court will determine whether Defendant has satisfied its burden under Federal Rule of Civil Procedure 56 for each of Plaintiff's claims.
A. Breach of Contract Claim
Defendant argues that Ms. Howard's policy contains a valid, enforceable provision limiting the time to bring a breach of contract claim to one year after the date of loss: "We may not be sued unless there is full compliance with all the terms of this policy. Suit must be brought within one year after the loss or damage occurs." [R. 32-2 Page ID #: 193] Ostensibly the provision requires two things from the insured in order to successfully bring suit: (1) compliance with the terms of the policy, and (2) filing suit within one year of the loss or damage. Under Kentucky law, "[c]ontract provisions limiting the time within which an insured may sue are generally valid." Smith v. Allstate , 403 F.3d 401, 404 (6th Cir. 2005) (citing Edmondson v. Pennsylvania Nat'l Mut. Cas. Ins. Co. , 781 S.W.2d 753, 756 (Ky. 1989) ; Webb v. Kentucky Farm Bureau Ins. Co. , 577 S.W.2d 17, 18–19 (Ky. Ct. App. 1978) ). However, Ky. Rev. Stat. § 304.14–370 places some guardrails on a foreign insurer's ability to contractually limit the time in which a party can file suit:
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 from the time when the cause of action accrues.
Ky. Rev. Stat. § 304.14–370 (emphasis added); see also Smith , 403 F.3d at 404 ; Webb , 577 S.W.2d at 18.
The question for purposes of § 304.14–370 is: when does a cause of action "accrue" under the statute? Most contractual limitations provisions, like the one at issue here, set the date of loss as the marker for purposes of claim accrual: "Suit must be brought within one year after the loss or damage occurs." [R. 32-2 Page ID #: 193] The date of loss, however, is not always synonymous with the date of accrual. Howard v. Allstate Ins. Co. , No. 5:14-173-DCR, 2014 WL 5780967, at *4 (E.D. Ky. Nov. 5, 2014) (citing Price v. AgriLogic Ins. Servs., LLC , 37 F. Supp. 3d 885, 892 (E.D. Ky. 2014) ). Typically, a claim accrues when the last event necessary to create the cause of action occurs, and where multiple claims are brought, the accrual date may vary between the different claims. Howard , 2014 WL 5780967, at *4. Ky. Rev. Stat. § 304.14–370 requires a limitation provision to give a party one year to sue from the date of accrual.
Kentucky courts have been reluctant to address the issue of accrual under § 304.14–370, focusing instead on whether § 304.14–370 conflicts with other statutes of limitation. See, e.g., Webb , 577 S.W.2d at 17–19 (finding that a one-year limitation in a homeowner's policy did not conflict with the general fifteen-year limitations period for actions on written contracts); Elkins v. Kentucky Farm Bureau Mut. Ins. Co. , 844 S.W.2d 423, 425 (Ky. Ct. App. 1992) (finding that a one-year limitation in a car insurance policy conflicted with the two-year limitations period in the Motor Vehicle Reparations Act). However, the Sixth Circuit considered § 304.14–370 in relation to a similar insurance policy provision in Smith v. Allstate , 403 F.3d 401 (6th Cir. 2005). The Smith policy provided:
No suit or action may be brought against [Allstate] unless there has been full compliance with all policy terms. Any suit or action must be brought within one year after the inception of loss or damage.
Id. at 403. In that case, the Smiths suffered a fire loss to their property in Pike County, Kentucky. Id. After the Smiths sued Allstate on the loss, the defendant moved for summary judgment, arguing that the Smiths had filed the action after the contractual one-year limitations period expired. Id. The Sixth Circuit found that the limitations provision requiring the Smiths to sue Allstate within one year of the fire loss was not inconsistent with Ky. Rev. Stat. § 304.14–370, in relation to a breach of contract claim, even though the provision simultaneously prohibited suit until there was "full compliance with all policy terms." Id. at 405. The Sixth Circuit concluded that "the limitations provision requiring the [plaintiffs] to sue Allstate within one year of their loss, while prohibiting suit during a portion of that year, is not inconsistent with § 304.14–370," reasoning that "[u]nder Kentucky law, it appears, a cause of action for breach of an insurance contract may ‘accrue’ in some sense, before the claimant is entitled to sue." Id.
Other courts have questioned the holding in Smith , particularly its implicit holding that the cause of action for breach of contract accrued on the date of the loss. See, e.g., Tennant v. Allstate Ins. Co. , No. Civ.A. 04-54, 2006 WL 319046, at *6 (E.D. Ky. Feb. 10, 2006) ; Price , 37 F. Supp. 3d at 894. Even so, Smith remains good law in the Sixth Circuit, and this Court is bound by it. Because the policy here, as in Smith , sets the same time period for a party to sue (within one year of the loss), the Court finds that the policy complies with Ky. Rev. Stat. § 304.14–370 with respect to the breach of contract claim. The fire loss occurred on or about January 25, 2017, giving Plaintiff until January 25, 2018 to bring her breach of contract claim against Auto-Owners. But Plaintiff waited nearly fifteen months after the loss—until April 16, 2018—to sue.
