American General Life Insurance Company v. Jude
Filing
144
MEMORANDUM OPINION AND ORDER: 1) Pla's 140 Motion for Reconsideration is DENIED; 2) Pla's 143 Motion to Set a Scheduling Conference is GRANTED; and 3) a Telephonic Scheduling Conference is hereby set for F riday, 12/3/21 at 11:00 a.m. The parties must dial in to this conference at least five (5) minutes before the scheduled time by following these steps: Call AT&T Teleconferencing at 1-877-336-1839; and Enter access code 8854898. Signed by Judge David L. Bunning on 11/16/21.(JLS)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
AT ASHLAND
CIVIL ACTION NO. 17-90-DLB-EBA
AMERICAN GENERAL LIFE INSURANCE COMPANY
v.
PLAINTIFF
MEMORANDUM OPINION AND ORDER
ESTATE OF CHAD JUDE, by and through its
executrix Lori Jude; LORI JUDE, individually
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DEFENDANTS
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Plaintiff American General Life Insurance Company (“American General”), filed the
underlying action in 2017, seeking a declaratory judgment voiding a $1.5 million 2015 life
insurance policy (“the 2015 policy”) issued to Defendant Chad Jude. (Doc. # 1 at 1).
American General alleged that Jude had misrepresented the state of his health in his
application for the 2015 policy. (Id.). In 2019, this Court granted American General’s
Motion for Summary Judgment, (Doc. # 112), which Jude appealed, (Doc. # 119). The
United States Court of Appeals for the Sixth Circuit affirmed in part, reversed in part, and
remanded the case to the District Court for further findings consistent with the Sixth Circuit
opinion. (Doc. # 122). Following remand, this Court granted in part and denied in part
American General’s second Motion for Summary Judgment through a Memorandum
Opinion and Order entered on July 12, 2021. (Doc. # 139).
Thereafter, the Judes filed a Motion to Revise the Memorandum Opinion and
Order. (Doc. # 140). The Motion has been fully briefed, (Docs. # 141 and 142), and is
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now ripe for the Court’s review. For the reasons set forth herein, Plaintiff’s Motion to
Revise the Memorandum Opinion and Order is denied.
I.
FACTUAL AND PROCEDURAL BACKGROUND
The relevant facts of this case were described in the Court’s previous order, (Doc.
# 111), were further described by the Sixth Circuit, (Doc. # 122), and were again explained
in the Court’s most recent order, (Doc. # 139). Therefore, the Court finds it unnecessary
to recite the facts for the current motion.
II.
ANALYSIS
A.
Standard of Review
Federal Rule of Civil Procedure 54(b) allows for modification of orders “that
adjudicate[] fewer than all the claims . . . at any time before the entry of judgment
adjudicating all the claims and all the parties’ rights and liabilities.” Generally, district
courts may “afford such relief from [interlocutory orders] as justice requires.” Rodriguez
v. Tenn. Laborers Health & Welfare Fund, 89 F. App’x 949, 959 (6th Cir. 2004) (alteration
in original).
There are three situations in which courts may find justification for
reconsidering interlocutory orders: “where there is (1) an intervening change of controlling
law; (2) new evidence available; or (3) a need to correct a clear error or prevent manifest
injustice.” Louisville/Jefferson Cnty. Metro Gov’t v. Hotels.com, L.P., 590 F.3d 381, 389
(6th Cir. 2009) (internal brackets omitted) (quoting Rodriguez, 89 F. App’x at 959 (internal
quotation marks and brackets omitted)).
Ultimately, district courts have “significant
discretion in deciding motions for reconsideration,” Woods v. RHA/Tenn. Grp. Homes,
Inc., 803 F. Supp. 2d 789, 798 (M.D. Tenn. 2011), however, motions for reconsideration
are “extraordinary in nature and, because they run contrary to finality and repose, should
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be discouraged.” Younglove Constr., LLC v. PSD Dev., LLC, 767 F. Supp. 2d 820, 824
(N.D. Ohio 2011).
B.
Punitive Damages
In the pending Motion, the Judes attempt to correct the standard recited by the
Court for punitive damages. (Doc. # 140 at 1). The Judes assert that “the correct
standard for punitive damages is whether there is evidence of oppression, fraud or gross
negligence—not ‘bad faith.’” (Id.). In its previous Memorandum Opinion and Order, the
Court noted that according to the Kentucky Supreme Court, “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.” (Doc. #
139 at 17) (quoting Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993)). The Court then
noted that because there was no evidence of bad faith, the Judes could not recover
punitive damages. (Id.). The Judes argue that Wittmer does not stand for the proposition
that a showing of bad faith is required to recover punitive damages. (Doc. # 140 at 2-3).
