Lewis v. Drury et al
Filing
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MEMORANDUM OPINION & ORDER: It is ordered 1) Dft's Motion for Summary Judgment 18 is GRANTED IN PART; 2) This matter is referred to Magistrate Judge Candace J. Smith for her Report and Recommendation as to whether Dft acted in bad faith regarding payment of Plf's MPC benefits; 3) The parties shall supplement the record with any evidence necessary for resolution of the issue. Signed by Judge William O. Bertelsman on 06/26/2012.(TED)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
AT COVINGTON
CIVIL ACTION NO. 2011-85 (WOB-CJS)
KATHY LEWIS
VS.
PLAINTIFF
MEMORANDUM OPINION
AND ORDER
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY
DEFENDANT
In this matter, Plaintiff alleges that her insurance
company acted in bad faith in its handling of her claims.
The
Court heard oral argument on Defendant’s Motion for Summary
Judgment (Doc. 18) on June 20, 2012.
James B. Galbreath
represented Plaintiff, who was personally present, and Richard
W. Edwards represented Defendant.
Official court reporter Joan
Averdick recorded the proceedings.
Factual and Procedural Background
On May 31, 2008, Plaintiff was injured in a motor vehicle
accident when Anne Drury rear-ended Plaintiff’s vehicle.1
(Plaintiff Depo. at 21-23).
As a result of the accident,
Plaintiff was initially diagnosed with cervical strain.
(Id. at
26).
1
Drury was originally named as a defendant in this action, but all claims
against her were settled, and she was dismissed by agreement of the parties
on July 21, 2011. (See Docs. 12, 14).
Four to six weeks after the accident, Plaintiff began to
experience numbness and tingling in her arms.
(Id.).
Further
testing and consultations revealed that she was suffering from
thoracic outlet syndrome and, in December 2010, she underwent
surgery for this condition.
A.
(Plaintiff Depo. at 30-32, 39).
Available Coverage
At the time of the accident, Drury was insured by
Progressive Insurance Company for $50,000 in liability limits.
Plaintiff was insured by Defendant, and her policy provided
$25,000 in Medical Payment Coverage (“MPC”) and $100,000 in
Underinsured Motorist (“UIM”) benefits.
Furthermore, because the accident occurred in Kentucky,
Plaintiff was entitled to $10,000 in personal injury protection
(“PIP”) benefits under Kentucky’s Motor Vehicle Reparations Act
(“MVRA”).
B.
PIP and MPC Benefits
Shortly after the accident, Plaintiff began submitting her
bills directly to Defendant.
(Id. at 95).
These initial
medical bills were handled under the PIP benefits.
When those
benefits were exhausted, further claims were paid under the MPC.
The record reflects some delays in the payment of benefits.
The parties do not dispute there were coding issues regarding
Plaintiff’s change in diagnosis and with some of the bills
2
submitted, specifically, those submitted by her massage
therapist.
(Id. at 108, 179-80).
Additionally, the parties
agree that Defendant conducted an investigation into the
propriety of Plaintiff’s treatment.
(Id. at 101); (Doc. 18-4,
Letter Requesting Doctor’s Report, at 1).
However, the details
of these coding issues and the investigation, and their relation
to the payment delays, are unclear.
It is undisputed that Defendant has paid all available PIP
benefits and has exhausted the MPC coverage.2
C.
UIM Benefits
Plaintiff’s insurance policy also provided $100,000 in UIM
coverage.
She admits that she never specifically discussed with
her agent how UIM coverage worked.
(Plaintiff Depo. at 70).
On February 3, 2011, Plaintiff demanded the policy limits
of her UIM benefits.
(Doc. 18-7, at 2).
At that time,
Plaintiff had not resolved her claims against Drury.
18-8).
(See Doc.
Thus, Defendant notified Plaintiff that it could not
process her claim for UIM benefits until receiving notice of the
settlement with Progressive.
(See id.).
Thereafter, Plaintiff sent Defendant a copy of the
Complaint along with a letter addressed to Progressive accepting
its tender of Drury’s policy limits of $50,000.
2
(Doc. 18-10, at
On June 24, 2011, Defendant exhausted MPC coverage by tendering the amount
of remaining benefits directly to Plaintiff. (Doc. 18-5, at 1).
3
1).
This constituted Defendant’s first notice of Plaintiff’s
settlement with Progressive.
Defendant notified Plaintiff that
it would waive its subrogation rights, (see doc. 18-13, at 1),
and within one month of the filing of the Complaint, Progressive
tendered its policy limits.
(Doc. 18-11, at 1).
On June 3, 2011, Defendant offered to pay the remaining
benefits available under Plaintiff’s policies.
