Kelley v. Westfield Insurance Company et al

Filing 16

MEMORANDUM OPINION & ORDER: IT IS HEREBY ORDERED that Dft Transamerica Life Insurance Company's Motion to Dismiss DE 5 and Dft Westfield Insurance Company's Motion for Summary Judgment DE 8 be SUSTAINED and this matter be DISMISSED WITH PREJUDICE and STRICKEN from the docket of this Court. Signed by Judge Henry R. Wilhoit, Jr on 10/22/2015.(KSS)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
ASHLAND
Civil Action No. 15-12-HRW
HELEN KELLEY,

v.

PLAINTIFF,

MEMORANDUM OI>INION AND ORDER

WESTFIELD INSURANCE COMPANY
and
TRANSAMERICA LIFE INSURANCE
COMPANY,

DEFENDANTS.

This matter is before the Court upon Defendant Transamerica Life Insurance Company's
Motion to Dismiss [Docket No. 5] and Defendant Westfield Insurance Company's Motion for
Summary Judgment [Docket No. 8]. The motions have been fully briefed by the parties [Docket
Nos. 9, II, 12 and 13]. For the reasons set fotih herein, the Court finds that the Complaint fails
to state a claim for which relief can be granted and that the Defendants are entitled to judgment
as a matter oflaw.

I.
The facts as alleged in the Complaint are, for the most part, undisputed. As set forth in
the Complaint, this matter arises from a severe accident which occurred on April 28, 1983 and
resulted in Plaintiffs late husband's, William Kelley II's, complete and permanent paralysis.
[Complaint, Docket No. 1-1, ~ 5]. A lawsuit followed the accident, in which Plaintiff and her
husband alleged negligence; Mr. Kelley sought damages for personal injuries resulting from the
accident and Plaintiff Helen Kelley sought damages for lost ofconsortium.ld.

at~

8-9. Both

claims were settled with the negligent party and their insurance carrier, Defendant Westfield
Insurance Company ("Westfield"). !d.

at~

10.

On January 4, 1985, Mr. and Mrs. Kelley entered into a Settlement Agreement and
Release (hereinafter, "Agreement) with Westfield. !d.

at~

11. The Agreement was drafted by

the attorney for Westfield. [ Affidavit of C. David Mussetter, Docket No. 9-1].
The Agreement provided for a structured settlement of Mr. and Mrs. Kelley's claims,
including particularly at issue here, lifetime payments of five thousand dollars ($5,000) per
month, but guaranteed for a minimum of thirty (30) years. [Agreement, Docket No. 8-2]
Section I, Paragraph 2 of the Settlement Agreement states:
In consideration for this Release, Westfield Insurance Company
(hereinafter referred to as "the Insurer") agrees to make the
following payments:
Eight Hundred Thousand Dollars ($800,000) on January 4, 1985;
Five Thousand Dollars ($5,000) per month, for life, guaranteed for
thirty (30) years begi1ming February 4, 1985.

!d.
In addition, lump sum payments were scheduled every five years:
Three Hundred Ten Thousand Dollars ($31 0,000) on
February 4, 1990.
(b)
One Hundred Thousand Dollars ($100,000) on February 4,
1995.
(c) One Hundred Fifty Thousand Dollars ($150,000) on
February 4, 2000.
(d)
One Hundred Seventy-Five Thousand Dollars ($175,000)
on February 4, 2005.
(e)
Two Hundred Twenty-Five Thousand Dollars ($225,000)
on February 4, 2010.
(f)
Two Hundred Seventy-Five Thousand Dollars ($275,000)
on February 4, 2015.
(a)

2

The Agreement further contains terms regarding, specifically, the death of either or both
Plaintiff or her husband before the expiation of the 30 year period, Februmy 4, 2015:

In the event of the death of William E. Kelley, II prior to Februmy
4, 2015, the payments in the amounts heretofore set forth and on
the dates hereinabove mentioned, shall continue to his wife, Helen
Kelley, said payments to continue until February 4, 2015.
In the event of the death of Helen Kelley prior to February 4, 2015,
the payments in the amounts heretofore set forth and on the dates
hereinabove mentioned, shall continue to William E. Kelley, II,
said payments to continue as set forth above.
In the event that both William E. Kelley, II and Helen Kelley die
prior to February 4, 2015, the payments in the amounts heretofore
set forth and on the dates hereinabove mentioned, shall pass into
the estate of William E. Kelley, II or Helen Kelley, whichever lives
longer, said payments to continue until Februmy 4, 2015.