However, before discussing the correct legal standard, the Court notes that the Judes’
assertion seems rather disingenuous when reviewing their Response to American
General’s second Motion for Summary Judgment—the section discussing punitive
damages is entitled: “[p]unitive damages are allowable in bad faith actions.” (Doc. # 133
at 28). The Judes then go on to discuss the relationship between bad faith and punitive
damages in the insurance context:
Kentucky permits the “recovery in tort when an insurance company acts in
bad faith” that would include a claim for punitive damages. Kentucky law
places “extraordinary confidence” in entrusting juries to consider punitive
damages for bad faith. After listening to all of the evidence presented at
trial, if there is sufficient evidence of a “reckless disregard to the rights of an
insured or claimant,” then awarding punitive damages is “a matter within the
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jury’s discretion.” “[I]f a cause of action existed against [an insurer] for bad
faith violations . . . the claimant was entitled to an instruction permitting an
award of punitive damages.”
Taking all of the evidence in the light most favorable to the nonmoving party
and giving them every inference there is a genuine issue of material fact as
to whether American General acted in bad faith when it issued the policy in
violation of 806 Ky. Admin. Regs. 12:080. Therefore, summary judgment is
not appropriate.
(Id. at 29) (internal citations omitted). Now, following an adverse finding preventing the
Judes from recovering punitive damages, they attempt to take a proverbial second-bite
at the apple after what they allege was a misstatement of the law by the Court, when they
presented that misstatement for the Court’s review.
Nonetheless, the Court will review the applicable law to ensure its prior decision
was correct. The Judes argue that Wittmer does not stand for the proposition that bad
faith is required to recover punitive damages, and instead “held that there must be ‘bad
faith’ to get compensatory damages.” (Doc. # 140 at 2) (emphasis added). The Judes
now ask the Court to allow for punitive damages if “there [is] sufficient evidence of
intentional misconduct or reckless disregard of the rights of an insured.” (Id. at 3) (quoting
Wittmer, 864 S.W.3d at 890). A closer reading of Wittmer reveals the fallacy of their
argument. Directly before the paragraph cited by Plaintiffs, the Wittmer court explains
that “[t]he essence of the question as to . . . whether there are tortious elements justifying
an award of punitive damages depends first on whether there is proof of bad faith and
next whether the proof is sufficient for the jury to conclude that there was conduct that is
outrageous because of the defendant’s evil motive or his reckless indifference to the
rights of others.” 864 S.W.2d at 885, 890 (quoting Federal Kemper Ins. Co. v. Hornback,
711 S.W.2d 844, 848 (Ky. 1986) (Leibson, J., dissenting)) (internal quotations and
citations omitted) (emphasis added). This undoubtedly stands for the proposition that, at
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least in the context of KRS § 304.12-230, bad faith is a prerequisite to an ultimate
determination of whether a defendant acted outrageously and therefore may be liable for
punitive damages. Accordingly, Plaintiffs’ argument that the Wittmer court did not require
proof of bad faith to include a punitive damages instruction is misplaced.
Moreover, even assuming the standard in Wittmer does not apply to violations of
KRS § 304.12-010, it is still clear that punitive damages are not recoverable in the instant
action. Kentucky’s punitive damages framework provides two routes to recovery—“one
statutory and one under common law.” St. Joseph Healthcare, Inc. v. Thomas, 487
S.W.3d 864, 870 (Ky. 2016). Under KRS 411.184(2), punitive damages are recoverable
“upon proving, by clear and convincing evidence, that the defendant from whom such
damages are sought acted toward the plaintiff with oppression, fraud[,] or malice.”
“However, in Williams v. Wilson, 972 S.W.2d 260 (Ky. 1998), [the Kentucky Supreme
Court] held that punitive damages may also be awarded under the common law standard
of ‘gross negligence.’” St. Joseph Healthcare, 487 S.W.3d at 870. Gross negligence
requires that a defendant act with “wanton or reckless disregard for the lives, safety, or
property of others.” Id. (quoting Gibson v. Fuel Transport, Inc., 410 S.W.3d 56, 59 (Ky.
2013)).