1).
(Doc. 18-12, at
This offer represented payment of the UIM policy limits of
$100,000, reduced by the $50,000 tendered by Progressive, and
the remaining amount of MPC benefits.
(See id.).
Plaintiff’s Complaint asserts that Defendant acted in bad
faith and in violation of the Kentucky Unfair Claims Settlement
Practices Act (“KUCSPA”) by failing to settle Plaintiff’s claim
for UIM coverage, as well as setting off the amount she
recovered from Progressive.
She seeks a declaration that she is
entitled to the full $100,000 under her UIM policy.
Plaintiff also alleges that Defendant failed to reasonably
or timely investigate her claims and delayed payment of her
benefits in bad faith and in violation of the KUCSPA.
Analysis
A.
Summary Judgment
Rule 56(a) of the Federal Rules of Civil Procedure provides
in relevant part that: “[t]he court shall grant summary judgment
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if 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).
Under Rule 56, the moving party bears the burden of proving
that no genuine issue of material fact exists, and the court
must construe the evidence and draw all reasonable inferences in
favor of the nonmoving party.
Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586-87 (l986).
Ultimately,
the court must determine whether the evidence presents a
sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a
matter of law.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
251–52 (1986).
B.
Plaintiff’s Claims Regarding her UIM Benefits
As a preliminary matter, the Court concludes that Ohio law
applies to determine the rights and obligations of the parties.
A court sitting in diversity applies the choice of law
rules of the forum state.
See Klaxon Co. v. Stentor Elec. Mfg.
Co., 313 U.S. 487, 496 (1941).
Under Kentucky law, the law of
the state with the most significant relationship to the
transaction and the parties applies to resolve the dispute.
See
Lewis v. Am. Family Ins. Grp., 555 S.W.2d 579, 581-82 (Ky.
1977).
“Using this test, in most cases the law of the residence
5
of the named insured will determine the scope of his automobile
liability insurance policy.”
Id. at 582.
In this case, Plaintiff resides in Ohio, and the insurance
policy was issued in Ohio.
The performance of the contract
occurred in Ohio, as Plaintiff’s claims for reimbursement and
the subsequent payments transpired in Ohio.
In fact, the only
contact with Kentucky is that the accident occurred there.
Therefore, Ohio law governs the parties’ conduct under the
contract.
Plaintiff seeks a declaration that she is owed $50,000 in
UIM benefits, which constitutes the amount by which Defendant
reduced her payment because of Progressive’s settlement.
She
also contends that Defendant’s failure to pay this amount
constituted bad faith.
Plaintiff’s argument is not well-taken because Defendant’s
set off was proper under both the terms of the Policy and under
Ohio law.
The Policy unambiguously provides that the insured’s
UIM coverage will be reduced by the amount available for payment
from other liability insurance policies.3
3
The relevant policy language provides:
4.
The most we pay for all damages arising out of and due to
bodily injury to one person is the lesser of:
a.
the difference between the “each person” limit of
liability of this coverage and the total amount
available for payment from all liability bonds,
liability insurance policies, self-insurance covering
persons or organizations liable for the bodily
6
Additionally, the Ohio Revised Code provides in relevant
part:
Underinsured motorist coverage in this state is not
and shall not be excess coverage to other applicable
liability coverages, and shall only provide the
insured an amount of protection not greater than that
which would be available under the insured’s uninsured
motorist coverage if the person or persons liable to
the insured were uninsured at the time of the
accident. The policy limits of the underinsured
motorist coverage shall be reduced by those amounts
available for payment under all applicable bodily
injury liability bonds and insurance policies covering
persons liable to the insured.
O.R.C. § 3937.18(C) (emphasis added).
Plaintiff had UIM coverage in the amount of $100,000.
settled with Progressive and received $50,000.
She
Therefore,
Defendant paid her $50,000, the difference between these two
amounts.
This reduction was in compliance with both the plain
language of the Policy and Ohio law and, therefore, was proper.4
See id.; Littrell v. Wigglesworth, 746 N.E.2d 1077, 1084 (Ohio
2001) (concluding that payments made by the tortfeasor to the
injury, and all payments individually made by persons
or organizations liable for the bodily injury; . . .
(See Doc. 25-1, at 2)(emphasis in original).
4
To the extent that Plaintiff contends that Defendant acted in bad faith
because her agent failed to adequately explain the set-off provision and thus
misrepresented that she had $100,000 of UIM coverage when, in fact, she did
not, this argument fails.