Even if a policy complies with Ky. Rev. Stat. § 304.14–370, the Smith Court acknowledged that a contractual limitation provision may still be unenforceable if it does not give a party a reasonable time to sue. Id. at 405–06. The Court found that prompt compliance with the policy's terms would have given the Smiths six months to sue, which Kentucky courts have held to be a reasonable limitation. Id. at 406. Finding that the limitation provision was valid and reasonable, the Court held that the plaintiff's breach of contract claim was time-barred. Id.
Here, neither Plaintiff nor Defendant provide any evidence showing when "full compliance with all the terms of [the] policy" occurred for the Court to determine whether there was a reasonable time to sue thereafter. As in Smith , the policy here spelled out the steps to be taken by an insured if a loss occurred. Smith , 403 F.3d at 403. First, the insured had to give Auto-Owners "immediate" notice of the loss, protect the property from further damage or loss, make necessary and reasonable temporary repairs, and keep records of the cost. [R. 32-2 Page ID #: 199–200] The insured also had to make an inventory of all damaged and destroyed property; show in detail quantities, costs, actual cash value, and amount of loss claimed; and attach to the inventory all available bills, receipts, and related documents that substantiate the figures in the inventory. [Id. at Page ID #: 200] Within sixty days after the loss, the insured was required to submit a signed and sworn proof-of-loss statement. [Id. ] In support of her compliance with these terms, Plaintiff merely alleges in her Amended Complaint that:
Auto Owners Insurance was further supplied all information requested concerning the damages and injuries to the Plaintiff, Melissa Howard, including but not limited to bank statements, living expenses, lists of lost items, and estimates to remove the debris of the destroyed home.
[ R. 1-1 Page ID #: 21] But nowhere does Plaintiff allege when she provided these documents and other materials to Auto Owners after the fire loss.
Even so, Plaintiff's obligations under this policy are substantially similar to the policy at issue in Smith. For example, each policy required either "prompt" or "immediate" notice of the loss. See Smith , 403 F.3d at 403 ("prompt"); [R. 32-2 Page ID #: 199 ("immediate")]. Each policy also required the insured to produce all records reasonably requested by the company and to submit to examination under oath if requested to do so. See Smith , 403 F.3d at 403 ; [R. 32-2 Page ID #: 200]. And under each policy, the insured was obligated to submit a proof-of-loss statement within sixty days after the loss. See Smith , 403 F.3d at 403 ; [R. 32-2 Page ID #: 200]. Because Ms. Howard's obligations under her policy are nearly identical to the policies in Smith , her prompt compliance would likely have given her at least six months to sue, which Kentucky courts have held to be a reasonable limitation. Smith , 403 F.3d at 406. Moreover, Plaintiff failed to file a substantive response to Defendant's Motion by the Court's extended deadline, and the Court does not detect a persuasive reason to question the reasonableness and validity of the limitation provision in her policy (which closely tracks the Smith policy).
The undisputed facts are that Plaintiff's policy with Auto-Owners contained a one-year limitation on her right to sue after a loss occurred, that Plaintiff claimed a fire destroyed her home in January 2017, and that Plaintiff did not file suit against Auto-Owners until April 2018. Nothing in the record indicates that it would not have been possible for Plaintiff to comply with all the prerequisites for suit and still bring a breach of contract claim within one year of the fire loss. See Miller v. Seneca Specialty Ins. Co., Inc. , No. 5:18-CV-054-TBR, 2019 WL 3431588, at *3 (W.D. Ky. July 29, 2019) (dismissing plaintiff's breach of contract claim where plaintiff failed to respond to the defendant's summary judgment motion and thus did not argue "that the contractual limitation period is unreasonable or that it conflicts with any statute or regulatory scheme in Kentucky"). Under Sixth Circuit precedent and Kentucky law, Plaintiff's breach of contract claim is time barred. There are no genuine issues of material fact, and Auto-Owners is entitled to summary judgment on this claim.
B. Kentucky Unfair Claims Settlement Practices Act Claim
The KUCSPA prohibits insurances companies from engaging in fourteen enumerated unfair practices. Ky. Rev. Stat. § 304.12–230. Plaintiff alleges that Auto-Owners violated the following subsections:
(2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
(3) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
(4) Refusing to pay claims without conducting a reasonable investigation based upon all available information; [and]
(6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear[.]