Under any of the three statutory standards—whether oppression, fraud, or
malice—a plaintiff must show by “clear and convincing evidence” that defendant
“specifically intended” to harm the plaintiff in some way. Ky. Rev. Stat. §§ 411.184(1)(a)(c), (2). Likewise, under the common law standard, for the Judes to recover punitive
damages, American General would had to have acted with reckless disregard to the
Judes’ “lives, safety, or property.” St. Joseph Healthcare, 487 S.W.3d at 870 (quoting
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Gibson, 410 S.W.3d at 59). The unfortunate reality for the Judes is that the bad faith
standard and the punitive damages standard in Kentucky are undoubtedly similar. The
third element of a bad faith claim “‘requires evidence that the insurer’s conduct was
outrageous, or because of his reckless indifference to the rights of others’ because a bad
faith claim is ‘a punitive action.’” Bowlin Group, LLC v. Rebennack, 626 S.W.3d 177, 188
(Ky. Ct. App. 2020).
Similarly, to succeed on a punitive damages claim, the Judes would have to prove
American General acted with reckless disregard under the common law standard or acted
with a specific intent to harm the Judes under the statutory standard. Although the Sixth
Circuit found that American General violated 806 Ky. Admin. Reg. 12:080, which this
Court found to also be a violation of KRS § 304.12-010, the Sixth Circuit explained that
because of the scarce case law in the area, “American General’s actions did not ‘lack
reasonable basis in law or fact[,]’” and further noted that “there was room for reasonable
disagreement as to the proper outcome of the contested legal issues in this case.” (Doc.
# 122 at 18). This finding necessitates the conclusion that American General did not
specifically intend to violate the statute and neither did it act with reckless disregard in
doing so.
To find otherwise would offend Kentucky jurisprudence which holds that
“[u]ncertainty as to application of insurance policy provisions . . . is a reasonable and
legitimate reason for an insurance company to litigate a claim.” Philadelphia Indem. Ins.
Co. v. Youth Alive, Inc., 732 F.3d 645, 650 (6th Cir. 2013) (quoting Farmland Mut. Ins.
Co. v. Johnson, 36 S.W.3d 368, 375, 377 (Ky. 2000)).
Additionally, the Judes have presented no evidence to the contrary, except to point
out that: “a reasonable juror could easily surmise that American General’s conduct was a
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failed attempt to avoid the statutory credit enacted to protect the citizens of this
Commonwealth.” (Doc. # 140 at 6). This type of assumption is not sufficient to survive
summary judgment. Thompson I.G., LLC v. Edgetech I.G. Inc., 590 F. App’x 532, 537
(6th Cir. 2014) (“The nonmoving party cannot create a genuine dispute of material fact
through mere speculation . . .”) (internal quotations omitted). While the Judes argue that
the inference of a “clear economic advantage gained by American General to the financial
detriment of its insureds,” this alone is not enough to survive summary judgment and
certainly does not meet the punitive damage standard recited above. Although inferences
drawn from material evidence are evaluated while adjudicating a summary judgment
motion, the “mere possibility of a factual dispute is not enough.” Hartsel v. Keys, 87 F.3d
795, 799 (6th Cir. 1996) (internal quotations omitted).
Finally, the Court notes that “[i]t is well-settled that ‘parties cannot use a motion for
reconsideration to raise new legal arguments that could have been raised before a
judgment was issued.’
Additionally, reconsideration motions cannot be used as an
opportunity to re-argue a case.” Bank of Ann Arbor v. Everest Nat. Ins. Co., 563 F. App’x
473, 476 (6th Cir. 2014) (quoting Roger Miller Music, Inc. v. Sony/ATV Publ’g, 477 F.3d
383, 395 (6th Cir. 2007)). The arguments raised in the instant motion undoubtedly could
have been raised initially in the Judes’ response to American General’s second Motion
for Summary Judgment.
III.
CONCLUSION
Thus, for the reasons set forth herein, IT IS HEREBY ORDERED as follows:
(1)
Plaintiff’s Motion for Reconsideration (Doc. # 140) is DENIED;
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(2)
Plaintiff’s Motion to Set a Scheduling Conference (Doc. # 143) is
GRANTED; and
(3)
A Telephonic Scheduling Conference is hereby set for Friday,
December 3, 2021 at 11:00 a.m. The parties must dial in to this conference at least
five (5) minutes before the scheduled time by following these steps:
●
Call AT&T Teleconferencing at 1-877-336-1839; and
●
Enter access code 8854898.
This 16th day of November, 2021.
M:\DATA\ORDERS\Ashland Civil\2017\17-90 Order on Motion for Reconsideration.docx
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