Ohio law specifically explains that UIM insurance is not excess
insurance, but rather provides that a UIM policy shall be the difference
between “those amounts available for payment under all applicable bodily
injury liability bonds and insurance policies covering persons liable to the
insured” and the UIM policy limits. See id. Therefore, Plaintiff received
$100,000 worth of UIM coverage as it is defined under Ohio law, and no
misrepresentation occurred.
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plaintiff offset the amount of UIM coverage available under the
policy).
To the extent that Plaintiff argues that Ohio law, which
requires set off, should not be applied because it violates
Kentucky public policy, this argument fails.
Plaintiff relies
on Kentucky’s public policy in favor of stacking UIM policies.
See Allstate Ins. Co. v. Dicke, 862 S.W.2d 327, 329 (Ky. 1993)
(concluding that anti-stacking provisions contained within
insurance policies were void as against public policy when
“separate items of ‘personal’ insurance [were] bought”).
However, stacking is not at issue in this case.
Stacking
occurs when an insured seeks to recover benefits under two
different insurance policies.
See Hammer v. State Farm Mut.
Auto. Ins. Co., 950 F. Supp. 192, 194 (W.D. Ky. 1996).
Here,
Plaintiff is attempting to recover UIM benefits under a single
policy and, therefore, her reliance is misplaced.
Moreover, application of Ohio law does not “violate any
public policy of Kentucky because such would not deny benefits
to a Kentucky resident who would otherwise be entitled to them
under our law; and Kentucky has no interest in applying our
public policy to provide benefits to [Ohio] residents who would
not be entitled to them under [Ohio] law.”
State Farm Mut. Auto
Ins. Co. v. Marley, 151 S.W.3d 33, 42 (Ky. 2004) (Cooper, J.,
8
dissenting).
See also Hammer, 950 F. Supp. at 195 (applying
Indiana law to enforce an anti-stacking provision within an
insurance policy, even though such provisions are void against
public policy in Kentucky).
Because Defendant properly paid Plaintiff $50,000 in
compliance with both the terms of the Policy and Ohio law,
Defendant did not act in bad faith.
Accordingly, Defendant is
entitled to summary judgment as to Plaintiff’s claims premised
on payment of her UIM benefits.5
C.
Plaintiff’s Claim Regarding PIP Benefits
Plaintiff originally asserted a bad faith claim premised on
Defendant’s administration of the PIP benefits.
However, she
clarified during oral argument that she is not pursuing this
claim.
Accordingly, to the extent that Plaintiff’s bad faith
claim was based on Defendant’s payment of PIP benefits,6
Defendant’s motion is granted.
5
Plaintiff originally argued that Defendant, in bad faith, delayed payment of
her UIM benefits. However, during oral argument, Plaintiff clarified that
she is not premising her bad faith claim on any delay in payment of UIM
benefits.
6
In her Complaint, Plaintiff sought to recover “any and all relief available
to her under the Kentucky Motor Vehicle Reparations Act, including, but not
limited to exemplary and punitive damages . . . .” The MVRA is the exclusive
remedy for an insurance company’s improper delay or denial of no-fault
benefits, see Foster v. Ky. Farm Bureau Mut. Ins., 189 S.W.3d 553, 557 (Ky.
2006), and any recovery for untimely payments is limited to attorney fees and
statutory interest. KRS 304.39-210(1)-(2); KRS 304.39-220(1). Therefore,
Plaintiff would not be entitled to exemplary and punitive damages under the
MVRA. Furthermore, because Plaintiff is not pursuing any claims based on
Defendant’s administration of PIP benefits, the Court will not determine
whether any additional relief would be available.
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D.
Claim of Bad Faith for Alleged Delay in Payment of MPC
Benefits
Plaintiff contends that Defendant acted in bad faith by
delaying and denying payment and settlement of her MPC claims.
Defendant argues that once it completed its investigation
regarding the necessity of massage therapy, it timely paid any
pending claims.
Review of the record reveals that additional information is
needed to determine whether any delay in paying Plaintiff’s MPC
benefits was in bad faith.
This requires a detailed analysis of
each medical bill and reimbursement, and this issue will be
referred to the assigned Magistrate Judge for her Report and
Recommendation as to whether summary judgment on this issue is
appropriate.
Conclusion
Therefore, having reviewed this matter, and the Court being
otherwise advised, IT IS ORDERED that:
(1) Defendant’s Motion for Summary Judgment (Doc. 18) be,
and is hereby, granted in part;
(2) This matter is hereby referred to Magistrate Judge
Candace J. Smith for her Report and Recommendation as to whether
Defendant acted in bad faith regarding payment of Plaintiff’s
MPC benefits; and
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(3) The parties shall supplement the record with any
evidence necessary for resolution of the issue.
This 26th day of June, 2012.
TIC: 30 min.
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