Id

It is undisputed that Plaintiff and her husband were represented by counsel, Garis Pruitt
and C. David Mussetter, and Plaintiff, her husband and her attomeys signed the Agreement.
The Agreement expressly gave Westfield the right, which it ultimately exercised, to
assign its duties and obligations for future payments to Transamerica Annuity Service
Corporation ("Transamerica"). !d. The Agreement further provided that all payments to be made,
except for the initial $800,000 payment, could be funded by the purchase of an annuity from
Transamerica Life Insurance Company. !d.
Mr. Kelley died on June 22, 2012. [Docket No. 1-1, '1!6].
On July 19,2012, Transamerica sent a letter to Plaintiff informing her that the 360th and
final monthly payment would be due for Janumy 4, 2015, and that the final lump sum payment of

3

$275,000 would be for February 4, 2015.
On December 25, 2014, Transamerica made the final guaranteed monthly payment of
$5,000 as well as the final guaranteed lump-sum payment of $275,000. [Affidavit of Tracy
Martin, Docket No.

5-2~

2 and 3].

As provided for in the Agreement, the first monthly payment was made on February 4,
1985. Therefore, Plaintiff and/or Mr. Kelley received 11 payments in 1985, 12 payments each
year from 1986 through 2013, and 13 payments in 2014, because the final and 360th payment,
due for January 4, 2015, was made on December 25,2014.
On February 4, 2015, Plaintiff initiated this lawsuit against Westfield and Transamerica
in Greenup Circuit Court. Plaintiff alleges that the Agreement requires that monthly payments be
made "not only through the life of William E. Kelley, II, but also through the life of [Plaintiff], as
compensation for her consortium claim." [Docket No. 1-1, ~ 17]. She alleges that "[fjailure to so
pay the Five Thousand Dollar ($5,000.00) monthly payments to Kelley for her lifetime
constitutes a breach of contract ... ."!d.

at~

18.

Defendants filed a Notice of Removal, asserting diversity jurisdiction pursuant to 28
U.S.C. § 1332. This Court sustained the removal.
Transamerica seeks dismissal of Plaintiffs Complaint and Westfield seeks summary
judgment. Both Defendants argue that Plaintiffs allegations ignore the clear, unambiguous
terms of the Agreement, which was entered into knowingly and voluntarily by Plaintiff and Mr.
Kelley, and their attorneys. As such, her claim fails.

4

II.
Defendants' dispositive motions attack both the legal and factual sufficiency of Plaintiffs
case.

The Federal Rules of Civil Procedure allow for both methods.
Transamerica seeks dismissal pursuant to Fed.R.Civ.Proc. 12(b)(6). Dismissal of a

complaint is warranted under Fed.R.Civ.P. 12(b)(6) if it fails to state a claim upon which relief
can be granted. The "complaint must contain either direct or inferential allegations respecting
all material elements to sustain a recovety under some viable legal theory." Bishop v. Lucent

Technologies, Inc., 520 F.3d 516, 519 (6th Cir. 2008) (internal citation omitted).
Westfield seeks judgment as a matter of law pursuant to F ed.R.Civ .Proc. 56. Sununmy
judgment is appropriate where "the pleadings, the discovery and disclosure materials on file, and
any affidavits show that there is no genuine issue as to any material fact and that the movant is
entitled to judgment as a matter of law." Fed.R.Civ.P. 56( c). The moving party "bears the
initial responsibility of informing the district court of the basis for its motion, and identifying
those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue
of material fact." Celotex Corp. v. Caire//, 477 U.S. 317, 323 (1986). The Court views all
evidence in the light most favorable to the non-moving pmty. Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574,587 (1986)." 'The mere existence of a scintilla of evidence in
support of the [non-moving party's] position will be insufficient [to defeat a motion for summary
judgment]; there must be evidence on which the jury could reasonably find for the [non-moving
party].' "Moldowan v. City of Warren, 578 F.3d 351, 374 (6th Cir.2009) (quoting Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)).
5

The law I fact distinction which organizes the rules of civil procedure is of no moment in
this case. This Court's task is to interpret the Agreement, which, in this case, speaks for itself
III.

In seeking dismissal, Defendant Transamerica argues that the terms of the Agreement are
unambiguous and clearly provide that the $5,000 monthly payments would be made for the
duration of Mr. Kelley's life, but if Mr. Kelley died before February 4, 2015, then the payments
would terminate 30 years, or 360 months, from February 4, 1985, the date of the first monthly
payment. Transamerica states that it has tendered all required monthly payments.
Westfield denies any involvement in the dispute between Plaintiff and Transamerica.
Specifically, it entered into an agreement with Defendant Transamerica to provide payment to the
Kelleys according to the terms of the Release. The validity of that agreement has not been
questioned.
Plaintiff contends that the Agreement is ambiguous and, as such, should be construed
against the Defendants. She further maintains she never would have settled that claim under
Transamerica's interpretation of the Agreement.
The parties concede that Kentucky law governs this case. With regard to the
interpretation of insurance contracts, Kentucky's Supreme Court has stated, in no uncertain
terms:
[A]s to the manner of construction of insurance policies, Kentucky
law is crystal clear that exclusions are to be narrowly interpreted
and all questions resolved in favor of the insured. Exceptions and
exclusions are to be strictly construed so as to render the insurance
effective. Any doubt as to the coverage or terms of a policy should
be resolved in favor of the insured. And since the policy is drafted
in all details by the insurance company, it must be held strictly

6

accountable for the language used.