[ R. 1-1 Page ID #: 21–22 (citing Ky. Rev. Stat. § 304.12–230(2) – (4), (6) )]
To state a claim under KUCSPA, a plaintiff "must meet a high threshold standard that requires evidence of ‘intentional misconduct or reckless disregard of the rights of an insured or claimant’ by the insurance company that would support an award for punitive damages.’ " Motorists Mut. Ins. Co. v. Glass , 996 S.W.2d 437, 454 (Ky. 1997) (quoting Wittmer v. Jones , 864 S.W.2d 885, 890 (Ky. 1993) ). Once the plaintiff has made this initial showing, she must establish the following three elements of a bad faith claim:
(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.
Phelps v. State Farm Mut. Auto. Ins. Co. , 736 F.3d 697, 703 (6th Cir. 2012) (quoting Wittmer , 864 S.W.2d at 890 ) (other citations omitted).
Defendant argues that Plaintiff's KUCSPA claim is similarly time-barred under the contractual limitations period. [R. 32 p. 5] However, Smith was arguably limited to breach of contract claims: "[u]nder Kentucky law, a cause of action for breach of an insurance contract may ‘accrue’ in some sense, before the claimant is entitled to sue." Smith , 403 F.3d at 405 (emphasis added). It is unsettled whether the holding in Smith applies outside the breach of contract context. See, e.g., Tennant , 2006 WL 319046, at *3, *6 (declining to extend Smith ’s logic to the bad faith context); Price , 37 F. Supp. 3d at 897–98 (agreeing with the Tennant court that Smith does not resolve the issue of when a bad faith cause of action accrues); Howard , 2014 WL 5780967, at *5 (noting Smith ’s silence as to whether its conclusion extends to the bad faith context). These courts note the textbook legal principle that a claim cannot accrue until the last event necessary to create the cause of action occurs. Combs v. Int'l Ins. Co. , 354 F.3d 568, 591 (6th Cir. 2004) ("Legal rights and obligations vest when the last event necessary to create the cause of action occurs."). The Court finds the reasoning in Tennant, Price , and Howard persuasive. Plaintiff's KUCSPA action could not have accrued until Auto-Owners actually engaged in the alleged unfair settlement practices, so the "last event necessary" to create this cause of action was not the date when the fire loss occurred.
Unfortunately, neither party has provided any facts concerning when Plaintiff's KUCSPA claim accrued. That is, there are no facts in the record detailing when the "last event necessary" to create the cause of action occurred. Defendant has failed to advance any facts in this regard, and the Court may not assume such action accrued on the date of loss. Howard , 2014 WL 5780967, at *4 ; Price , 37 F. Supp. 3d at 892. Recall that the policy here defined "suit" as "a civil court proceeding in which damages because of bodily injury, property damage or personal injury to which this insurance applies are alleged." [R. 32-2 Page ID #: 181] Plaintiff's KUCSPA claim does not seek recovery for the "property damage" that occurred as a result of the fire at her residence (to which her policy applies). Instead, Plaintiff's KUCSPA claim seeks damages "by reason of violation of the statute [itself]." Glass , 996 S.W.2d at 452. And the policy contains no provision purporting to limit Plaintiff's right to sue Auto-Owners for alleged violations of the KUCSPA (or any other statute). Although it may have been possible for Plaintiff to bring her first claim—that Auto-Owners breached the express terms of the policy—within one year of the fire loss, the same cannot necessarily be said for her KUCSPA claim. The Court declines to grant summary judgment to Auto-Owners based upon extending the logic of Smith. Defendant's motion relies entirely on its statute of limitations argument and fails to address the merits of the case, providing the Court with no ability to rule on that ground. See, e.g., Miller , 2019 WL 3431588, at *3–*4 (denying summary judgment on the bad faith claim where the defendant only argued that the claim must fail because the breach of contract claim was time barred).
As a result, the Court will provide Defendant the opportunity to file a successive motion for summary judgment addressing the merits of Plaintiff's KUCSPA claim. See Kovacevich v. Kent State Univ. , 224 F.3d 806, 835 (6th Cir. 2000) (Gilman, J., concurring in part and concurring in the judgment) ("District courts may in their discretion permit renewed or successive motions for summary judgment, particularly when the moving party has expanded the factual record on which summary judgment is sought."). Plaintiff may also file her own summary judgment motion on her KUCSPA claim, and both parties will receive the regular response and reply times as set out in the Local Rules.
IV. Conclusion
For the reasons discussed above, Auto-Owners is entitled to summary judgment on Plaintiff's breach of contract claim, but not on Plaintiff's KUCSPA claim. Accordingly,
IT IS HEREBY ORDERED as follows:
1. The Defendant's Motion for Summary Judgment [R. 32 ] is GRANTED in part as to Plaintiff's breach of contract claim (Count I).
2. The Defendant's Motion for Summary Judgment [R. 32 ] is DENIED in part as to Plaintiff's KUCSPA claim (Count II).
3. Plaintiff and/or Defendant MAY FILE a successive motion for summary judgment addressing the merits of Plaintiff's KUCSPA claim within sixty days of this Order .
The parties shall have response and reply times as set out in the Local Rules.