Eyler v. Nationwide Mutual Fire Insurance Company, 824 S. W.2d 855, 859 (Ky. 1992)(citations
omitted).
However, these canons of construction are applicable only when the insurance contract is
ambiguous or self contradictory. Peoples Bank & Trust Co. v. Aetna Casualty & Surety Co., 113
F.3d 629,636 (6'h Cir. 1997). In the absence of a ambiguity, the contract is to be given its plain
meaning. Jd
Plaintiff insists that paragraph 2 of the Agreement, which provides for monthly payments
of Five Thousand Dollars ($5,000) for life, guaranteed for thitty (30) years, is ambiguous because
it does not state whose life is being referenced. Yet, Plaintiffs bid for a lifetime of monthly
payment is in direct contravention of the clear terms of the Agreement. The Agreement provides
monthly payments for life, guaranteed for 30 years in the event Mr. Kelley died before 30 years
elapsed. The terms contained in that same paragraph make clear that "for life" applies only to
Mr. Kelley. Plaintiff stopped reading mid-way through the Agreement. The Agreement also
provides that "[i]n the event of the death of William E. Kelley, II prior to Februmy 4, 2015, the
payments in the amounts heretofore set forth and on the dates hereinabove mentioned, shall
continue to his wife, Helen Kelley, said payments to continue until February 4, 2015."
(emphasis added). By differentiating between Mr. and Mrs, Kelley, it is clear that the measuring
life is that of Mr. Kelley. Additionally, the next term of Paragraph I provides that "[i]n the event
of the death of Helen Kelley prior to February 4, 2015, the payments in the amounts heretofore
set forth and on the dates hereinabove mentioned, shall continue to William E. Kelley, II, said
payments to continue as set forth above." (emphasis added).
7

Reading the entire Agreement

confirms that the payments would not continue past February 4, 2015 if Mr. Kelley died before
that date. Any other interpretation of the Agreement would render both the provision for
guaranteed monthly payments for 30 years/360 months and the provision for payment to Plaintiff
continuing only until February 4, 2015 to meaningless prattle. Nowhere in the Agreement is
there any indication that the parties intended for Plaintiff to receive monthly payments for life,
and to construe the Agreement that way would render subsequent provisions of the very same
paragraph moot. Plaintiffs interpretation of the Agreement only succeeds if these two provisions
are ignored, an approach strictly prohibited by well-established contract law. "Any contract or
agreement must be construed as a whole, giving effect to all parts and every word in it if
possible." Cantrell Supply, Inc. v. Liberty Mut. Ins., 94 S.W.3d 381, 384-85 (Ky. Ct. App. 2002).
Plaintiff also argues that she never would have agreed to a settlement that did not pay her
$5,000 per month for the term of her life because her loss of consortium claim was so strong.
She urges the Court to consider her situation at the time the Agreement was entered and the
conditions under which it was executed. She emphasizes that she had a substantial claim for loss
of consortium; she provided daily care for more than twenty-eight (28) years to Mr. Kelley, who
was paralyzed from the chest down. She states that it is only logical the Agreement
contemplated that she also would receive the benefit of lifetime monthly payments.
The Court recognizes that "the agreement is to be construed according to the intention of
the parties," however, in order to determine such intention, a court "must give consideration and
effect to every provision. State Farm Mut. Auto. Ins. Co. v. Hobbs, 268 S.W.2d 420, 422 (Ky.
1954). Yet, notwithstanding what Plaintiff and her husband endured, this Comi cannot "revise
the agreement while professing to construe it." Id.

8

Taken as a whole, the Agreement is not ambiguous. No pmiion of it discusses the
possibility
of payments to Mrs. Kelley after February 4, 2015, if her husband predeceased her. Instead, it
clearly provides that in the event Mr. Kelley predeceased Plaintiff prior to Februmy 4, 2015, then
Transamerica would make all remaining 30 year/360 month guaranteed monthly payments, the
final being paid on January 4, 2015, and all remaining guaranteed lump-sum payments, the final
being paid on Februmy 4, 2015. Transamerica made all such payments and Plaintiff is not
entitled to any further payment.

IV.
Pursuant to the unambiguous terms of the Agreement. Plaintiff has failed to allege any
facts which plausibly entitle her to relief. No amendment to the Complaint can cure this
deficiency. As such, the Complaint should be dismissed in its entirety and Defendants are
entitled to judgment as a matter of law.
Accordingly, IT IS HEREBY ORDERED that Defendant Transamerica Life Insurance
Company's Motion to Dismiss [Docket No. 5] and Defendant Westfield Insurance Company's
Motion for Summary Judgment [Docket No. 8] be SUSTAINED and this matter be
DISMISSED WITH PREJUDICE and STRICKEN from the docket of this Comi.
f} r;;ttl
This .!21t2f___ day of October, 2015.

~~~;~\
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9

Signed By:
Henrv B. Wllhnlt. Jr.

United Stateg

Ol~trlct Judge